How DoD is Better Defining What Lowest Price Means in Contracts

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This is a guest post by Scott Maucione of Federal News Radio.

The Defense Department is implementing a major change to the way it awards contracts to companies.

An April 1 memo from Claire Grady, DoD’s director of defense procurement and acquisition policy lessens the onus on source selection officials to justify paying more for their requirements than just lowest cost technically acceptable (LPTA). It also adds some transparency to how the department prices its requirements.

The policy change is part of the Better Buying Power acquisition reforms, which stated the LPTA requirements sometimes ended up costing DoD more money in the long run. A 2013 Market Connections and Centurion Research Solutions study found 65 percent of contractors and 43 percent of government workers thought LPTA hurt long term value for short term savings. Some critics said DoD places too much emphasis on LPTA contracts.

DoD now will try to make clearer the worth of delivering a capability above “technically acceptable” or the minimum requirement when awarding contracts.

“What that would allow the source selector to do is then say, ‘Because the other offer came in that’s more expensive than the lowest price one, but it has this additional capability, I can put a price on that and quantify the value to the government of that additional capability,’” said Bryan Clark, senior fellow at the Center for Strategic and Budgetary Assessments in an interview with Federal News Radio. “This opens up a better way of doing best value selection that’s more defendable when it comes to protests.”

Over the past few years, LPTA has become more widely used, whether or not it was specifically called out in the contract requirements

That caused some problems for DoD. Industry has long complained that “technically acceptable” is not well defined. Some companies would lowball their bids to win contracts and then could not follow through on their promises. The government would then have to go through the contracting process again.

Also, as DoD bought some systems on the cheap, they would end up costing more money to sustain than if the government had invested more money into the original contract.

If the source selector wanted to go with a vendor that cost more during a LPTA competition, the contracting officer would then have to go through a process to justify spending the extra money.

Clark said that process was “very subjective.”

Now with the issuance of the memo, DoD will outline in its request for proposals how much it is willing to pay extra for something better than minimally required.

“You could say I need this thing to go this fast, but if it can go faster we would be willing to pay X number of dollars per additional mile per hour of speed,” Clark said.

The memo asks source selectors to prioritize the most important capabilities that DoD should pay extra for.

Roger Waldron, president of The Coalition for Government Procurement, said the change is beneficial for industry.

Waldron said the policy will provide a clearer statement to potential competitors as to how DoD values certain capabilities so it can get its pricing right and avoid the lowball scenarios.

Waldron said as a competitor it’s hard to get a sense of what the government values in certain items. When the government explains how much it is willing to pay for something it will help industry in how they price their contracts. Industry also can decide what risks it is willing to take investing in certain technologies.

DoD hinted it was looking into the methodology of its LPTA source selection back in late 2014.

The department made it clear that it was not embarking on a full review of LPTA.

“It’s just not something that we see as a problem. We’re not going to apologize for making price important, but we think there’s enough evidence to dispel the myth that we’re demanding that our people use LPTA techniques when they shouldn’t be. The data just doesn’t say we’re doing what some people say we’re doing,” Shay Assad, the director of defense pricing said last year.

This post originally appeared on Federal News Radio at http://federalnewsradio.com/defense/2016/04/dod-tweaks-lpta-methods-save-money-help-industry/ and was reprinted with permission.


The Need for Acquisition Reform

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It’s no secret that many of the procurements in federal contracting take a really long time. Collectively, we’ve built some very big and complex processes around the rules and so forth, and now we’re reaping the result of having to get through all these gates. At the end the contractors and the Government are not clear if we’re left with anything better (although the gates make sure certain elements of fairness are covered), but what we are sure of is that the process took an extra year or more.

Here is just one example: At TAPE, we had started to respond to an RFP. We had asked a bunch of questions and been through several RFP Q&A responses and RFP iterations. One of our questions had to do with RDT&E (Research, Development, Test and Evaluation) activities. Like other respondents, we were trying to get more information in order to successfully respond to that portion of the RFP.

Now, any official change to an RFP that goes out – including answers to questions – are reviewed by the Government’s lawyers. In this case, the lawyers said that since RDT&E money comes from a different part of the budgeting process (different “colors of money”) than operations and maintenance, these activities should not be mixed into the same RFP or contract.

And just like that, we were done. Two days before it was due, the Government pulled (cancelled) the RFP and estimated a six-month to one-year delay before it would be re-opened, while they worked on a way to split up these functions in some fashion.

As you can imagine, everybody went a little bit crazy. We had done all this work, talked to the customer, got our capture information, etc. When we talked to the agency’s small business people, all they could say was that they’d needed to reframe the RFP. True, but why couldn’t they have caught that in one of the iterations? This wouldn’t have necessarily saved us and our cohorts from the ultimate disappointment, but would have certainly saved some of our efforts.

For it to take six months to pull out section of an RFP, rejig it, and put it back on the street, seems an absurd length of time. We’re not talking about a complicated weapons system here, but something in the services realm.

Shortening the acquisition timeline is one goal of reform, and other is to address the “ginormous” amount of overruns – when the acquisition takes more time and money than planned or available.

In any RFP, the government tries to give you detailed specs to build what they want, ranging from a mousetrap to a huge missile. They try to gather a huge number of details – performance measures, trail of spares, logistics, necessities to maintain it, etc.

In one case with procurement of defenses against the improvised explosive devices (IEDs) encountered in Iraq and Afghanistan, the war effort was over before the outcomes and results of the acquisition process were finished.

The more detailed the specs need to be, the longer the process will take. And when things take longer they cost more. This is how a $10 screwdriver ends up costing $1,000 – because you’ve given somebody 100 pages about the exact screwdriver you want. That’s what we need to fix.

This is an ongoing movement, and the pendulum is swinging both ways.


2017 NDAA Markup Makes Subcontract Plan Compliance Failure a Material Breach

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This is a guest post by Paul Murphy,which I spotted in the Mid-Tier Advocacy Group’s MTA Alert email. Sign up now for all the latest news on public policy and Capital Hill.

Congress is finally getting serious about the woefully inadequate subcontract reporting contained in the federal government’s Electronic Subcontracting Reporting System (ESRS).

Section 1821 of the just-passed Chairman’s Mark of H.R. 4909, the 2017 National Defense Authorization Act contains a potentially game-changing procurement reform innocently called, “Good Faith in Subcontracting.” It states: “. . . failure to provide contractual documentation showing compliance with a subcontracting plan is a material contract breach, just as existing law states that failing to comply with a subcontracting plan is a material breach.” In other words, any vendor found not to be compliant with their announced subcontracting plans could face breach of contract charges from their agency client. This is huuuge.

Breach of contract is one of the most serious charges federal prosecutors can bring against a vendor. If a vendor is found to have negotiated a contract in bad faith, or if they committed to subcontract plans they had no capability to fulfill, a material breach could lead to corrective action, fines or worse punishment.

Tens of thousands of vendors, hundreds of thousands of contracts and billions of dollars are potentially impacted by this one, simple sentence in HASC Chairman Rep. Mac Thornberry’s new bill. The markup, which just passed out of committee in the wee hours of April 28th, will likely come to the House floor within two weeks, followed by a trip over to the Senate before final reconciliation and approval. Clearly, the new subcontracting language has the Chairman’s support.

About the author: Paul Murphy is a senior data analyst at Bloomberg Government. BGOV’s Congress Tracker team aggressively monitors the progress of the NDAA and other major bills daily, in real time. BGOV’s data team ingests all the latest subcontract data as it is released and dynamically links it to the prime contract data. If you need to monitor the latest defense legislation or insure your company is compliant with subcontract reporting, contact BGOV at http://about.bgov.com/. They can help.


When Asked For a Certificate of Competency

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A small business procurement is often a risky proposition for the government, especially if the function that has been performed by a large business with lots of back up. In that case, the government can be confident that their contractor can always pull in a subject matter expert at a moment’s notice.

If I’m building a missile, for example, I want to be assured that the contractor has access to a guidance expert and the funds to pay for their help. The risk is that a small company will only work with the people they’ve got, and don’t build the cost of any extra people into their bid.

In some number of cases during the procurement process, the government gets down to the person whose proposal seems the best, but these kinds of risks may stop them from wanting to go forward. One of the ways they can mitigate that risk is with a Certificate of Competency.

The agency’s program office will ask the Small Business Administration to conduct an investigation into the small business applicant – not their proposal, but their ability to perform. This includes a look at the financial and managerial competence of the people running the business, and how the business functions.

I once saw a statistic that almost 75% of companies asked for a COC do not get it. Whether that is still true or not, I strongly urge anyone in this situation to find someone who’s been through it and can advise you from real experience – there will be a lot of issues raised and you don’t want to stumble.


When a Former Government Official Goes to Work For a Contractor

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This is a guest post by David Moyer.

David Moyer is our Army Reserve Command subject matter expert, and the capture manager for our largest contract, the Army Training Models. He formerly was the Director of Resource Management for the Deputy Chief of Staff, G-3/5/7 US Army Reserve Command (USARC), where he was initially our USARC customer, and then a consultant for TAPE, advising the USARC.

We can all learn a lot from Dave’s experience, so I asked him to write about it here.

What are some of the organizational conflict of interest (OCI) issues that arise when a former government official comes to work for a company that they formerly supervised?

There are legal and moral issues associated with a former government official going to work for a contractor. The legal issue is one of whether or not the official influenced the hiring of the company or the awarding the contract in order to obtain employment.

Federal regulations and statute specifically preclude government employees from working for a contractor if a pecuniary relationship existed while the employee was still employed by the Federal Government. In this case, while I had TAPE employees working with me and in my directorate, I was not a signatory on the contract nor did I have a direct bearing on who won the contract.

If a federal employee anticipates working for a contractor after retirement a letter recusing that employee from all contract negotiations must be circulated within his or her organization.

As a funds certifying officer, I was more aware of the OCI issues than most. I was approached by the Graduate School USA to become an instructor prior to my retirement. I solicited Staff Judge Advocate guidance and was told to circulate a letter regarding my intention to become a contractor, which I did. When I was approached by TAPE three months after my retirement, neither a moral nor a legal impediment existed.

Federal employees do not supervise contractors, but task them to perform those tasks identified and specified in the Statement of Work. They are supervised by someone within the company awarded the contract.

What are your tips for how to handle these issues?

All government employees must know the regulations surrounding working for a government contractor. To ensure this occurs, employees are required to take annual classes on ethics provided by legal counsel. These classes address the issue in depth. Again, in my position I not only had to attend these classes by had to fill out an OGE 450 financial disclosure form on an annual basis. As I mentioned above I am also an adjunct professor for the Graduate School USA and one of the classes I regularly teach is Federal Appropriations Law. This course covers many of the issues associated with outside employment and future employment of government employees.

How can someone best prepare for being in this situation?

If an employee anticipates or even considers the possibility of working for a contractor upon retirement they should seek guidance from their department legal team. The requirement is well publicized and all legal departments deal with this type of inquiry on a regular basis.

What are some of the benefits your previous experience brings to your new position?

My case is somewhat unique in that I am for the most part assisting my previous organization. The turnover of government employees tends to be high in most organizations. Historical knowledge is rapidly lost even though the environment remains fairly constant.

In my case I was in the same directorate for almost 22 years and was the director for 18 of those years. Prior to that I had worked in resource management for over 11 years as an Army Officer. I either reviewed the work or assisted in the development of virtually all of the models used within the Army Training Model umbrellas in both the Active Army and then the Army Reserve.

In that 33-year span, I was part of every change and modification to the models and assisted in the development of the algorithms associated with the model designs. In my current capacity, I receive inquiries as to whether I remember how something was generated, what issue was it designed to address and what were the benefits or drawbacks of doing it another way. That knowledge is not easily replicated.

Can you give us an example of how you navigated or avoided a conflict?

I was well prepared for avoiding a conflict of interest due to the nature of my position. I was required by both regulation and statute to be an “honest broker” in all my dealings within my organization and with contractors. I was also keenly aware of what my relationship with all of my contractors was to be.

I always considered contractors an “asset” to be applied wherever and whenever prudent. I was able to incorporate their actions with the actions of my employees to obtain a synergy not previously possible. I considered them an integral member of my team and ensured they knew their role in achieving the goals and objectives my superiors had given me.


GAO: Rule of Two Not Satisfied Where Businesses Do Not Manufacture Products

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This is a guest post by Matthew Schoonover of SmallGovCon.

Where an agency buys manufactured goods, the FAR’s Rule of Two is satisfied when two or more small business manufacturers of the end products exist. It is not enough, as GAO recently held, for two or more small business distributors of manufactured products to exist.

In Manus Medical, B-412331 (Jan. 21, 2016), GAO denied a protest claiming that the Department of Veterans Affairs erred by not setting aside the solicitation for service-disabled veteran-owned small businesses. The solicitation called for a contractor to “provide all labor, materials, transportation, equipment and supervision . . . to provide a Custom Sterile Procedure Pack program” for the VA’s Central Region medical facilities. “The packs,” the solicitation continued, “shall be available for distribution by the Medical Surgical Prime Vendor . . . or by direct purchase, at the discretion of the local facility.”

Manus—an SDVOSB—protested the VA’s decision to issue the solicitation on an unrestricted basis, claiming that at least two SDVOSBs expressed an interest in submitting offers under the solicitation. It did not assert, however, that either of these SDVOSBs actually manufactured the products sought; instead, it claimed that the SDVOSBs could perform the requirements based on “established distribution relationships with large manufacturers of the custom packs[.]”

At issue in this protest was the application of the small business nonmanufacturer rule, which applies to small business set-asides. GAO explained this rule, found in FAR 19.502-2(b) and (c), as follows:

An acquisition for the type of goods and services sought here, with an anticipated dollar value of more than $150,000, must be set aside for small business concerns if the agency determines there is a reasonable expectation that offers will be submitted by two or more small businesses that are offering products manufactured by small business concerns.

GAO then considered the “extensive market research” conducted by the VA. This research showed that though there were several small business distributors of custom sterile surgery packs, the products being distributed ultimately were manufactured by large businesses. Thus, the VA did not have a reasonable expectation that two or more small businesses (or SDVOSBs) offered products manufactured by small business concerns, so the Rule of Two did not apply.

GAO found this determination reasonable. In doing so, it rejected Manus’s claim that the VA was “obligated” to seek a waiver of the rule that requires products procured under a contract set-aside for small businesses to be manufactured by small businesses. According to GAO, the contracting officer has discretion to seek a waiver of this rule, but “this provision is discretionary,” and there was nothing improper about the VA’s decision not to see a nonmanufacturer rule waiver. Because the Rule of Two did not apply, and because the contracting officer was not obligated to seek a waiver, GAO held that the VA had not been required to issue the solicitation as a SDVOSB set-aside.

Applying the Rule of Two to small business procurements can be tricky. But as GAO held in Manus Medical, the Rule of Two’s application to contracts seeking manufactured items is satisfied only when two or more small business manufacturers of the end products exist and will submit offers.


This post was originally published at SmallGovCon at http://smallgovcon.com/gaobidprotests/rule_of_two_manufactured_products/ – sthash.fEIyIKnz.dpuf and was reprinted with permission.


NDAA FY2016 and Small Business – Part Two

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The new National Defense Authorization Act is full of small business actions and policy decisions.

I went through some of these in last week’s post, and we’ll continue today.

Section 862 – Amendments to data quality improvement plan

This section works on the increasing tendency to bundle (or consolidate) contracts. While bundling clearly makes it easier for the contracting folks, with much less to administer and less competitions to run, it tends to make requirements too big for small businesses and therefore shuts them out of priming work they could easily do.

The NDAA now requires specific identification and data analysis before justifying a consolidated/bundled approach. This is a very small business-friendly provision.

Section 863 – Notice of contract consolidation for acquisition strategies

Continuing on the same theme of bundling, this section requires a pre-publication, pre-solicitation, notice of bundling. And those bundling decisions will be protestable. This is good for small businesses, but will increase the potential for pre-award/pre-proposal protests.

Section 864 – Clarification of requirements related to small business contracts for services

This is one of those arcane provisions that makes everyone wonder how things got so dang convoluted. This provision is designed to limit instances where an agency (or court, in a protest action) applies “non-manufacturer” rules on certain small business service contracts. It really covers “incidental items” and makes them easier to include in service contracts for small businesses.

Section 865 – Certification requirements for Business Opportunity Specialists, commercial market representatives, and procurement center representatives

In general, the best offense a small business has a small business advocate who takes action before anyone even knows the opportunity is percolating. But the truth is, many of these folks (including procurement center and OSDBU people) lack the training to really stand up with knowledge and specifics. More training and familiarity with small business by these advocates is very desirable.


NDAA FY2016 and Small Business – Part One

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Another year, another National Defense Authorization Act, littered with small business actions and policy decisions!

Let’s go through the first section of the list of provisions and descriptions, and I’ll follow up with more later on – after I’ve digested them myself!

Section 821 – Acquisition strategy required for each major defense acquisition program, major automated information system, and major system 

Requires that an acquisition strategy be developed for every contract opportunity, with a recognition of small business potential for priming or utilization.

Section 844 – Mandatory requirement for training related to the conduct of market research

A Sources Sought notice is a research tool used by government agencies as a key way to determine if there are two or more capable small businesses that can perform the requirements of a planned contract. This section requires training for contracting staff in conducting Sources Sought and market research.

Section 851 – Procurement of commercial items 

For commercial items (products), each system of defining these can be different and require multiple submissions across civil, defense, and other non-FAR agencies (like FAA). This section tries to start this process becoming homogenized for all submissions.

Section 854 – Report on defense-unique laws applicable to the procurement of commercial items and commercially available off-the-shelf items

This section specifically asks that DoD justify any unique DFAR (Defense Federal Acquisition Regulation Supplement) provisions specifically related to commercially available items (products, mostly).

This is trying to reduce the DFAR versus FAR differences by reducing those sections of the DFAR that cover the same types of items acquired by other FAR provisions.

Section 857 – Treatment of goods and services provided by nontraditional defense contractors as commercial items

Ordinarily, the complex government regulations for FAR and DFAR contracting requires a contracting specialist or even a lawyer to interpret. This is especially true when it is a firm’s first attempt to sell to the Federal Government. This clearly stifles innovation, so Section 857 establishes new FAR/DFAR guidelines that simplify procedures for commercial items, rather than requiring the full-blown contracting procedures. While this mostly applies to products, it does establish a pathway for simpler acquisitions.

Section 861 – Amendment to Mentor-Protégé Program 

The DoD Mentor-Protégé program requires specific tri-annual re-authorization, and this section accomplishes that. This is a good thing, since it means more money for small business and help for the small protégés from the big guys.


The Expanded WOSB Program – What You Need to Know

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This is a guest post by Judy Bradt of Summit Insight.

The federal woman-owned small business (WOSB) program has just been expanded once again. The most recent changes require attention, and possibly action, by every business involved in federal contracts. Your company could be affected whether you do business as a prime or a sub.

Once upon a time – 2011, to be specific – when the WOSB program was originally implemented, companies in 83 NAICS codes were eligible to participate. On March 3rd, SBA published its new rule that, based on the December 2015 report by the Department of Commerce, a total of 113 industry groups are now eligible for federal contracting under the WOSB Program.

That simple statement encompasses four important changes.

  1. In the WOSB program as a whole, 36 NAICS codes were added – either to WOSB or to EDWOSB.
  2. 27 NAICS codes were dropped from the program entirely.
  3. Some NAICS codes stayed in the program but were moved between WOSB and EDWOSB.
  4. EDWOSBs are now eligible to participate in woman-owned set-aside or sole-source contracts in an additional 21 designated NAICS industry groups beyond the 92 NAICS industry groups identified for WOSBs.

If your company has been certified as WOSB or EDWOSB at any time before March 3rd, 2016, you need to know whether the new rules changed your program eligibility. If your company was excluded from the original WOSB and EDWOSB NAICS definitions, you need to know whether you’re included in the expanded program.

You want to ensure that you don’t overlook opportunities that are newly open to you. You also want to make sure that your company’s federal and supplier registrations, as well as your website and marketing collateral, reflect your company’s WOSB or EDWOSB certification under the most current rules.

Let’s be more specific. If your company is in any of the following situations, you need to act now to verify whether your EDWOSB or WOSB program eligibility has changed (for better or worse) under the new rules, and take action as appropriate.

  • Were you WOSB or EDWOSB before March 3rd, 2016? Check to see if your original qualifying NAICS codes are on the new WOSB or EDWOSB lists.
  • Did your woman-owned small business not provide services or products covered by one of the original 83 NAICS codes eligible for the WOSB program?
  • Is your company a large business? You already know that you need to include a small business subcontracting plan in every federal proposal on a contract estimated to be worth more than $650,000. The WOSB program changes matter to you because the WOSBs that you might already be working with might no longer fit the program eligibility definition. You might need to find new partners to meet your small business subcontracting obligations.

The other big recent change to the WOSB program was the final procedures put into place to permit sole-source awards. Here’s the thing with sole source: less than 3% of ALL small business prime contract dollars were awarded through sole source in 2014. Why? Because a federal sole source award represents a lot more risk and work for a contracting officer than most people realize.

We’ll be presenting the facts about WOSB sole-source, and what you can do to make it easier to win this special kind of contract, in a free webinar hosted by Judy Bradt and Summit Insight on March 31st from 2:00-3:00 p.m. EDT. Find out more here, and register today. Even if you can’t participate live, all registrants will get a link to the webinar recording and files.


About the author: Judy Bradt, CEO of Summit Insight, gives federal contractors the focus, skills and tools you need to transform your federal business and achieve the sales and partnerships you’ve always wanted. It’s easier than you ever imagined. Call her at 703-627-1074 or visit http://www.summitinsight.com and find out more.


New Bill Would Require “Transparency” In Small Business Goaling

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This is a guest post by Steven Koprince of SmallGovCon.

A new bill introduced in the House of Representatives would require the SBA to count contracts performed overseas when calculating the government’s achievement of its small business goals.

The bill would codify a policy that the SBA already says it is in the process of adopting–and one that will likely lead to a perceived drop in the government’s small business goaling achievement in Fiscal Year 2016.

Although the government has crowed about exceeding its 23% small business goal in the last two fiscal years, that achievement has come with a rather important asterisk. Unbeknownst to many small businesses, the SBA historically has excluded contracts performed overseas from its goaling calculations. Excluding these contracts likely has inflated the government’s overall goaling achievement numbers.

Last year, the SBA announced that it would begin to include overseas contracts as part of the baseline used to evaluate small business goaling achievement. In announcing the change, the SBA predicted that perceived goaling achievement could drop by as much as two points as a result.

Now, a bipartisan House bill would codify the requirement that the SBA include overseas contracts in its goaling numbers. Representatives Judy Chu (D-CA) and Trent Kelly (R-MS) have introduced H.R. 4329, the “Transparency in Small Business Goaling Act of 2016.”

The bill would amend the Small Business Act to prevent the SBA from calculating goaling achievement in a manner that excludes the value of a contract based on where it was awarded or where it was performed, as well as certain other reasons.

The Transparency in Small Business Goaling Act is the sort of simple but effective legislation that could find its way into the next National Defense Authorization Act. In the meantime, it is good news that the SBA intends to discontinue the overseas exclusion on its own initiative. After all, if the government is going to brag about meeting its small business goals, it ought to do so based on the full picture.


This post was originally published at SmallGovCon at http://smallgovcon.com/statutes-and-regulations/new-bill-would-require-transparency-in-small-business-goaling/ and was reprinted with permission.

 


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