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This blog is managed by Bob Antonio, the Owner of Wifcon.com. It includes link to news items on contracting and the blogger's comments

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bob7947

It's not a religious thing; it's a contracting thing — G. L. Christian style. We've all heard of the "Christian Doctrine." Here is how one judge of the Court of Federal Claims applied it to Bay County, Florida v. U. S., No. 11-157C, August 14, 2013 — released today. You can read the entire 11-page opinion or you can read the excerpt below.

"The government argues that Bay County waived its potential status as an independent regulatory body by including FAR § 54.241-8 in the Sewage Contract — ignoring the limitation of Subsection (a) on application, viz., “[t]his clause applies to the extent that services furnished hereunder are not subject to regulation by a regulatory body.” FAR § 52.241-8(a); see Hr’g Tr. 11:11 to 12:1. Pointing to the principle that this court must avoid contract interpretations that render the FAR or contract terms superfluous, the government contends that the only way to give meaning to the Sewage Contract is to treat Bay County as a non-independent regulatory body. Hr’g Tr. 11:13 to 15:3. In making this argument, the government implicitly urges that a contractual provision that is inapplicable by its own terms must take precedence over the FAR’s requirements. The court cannot accede to such a proposition.

When a contract subject to the FAR incorporates improper terms of the FAR, the correct provisions of the FAR control. See S.J. Amoroso Const. Co. v. United States, 12 F.3d 1072, 1075 (Fed. Cir. 1993); G.L. Christian & Assocs. v. United States, 312 F.2d 418, 426 (Ct. Cl.1963), mot. for rehearing and reargument denied, 320 F.2d 345 (Ct. Cl. 1963). “Under the so called Christian doctrine, a mandatory contract clause that expresses a significant or deeply ingrained strand of procurement policy is considered to be included in a contract by operation of law.” S.J. Amoroso, 12 F.3d at 1075. In S.J. Amoroso, as here, an improper clause was substituted for a proper clause. Id. As S.J. Amoroso held, “[a]pplication of the Christian doctrine turns not on whether the clause was intentionally or inadvertently omitted, but on whether procurement policies are being ‘avoided or evaded (deliberately or negligently) by lesser officials.’” Id. (citing G.L. Christian & Assocs., 320 F.2d at 351). The proper clause was consequently given effect. Id. at 1077.

In this instance, inclusion of the clause prescribed for unregulated utilities constitutes such an impermissible deviation. See FAR § 1.401 (“Deviation means . . . [t]he omission of any solicitation provision or contract clause when its prescription requires its use . . . [or] [t]he use of a solicitation provision or contract clause . . . if such use is inconsistent with the intent, principle, or substance of the prescription or related coverage on the subject matter in the FAR.”). The text of the FAR is unambiguous in its requirement for inclusion of the proper change of rate clause: “The contracting officer shall insert clauses substantially the same as the clauses listed below in solicitations and contracts under the prescribed conditions.” FAR § 41.501(d) (emphasis added). The prescribed condition for inclusion of FAR § 52.241-7 is that the utility services “are subject to a regulatory body.” Id. As established supra, Bay County qualifies as an independent regulatory body, and as such, FAR § 52.241-7 is a required term of the utility contract. Correspondingly, FAR § 52.241-8 is inappropriate. Although deviations may be authorized by the agency head for individual contract actions, such a deviation must be documented and justified in the contract file. FAR § 1.403. No such documentation or justification is present here.

Accordingly, the Christian doctrine applies and binds the contracting parties to the mandatory contractual term. See G.L. Christian & Assocs., 312 F.2d at 426 (“We are not, and should not be, slow to find the standard [regulation-mandated] article incorporated, as a matter of law, into plaintiff’s contract if the [r]egulations can fairly be read as permitting that interpretation.”). “Such regulations are law, binding on the contract parties” when otherwise applicable to the contract, Dravo Corp. v. United States, 480 F.2d 1331, 1333 (Ct. Cl. 1973), and “need not be physically incorporated into the contract,” First Nat’l Bank of Louisa, Ky. v. United States, 6 Cl. Ct. 241, 244 (1984) (citing Hills Transp. Co. v. United States, 492 F.2d 1394, 1396 (Ct. Cl. 1974)); see also Bethlehem Steel Corp. v. United States, 423 F.2d 300, 305 (Ct. Cl. 1970) (holding that the regulation need not be in effect when the contract was awarded so long as adoption of the regulation was remedial and intended to afford safeguards to the contractor). The court determines as a matter of law that the clause pertaining to independently regulated utilities, FAR § 52.241-7, is incorporated into the contract in place of the improper clause, FAR § 52.241-8, which is physically present."

bob7947

In Thomas F. Neenan, as Trustee of the Thomas F. Neenan, Sr., Revocable Trust, v. U. S., No. 11-733C, August 22, 2013, you are taken through some of the basics of federal contracting. How many basic points can you identify in this 10-page opinion? I've listed those that I identified below:

1. Offer and acceptance, unconditional offer, preliminary negotiations.

2. Change in ownership, death of party, trust agreement.

3. Pattern or practice.

4. Contract specialist's authority, integral part of the duties assigned.

5. Express authority, implied authority, actual authority, apparent authority.

bob7947

The Competition in Contracting Act of 1984 requires the Government Accountability Office (GA0) to report to the U. S. Congress annually when government agencies fail to fully implement its bid protest recommendations. GAO has posted these reports on its website since fiscal year (FY) 1995. Initially, these reports provided little information but by FY 2004, GAO published its "Bid Protest Statistics" covering FY 2004 through 2001. I have added every one of these reports to the fiscal year numbers at the top of the bid protest statistics.

Beginning in its report for FY 2013, GAO began listing its "most prevalent reasons for sustaining protests" during the FY. This has continued for FY 2014, FY 2015, and FY 2016. Although the information provided does not include cases where an agency took corrective action before a formal sustained decision was reached, it does provided information on 366 sustained decisions. In that sense, it may provide some help whether you are trying to prevent a protest or whether you may protest a procurement.

For FY 2016, there were 139 sustained protests compared to the 227 protests for the previous 3 Fiscal Years. Since GAO does not provide the number of sustained protests by most prevalent causes, I have ranked the most prevalent causes considering the number of sustained protests during a year.  For example, I divided the number of protests in each of FY 2016, 2015, 2014, and 2013 by 1.  That resulted in the following factors:

  • FY 2016 (139/100=1.39)
  • FY 2015 (68/100=.68)
  • FY 2014 (72/100=.72)
  • FY 2013 (82/100=.82)

I then multiplied each factor by each most prevalent reason in each Fiscal Year using GAO's ranking.  Then I added my raw rankings of individual reasons for each Fiscal Year to come up with my final numerical ranking.  Yes, it's somewhat crude but all that GAO provides is general information.  

Below is my ranking of the most prevalent reasons for sustained protests listed by GAO for FY 2016 through FY 2013 with my numerical ranking:

  1. failure to follow the evaluation criteria (Numerical Ranking of 8.4 and it was listed 3rd in FY 2015 and 1st in FYs 2014 and 2013)
  2. unreasonable technical evaluation (Numerical Ranking of 8.28 and it was listed 5th in FY 2015, 3rd in FY 2014, and 1st in FY 2016)
  3. unreasonable cost or price evaluation (Numerical Ranking of 7.05 and it was listed 1st in FY 2015, 4th in FY 2013, and 3rd in FY 2016) and
  4. unreasonable past performance evaluation (Numerical Ranking of 6.89 and it was listed 2nd in FY 2015 and FY 2016)
  5. inadequate documentation of the record (Numerical Ranking of 3.97 and it was listed 4th in FY 2015 and 2nd in FY 2013)

Anyway, that is my way of trying to quantify the reasons.  

Other reasons for sustained protests GAO listed include

  • flawed selection decision (Numerical Ranking of 2.75 and it was listed 2nd in FY 2014)
  • unequal treatment of offerors (Numerical Ranking of 2.42 and it was listed 4th in FY 2014 and 3rd in FY 2013)

In addition to listing the most prevalent reasons, GAO also gives 1 example decision for each of the most prevalent reasons it lists in a FY.  For example, under unreasonable technical evaluation which GAO placed first in FY 2015, GAO lists Deloitte Consulting, LLP, B-412125.2, B-412125.3, Apr. 7, 2016, 2016 CPD ¶ 119.

To me, the most striking reason for GAO sustaining a protest is inadequate documentation. That can be prevented by a thorough review of what documents are provided in the evaluation and selection decision. If there is something missing, identify it and correct it. You can get more information on the documentation issue by looking at the Wifcon.com protest page FAR 15.305 (a)(3): Technical Evaluation - Documentation.

Another striking reason for sustained protests is the first that I list--failure to follow the evaluation criteria. One time a friend of mine was sitting on an evaluation panel for a GAO procurement that I had no involvement in at all. He had something extra he wanted to include in his evaluation of proposals and he asked me about it. Although I was stunned at the question, I simply told him that he must follow the evaluation criteria in the solicitation and if he had any questions he should ask the contracting officer--not me.

Before ending this entry, I will once again remind you that the information provided by GAO only includes sustained protests. These are decisions in which the agency digs in its heels and fights the protest to a final decision. As GAO explains, "agencies need not, and do not, report any of the myriad reasons they decide to take voluntary corrective action." What you see here may be the tip of the iceberg.

bob7947

We've all seen this before. The government and contractor sign a contract with a base period and several 1-year options. Sometimes, the 1-year option periods even mirror the government's fiscal year. A nice little puppy. Then, the harsh realities of government take over and our little puppy grows into an unwieldy mongrel. Such is life in federal contracting and here is a story about one such dog.

On February 27, 2009, the Army National Guard and Glasgow Investigative Solutions, Inc. (GIS) signed a contract for armed security guard services at the National Guard Armory, Washington, DC. The contract included a 3-month base period from March 1, 2009 to May 31, 2009 (CLIN 0001) and 4 option years (CLINs 2 through 5) beginning October 1, and ending September 30 of 2010, 2011, 2012, and 2013. There is another option to extend the base period for 4 months from June 1, 2009 to September 30, 2009 (CLIN 0006). Of course, the contract included the clause at FAR 52.232-18, Availability of Funds (Apr 1984).

Mod 1, a bilateral agreement, exercised the option in CLIN 0006 for the 4 months to the base period from June 1, 2009 to September 30, 2009 and added the clauses in FAR 52.217-6 Option for Increased Quantity and 52.217-8 Option to Extend Services.

Mod 2, a bilateral agreement, fully funded the contract through September 30, 2009.

Mod 3, a bilateral agreement, modified the contract by extending CLIN 0006 from October 1, 2009 through January 31, 2010 and fully funded this 4-month extension. The 4, 1-year option periods in CLINs 0002, 0003, 0004, and 0005 were reset to begin February 1 and end January 31 of the following years.

Mod 4, a bilateral agreement, exercised the first 1-year option period in CLIN 0002 from February 1, 2010 through January 31, 2011.

Mod 7, a bilateral agreement, extended the first option period in CLIN 0002 for 2 months, from February 1, 2011 through March 31, 2011.

Mod 8, a unilateral agreement, and Mods 9 and 10, bilateral agreements, extended the first option period in CLIN 0002 from April 1, 2011 through June 30, 2011.

By now, the contractor was irritated with the extensions to the first option period. After all, the parties signed an original contract that contained 1-year options--not 1- or 2-month extensions to the first option period. The contractor notified the contracting officer about its concerns. On June 28, 2011, the contracting officer noted the contractor's concerns but explained that "due to limited funding, the government is unable to exercise a one (1) year option to the contract at this time." Instead, the contracting officer said she was prepared to extend the contract for an additional 30 days through July 31, 2011. The contractor agreed to the 30-day extension but maintained its position that the modification is contrary to the original contract.

On November, 17, 2011, the contractor filed a claim due to fundamental changes in the original option periods. The contractor had signed up for 1-year options not 1- or 2-month extensions. The contractor filed a notice of appeal to the Armed Services Board of Contract Appeals on April 27, 2012 and about 1 year later the Board rendered its decision.

So what did the Board say? Find out on the bottom of page nine at Glasgow Investigative Solutions, Inc.

bob7947

Propinquent. The word you've entered isn't in the dictionary. (Source: merriam-webster.com)

Imagine quoting on a procurement in which you submitted the lowest-priced, technically acceptable quote. Instead of winning the award, you were told that your quote was unacceptable and ineligible for award because you did not possess the requisite facility clearance prior to award. Although you submitted your facility clearance information to the contracting officer on December 6, 2012, nearly two months later on February 1, 2013, little had been done on it.

You protest to the U. S. Court of Federal Claims and everything seems to be going your way until you read the following quote from the opinion:

While . . . certainly did not act with alacrity, vigor, or timeliness, he provided a propinquent level of bureaucratic service and consideration.

Nonsense! Even the dictionary cannot tell me what propinquent means. However, the dictionary does define propinquity. My interpretation of the phrase that I italicized is "good enough for government work." That's not good enough for me. I disagree with the judge's ruling! In addition, I disagree with the judge's singling out one individual for a process issue.

Now, let's look at the cause for the nearly 2-month delay in processing the facility clearance. I blocked out the individual's name because I want you to look at this as a process issue.

Regarding GSAs actions, Mr. . . . provides an explanation for his delay in processing MVSs facility clearance request. He notes that between December 6, 2012, and February 1, 2013, he worked on the development of [six] DD-254 packages, including MVSs, as well as . . . numerous others that were in various stages of development or modification award processing. Decl. of . . . (. . . ) ¶ 14 (May 10, 2013), ECF No. 44. He states that he also worked on a security audit report and was on personal leave for sixteen days during that time period. Id. Mr. . . . additionally says he halted the processing of DD Form 254 requests for a two-week period in January while DSS was questioning whether a bona fide need existed for any facility clearances under SINs 132-54 and 132-55 under Schedule 70. Id. ¶ 15. He resumed processing requests after that issue was resolved and worked on all the vendors[] requests for facility clearances and did not expedite the request of any particular vendor. Id. ¶ 16. Mr. . . . , however, notes that he did expedite the processing of MVSs request as soon as he was informed that the matter required prompt consideration. Id. ¶ 17.

I'm asking you to look at the above quote and the entire opinion to identify ways to improve the process in this procurement. I'm not looking for an answer here. Instead, how would you initiate the improvements? I'll point out a few items to give you a start.

  1. He was on personal leave for sixteen days during that time period.
  2. He halted the processing of DD Form 254 requests for a two-week period in January while the Defense Security Service was questioning whether a bona fide need existed for any facility clearances under SINs 132-54 and 132-55 under Schedule 70.
  3. The splitting of responsibilities in the Memorandum of Agreement between the Defense Information Systems Agency and the General Services Administration.

bob7947

On April 26, 2007, the Army awarded an indefinite delivery, indefinite quantity, fixed price, job-order contract to Lakeshore Engineering Services, Inc., for repair, maintenance, and construction services at Fort Rucker, Alabama. Lakeshore performed 79 construction delivery orders in the base year and 74 construction delivery orders in the first option year.

On March 10, 2009, Lakeshore filed a claim with the contracting officer seeking $1,996,152.40 for losses it incurred while performing during the base and first option year. Lakeshore claimed that it had lost money as a result of the Army's pricing scheme. The contracting officer issued a final decision denying the claim and Lakeshore took the matter to the Court of Federal Claims.

The pricing scheme was a bit complex. Offerors were told that offers were to be priced using three coefficients – one for work (1) during normal hours on pre-priced items, (2) during overtime work on pre-priced items, and (3) on non-pre-priced items. For the pre-priced items, the coefficient was to be "multiplied by the unit prices listed in a Universal Unit Price Book (UUPB) to price a job or project on individual job orders. According to the Solicitation, the coefficient was "a numerical factor that represents costs (generally indirect costs) not considered to be included in the [uUPB] prices, e.g., general and administrative and other overhead costs, insurance costs, bonding and alternative payment protection costs, protective clothing, equipment rental, and contractor’s profit." The Solicitation said the coefficient should account for a wide variety of risks of doing business, adding at a later point, the coefficient "shall contain all allowable contractor costs, including contingencies and profit." It further stated that the "offeror’s coefficient shall contain all costs other than the pre-priced unit prices, as no allowance will be made after award." The Solicitation, however, allowed for adjustments in the coefficient for the option years, to be based on the Engineering News Record building Cost Index (BCI), in accordance with the Economic Price Adjustment Clause, Army Federal Acquisition Regulation Supplement 5152.237-9000.

The Solicitation designated the Gordian Group Construction Task Catalog (the Gordian Catalog) and PROGEN Online as the UUPB and accompanying software, respectively, to be "used by the contractor in development of price proposals for individual Task Orders." According to the Solicitation’s technical specification, "[t]he UUPB, modified for Fort Rucker, contains pricing information (i.e., Government Estimate) for the description of work to be accomplished and for the units of measure specified." This segment further indicated that the "UUPB consists of Divisions 1 through 16 that are applicable to Divisions 1 through 16 of the Job Order Contract Technical Specifications." It additionally specified that the "UUPB modified for Fort Rucker contains unit pricing data to be used by the Contractor in development of price proposals for each work order," adding that "[t]he pricing data is presented as basic items and as price adjustment modifiers to the basic item."

The pricing information available to offerors also included the caveat that: "[w]hile diligent effort is made to provide accurate and reliable up-to-date pricing, it is the responsibility of the Contractor to verify the unit prices and to modify their Adjustment Factors accordingly."

What happened at the Court of Federal Claims? See Lakeshore Engineering Services, Inc. v. U. S., No. 09-865C, April 3, 2013.

bob7947

On June 20, 2015, Vern Edwards introduced us to F & F Laboratories, Inc., ASBCA 33007, 89-1 BCA ¶ 21207 (Sept. 14, 1988).

In early 1986, the Defense Personnel Support Center (DPSC) awarded a contract to F & F Laboratories, Inc. (F & F) for "starch jelly bars" as part of the military's abandon ship ration procurement. F & F offered its commercial jelly bar as part of its proposal and it was incorporated into the contract documents. Unfortunately, the commercial product didn't fit into the abandon ship ration package and F & F was terminated for default. In an Armed Services Board of Contract Appeals (ASBCA) decision, the termination for default was converted into a termination for convenience because DPSC "was obligated to reject [F & F's] offer prior to award and that its failure to do so until [F & F] manufactured over half the supplies after award was a material breach of the contract."

If life was simple and straightforward, we could end there.

In 1985, DPSC's records showed that its last procurement for jelly bars was with the Chuckles Division of Nabisco in 1982. The Chuckles bar came in 5 pieces to a bar and one current image shows the bar is nearly 5 Inches long today. That is larger than the federal specification size from the ASBCA case. The F & F bar, in 1986, was over 6 inches with 5 pieces also. Since both firms were Illinois firms, I assume that the sizes of the commercial bars were about the same in the 1980s. That is a long way of concluding that the Chuckles Division probably produced a non-commercial jelly bar for DPSC's needs in 1982.

Chuckles is now part of the Ferrara Candy Company which, in addition to Chuckles and other candies, makes "Atomic Fireball" candies. I may not have been a fan of Chuckles as a kid but I can remember those fireballs. F & F was in bankruptcy in 2010 and is now The Smith Brothers Co. You can track it down with Google Maps.

So what's the punch-line here? That's the funny part. I never saw an F & F jelly candy bar--until a day or two ago. Read through the discussion on this site and pay special attention to the image of the "Jelly Bar." You can enlarge the size of the image. The Abandon Ship ration the fellow tested was probably made between 1986 and 1992. You will see that the jelly bar was made by Lucy Ellen Candies which, if you do a bit of research, was a division of F & F. We can assume that after the ASBCA decision F & F and DPSC worked things out and F & F produced a non-commercial jelly bar to federal specifications. For that brief period of time, Lucy Ellen may have found happiness at DPSC.

bob7947

Yesterday, Don Mansfield posted an article entitled Lying to Ourselves: Dishonesty in the Army Profession. After reading the digest of the article and bristling at some of the jargon used, I can report on what was written in simple language. It is: under some circumstances Army officers can accept a lie as truth. Why single out Army officers? I won't. The truth is that humans can accept a lie as truth. I've written about that before.

The article made me remember an episode of 60 Minutes from the early to mid-1980s, possibly 1985. For some reason, the Army had agreed to a television test of the Division Air Defense Gun System (DIVAD). DIVAD's mission was to guard tanks on the battlefield from hostile fixed-wing aircraft, helicopters, and lightly armored ground vehicles. Yes, this is the legendary system that was claimed to have identified a latrine fan as an enemy. However, this blog entry is not about the system nor is it about the Army. It's about us. I have been unable to obtain a tape of the program from 60 Minutes so I will explain what I remember.

The show began and DIVAD's representative (an Army officer) explained what was going to happen. There would be two types of tests--one stationary and several drones. Off in the distance was a white object--the apparent stationary target. DIVAD's turret whirred back and forth, locked onto the target, and began firing its cannons in anger. After the cloud of dust cleared, the target appeared--unharmed. Next was the drone test. From the left side of the television screen a slow moving aircraft appeared. DIVAD gave it a taste of shock and awe with its cannon and the drone disappeared to the right of the screen--unharmed. A second drone appeared on the left side of the screen. Once again, DIVAD's cannon unleashed a merciless barrage but the drone flew off--unharmed. Finally, a third drone appeared from the left of the screen and DIVAD gave it everything it had. I saw a slight hit on the wing of the drone as it flew off to the right of the screen. Shortly after the drone disappeared from view, there was an explosion. (Later it was reported that the third drone was detonated by a self-destruct device.)

Now it was time to hear from DIVAD's representative about the test. I was young and naïve back then so I felt bad for the guy and wouldn't have blamed him a bit if he ran off and disappeared to the right of the television screen too. The person from 60 Minutes sheepishly approached the DIVAD guy not knowing what to say. However, the DIVAD guy jovially declared success for DIVAD. What did I miss? What did the entire audience miss? I don't know if the Secretary of Defense was watching but he cancelled the system after this episode of 60 minutes aired. Maybe the DIVAD representative had his fingers and toes crossed. Maybe he was conditioned to view the test as a success. All I know is I sat in front of the television stunned.

What's the moral of the story? Again it's simple: As humans, we all can lie. We even will lie about a lie. It isn't restricted to any organization nor is it restricted to any national border. Its universal. Try this. If you're going to a business meeting today, tell your boss that his/her stupid idea is stupid. Maybe you're going to a party this weekend. Tell everyone what you really think about them and see how that works for you. Remember those little white lies our Mothers told us about after we told a whopper. An online dictionary defines them as: an often trivial, diplomatic or well-intentioned untruth. It's not a lie; its an untruth. Maybe that is a fib. One of my most used lines when I was a kid was: she did it! She being my sister. We all can lie--we're human! We may call it a social grace, more than likely, its a survival tactic. Just don't be surprised if the person on the other side of the negotiation table is telling you an untruth. Its part of our life experience. Besides, I'd never lie to you. :o

bob7947

"Under a Contractor Team Arrangement (CTA), two or more GSA Schedule contractors work together to meet ordering activity needs. By complementing each other's capabilities, the team offers a total solution to the ordering activity's requirement, providing a "win-win" situation for all parties."

But what is a Prime/Subcontractor relationship and what is the difference from a CTA? Let GSA explain.

See the information at gsa.gov.

bob7947

At the end of calendar year 2014, I analyzed the number of Federal Acquisition Circulars (FACs) issued by the FAR Council, by month, from 2014 through 2000.  I had mentally noticed that the Council had a penchant for issuing FACs in December so I wanted to see if the actual numbers matched what I thought was happening.  The numbers did!  My mind was still working.  So this year, I updated my 2014 analysis. Well, in 2016 and 2015, the Council was quite merry in December.  They issued 2 FACs during December in each of those years. Since the beginning of 2000, or for the past 17 years, there have been 133 FACs issued. They are grouped by the 12 months of the year below.  (By the way, in 2014 I typed the incorrect number.  I typed 188 when the actual number was 118.)

  • January -- 11 FACs
  • February -- 4 FACs
  • March -- 16 FACs
  • April -- 13 FACs
  • May -- 10 FACs
  • June -- 11 FACs
  • July -- 14 FACs
  • August -- 7 FACs
  • September -- 9 FACs
  • October -- 7 FACs
  • November -- 11 FACs, and
  • December -- 20 FACs.

As you can see, the FAR Council celebrates the December holidays by issuing FACs. The largest number of FACs--20--have been issued in December. Additionally, the FAR Council has issued FACs in 14 of the 17 Decembers. The only years that they missed were 2011, 2008, and 2005. (I just noticed that the years they missed were three years apart.  Obviously, a government conspiracy.)  In those 3 years, only 6 FACs were issued--the lowest number of FACs issued in any year. Perhaps, they just ran out of gas in those years.

Getting back to December, in 6 of the 17 years, including 2016 and 2015, the Council issued 2 FACs in December.  Again, that is the most for any month.  What can we conclude?  How about this.  Since the Council spreads holiday cheer in the only way it can during December by issuing FACs, they just love all of you.  And guess what.  There are still several business days left in 2016 and the Council has never issued 3 FAC's in any December, or for that matter, in any month.  If they feel extra cheery this year, maybe they will give you a third to ponder.

bob7947

For those of you who are not familiar with the auditing world, GAGAS is the acronym for Generally Accepted Government Auditing Standards and it is written and maintained by the Government Accountability Office (GAO). Compliance with GAGAS is mandatory for an auditor during the conduct of an audit and a memo noting compliance with GAGAS should be in the auditor's assignment folder for each audit.

Although I was a member of the auditing community during my career with the GAO, I also viewed myself as a member of the contracting community, As an auditor, I too was bound by GAGAS and I satisfied all of the training necessary to be a professional auditor. As a member of the contracting community, I reviewed thousands of contract files at contracting offices throughout the United States. In addition, I gained an MS in Procurement Management and I wrote GAO's contracting course which I specifically designed for auditors.

Before you think I'm a braggart of some sort, let me explain that I never awarded a federal contract, never wrote a justification and approval, never wrote a determination and findings, never wrote a negotiator's memorandum, etc. I never was a contract specialist and I don't think any auditor should have been one. My interest as an auditor was in how contracting should be done; not how it was being done. There could be a big difference between the two. But enough of this. Why am I writing this entry?

GAGAS CAN BE A SHAM

Recently, I read one of the worst pieces of garbage issued by an auditing activity in my lifetime. It was so pathetically awful that I couldn't read the report. It was page after page of unintelligible gibberish. That brought me back to a longstanding problem I have with GAGAS. It is why GAGAS should make you gag. GAGAS includes things that an auditor should possess for an audit. Below, is an excerpt from GAGAS on an auditor's Competence at section 3.69. I bolded and italicized the word collectively.

The staff assigned to perform the audit must collectively possess adequate professional competence needed to address the audit objectives and perform the work in accordance with GAGAS.

If an auditor does an audit on contracting, must the individual auditor know something about contracting? Simple answer. No! Let's dive a little deeper into the area covering an auditor's Technical Knowledge at section 3.72.

The staff assigned to conduct an audit in accordance with GAGAS should collectively possess the technical knowledge, skills, and experience necessary to be competent for the type of work being performed before beginning work on that audit. The staff assigned to a GAGAS audit should collectively possess . . .

c. skills to communicate clearly and effectively, both orally and in writing; and . . . .

Let's ask another question. If an auditor does an audit on contracting, must the individual auditor know what the auditor is talking about? Simple answer. No!

Go back and look at the two quotes. Notice how I highlighted the word "collectively." Collectively is an agency's way out. The staff assigned to an audit might include an attorney assigned to review the draft audit report once the audit is finished. Maybe, the attorney has some familiarity with contracting but the attorney will not be involved in doing the work. Perhaps, the staff assigned to an audit has an advisor who is knowledgeable but that advisor has no real authority over the conduct of the audit. I served as such an advisor. So much for "collectively possess." GAGAS can be a sham.

Over the years, I listened to agency officials' stories about ignorant auditors who would review their contracts. One of my favorites was the auditor who asked the contracting officer to point out the solicitation for him in the contract file. I wonder what the auditor was going to do with it when he was shown which document it was. You may have had your own unfortunate experiences.

During one of the final audits that I performed, I had contract files stacked in an agency conference room. From time to time, contract specialists would stop in the conference room and talk to me and we would discuss contracting issues. Towards the end of my stay in that conference room, an experienced contracting officer stopped in to see the anomaly--an auditor who could talk intelligently about contracting. I was proud of that. It let that contracting officer and other contract specialists know that I, as a reviewer of their work, took the time in my life to become familiar with the subject matter of their careers.

If the current version of GAGAS ensures an auditor's technical competence, why are there so many horror stories about auditors contracting ignorance? Why was I viewed as the anomaly during my entire career? The honest answer is that GAGAS, as it is currently written, does not ensure an auditor's technical competence in the field of contracting. That's it!

GAGAS CAN BE REVISED EASILY

Now for my suggestion. GAO should rewrite GAGAS's section 3.69 on Competence as I describe below.

The auditor-in-charge of the audit must possess adequate professional competence needed to address the audit objectives and perform the work in accordance with GAGAS.

GAO should rewrite GAGAS section 3.72 on Technical Knowledge as I describe below.

The auditor-in-charge of conducting the audit in accordance with GAGAS should possess the technical knowledge, skills, and experience necessary to be competent for the type of work being performed before beginning work on that audit. The auditor in charge of a GAGAS audit should possess . . .

c. skills to communicate clearly and effectively, both orally and in writing; and . . . .

My suggestion places responsibility for Competence and Technical Knowledge in one individual--the person who directs the audit. Normally, that person is called an auditor-in-charge or something similar. This can easily be done for contracting audits. For example, I was responsible for the conduct of an audit that included 17 subordinate auditors who had no experience with contracts. The work was done at several agencies and several sites around the country. To do the audit, I brought all members of the team to Washington, D. C. and trained them specifically for the work to be done. By the time we were done with the training, my staff knew what to look for and what the documents would look like. They had no trouble identifying problems and documents. As my staff performed their work, I visited with each of them, reviewed their workpapers, and reviewed the contract files, if it was necessary. Throughout the audit, I was available to assist and answer contracting questions. The audit was successful and it had an effect on the way you do contracting.

More and more, an ignorant Congress depends on what auditors report as contracting findings and recommendations. As a result, the work of ignorant auditors can affect contracting careers and contracting laws. Additionally, when an agency sends an ignorant auditor out to identify contracting problems the ignorant auditor doesn't know what to look for and couldn't identify the problem if it him him/her.

MORE SUGGESTIONS

In addition to GAO making the changes I noted to GAGAS, I suggest that agencies that conduct audits

identify auditors who have an interest in contracting and provide the technical training and knowledge they will need as they become auditors-in-charge on contracting audits.

require officials signing an audit to identify the auditor-in-charge on the signature page and certify that the auditor complies with the revised version of GAGAS's Competence and Technical Competence standards.

Further, I suggest that contracting agencies who are the subject of an audit require

their procurement executive or designee to request proof of auditor compliance with GAGAS sections 3.69 and 3.72.

officials that comment on the draft audit report to note any auditor non-compliance with GAGAS sections 3.69 and 3.72 in their comment letter.

bob7947

No, they are not candy; no they are not turtles. However, they did have an iron shell. Pook Turtles were designed by Samuel M. Pook and were the "City Class" of armored gunboats that sailed the Mississippi and its tributaries beginning in early 1862. They were called Pook Turtles because people thought they looked like turtles. The seven ships were the USS Cairo, Carondelet, Cincinnati, Louisville, Mound City, Pittsburg, and St. Louis. The recovered remnants of the USS Cairo now rest at the National Military Park in Vicksburg, Mississippi.

The contract is between James B. Eads, the ships' builder, and Montgomery C. Meigs. Among other accomplishments, Meigs was the architect and engineer of the Pension Building, now the National Building Museum, across G street from the GAO Building. In the contract, Eads is referred to as the "first part" and Meigs is referred to as the "second part." You will see reference to an 1808 act in the contract. That was a law passed to prevent members of Congress from benefiting from government contracts.

I found this 1861 contract while I was doing research for a future article. As you read it, you will notice some concepts that are in current government contracts. In fact, as you read the Wifcon Forum, you will note that its members ask questions about some of the same concepts that are in the following contract

Oh! About the price and delivery date--the price more than doubled and the delivery slipped by several months due to design changes. Some things never change!

Agreement between James B. Eads, of the city of Saint Louis, State of Missouri, of the first part, and Brig. Gen. M. C. Meigs, Quartermaster-General, acting for the United States, of the second part, witnesseth:

That the party of the first part, for and in consideration of the matter hereinafter referred to and set out, covenants and agrees with the party of the second part to build, on the Mississippi River, and deliver to the party of the second part at the wharf in the city of Cairo, State of Illinois, seven gun-boats, as described and referred to in the printed specification, a copy of which is annexed to, and is to be deemed and taken as part of, this contract, and do the same in conformity to said specifications and to the directions he may from time to time receive from the superintendents in charge.

Said gunboats are to be completed and finished, according to the specifications, on or before the 10th day of October next; and the said party of the first part agrees to forfeit to the United States the sum of $250 per day for each and every boat that is delayed beyond that time, i. e., the 10th day of October next.

The party of the first part further binds himself, with four sureties of $30,000 each, that he will faithfully perform his part of the contract, said sureties to be approved by the Secretary of War.

And the party of the second part, for and in consideration of the premises, covenants and agrees to pay to the party of the first part, for each and every boat so built, the sum of $89,600, as follows: The work to be estimated every twenty days, and 75 percent of said estimate to be paid by the party of the second part to the party of the first part.

Provided, nevertheless, That in case the party of the second part shall at any time be of the opinion that this contract is not duly complied with by the party of the first part is irregular or negligent, in such case he shall be authorized to declare this contract forfeited, and thereupon the same shall become null and void. And the United States shall thereupon be exonerated from every obligation thence arising and the reserved percentage on the contract price, as well as all the material furnished, upon which no estimate or payment may have been made, shall be forfeited to and become the right and property of the United States; and the party of the second part may thereafter agree with any other person for the execution of the remainder of the work, and the party of the first part shall have no appeal from the opinion and the decision aforesaid, and he hereby releases all right to except to or question the same in any place or under and circumstances whatever; but the party of the first part shall still remain liable to the party of the second part for the damages occasioned to him by said failure or refusal.

And it is further agreed between the parties that, in order to secure the punctual performance of the covenants above made by the party of the first part, and to indemnify and protect the party of the second part from loss in case of default and forfeiture of this contract, the said party of the second part shall be authorized to retain in his hands, until the completion of the contract, 25 per cent on the amount of moneys at any time due to said party of the first part.

The United States reserves the right to suspend the work under this contract at any time, and when the work has been faithfully performed by the contractor he will be paid in full for all work done up to the time of such suspension.

And it is further stipulated and agreed that no member of Congress shall be admitted to any share or part in this contract or agreement, or to any benefits to arise therefrom. And this contract shall be in all its parts subject to the terms and conditions of an act of Congress passed on the 21st day of April, 1808, entitled an act relating to public contracts.

Provided, Nothing herein contained shall be so construed as to authorize any officer of the United States to bind the United States by contract beyond the amount appropriated by Congress, or to sanction any such contract heretofore made:

Provided, also, That it is expressly understood and agreed that this contract, nor any part thereof, shall not be sublet nor assigned, but that it shall be well and truly carried out and fulfilled in good faith by the above-recited party of the first part, and that all payments on account thereof shall be made to the aforesaid party of the first part, his heirs, executors, or administrators.

It is further agreed that the party of the second part shall immediately appoint a superintendent, whose duty shall be to inspect the material used in constructing said boats as the work progresses, and to reject all that he may deem defective. If all of said boats are not built in one yard, then an assistant superintendent shall be appointed for each additional yard where the said boats may be in course of construction, provided there shall not be more than one superintendent to two boats. All extra work shall be estimated and paid for accordingly.

And for the true and faithful performance of all and singular the covenants, articles, and agreements hereinbefore particularly set forth, the subscribers hereunto bind themselves, jointly and severally, their and each of their successors, heirs, executors, ad administrators.

Thus covenanted and agreed by the said parties this 7th day of August, in the year of our Lord 1861, as witness their hands and seals.

James B. Eads,

M. C. Meigs,

Quartermaster-General

Witness: William A. Gordon

bob7947

In 2010, the U.S. Central Command's Task Force for Business and Stability Operations, had a requirement for security services to facilitate investment and commerce in Iraq. This blog entry deals with the 2 competitive solicitations and contracts that led to a case before the Court of Federal Claims (COFC).

Unfortunately for Tigerswan, the awardee of the 2 contracts under the solicitations, the contracts weren't rewarding--at least for the contracted items. (TigerSwan did claim damages of $56,246.24 on the first contract which DoD paid.)

The first contract was terminated for convenience in a litle over a month. The second contract received a stop work order within days due to a bid protest. It too received a termination for convenience a little more than 3 months after contract award. Meanwhile, the incumbent contractor received sole-source work at the same time. What to do?

Tigerswan filed a breach of contract claim to the COFC "arising from the termination for convenience of the last contract [solicitation W91GDW-10-C-6005] awarded to TigerSwan. For its breach of contract claim, [it] seeks $238,352.72 for lost anticipatory profits and $35,539.06 for line of credit interest."

So what did the COFC say? Here is a short excerpt: "TigerSwan has alleged sufficient facts to demonstrate a potential breach of contract for improper termination for convenience based on the government's alleged 'abuse of discretion' and failure to honor its contract with TigerSwan."

There is more to it than that. If you are interested in the whole case, you can read it at TigerSwan, Inc. v. U. S., No. 12-62C, April 2, 2013.

bob7947

GAO supplies us with its contracting rules in bid protest decisions. These rules are repeated and this is one of the reasons I provide key excerpts from bid protest decisions on Wifcon.com's Bid Protest pages. If you read these rules repeatedly, you will remember them. For example, here is a rule on what GAO reviews on a past performance issue.

The evaluation of past performance is a matter of agency discretion, and we will review the evaluation only to ensure that it was reasonable and consistent with the solicitation’s stated evaluation criteria and applicable statutes and regulations. (Advanced Computer Concepts, B-408084, May 30, 2013)

Think "consistent with the solicitation’s stated evaluation criteria" for this blog entry.

Recently, GAO's decision in American Apparel, Inc., B-407399.2, Apr 30, 2013, drew my attention. We know a solicitation's terms are important because it is what bidders and offerors rely on to prepare their bids and offers. However, could GAO's own rule that states "consistent with the solicitation’s stated evaluation criteria" leave it with an oddly written decision. I believe that it did.

In the American procurement, the solicitation stated that

“[f]or the period two years prior to the solicitation closing date, the Government will assess offeror-submitted past performance information, as well as relevant information from any other sources, for use as an indicator to successful contract performance.”

All of you probably have seen something similar to the above in a solicitation. It is not the solicitation language in this procurement; it is the events that interest me. The solicitation closed on September 22, 2010 but the contract wasn't awarded until January 18, 2013, over 2 years later. Things can happen in 2 years and in this procurement things did happen. American claimed that during this 2-year period, the successful offeror--Bluewater Defense--had performance deficiencies. However, in response to the protestor's claim GAO said

The RFP in this case provided that offerors’ past performance would be assessed “[f]or the period two years prior to the solicitation closing date,” which in this case covered the time period between September 23, 2008, and the closing date of September 22, 2010. RFP at 184. Where the Bluewater performance deficiencies identified by American fall outside of that time period, there was nothing improper about the agency’s decision not to consider these issues. See FR Countermeasures, Inc., B-295375, Feb. 10, 2005, 2005 CPD ¶ 52 (agency not required to consider past performance information outside of the time period set forth in the solicitation, even where solicitation reserved the agency’s right to do so).

My problem with using FR Countermeasures, Inc., in its decision as an example is that, in FR Countermeasures, there was a short period of time between the solicitation closing date and contract award. In the American decision, this time period was over 2 years. However, GAO happily states its rule without dealing with this 2-year period. That bugs me. Case closed, decision over, the protester loses. Maybe this caused some scratching of heads in GAO's bid protest unit too. I don't know but it left me wondering.

A skilled writer can use sleight-of-pen to make it appear that it dealt with an issue without really dealing with it. In my opinion, that is what GAO did and dealt with the 2-year time period in its background section. GAO mentions that the source selection authority (SSA) made its selection decision on January 13 without adding which year. (The decision also includes 2 different solicitation closing dates so I assume that the missing year was an oversight.) However, the sequence of events leads me to assume that the date was January 13, 2011. GAO further explains, that the procurement record (probably the contract file) included a memorandum from the contracting officer dated November 1, 2012, about a briefing given to the SSA on the results of a "supplementary past performance review." The memorandum explains that this review was written due to the length of time that had passed between the solicitation closing date and the award decision. GAO included a blurb from that memorandum which explained

When evaluating Bluewater for the additional two years [since the closing date of the RFP], their record of on or ahead of schedule decreased from[DELETED] to [DELETED], and American's record of on or ahead of schedule decreased from [DELETED] to [DELETED]. While both offerors records of on-time deliveries have decreased since their initial evaluation, they would both still be considered Very Good for their overall past performance rating, and on a comparative basis, Bluewater would still be considered superior to American for overall past performance.

Remember GAO did not discuss this memorandum in its "ruling" section of its decision. To complete its story, GAO wrote in the background section that

The record shows that the SSA considered the supplemental past performance information in making his affirmative determination of responsibility regarding Bluewater. The determination of responsibility noted that Bluewater had encountered certain performance deficiencies, but found that Bluewater maintained the production capacity, technical capacity, financial strength, integrity, and business ethics to be found responsible.

In the end, GAO issued its decision using its rule on the solicitation's requirements, ignored the 2-year period in its ruling, but deals with the 2-year period in the background section. Would GAO have mentioned it in the ruling section, if during the 2-year period, there was a substantial decline in the winning offeror's past performance? Anyway, it had me wondering.

There are 2 decisions you might want to read. They are FR Countermeasures, B-295375, February 10, 2005, mentioned in the decision, and International Business Systems, Inc., B-27554, March 3, 1997 for the "too close at hand" passage mentioned by the protester.

bob7947

In my last post on the Wifcon Blog, I proposed a House and Senate Committee on Contracting and Assistance. Why, you might ask? Remember the Clinger-Cohen Act? It was part of the National Defense Authorization Act for Fiscal Year 1996, P. L 104-106. What about the SBIR/STTR Reauthorization Act of 2011? It was part of the National Defense Authorization Act for Fiscal Year 2012, P. L. 112-81. What about the new Limitations on Subcontracting provision that was mentioned on the Wifcon Forum? You may have guessed: The National Defense Authorization Act for Fiscal Year 2013, P. L. 112-239, Section 1651.

So how does government-wide contracting legislation end up in the annual National Defense Authorization Acts? Think "sticky bill!" To be more exact, and maybe more accurate as it affects contracting, remember the scene in Saving Private Ryan where Tom Hanks' character explains how the remnants of his unit will deal with tanks--"

." As the annual National Defense Authorization Act makes its way through the corridors of Congress, you throw your sticky bill at it and hope it sticks.

It doesn't begin nor end there. Remember our old friend the Federal Acquisition Streamlining Act of 1994? It was originally introduced in the old Senate Committee on Government Affairs, now the Senate Committee on Homeland Security and Governmental Affairs. This Senate Committee has a counterpart in the House of Representatives--the House Committee on Oversight and Government Reform, formerly the old Committee on Government Operations. If Congress cannot keep the names of its committees simple, how can it keep contracting legislation streamlined? I'll answer that--it cannot. Getting back to the House Committee on Oversight and Government Reform, this year its chairman introduced H. R. 1232, the Federal Information Technology Acquisition Reform Act. Currently, H. R. 1232 is wallowing in the full House of Representatives. It may eventually stick to something and get passed. Pray it doesn't.

Finally, there are agencies totally overseen by a single committee in the House and Senate. These committees treat their agencies as their own turf, and of course, write agency-specific contracting laws. I remember sitting with some bright, young, eager, staff members of one such committee. They were writing a piece of legislation that would affect an agency's contracting law. As I read the bill, all I could think of was--at least they heard of the Competition-in-Contracting Act. Eventually, the bill was passed without question and became another piece of garbage legislation affecting one agency's contracting. If you are working in one of these agencies' contracting offices, woe are you.

I only will briefly mention that the House and Senate Small Business Committees can initiate their own legislation and eventually pass it too.

In our wonderful game of baseball, one pitcher stands on a hill and throws the ball towards the batter to start the action. If Congress wrote the rules for baseball, all 8 players facing the batter would throw balls toward the batter and the catcher squatting behind the batter would take some cheap shots at the batter. If you work in a contracting office or if you are a contractor, you are the batter in Congress's version of baseball.

bob7947

I was reading a decision of the Armed Services Board of Contract Appeals (ASBCA) about a week ago and I found the following.

Sharp Electronics Corp. v. McHugh, 707 F.3d 1367 (Fed. Cir. 2013) is the first Federal Circuit interpretation of FAR 8.406-6 regarding the respective authorities of GSA schedule COs and ordering agency COs.

Why read the ASBCA decision when I could go straight to the horse's mouth! So I searched the Court of Appeals for the Federal Circuit (CAFC) web site and I found the Sharp decision--and it was recent. Here is a brief description of the issue in the Sharp case.

On September 18, 2001, the General Services Administration (GSA) awarded a multiple award schedule (MAS) contract to Sharp Electronics Corporation for office equipment. On December 1, 2005, the Army issued a delivery order "in accordance with and subject to terms and conditions" of Sharp's MAS contract. The order provided for a four-year lease of copier equipment, including one base year and three option years, with the last option year ending on December 1, 2009. Option years one and two were exercised in full. The Army partially exercised option year three for six months and subsequently extended the lease for three more months. The lease finally ended on August 31, 2009.

Sharp filed a claim with the Army contracting officer (CO) citing the termination fee provisions of its schedule contract. The Army CO did not respond and did not refer Sharp's claim to GSA's CO who was responsible for Sharp's MAS contract. After 60 days, Sharp appealed to the ASBCA which determined that it did not have jurisdiction and dismissed the case. Sharp then filed an appeal with the CAFC.

What should an agency CO do with a dispute on an order? What should an agency CO do if there is a question of contract interpretation with the MAS contract and that interpretation affects the interpretation of the agency order? Well, in a majority decision, the CAFC tells us this.

We hold that FAR 8.406-6 does not authorize an ordering CO to decide a dispute requiring interpretation of schedule contract provisions, in whole or in part, regardless of whether the parties frame the dispute as pertaining to performance. However, the ordering CO is certainly authorized to construe the language of the order (or its modifications). Because an order's details--not merely price, quantity, and specifications, but also permissible variation in quality or quantity, hours and location of delivery, discounts from schedule pricing, etc.--are arranged between the schedule contractor and the ordering CO, the ordering CO is able to construe these commonly disputed terms as long as the dispute does not involve interpretation of the schedule contract. We also see no reason why an ordering CO resolving a dispute cannot apply the relevant provisions of the schedule contract, as long as their meaning is undisputed. For example, an ordering CO who resolves a dispute over whether goods are conforming may apply schedule contract provisions governing replacement of nonconforming goods. See FAR 8.406-3(a) (2012) ("If a [schedule] contractor delivers a supply or service, but it does not conform to the order requirements, the ordering [CO] shall take appropriate action in accordance with the inspection and acceptance clause of the contract, as supplemented by the order."). The dispute only need go to the GSA CO if it requires interpretation of the schedule contract's terms and provisions.

It is easy for the CAFC but is it that easy for you? There was a minority opinion in this CAFC case too which looked at it differently.

Anyway, the CAFC case is Sharp Electronics Corporation v. John McHugh, Secretary of the Army, No. 2012-1299, February 22, 2013. The ASBCA decision is Impact Associates Inc.

bob7947

I had planned to write a detailed article about my plan for the above committees. However, I'm never going to get to it. So, I'm going to try a series of quick posts to get my thoughts published. Don't tell me that these committees will never be formed. I know they won't. Committees and subcommittees are entities run by politicians for politicians. However, I can dream.

You can see from the titles of my proposed committees that they would deal with federal contracting and federal assistance. For now, this blog entry will deal with federal contracting only. In fact, this blog entry will deal only with the structure of the committees. Both the House and Senate committees will have the same jurisdiction and subcommittees. Here we go!

Committee on Contracting and Assistance: Complete jurisdiction over federal contracting. No other committee or subcommittee may propose contracting legislation.

  • Subcommittee on Defense Contracting: All defense contracting issues.
  • Subcommittee on Civilian Agency and Congressional Agency Contracting: All civilian and congressional agency contracting issues.
  • Subcommittee on Small Business Contracting: All small business and socioeconomic issues.
  • Subcommittee on the Contracting Workforce: All issues dealing with the contracting workforce.
  • Subcommittee on Streamlining: Identifying (1) current public laws governing federal contracting with the goal of eliminating unnecessary and conflicting legislation and (2) any needed public laws.
  • Subcommittee on Congressional Contracting Goals: For any needed public laws, this subcommittee will convert specific legislative language into congressional goals that identify the outcomes Congress seeks to achieve.

I view the first 4 subcommittees as oversight committees that would work with the last 2 subcommittees. However, I see much work for the final 2 subcommittees beginning with Day 1.

More later.

bob7947

The General Services Administration (GSA) has about 19,000 Multiple Award Schedule (MAS) contracts. About 80 percent are contracts with small businesses. Last year, GSA proposed terminating thousands of small business contracts for not meeting the $25,000 annual sales threshold. Apparently, GSA forgot to pay the contractors something--$2,500.

The House Committee on Small Business did some checking--more likely someone told them--and found that GSA owed some money. Here is the story.

Between Fiscal Year 2008 and Fiscal Year 2012, there were 3,300 of these canceled federal contracts. Of these, 1,334 were eligible for a minimum guaranteed payment from GSA; 1,281 of the eligible firms were small businesses. Because of this error, GSA will pay $3,108,888 owed to these companies. The remaining firms had not filed the necessary forms, so it is unclear if GSA would have owed them the $2,500 payment.

You can read all about it at the Small Business Committee site.

bob7947

In Lockheed Propulsion Company; Thiokol Corporation, B-173677, June 24, 1974, GAO issued its bid protest decision on the Solid Rocket Motor (SRM) Project for the Space Shuttle Program. This decision was issued before the National Aeronautics and Space Administration (NASA) had its first SRM and before it had its first Space Shuttle.

One part of the Lockheed protest dealt with the proposed costs for ammonium perchlorate (AP), a major part of the propellant in the SRM. Two offerors, Lockheed and Thiokol, had proposed different costs for the AP even though they would be getting the AP from the same suppliers. GAO concluded that the offerors' evaluated costs should be the same for the AP because of this. As a result, GAO proposed a $68 million dollar adjustment to the evaluated costs of Lockheed and Thiokol. Since NASA had concluded that Lockheed and Thiokol were technically equal and that their evaluated costs were both in the $800 million range, a proposed adjustment of this size could affect the outcome of the selection.

GAO recommended that

In view of our findings in the ammonium perchlorate area, we believe that [NASA] should determine whether the validity of [its] selection is materially affected by the substantial reduction in the cost difference.

NASA promptly considered GAO's recommendation and continued with its original selection of Thiokol for the SRM award.

Nearly 39 years later, I was reminded of this decision by GAO's decision in BC Peabody Construction Services, Inc., B-408023, May 10, 2013. In this procurement, the Corps of Engineers rated the same subcontractor as acceptable for Edens Construction Company but unacceptable for BC Peabody Construction Services.

GAO explained

Where multiple proposals propose the same subcontractor, once the agency becomes aware of that subcontractor's experience, including from another firm's proposal, it cannot reasonably assign one proposal a higher score than another based on that experience.

Although GAO concluded that the two offerors had been treated unequally by the Corps, GAO further explained that it

will not sustain a protest unless the protester demonstrates a reasonable possibility that it was prejudiced by the agency's actions; that is, unless the protester demonstrates that, but for the agency's actions, it would have had a substantial chance of receiving the award.

Unlike in the Lockheed decision, GAO decided that BC Peabody did not have a chance to win because it still would have received a "deficiency" for not having a letter of commitment from a subcontractor.

The moral of this story is that even after proving that a mistake was made, if the protester cannot win anyway, it still loses.

bob7947

Searching for an item to post is time-consuming and frustrating. However, some times an item pops up from an unexpected place. In this case, it was the U. S. Civilian Board of Contract Appeals. The case is straightforward and easy to read and contains some excerpts that are noteworthy. Here is what the Board said:

"Our view is in line with the contractor's. Although Drennon's technique for excavating the hillside may not have been ideal, due to the defects in the design of the project and significant differences between the geotechnical information provided and the actual soil composition, the hillside would have collapsed no matter what technique the contractor had used. Whether the contractor's design for the wall (which was approved by the agency) would have succeeded is irrelevant; the virtue of the design was not tested, since the project was truncated before the wall was built. We grant the appeal, excluding from the award only the contractor's profit on its suspension of work claim."

See the entire case at Drennon Construction & Consulting, Inc. v. The Department of the Interior.

bob7947

In early 1977, Gordon Wade Rule (Rule) sat in a chair in a corner of a conference room at the Naval Material Command reading a document that I had prepared about his negotiations on the CGN-41, a nuclear-powered guided missile cruiser.  Days earlier, I was among a group that was briefed by a staff member of Admiral Hyman Rickover (Rickover), the Director of the Naval Nuclear Propulsion Program.  Although, the briefing was supposed to be about the CGN-41 negotiation, we were treated to a 3-hour lecture on how the Navy's shipbuilders were trying to "pin the rose" on Rickover. In this case, pinning the rose had nothing to do with the shipbuilders asking the Admiral to a prom.

When I began writing this blog entry, I had planned to include only the work I had done decades ago for the Chairman, House Committee on Armed Services.  That work involved Rule's negotiation of Modification 31 to the contract that included the CGN-41, the eventual USS Arkansas. I wanted you to figure out if the modification that Rule signed was done in a manner that would allow it to survive a court test.  It took 2 courts to decide that question so it wasn't as easy as it sounded.  Unfortunately I read too much surrounding material and I realized that I was taking Rule's actions out of the context in which they happened back in the 1970s.  So, I added a bit more information.  You will see Rule as the contracting officer, Rickover as a program officer interfering with the contracting officer, Senator William Proxmire apparently acting for Rickover and himself, and Deputy Secretary of Defense William P. Clements, Jr. (Clements) trying to resolve the shipbuilding claims problem in any manner he could.  You cannot choose sides on this one.  All characters, including government agencies and shipbuilders, were trying to manipulate and influence anyone that became involved with the CGN-41.  It seemed as if sides were drawn by identifying the enemy of an individual's enemy.  

A Brief Introduction to the Shipbuilding Claims Era

In the early 1970s, cost overruns and shipbuilders' claims had become a major problem.  By 1976, it had reached epidemic proportions with $1.9 billion in shipbuilder claims.  The shipbuilders, the Navy, the Department of Justice, and Rickover were in a war.  In the case of the CGN-41, Newport News Shipbuilding and Drydock Company was the industry player.  

Clements wanted to settle the ship claims problem with the use of P. L. 85-804.  A June 21, 1976, Business Week article explains his early effort.  The excerpt below is a quote from the article entitled:  The Shipbuilders Balk at 40 Cents on the Dollar.  The article explained that Clements had planned to settle $1.9 billion of shipbuilding claims against the Navy for "between $500 million and $700 million" but that plan fell fiat with the Navy's shipbuilders.  He explained that "the shipyards are giving me trouble."  The article further described:

Quote

On Apr. 30 Clements informed both the Senate and the House Armed Services Committees of his unusual plan to clear up long-pending claims, which he said are largely responsible for the "acrimonious and adversarial environment that now marks Navy-shipbuilders business relations." He promised the legislators a progress report on June 10. At the same time, he predicted privately that he would have the claims situation wrapped up by that date.

The settlements would be under terms of Public Law 85-804, enacted by Congress in the early 1960s to enable the Defense Dept. to modify contracts when it is in the interest of national defense. The law was amended in 1973 to require that Congress be notified prior to use of the law for any modification exceeding $25 million and be given 60 days to disapprove.

Clements intended to use this program to bypass traditional, drawn-out appeals board procedures and to wipe the slate clean of the massive extra dollar amounts demanded by shipbuilders to compensate them for such things as Navy-ordered design changes, late delivery of government-furnished equipment, and higher-than-anticipated inflation rates. But at midweek Clements was far short of his goal. The two shipyards with the bulk of the outstanding claims were reluctant to accept his offer of roughly 40¢ on the dollar in immediate cash.

A lot of money. Tenneco Inc.'s Newport News Shipbuilding & Dry Dock Co. filed the largest of the outstanding claims-some $894 million. After meeting Wednesday morning with Clements, Newport News President John P. Diesel said: "We have failed. We can't get together on money, and the Navy has not done a damn thing about changing contracting procedures."

After failing to reach a settlement himself, Clements called Navy management to his office for a meeting of the status of shipbuilding claims.  Nothing had been accomplished by them either.  He then focused on the CGN-41.  The work on this ship had been stopped by Newport News because of issues it was having with the Navy.  The contract was in court and work had started again under the condition that the Navy negotiated in good faith with Newport News to resolve the issues.  The court's time limit for good faith negotiations was running out and something had to be done.  Since the CGN-41 contract was in court, the Department of Justice was required to play a part in the review of any settlement proposed to the court.  

This is where our story begins.  I have added the dates on which the actions occurred so that you can follow.  All facts are based on documents that I had reviewed in the 1970s or documents that I recently reviewed.  I needed to limit the length of this entry so I added enough information to give you a flavor of the times.  Sometime in the future, I may write a larger article.  Rule was appointed as a special contracting officer on the CGN-41 to resolve the issues that the Navy and the Secretary of Defense could not accomplish.  Undoubtedly he knew he was heading into a mighty storm that might harm him.  

Contract Modification P00031 To CGN-41:  Chronology of Events

July 13, 1976:  Clements held a meeting to discuss Navy shipbuilding claims.  Among those in attendance were:

  • Deputy Secretary of Defense (Clements)
  • Consultant to the Deputy Secretary of Defense
  • Assistant Secretary of the Navy (Installations and Logistics) (ASN (I & L))
  • Chief of the Naval Material Command (NAVMAT)
  • Vice-Chief of the Naval Material Command  (NAVSEA)
  • General Counsel of the Navy, and 
  • Gordon Rule, Director, Procurement Control and Clearance Division, Naval Material Command. (Rule)

In regard to the Newport News claims, a member of the meeting quoted Clements as saying that he was "irrevocably committed to solving this problem; unlike Admiral Rickover."  Clements then asked the Navy officials why they had not reformed the contract, indicating that if they would not, he would.  He then stated that he wanted to see four changes incorporated in the CGN-41 contract:  (1)  a new escalation clause; (2) a new "changes" clause; (3) a new ceiling price; and (4) a new delivery date.  (emphasis added)

During the meeting it was agreed that Rule would become negotiator for the CGN-41.  He was to report directly to the Chief, NAVMAT and the Vice Chief, NAVMAT was to meet with Clements each day at 9:15 a.m to report on the progress of the negotiation.

July 14, 1976:  Rule telephoned Newport News to explain that he had been assigned principal negotiator on the CGN-41 and requested a meeting.

July 15, 1976:  Newport News was contacted by a consultant to Clements who explained Rule's authority. Rule and Newport News held their first meeting.

July 16, 1976:  The Assistant Secretary of the Navy (Installations and Logistics) wrote to the Chief, NAVMAT informing him that the Chief would be responsible for the direct discussions between Rule and Newport News.  Rule would be the principal negotiator and Rule would be assisted by NAVSEA and the Navy General Counsel, as required.

July 16, 1976:  Rule sent a memo to Clements describing his first meeting with Newport News.  As a note, he mentioned that he intentionally did not contact the Navy's Supervisor of Shipbuiliding, Conversion and Repair (SUPSHIPS), Newport News.

July 19, 1976:   Rule sent a memo to the Deputy Commander for Contracts, NAVSEA asking for brief descriptions of what the Navy considered as key issues for negotiation and the Navy's negotiating position so he could develop his own negotiation position.

July 28, 1976:  The Vice Chief, NAVMAT and a consultant to Clements held discussions with Newport News.  Areas discussed were: when the CGN 41 problems would be solved, ceiling price, and escalation provisions.

August 10, 1976:  Rule telephoned Newport News and requested a meeting in Washington on August 12,1976.

August 12, 1976:  During a meeting in Washington between Rule and Newport News, Newport News left a general outline for negotiations.

August 12 and 13, 1976:  The Vice Chief, NAVMAT asked Rule about the August 12 meeting so he could inform Clements.  Rule explained that Newport News had delivered a proposal and he did not approve of it.

August 17, 1976:  Rule telephoned Newport News and requested a negotiating session to be held on August 20, 1976.

August 19, 1976:  The Deputy Chief of Naval Material (Procurement and Production) issued Rule an appointment as Contracting Officer with "unlimited authority with respect to negotiations with Newport News."

August 20, 1976:  Negotiations were held between Rule and Newport News.

August 23, 1976:  The Vice Chief, NAVMAT and Rule met with Clements to brief him on the August 20th negotiations.  According to Rule, Clements' comment on the negotiations was "fine."  After the meeting with Clements, Rule received a note from the Chief, NAVMAT to meet him in the Office of the Assistant Secretary of the Navy (Installations and Logistics).  Among those attending were:

  • Assistant Secretary of the Navy (Installations and Logistics),
  • Chief, NAVMAT, 
  • Vice Chief, NAVMAT,
  • Rule, Director, Procurement Control and Clearance Division, Naval Material Command,
  • Commander, NAVSEA,
  • Deputy Commander for Contracts, NAVSEA,

At this meeting, the Chief, NAVMAT ordered Rule to describe the results of the August 20 negotiations.

August 24, 1976:  Rickover wrote to the Chief, NAVMAT that he had heard a rumor of a settlement on the CGN-41 between Rule and Newport News.  Rickover commented point-by-point about the rumored settlement and said such a settlement "would show that the Government will not require Newport News to honor its contracts."  Rickover recommended that any

Quote

settlement be referred formally to the Naval Sea Systems Command for review and comment by knowledgeable personnel directly responsible for the work in question. In this regard I [Rickover] will be glad to provide assistance based on my own knowledge of the events in question.

August 24, 1976:  Senator William Proxmire wrote to the Attorney General, Department of Justice expressing concerns about Gordon Rule's views on the CGN-41 negotiations and telling the Attorney General:

Quote

I understand that the Department of Justice has sole responsibility within the Government for approving out-of-court settlements involving Government matters under litigation. I assume that the Justice Department will review any such settlements proposed by the Navy in the CGN-41 case. However. in view of the importance of the CGN-41 case to the overall shipbuilding claims problem, I request that you direct the Navy to keep you fully informed of any negotiations and that you review any settlement offer to ensure that it is on sound legal ground and in the public interest before the Government becomes a party to it.

August 25, 1976:  Newport News telephoned Clements and read a prepared press release.  The consultant to Clements said he and Clements approved of the press release, an excerpt of which stated:  "The parties have agreed to sign a definitive contractual document embodying the negotiated agreement for the construction of the CGN-41."  Later that day, the Assistant Secretary of the Navy (Installation and Logistics) telephoned Newport News, informed them that he was perturbed by the Newport News press release and stated that the Navy would issue its own press release stating that agreement had been reached in principle but that the matter was to be reviewed by higher authority.  On this same date the Navy issued a press release explaining an "agreement in principle" was being drafted for review and approval.  (Emphasis added)

August 26, 1976:  The Chief, NAVMAT sent Rickover a response to his August 24, 2016 letter stating:  

Quote

From your many, years in government service I know you realize that business sensitive negotiations should not be influenced by sources outside of the designated negotiating parties, and that a broadly distributed letter from you, such as reference (a) [August 24, 1976 memo from Rickover described above], cannot help but cause perturbation in the negotiating process, disrupting the efforts of the assigned negotiator. 

The Chief, NAVMAT further wrote:  For reasons such as this, you must stand apart from these negotiations unless the technical areas regarding naval nuclear reactors become involved.

August 27, 1976:  Rickover responded to the Chief's, August 26, 1976 letter to him.   In response to the wide distribution he used for his letter of August 24, 1976, Rickover explained that: 

Quote

I felt obliged to inform them of what I had heard. I am sure you are not implying that it is improper for me to call such matters to the attention of those responsible, and point out potential problems. To remain silent would be analogous to not warning my mother that she was about to fall off a cliff.

He used the same distribution list for this 6-page letter as he did in his August 24, 1976 letter.

August 30, 1976:  Newport News met with Rule in Washington and delivered the first draft of Modification P00031.

The Chief, NAVMAT sent a letter to Rule explaining that, prior to a binding agreement on the CGN-41, the elements of the agreement must be submitted to the Chief, NAVMAT for review and approval.  The review was to be conducted by the Vice Chief, NAVMAT, the Deputy Chief, NAVMAT (Procurement and Production), the NAVSEA Deputy Commander for Contracts; and the General Counsel for the Navy.  Mr. Rule was to provide the proposed contract modification, the business clearance justifications, and other supporting papers for review prior to signature by the contracting officer.

Gordon Rule forwarded a draft memorandum to the Chief, Naval Material that summarized his negotiations with Newport News.

August 31, 1976:  The General Counsel of the Navy noted the Rule draft memorandum and told Rule of the General Counsel's responsibility to review the summary of negotiations.  Additionally, the General Counsel requested more information to support Rules' summary.

September 1, 1976:  Rule sent a summary of his negotiations to the Chief, NAVMAT.

September 3 1976:  In response to the August 31, 1976 memo from the Navy General Counsel, Rule sent him additional information supporting his summary of negotiations.  He also provided a copy of the first draft of Modification P00031.

September 14, 1976:  Members of Rule's and Newport News negotiating teams and DCAA auditors met in Washington to discuss provisions in the first draft of Modification P00031.  DCAA was asked to review certain provisions of the proposed modification.

September 16, 1976:  The Attorney General, Department of Justice, responded to Senator Proxmire's August 24th letter by writing:

Quote

Your letter requests that I direct the Navy to keep me fully informed of any negotiations and that I review any settlement offer to insure that it is on sound legal ground and in the public interest. The Justice Department intends to review any proposal and/or papers before submission to the court. We would request the court to approve any settlement only if we are satisfied that it is on sound legal ground and in the public interest.

September 20, 1976:  NAVSEA's Deputy Commander for Contracts and a member of the "review team" submitted his analysis of the first draft to the Vice Chief, NAVMAT.  This analysis was not made available to Rule.

September 24, 1976:  DCAA submitted its analysis of certain provisions of the first draft to a member of Rule's negotiating team.

September 27, 1976:  Newport News delivered a second draft of the modification to Rule and Rule requested DCAA to review the draft.

[September 28, 1976:  Clements wrote a letter to the Attorney General, Department of Justice, commenting on the August 24 letter of Senator Proxmire.  In regard to Rule, he wrote:

Quote

Senator Proxmire in his letter suggests that Mr. Gordon Rule is not impartial and that he might not act in the Government's interest but would so act as to undermine the Government's ability to enforce contracts. This is a serious charge by the Senator and defames both the character and competence of Mr. Rule. As I have indicated, it was at my suggestion that Mr. Rule was appointed by the Navy as the senior negotiator in the CGN-41 matter. I know Mr. Rule's background and work experience during his years as a Navy procurement official, and I am familiar with his current work as the CGN-41 negotiator. I consider Senator Proxmire's remarks regarding Mr. Rule ground-less, ill-tempered and unworthy of a member of the U.S. Senate.

In regard to the Department of Justice's review of the CGN-41 negotiation, he said:  "Let me assure you that we in DoD have no intention to by-pass or withhold from your department any information which you determine that your department needs in connection with legal proceedings under the court order."

September 28, 1976:  DCAA submitted its analysis of the second draft to Rule.  

October 4, 1976:  NAVSEA submitted its estimate of the cost of the draft modification.  Rule rejected the NAVSEA estimate.

October 5, 1976:  Rule submitted a memorandum to the Chief, NAVMAT for his approval.  It included the estimated dollar impact of his negotiated settlement.  For those in contracting, it would be similar to a negotiator's memorandum.  The Navy General Counsel sent its analysis of the information supplied by Rule to the Attorney General.  In the memorandum, Rule noted that a member of his negotiating team could not complete an analysis he requested because of interference from Rickover and his staff.  However, he was able to devise a workaround to complete his cost estimate of the modification for the Chief's review and approval.

October 7, 1976:  Newport News carried a third draft of the proposed modification to Rule.  The cover letter from Newport News attached to the modification said "I have executed the enclosed modification on behalf of the company and request you immediately return a fully executed copy."

Rule took a copy of the cover letter to the Chief and Vice Chief, NAVMAT in the afternoon.  He returned to his office and received a letter from the Chief, NAVMAT telling him that neither he nor his review group had a copy of the proposed modification that accurately reflected the results of Rule's efforts.  Final review had not been completed and the proposed modification could not be consummated before the review was done.

According to Rule, he thought about the CGN-41 negotiation effort all afternoon after he met with the Chief and Vice-Chief, NAVMAT.  He explained in a deposition that he:

Quote

could see what was happening to this whole negotiated settlement. I knew the object of the negotiation. I knew why I had been picked to negotiate a settlement pursuant to the order of the court, which I had done. I could see the Rickover-Proxmire, et al., influence at work everywhere.

And I decided those things all-those things all ran through my mind-I wasn't unmindful of the roadblocks and the lack of cooperation that I had gotten and was getting from the office of General Counsel. When my Contracting Officers statement was turned over to the Office of General Counsel for their review, they then asked me for substantiating documents. I gave them those documents . . . . They were requested by Admiral Lascara [Vice Chief, NAVMAT] to please not write anything until we can get together and discuss this: Let's at least discuss it. Rule had said one thing. Now, review it and let's get together and discuss it before you write anything. They never did. They wrote a 85-page document. They had lawyers working their butts off. They wrote an 85-page document and turned it over to the Department of Justice. And I don't know what it says today. They won't tell me. These are my own lawyers that are supposed to be helping me. They've never told me what was in there. Well, on the 7th of October when these things ran across my face, before my eyes, I said: Something's got to be done. I'm a Contracting Officer. I've got the authority. Now-I'm going to sign the goddam thing. And I signed it.

October 8, 1976:  The Vice Chief, NAVMAT called Rule into his office at 8:22 a. m.  He gave Rule a letter dated October 7, 1976 that explained that he did not have authority to sign the modification.  Rule explained he had signed it and the Vice Chief requested Rule to give him all signed copies.  Rule refused but said he would give them to Clements.  The Vice Chief then left for his 9:15 am meeting with Clements.  Rule returned to his office dictated a transmittal letter imposing two conditions upon the modification and gave Newport News a copy.  The Vice Chief, NAVMAT called Rule into his office and told him that the Undersecretary of the Navy would keep all executed copies of the modification but Rule told him that he already had signed it.  He returned to his office, signed the transmittal sheet, and handed it to Newport News at 10 A. M.  Shortly afterward at 11:50 a. m., Rule was notified that his appointment as contracting officer was rescinded.  

March 8, 1977:  The District Court for the Eastern District of Virginia ruled that:

Quote

There was a meeting of the minds of the parties on August 20, 1976; there is adequate consideration to support this compromise agreement; and failure to provide cost of pricing data does not invalidate the agreement.  We find that Deputy Secretary of Defense Clements, who initiated the negotiation efforts, has approved the compromise agreement.

February 27, 1978:  The United States Court of Appeals, Fourth Circuit ruled that

Quote

We vacate this order [District Court's above] because we conclude that the parties' negotiators did not settle the case orally and because the Attorney General, whose approval was essential, rejected the terms that were ultimately reduced to writing.

 

bob7947

"According to the complaint, filed in this matter with the United States District Court, Southern District of California, case number 13MJ1269, Cervantes is charged specifically with violating Title 18, United States Code (U.S.C.) Section 201 ( B )(2), bribery. Cervantes allegedly used his position to extort bribes from businesses seeking to do business at Camp Pendleton and allegedly referred to himself as the Godfather at Camp Pendleton; Cervantes is currently a U.S. Department of Defense employee and a supervisor for Construction and Service Contracts, Inspection Branch, at Camp Pendleton."

See it at fbi.gov.

bob7947

The government has plenty of rules involving time. In certain circumstances, an offeror has 10 days to submit a protest. On the other end of the process, contractors have so much time to submit a claim or to respond to a contracting officer's final decision. Here is one case involving time limits:

On April 26, 2012, EPSI submitted a certified claim to the SBA contracting officer seeking $135,013.27 from the SBA for increases in the minimum wages during EPSI's period of performance from October 1, 2007, through April 19, 2009. The contracting officer issued a final decision denying the claim on July 5, 2012. There is no dispute in the record that EPSI received the final decision on July 5, 2012. EPSI filed its notice of appeal by fax with the Board on October 5, 2012 (a Friday), which is ninety-two days after receipt of the final decision. On October 19, 2012, the respondent filed a motion to dismiss, arguing the notice of appeal was untimely. In response to a show cause order, EPSI responded to the motion, arguing that the notice of appeal should be considered timely in light of the extent of the activity and delays by SBA for three (3) years after performance of the contract and the existence of reasonable excuses for the one (1) day delay.

See what the Civilian Board of Contract Appeals had to say about this.

bob7947

The Army plans to develop and procure a new Ground Combat Vehicle (GCV) that will do two things: 1) operate as a combat vehicle and 2) transport soldiers onto the battlefield. The GCV would replace the current Bradley Infantry Fighting Vehicles. The Congressional Budget Office (CBO) believes that implementing the GCV program would cost $29 billion–in 2013 dollars–between 2014 to 2030.

The CBO did a report that compares the Army’s plan for the GCV with four other alternatives. Although none of those alternatives would meet all of the Army’s goals for the GCV program, the CBO claims that all are likely to be less costly and less risky than the Army’s plan. Two of the alternatives would involve procuring the vehicles from other countries.

See it at cbo.gov.

bob7947

In the U. S. District Court for the District of Columbia, a recent opinion was issued in which 3 hospitals wanted to avoid being labled as government subcontractors to avoid the Department of Labor's rules covering subcontractors.

The hospitals had contracts with UPMC Health Plan to provide medical services and supplies to individuals enrolled in its program. UPMC contracted with the U. S. Office of Personnel Management (OPM) to provide coverage for federal employees in the Federal Employees Health Benefits Program. Since the hospitals provided medical services to federal employees pursuant to their agreements with UPMC, the Department of Labor concluded that the hospitals qualified as subcontractors and were subject to certain statutory and regulatory requirements imposed on subcontractors.

Part of the judge's opinion stated that the "Provision of medical services and supplies was a critical component of the UPMC's contract. The contract depended on medical providers like the [hospitals] to offer medical services and supplies necessary for UPMC to meet its obligations under its contract with OPM." "Therefore, they qualify as subcontractors under the Secretary's regulations."

You can see the full opinion here.

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