This is a guest post by Cy Alba of PilieroMazza PLLC.
With proposals costing hundreds of thousands of dollars and many IDIQs having 50 or more awardees, it can easily happen that some contractors who win a spot on a contract are unable to capitalize on it and simply stop trying to capture task orders. Whether it was because the initial win was based on sheer luck or perhaps because of a tragic, unforeseeable change in circumstances, making it impossible to bid or even keep the company doors open, a contractor may find itself with a shiny new license to hunt, but without the proper tools to successfully compete for and win the actual task orders.
After failing to win any work for usually a year or more, contractors in situations like this may just be looking to recoup the bid and proposal costs or salvage the win. Often, they look to sell their zombie contracts to a more viable candidate. In the past, this was not too difficult, but in recent years, even months, it has become a harder and harder “sell.”
First, it has always been true, yet not fully understood by many, that the sale of a federal contract is prohibited. However, this has always been more of a technical or legal truth than reality. Now, however, agencies have started to question more and more transactions during the novation process, especially in cases where IDIQ contracts without ongoing task orders are sold to other contractors. At some agencies, but particularly GSA, contracting officers are questioning whether a transaction truly includes “all assets needed to perform the contract,” as required by FAR Part 42, or whether transactions are an improper sale of a federal contract.
Many contractors come back with something along the lines of “this is a services contract, there are no assets, just people.” However there are two issues with that statement: (1) it inaccurately admits the improper sale of a federal contract and (2) it ignores the fact that many tangible and intangible assets exist, even when a “naked” IDIQ contract is transferred. Despite what some inside and outside of the government may believe, assets such as proposals, bid strategies, and marketing plans all have real value. Indeed, the proposals themselves for these contracts may have cost hundreds of thousands of dollars to prepare.
Given these facts and recent experience, we recommend that contractors carefully review all possible tangible and intangible assets that are part of a transaction, value each item, and then include them on at least the buyer’s post-transaction balance sheets, if not the seller’s pre-transaction balance sheets when possible, to show the agency the factual reality that there are valuable assets changing hands.
Lastly, we have also seen agencies use purchase terms against contractors. Particularly, terms whereby the seller retains workshare have been used as evidence that (1) the buyer is not capable of performing the work and that (2) not all assets needed to perform the work were transferred. While the existence of a workshare guarantee is evidence of neither, it has not stopped contracting officers from making such conclusions. Thus, given these new interpretations coming out of various agencies, we recommend carefully crafting such provisions going forward and giving full explanations in the novation package cover letter.
While the government enjoys a broad level of discretion when reviewing novations so they are never guaranteed, focusing on these and similar issues can help resolve the government’s concerns as to improper sales of federal contracts. In the past year or so, we have seen a major paradigm shift amongst a number of federal agencies. Thus, if you are buying or selling “naked” IDIQ vehicles, be prepared for a fight on the novation front, regardless of how well crafted the purchase agreement—some agencies will use the smallest excuse to reject a novation as not being in the best interests of the government when, by any reasonable account, it absolutely is.
This post originally appeared on the PilieroMazza blog at https://www.pilieromazza.com/avoiding-flat-tires-when-acquiring-idiq-contract-vehicles and was reprinted with permission.
In some cases, you can give yourself an advantage by bringing your own customer or prospective customer to the table and setting yourself up to win. But what if you didn’t bring the customer? Is it still worth trying? It depends.
When it comes to multiple-award IDIQ contracts, the more detailed the proposal evaluation criteria and proposal instructions, the better – but only when you’ve worked with the customer to correspond those details to your company’s specific past performance. Otherwise, you could be putting yourself in competition with someone who did. Here are two specific clues that that’s the case:
- Key resumes – the more key resumes that there are, and the more detailed the resume requirements, the faster you should run away. If they’re specifying 10 or more key people and they have extensive requirements for what those key people need to have, you’re never going to win. Even if you were to find matching people, they’re not THE people that the customer wants. They wrote the requirements that way because they want a specific set of people.
- Past performance – similarly, if the proposal criteria include a whole host of technical systems and functions that you’re supposed to have done, it means the customer already has somebody in mind who has all those requirements.
So if you’re deciding whether or not to bid on a proposal for a customer you didn’t bring to the table, measure carefully against these two factors before making your choice.
Something else you might want to avoid when you’re considering potential multiple-award IDIQ proposals are LPTA (“lowest-price technically acceptable”) jobs. Most people who are successful at bidding on LPTA jobs have very, very low indirect rates. It is highly unlikely that you’re going to beat them at their game and still manage to keep your good people and your reputation with those people; and run your business successfully the way you want to run it; with the culture that you want to foster in your business.
At TAPE, we rarely if ever bid on LPTA jobs. The expectation is that you’re going to deliver the same qualified staff at a dramatically lower rate and we just don’t think we can do it, nor do we want do. It’s not the kind of culture we want to run.
So unless you brought the customer to the table and you’re fairly sure you’re the only one who can win, be very careful before choosing to bid on a multiple-award IDIQ task order.
Even when you win a multiple-award IDIQ contract, there is no actual guaranteed work. You still need to find customers who will award the work to you.
There are two situations where it’s easier to make sure you’re the only one who can win. The first is if there is a customer you’ve previously worked with, and the second is if you’ve done all the upfront work with a new customer who is ready and wants to buy from you.
In either case, when you are bringing a customer to the table in a multiple-award IDIQ you want to make it easy for them to choose you over the other companies in the mix, by advising them as they create their proposal instructions and proposal evaluation criteria.
The more detailed their criteria – and that those details are based on your actual experience – the more likely you will be able to eliminate the companies who don’t have the same exact requirements you have specified.
Aim to have the customer include these details:
- The key people who will be involved in the work, along with their specific technical skills and the functions they perform
- A requirement that these key people are current employees of the company
- A performance work statement (PWS) and statement of work (SOW) that correspond closely to your company’s actual past performance
If you are successful in guiding the prospective customer to base their proposal evaluation criteria on these details, your own proposal will send a strong message that you are ready for this contract.
Will you have an unfair advantage? Certainly! The point is, if you’re going to try to make it so nobody else can win, you’d better be sure no one else can win. This is not about being fair; if you want to be fair, then you’re not going to do any of these things and you’re going to have more competition.
In previous posts we talked a little about first what is a multiple-award IDIQ, then about what happens after you’ve won one. Today we’re talking about choosing target customers and bringing them to this contracting vehicle.
This really goes back to our discussions of knowing your customer base instead of chasing the wrong customers. So if you’ve already been making contacts in the government contracting community, and you know that there’s a target customer that you’d like to work with, a multiple-award IDIQ is particularly valuable because it gives you an opportunity to connect.
Now you can approach the customer to talk not just about their business, but about the opportunity they may have to use this particular vehicle and why that would be valuable to them.
You need to prepare for that conversation in two ways: you must be able to clearly state what your value is and what the vehicle value is to your government customer. This value may be the ease of contracting and, though this may be counterintuitive, the breadth of potential contract bids.
Why do you want to play up the fact that there will be multiple bids besides yours? Because even though you want to minimize competition and be the one to win, your customer wants to ensure that they’ve checked the boxes that there are enough contractors bidding on the job.
Otherwise, they’ll have to write up sole source justifications and all those kinds of things. They don’t mind evaluating proposals, but they don’t want this extra work, and this vehicle being an already-awarded contract helps them avoid that.
So your job here is to prepare your customer to see the benefits of this multiple-award vehicle, and to be clear that you are offering them exactly what they need. And in our next discussion, we’ll talk about how to make sure that you’re the only one who can win.
Winning a multiple-award IDIQ contract does not give you any new work; in fact it causes work, because you’re going to have to go figure out who can use this contract from amongst your customers, and help show them why moving things over to this contract you’ve won is the right step for them (because it’s also the way for you to get more work!).
Look at it this way: If we have a contract with a customer, and that contract is going to be eligible for renewal, would we rather have it competed in its current open scenario, let’s say through FedBizOpps, or would we prefer it to be a more limited competition under one of these multiple award IDIQ vehicles?
Assuming for the moment that we think it’s to our advantage as a small business, we now need to convince the government program office and contracting office that this new vehicle is easier to use and meets their needs better.
In the case of the GSA vehicles, GSA also wants to help you do that. This is not specifically about any particular piece of business, but that the more you actually bring over business or bring over an old customer doing a new function to this new vehicle where they can get to you, the more likely you are to win that work.
You’re trying to convince your existing customer that some piece of work should be put on this vehicle because you can respond to it as a prime. It doesn’t mean you’re going to win over your competitors within the contract, but it does mean that you’re at least going to be in the game as long as you have the capacity to respond.
Multiple-award IDIQs are a tempting source of revenue for small business federal contractors, particularly because the numbers are usually very big. Our VETS 2 contract, for example, has a ceiling of $2 billion! But only if you’re prepared, first to be able to write the proposals, and second to bring in the work where you have the knowledge, background or information. Otherwise it’s going to be like shooting in the dark.
Stay tuned for a later post when we’ll talk about how to pick and choose targets that you didn’t bring to the table.
Many federal contracts are issued as IDIQ – indefinite delivery, indefinite quantity. What an IDIQ means is that although the government may award you a contract with a ceiling value of let’s say $25 million, nothing is guaranteed. It’s all issued in the form of task orders.
That’s what makes this an indefinite quantity, because although there’s a ceiling, there is no actual guaranteed contract. In contrast, you may have an annual contract for $25 million, but it’s what’s called a level-of-effort (LOE) contract. Every year for five years you get an option or agreement for $5 million, one-fifth of your 25 million. That is a definite quantity.
The indefinite delivery refers to the fact that the task orders can be for differing durations – you could get a task order for one month, six months, or longer. They’re not for a specified time frame. Your LOE contract, on the other hand, has a set delivery schedule of one year, repeated four times.
The next distinction we have to make is between single award and multiple award. Obviously if you win a single-award contract you’re the only awardee. Everything that’s done under that contract is done by you. You may have sub-contractors, but in essence you’re the prime; all the revenue comes through you.
In a multiple-award, not only are the projects issued as task orders, but you have competitors who may also be able to bid on and win those items. For example, with the GSA’s IT Schedule 70, you don’t have to compete to get your contract, but every task order is competed. So you don’t actually get any work or any revenue unless you win a task order under the contract.
While a lot of this is changing (we won’t go into that here) the reality is that almost every agency uses some form of multiple-award IDIQ to focus portions of their effort. It may be something central to their mission, or it may be a service that contributes to the mission, like information technology or something of that nature.
There are several GSA multiple-award IDIQs in the information technology and engineering areas, such as Alliant, the Veterans Technology Services 2 (VETS 2) program, which is limited to service-disabled veteran-owned small businesses), STARS, which is limited to companies designated 8(a) or small disadvantaged businesses, and OASIS, that’s limited to engineering and related companies in various size standards.
Most of thee contracts will have a small business set-aside component, as well as an unrestricted or large business component. Think a multiple-award IDIQ is for you? Stay tuned for the next post, where we’ll discuss what to do once you’ve actually won one.
Back on October 1, 2015, GSA launched its new Professional Services Schedule (PSS), which consolidates eight professional services contract schedules into one.
The eight schedules are:
#520 – Financial and Business Solutions (FABS)
#541 – Advertising and Integrated Marketing Services (AIMS)
#738II – Language Services
#871 – Professional Engineering Services (PES)
#874 – Mission Oriented Business Integrated Services (MOBIS)
#874V – Logistics Worldwide (LOGWORLD)
#899 – Environmental Services
#00CORP – Consolidated Services
This is important for everybody to understand because it means that the old MOBIS schedule that many of us had, the one that handles program management services, is now a part of this new schedule and has a lot more scope than before.
This creates a new opportunity for people who have a MOBIS schedule or one of these other schedules to now add all these different functions to their schedule and bid on more work.
In particular, there may be things that you didn’t feel like you were quite qualified for, but now all you have to do is add another SIN code (this is not any kind of moral judgment; it stands for Special Item Number) to your profile. GSA has detailed instructions for how to modify your information.
It’s very important to understand and follow GSA’s rules for how you stay on a schedule, because the whole reason for this change is that GSA is trying to reduce the number of vendors and the number of contracting staff they need, in order to hold their costs down.
As Tiffany Hixson writes on the GSA blog, “By reducing the number of contracts supporting the Professional Services category of spend, GSA will eliminate more than 700 contracts resulting in an estimated five year savings of $3.95 million, and sustained savings of $1.29 million annually thereafter.”
MOBIS was a big deal before, but this new combination of MOBIS with professional engineering and the other schedules makes it a really big deal. So as readers, you should really be up to date on what these schedules look like, what your obligations are to stay on GSA’s good list, and most importantly how to make use of this increased opportunity.
This article originally appeared on The Chief Visionary’s Blog of The American Small Business Coalition, LLC, and was reprinted with permission.
(This is the first of six reports based on a conversation with Amy Morris, Morning Anchor at WNEW All News 99.1 (CBS Radio DC) These reports will also ‘air’ on All News 99.1.)
Once upon a time, the U.S. Government developed a way to streamline how it makes certain buys in a way that reduced the administrative burden for both agencies and vendors. But they didn’t stop there. Also built-in to this process was a way for agencies to increase business opportunities for small and disadvantaged business concerns in government contracting. Known as the ‘Simplified Acquisition Procedures,’ this procurement method accounts for billions of dollars in competitive and non-competitive obligations each fiscal year.
But while many in industry bid on and are awarded buys this way every day, most don’t realize it’s a different type of contracting when compared to how most dollars are obligated each fiscal year. “Simplified Acquisitions account for nearly $40B in obligations since the start of FY12,” says Guy Timberlake, chief visionary officer and CEO of The American Small Business Coalition. “It may be a drop in the bucket, but I never turned down an opportunity to engage agencies this way.”
That’s because according to Timberlake, his first million dollar deal in government contracting was the result of developing a relationship with a Navy customer via these smaller buys.
Another potential perk for some in industry is the fact most Simplified Acquisition buys are awarded via a purchase order, a standalone contract. “Purchase orders are not buys placed against an established contract vehicle so this eliminates some of the traditional upfront investment of pursuing and being awarded a GSA Schedule, Blanket Purchase Agreement or Indefinite Delivery Contract.”
So which agencies are buying this way and what are they buying? Timberlake says “Nearly all of them and pretty much anything they want to buy that is considered goods and services.”
Note from Bill: As Guy points out, this is a way to build a relationship. These small purchase items represent “starter” contracts, requiring no vehicle, and can be a way to prove yourself or your solution. Part of the reason for reaching out to ASBC is because they have really focused on the simplified acquisition process, and have made this a way of business to be reckoned with. And since we were members of ASBC back when it started, it’s always good to see more of our small business advocates succeeding.
Guy Timberlake is Chief Visionary and Chief Executive Officer of The American Small Business Coalition (The ASBC). Under Guy’s leadership, The American Small Business Coalition is credited with enhancing the knowledge, skills and confidence of small government contractors, facilitating hundreds of productive partnerships between small, mid-tier and large companies, and contributing to the successful award and capture of contracts and subcontracts valued at more than $10 billion dollars.
It’s been estimated that the government spends between 60-75% of its contractor dollars in the period between June and September (known as the “buying season”). A third of year, but two-thirds of its total contractor dollars (note this doesn’t include salaries, buildings, or other costs that go on all the time like entitlement payments, social security, and unemployment).
So money comes in at the upper levels and then flows down through the various organizational structures, with individual programs getting their budgets to allocate in the first quarter of the following calendar year.
That starts the sequence of gathering requirements, documenting them, establishing how they’re going to be competed, going through the legal process, putting out RFPs, and when all that was said and done it’s possible they wouldn’t have things awarded within the same fiscal year.
Meanwhile, there is a lot of continuing activity that might require a short contract action, for example a maintenance contract on some copiers and printers. Not changing over to a new supplier or anything, just renewing an existing contract to keep things working. Well, that kind of activity often also fell into the final quarter of the year.
What makes this particular buying season relatively unique is that it’s the first time in five years we’ve had an actual budget, and 2015 could be disastrous. They deferred sequestration for a year or so, which just puts more and more pressure on the people at government agencies. They really have to spend the money.
We’re not on a continuing resolution anymore. A continuing resolution limits the contracting that can be done for brand new stuff – you can continue or recompete, but you can’t change scope. It’s frustrating for everyone – and it’s designed this way to make things so onerous that Congress will be motivated to get the job done and put a budget together.
The good news is that we have a budget; the bad news is we’ve got to spend it.
So how do small businesses get work in this compressed buying season? A lot of this can be handled with first what’s called a “simplified purchasing agreement” – many agencies can spend up to $50,000 and others like Defense can use small purchase authority to spend up to $250,000. There is no competition for these awards, and small businesses can use this to get a foot in the door. Once you get started, you can work on competing for something bigger down the line.
In fact, my old friend Guy Timberlake of the American Small Business Coalition helps small business owners find success in government contracting, including how to use simplified purchasing.
If you’re going to stuff a year’s worth of spending into four months, you’ve got to find faster, more efficient ways, including these non-competitive spending options. These opportunities are strictly dependent on relationships. The customer – whether a contracting officer or government requiring group – makes their decision based on who they know. It’s exactly what Judy Bradt and Matt Falls have been talking about on this blog. In this compressed buying season, relationships are the ONLY thing that matters. If you don’t have them, you’re not going to get the business.
The second thing you’ve got to have, and this is a little more difficult, is a clear-cut strategy for how to get a contract without competition. Small purchase limits and simplified purchasing is one way your customer can award something to you without having to go through the timeframe necessary for a competitive result.
The other way is through purchasing vehicles that allow someone in a government agency to tell a contracting officer to put out their requirements in a BPA or IDIQ to a specific company (in this case, yours).
Another possibility, though less desirable, is that government agencies can award sole-source contracts to those kinds of companies companies with special certifications, using something called a J & A (justification and authorization).
Those are your three options. You either have something small enough to fit into simplified purchase authority, a contract vehicle with your name on it, or you’re one of those specially certified folks.
Fundamentally, a small business must be able to understand these options and be able to clearly convey to the customer how to use one of them to hire you.
Congresswoman Anna Eshoo and Congressman Gerry Connolly (who happens to be the representative of my local area) have proposed draft legislation that would overhaul how the federal government develops its IT projects.
Let’s look at the two key things they’re trying to do, and then tackle the third issue of how they’re proposing to pay for it.
First, they want to create an office within the Executive Office of the President (EOP), which would basically review major IT plans. Currently, every IT expenditure above a certain cost or that has mission critical importance falls under a requirement to have budgetary line items established well in advance and placed in a portfolio system called Exhibit 300. From the OMB website: “Under the Clinger-Cohen Act of 1996, agencies are required to submit business plans for IT investments to OMB that outline the steps they have taken to ensure they have adequately planned each investment to promote success.”
This new legislation will go beyond justifying the money, and get at how you’re actually going to carry out the project. This stems out of the technical problems with the launch of the Healthcare.gov website in October 2013. Healthcare.gov was slated for failure from Day One because the government, which is simply not equipped to do this, tried to do the systems integration. Systems integration is a complicated discipline requiring a lot of knowledge about how to put pieces together. No matter how talented our government IT professionals are, that’s not what they’re about.
The more companies and agencies have to describe and justify the follow-through of what they are planning with their IT ventures, the more likely you are to catch these things in advance. Of course, bureaucracy is a double-edged sword. You’ll catch a few big things and avoid some disasters, but you’ll also create delays and problems in getting numerous other things through.
The second thing this new legislation would do will allegedly be good for small businesses. It will raise the threshold on “streamlined contracting process,” from $150,000-$500,000. (From some people’s perspective this is a really good thing. Not working for a big company, I don’t have the same stake in the game.)
Streamlined acquisition processes are designed essentially to cut away all the wheat and chaff, and come down to what is often a very limited competition. The reason non-streamlined acquisition takes so long is because you have to have all the terms and conditions, and publish to a large community. Even with an IDIQ, a more limited community, it’s still a lot of people. With a streamlined process, you only have to pick two or three bidders, and no one else gets a shot at the job.
Unfortunately, this change is just as likely to produce crony-ism as efficiency. While it’s good to hire the people you know best and trust, are they automatically going to be the best for the job?
We have to realize that a lot of these $500,000 projects represent the bulk of what becomes task orders of IDIQ contracts. So for the big guys who are living off these as task orders, if we force these into the single acquisition process, the large companies will just bundle more work, making these contracts less accessible to small business. There’s always going to be a way for the big businesses to figure out how to keep their work and get around these new ideas. They big guys got big for a reason – they’re successful at doing what it takes to win business.
Lastly, let’s look at how Eshoo and Connolly propose to pay for this new office in the EOP, and that is to “repurpose” surplus GSA fees. Currently, everybody who has a GSA multiple award contract pays GSA a finder’s fee if they get any work out of the contract. GSA goes through the trouble of doing the contracting, the agency orders off that contract, and gives GSA payment in return. However, GSA may go about collecting more money than it costs to execute that particular contract, e.g., there’s a ton of work under IT70, so the money collected from IT70 contractors may in turn be redirected to cover the costs of contracting in an area with fewer transactions.
So while it seems like extra money that’s up for grabs, it’s actually not. The fact is that the GSA has built a structure based on knowing they can move around these excess fees to cover costs for things they need to do – things that Congress has asked them to do. It’s not “free money.” We can’t just use that money without having detrimental effects on something GSA is doing with that money. Something that is currently being supported will no longer be supported.
IT procurement is definitely in need of reform, but in my opinion, so is this bill.