Early in 2018, Edmund Amorisi of Smith Pachter McWhorter PLC and and Bill Walters of Dixon Hughes Goodman LLP presented a comprehensive summary of the key provisions of the FY 2018 NDAA. As they explained, Sec. 802 emphasizes DoD’s ongoing interest in intellectual property issues.
It directs DoD establish a “cadre of intellectual property experts” to “ensure a consistent, strategic, and highly knowledgeable approach to acquiring or licensing [IP] by providing expert advice” to the acquisition workforce. Sec. 802 also authorizes DoD to contract with a private-sector entity for “specialized expertise” to support the cadre.
Currently there are FAR and DFAR provisions to protect intellectual property, both the portion that the government should own after something new is developed, and the portion that the contractor brings to the table. However, this expertise does not exist in the regular contracting workforce. So this provision really goes into detail about intellectual property and directs the DoD to establish some intellectual property expertise that they can use.
Any company with an innovation will have a real issue about bringing their innovation into the contracting community because they may not be properly protected to keep their IP. Too often contractors don’t pursue their innovative ideas because they don’t want their innovation to become the property of the government.
So this provision is really about allowing innovation to play a part, and that’s a very good thing.
While we at TAPE provide services, other companies provide products, or a combination of the two. In terms of federal contracting, commercial items are all the things that are stuff, for example office supplies like pencils and paper clips.
What Sec. 846 of NDAA 2018 is trying to do is establish Amazon-like online portals where contracting officers and authorized people can simply go online and order their products and commercial items.
That would replace the current process, which in many cases is ordering these supplies off GSA schedules, and will make it easier and more efficient for government buyers to do their job. The problem is whether this takes away opportunities for competition. How do you regulate all of these things?
There is still work to be done to determine who is included in the portal, how search results are delivered, what kind of e-commerce portal do you create, and how this relates to the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS).
Until we figure out these things, I don’t think this portal will happen immediately. There doesn’t seem to be a rush to implement this, and this might be partially because GSA sees this as a competitor to their own portal. But I also don’t think we’ll be waiting too long.
We’ve been taking a closer look at some of the most relevant changes to the 2018 National Defense Authorization Act (NDAA), which includes several provisions designed to reduce the number of protests.
According to the U.S. Government Accountability Office (GAO), “federal agencies are required to award government contracts in accordance with numerous acquisition laws and regulations. If a party interested in a government contract believes that an agency has violated procurement law or regulation in a solicitation for goods or services, or in the award of a contract, it may file a bid protest with our Office.”
With contracting dollars being so tight over the last 10 years, every loss was a big deal, and large losses in particular resulted in long and involved protests. This led to us seeing more and more contracts being protested, which is creating a lot of problems.
So there are a number of things that this provision attempts to do, including to increase the amount of information flow in the debriefing (see: how to take full advantage of a debriefing).
That’s a double-edged sword for both the government and the contractor. On the one hand, it will help bidders better understand the decisions and help them shape future proposals for more success.
For example, they will now allow businesses pursuing contracts of $100 million or greater to see a redacted version of the source selection decision document. This is the recommendation document that goes to the source selection authority (SSA) – the panel that decides who to select among the bids – and is an incredible source of information. Small businesses may request the same disclosure for contracts valued at $10 million or more.
On the other side, these changes will produce a lot more documentation and paper trails, and sometimes when a contractor learns more about a decision, it actually increases the possibility of protest.
Another potential down side is a potential pilot program of charging protesters if they’re unsuccessful when a protest is made and denied. This compensates for the fact that the government has to spend money to defend the protest.
That means you’ll have to really think twice because there is the potential to incur hard costs (where before it was just your legal fees).
The hope in all of this is to get rid of frivolous protests that are only meant to extend existing contracts. Unfortunately, some incumbents who are about to be replaced start a protest knowing that for the 4-6 months while it’s in process, they can still be performing and collecting their money. While the protest is going on the government is prohibited to hire the new company. This is an unfair practice and definitely needs to stop. Time will tell if these changes are successful in doing that.
Simplified acquisition is “a contracting method which seeks to reduce the amount of work the government must undertake to evaluate an offer. Because source selection is less arduous under simplified acquisition, the dollar value of contracts allowable under simplified acquisition …is capped.” (Georgia Tech Contracting Education Academy.)
In the NDAA 2018, this simplified acquisition threshold increased from $100,000 to $250,000, in order to expand opportunities and increase participation of small and disadvantaged businesses – service-disabled, women-owned, small, and small disadvantaged (what used to be known as 8(a)).
What that means is that contracts valued up to $250,000 – a pretty fair amount to most small businesses – don’t have a justification and authorization requirement (known as a J&A). The government contracting officer can just issue a purchase order to the small business.
The Truthful Cost or Pricing Act (TINA) (previously known as the Truth in Negotiations Act) was instituted to protect government agencies from unfair pricing practices by contractors. NDAA 2018 also bumps up the threshold for which contracts need this particular oversight – from $750,000 to $2 million. From a government standpoint, this means fewer regulations associated with a larger pool of contract dollars.
As we head into the year-end federal purchasing blitz, everybody just got their budgets and they have to spend all of their money by September 30th. These changes give small business contractors important opportunities to get bigger amounts of money in sole sourcing.
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.
This is a guest post from Dave Moyer, part-time senior analyst for TAPE, LLC.
As a member of a group of adjunct professors for the Graduate School USA, we collectively develop abstracts of pertinent, current legislation for use by the group in multiple class presentations. We attempt to author papers that enlighten our students and occasionally will develop papers that are of use to entities working in the government arena.
The follow paper was developed by four of the financial management professors and contains information that would be of interest to government contractors. In my ongoing capacity as a senior analyst for TAPE, I condensed this information, which is available in the public domain, in an effort to make it a handy thumbnail of the latest NDAA.
On December 12, 2017, President Trump signed the 2018 National Defense Authorization Act (NDAA) (Public Law 115-91). It contains many significant changes to DoD operations and organization, as well as some government-wide changes. Here are some of the important changes, starting with a new law with government-wide applicability:
Subtitle G of the NDAA is referred to as the Modernizing Government Technology Act. It establishes a Technology Modernization Fund and a Technology Modernization Board. The Act also authorizes any agency (not just DoD) to establish an information technology working capital fund (WCF) to improve, retire, or replace existing systems, and for any project, program, or activity related to IT modernization.
An interesting aspect of these WCFs will be their funding sources, and the length of availability of the funds. Agencies are given the authority to transfer other appropriations into the fund, and the WCFs may also receive discretionary appropriations. Thus, the WCFs won’t rely on sales to customers to earn revenue.
In addition, due to their nature, currently WCF balances are always available without fiscal year limitations (that is, no-year). This is no longer true, as these WCF balances will be available for only three years after the year in which funds are transferred in, or the appropriation is received from Congress. After three years, any unobligated balances revert to the general fund in Treasury.
Section 806 of the NDAA amends Title 41 of the US Code and applies to all federal agencies. The micro-purchase threshold increases from $3,000 to $10,000.
The following are some DoD-specific provisions to be aware of:
- Section 827: Directs a pilot program on recovering costs from contractors whose protests are denied by the Government Accountability Office.
- Section 831: Redefines Major Defense Acquisition Programs and Defense Business Systems.
- Section 832: Prohibits the use of lowest price technically acceptable source selection process for engineering and manufacturing development contracts for major defense acquisition programs.
- Sections 841-844: Numerous enhancements relating to the acquisition work force.
- Section 854: Pilot program for multiyear contracts up to 10 years in length.
- Section 905: Adds qualifications for appointment as the Under Secretary of Defense (Comptroller) and the Deputy CFO. Adds duties and powers to the Under Secretary’s position.
- Section 906: Redesignates Principal Deputy Under Secretaries of Defense as Deputy Under Secretaries of Defense.
- Section 910: Establishes a Chief Management Officer of the Department of Defense. This will be the number three ranking person in the department, below the Secretary and Deputy Secretary, but above the Under Secretaries.
- Section 921: Adds qualifications for appointment as the Assistant Secretary for Financial Management in each of the three military departments.
- Section 925: Moves background and security investigations from OPM to DoD.
- Section 1002: Adds a new chapter to Title 10 consolidating, codifying, and improving authorities and requirements relating to the audit of DoD financial statements. Among many other changes, the Financial Improvement and Audit Readiness (FIAR) plan is now called Financial Improvement and Audit Remediation (FIAR) plan.
- Section 1004: By mid-March 2018, DoD must submit a report to Congress ranking every DoD component/agency on their auditability.
- Section 1103: The temporary authority for DoD to offer Voluntary Separation Incentive Program payments up to $40,000 (rather than the old $25,000) will not expire on Sept 30, 2018. It is extended to Sept 30, 2021.
- Section 1648: Requires a report to Congress by May 1, 2018 on the termination of the dual-hat arrangement for the Commander of the United States Cyber Command.
- Section 2802: Operation and Maintenance (O&M) appropriations may be used for construction up to $2,000,000 (up from the previous $1,000,000). Also, the unspecified MILCON limit goes from $3,000,000 to $6,000,000.
- Section 2803: The Secretary of each component will adjust the $6,000,000 unspecified MILCON limit each fiscal year to reflect the local construction cost index, but the limit may not exceed $10,000,000.
- Section 2805: The Secretary of each component may use O&M funds to replace building damaged or destroyed by natural disasters or terrorism incidents, with a limit of $50,000,000 per fiscal year.
We’ve been taking a look at new compromise language released about the creation of an online marketplace for DOD COTS purchases.
In this final post, we’ll look at some of the concerns people have about the program. The first is about data security. Another improvement over the original Section 801 language is the way the compromise bill deals with the treasure trove of data to which the portal providers will have access.
The previous Thornberry language precluded the online marketplace provider from selling or giving those data to third parties, but imposed no constraint on the provider’s use of those data for its own strategic purposes. Consequently, if a provider also were a seller, the provider could have used sales data from its competitors strategically to tailor its own offering and price its own products.
The new language precludes this by requiring the portal provider to agree “not to use for pricing, marketing, competitive, or other purposes, any information related to a products from a third-party supplier featured on the commercial e-commerce portal….” While this is improved language, it will not be easy for GSA to police this requirement. No doubt, the GSA OIG already is thinking through how it can help.
Notwithstanding the many improvements in the Section 846 language, the extensive breadth of the new program continues to concern many.
- First, the e-commerce portals will accommodate purchases up to the Simplified Acquisition Threshold. While more limited than the original Section 801 language, this still will direct a significant volume of DoD COTS purchasing into the hands of commercial entities.
- Second, while the language is focused on DoD purchasing, it expressly states the portal must be able to accommodate Government-wide purchasing. In other words, DoD is just the starting point. We can expect to see the program expanded to all agencies over time.
- Third, and perhaps most importantly, a companion provision of the NDAA provides that if a product previously has been purchased through a commercial items vehicle (e.g., a FAR Part 12 contract), it cannot be purchased via a more structured procurement (e.g., a FAR Part 15 contract) in the future without jumping through certain hoops.Indeed, the text expressly states that monies given to DoD may not be used to fund a FAR Part 15 procurement if the products being procured previously were purchased through a FAR Part 12 procurement. This new language appears to be designed to make it extremely difficult for DoD (and other agencies in the future) to circumvent the new portals by creating full and open commercial items competitions.
On the topic of commerciality, it is worth noting that, in addition to the e-commerce portal provisions of the compromise bill, the NDAA also includes a number of provisions designed to expand the Government’s use of commercial items purchasing vehicles and expand the number of products qualifying as commercial items.
These new provisions direct DoD to undertake a broad review of its current regulations, contracts, and subcontract flow-down terms to get rid of non-commercial clauses and provisions that have crept into DoD programs over the years. Indeed, the new language directs the Defense Acquisition University to develop new, meaningful training for COs to help them master commercial items acquisitions. This is a welcome development.
Finally, in addition to the positive changes for large businesses, small businesses also have something to cheer about in the compromise language. Section 846 makes clear purchases through the new e-commerce portals are deemed purchases from prime contractors such that the ordering agencies still get their small business purchasing credit.
The language also expressly states that agencies still can set aside their purchases for small businesses as they did before. (These provisions also suggest small business designation will be one of the several attributes portal providers will be required to display on their websites.)
In the end, the new language is a significant improvement over the original House proposal, but it leaves many questions unanswered. Section 846 directs OMB and GSA to fill in those blanks. And it provides for multiple reviews (including a detailed, phased-in GAO review) of how well OMB and GSA do their job.
Time will tell what the new program looks like. But we can be certain of one thing at the moment. The commercial items procurement landscape will change. It just may take longer than Rep. Thornberry had hoped.
As we continue our analysis of NDAA Section 846’s online marketplace provisions, let’s look at who can be a portal provider, and how they will work. We can see that the new language significantly reduces (but does not eliminate) the obstacles to becoming an official portal provider. Previously, Section 801 incorporated requirements only a handful of companies in the world (if that many) could have met.
Section 846 is less restrictive. It defines an acceptable portal as a “commercial solution providing for the purchase of commercial products aggregated, distributed, sold, or manufactured via an online portal.” It directs GSA to “consider” portals that are “widely used in the private sector” and that “have or can be configured to have” frequently updated supplier and product selections, as well as an assortment of product and supplier reviews.
As before, the language still expressly states the portal cannot be managed by the Government or designed for the primary use by the Government. Thus, neither GSA Advantage nor FedMall can satisfy the Section 846 requirements.
Unlike the House version of the bill, Section 846 does NOT state the portal providers will be selected without competition – a provision that greatly concerned not only industry, but many GSA officials as well. To the contrary, Section 846 states that current procurement laws will apply to the program unless explicitly exempted. This new language suggests GSA will have to develop some sort of competitive process to select the portal providers.
Whether that means GSA will conduct a full-and-open, head-to-head competition among potential portal providers or an everyone-who-meets-the-requirements-gets-in type competition (like GSA uses to award Schedule contracts) is unclear. In either case, the removal of the “non-competitive” language from Section 801 is a material improvement over the House bill.
As with Section 801, Section 846 vests significant responsibility in GSA to come up with a means to ensure products sold through the portals are screened to meet applicable statutory requirements. This likely refers to regimes like the Trade Agreements Act (“TAA”), the Buy American Act (“BAA”), environmental requirements, security requirements, and the like.
The language leaves it to GSA to figure out whether it will provide the necessary product data to the portal providers or will develop a mechanism for the providers to obtain those date on their own, presumably directly from the suppliers/manufacturers.
In either case, the continuing importance of product attribute data suggests neither suppliers nor portal providers should view the new procurement process as one devoid of obligations and/or risks.
On the flip side of the obtain-data-from-GSA coin, the new compromise language includes an expected submit-data-to-GSA obligation on the part of portal providers. Specifically, pursuant to Section 846, portal providers will have to collect and provide “order information” to GSA.
While GSA is left to determine what sort of “order information” it needs, chances are the resulting list will be similar to the data currently required through GSA’s TDR program.
Notwithstanding the Section 846 language directing OMB and GSA to ensure the awarded portals meet certain requirements, the compromise bill clearly reflects an effort on the part of Congress to minimize meddling in the structure of existing commercial ordering platforms.
In fact, the Conference Report accompanying the compromise bill encourages GSA “to resist the urge to make changes to the existing features, terms and conditions, and business models of available e-commerce portals, but rather demonstrate the government’s willingness to adapt the way it does business.”
This encouragement becomes a bit more pointed in the next sentence: “Pursuant to a diligent review of existing law and regulation, the conferees direct the Administrator to be judicious in requesting exceptions.”
Section 846 doesn’t have much to say about how agencies will purchase through the portal. Rather, it leaves most of that to GSA and OMB to figure out down the road. At this point, however, the language provides the authorized portals will be limited to COTS purchases. (The language actually uses the term “commercial products,” but strangely redefines the term to mean COTS items.)
Importantly, the language no longer includes the prior indecipherable provision that purchases would be deemed to meet all competitive requirements merely by virtue of there being more than one supplier selling the product.
Here again, the removal of the non-competitive language represents an improvement over the prior language. (The new language, however, provides no insight regarding the “protestability” of orders placed through the new portals, which currently is one of the only means industry has to hold agencies accountable for flawed purchasing decisions.)
Probably the most important change regarding purchasing relates to the prior Section 801 language that precluded ordering agencies from altering the marketplace provider’s standard terms and conditions.
That prohibition raised serious concerns over how fair a marketplace’s standard terms would be in a near-monopoly situation. The prohibition also raised significant questions about how the Government would deal with critical policy imperatives; things like data security, the Anti-Deficiency Act, socio-economic goals, country of origin rules, and the like.
The new language resolves at least some of those questions by providing that purchases through the portals “shall be made, to the maximum extent practicable, under the standard terms and conditions of the portal….”
This is not unlike the language currently used in FAR Part 12 procurements requiring that “contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses … determined to be consistent with customary commercial practice.”
Since it will not be easy to define when a commercial term must be accepted by the Government or not, however, this likely will be an area for future litigation – just as it has been under FAR Part 12.
Stay tuned for a final look at this new language, and some concerns that remain.
There has been a lot of speculation about the future of commercial items purchasing within the Federal Government since Representative Mac Thornberry circulated his “Section 801” proposal to hand over the bulk of DoD COTS (commercial-off-the-shelf products) purchasing to one or two existing online commercial marketplaces. Industry groups mobilized, companies called their legislators, and the media contributed several stories describing the widespread criticism of the House NDAA proposal. To the surprise of many, however, the Senate seems to have heard industry’s concerns or at least some of them.
The compromise language that just emerged from the House/Senate Conference, designated Section 846 of the 2018 NDAA, reflects significant improvements from the original Thornberry bill. While the new compromise language still moves the Government significantly down the path toward the creation of an online marketplace, which almost certainly will change the way DoD (and likely other federal agencies) will purchase COTS items, the new approach resolved many of the most problematic provisions of the original House bill.
Unlike Section 801, which contemplated a quick, non-competitive award to an existing commercial marketplace provider to handle DoD COTS purchasing, Section 846 directs OMB and GSA to create a phased-in implementation plan and schedule to develop, evaluate, and implement the new online marketplaces (now called “e-commerce portals”) over the better part of three years.
The new language identifies a three-phase approach:
- Phase 1 gives OMB and GSA 90 days to develop an implementation plan and schedule.
- Phase 2 gives OMB and GSA a year after the plan/schedule is complete to conduct market research and to consult with federal agencies, potential e-commerce portal providers, and potential suppliers. Among other things, the “consultation” contemplated in this phase will focus on how current commercial portals function, the standard terms and conditions of such portals, and to what extent the currently-existing portals would have to be modified to meet Government needs.
This phase will also involve an assessment of data security, consideration of issues of concern to “non-traditional” Government contractors, and a review of the impact of fees charged by portal providers. On the issue of fees, the Conference Report accompanying the compromise language offered this warning to GSA: “The conferees are aware of various fee-based and other business-to-business arrangements to feature products offered by certain vendors in many commercial e-commerce portals. The conferees expect the Administrator to ensure that any contract or other agreement entered into for commercial e-commerce portals under this program preclude such business-to-business arrangements.”
- Phase 3 gives OMB and GSA two years (from the creation of its Phase 1 plan/schedule) to develop guidance for the use of the portal, “including protocols for oversight” of procurements through the new program.
As OMB and GSA progress through these three phases under the watchful eye of Congress and the GAO, their efforts will be guided by other provisions of Section 846 that differ significantly from Section 801.
In two follow-up posts, we’ll look more closely at how the new language handles who can be a portal provider and how the portals will work, and then we’ll discuss some concerns about this new program.