In a recent thread in the Wifcon discussion forum, a member asked if a task order issued under an Indefinite-Delivery Indefinite-Quantity (IDIQ) contract can contain an option that permits extension of the order beyond the contract expiration date. Here is the question:
At about the same time as that post, I received a telephone call from a former student asking virtually the same question.
Those questions come after the decision by the Armed Services Board of Contract Appeals? decision in General Dynamics C4 Systems, Inc., ASBCA No. 54988, May 8, 2009, http://docs.law.gwu.edu/asbca/decision/pdf2009/54988.pdf. We work in a time in which people do not read the Federal Acquisition Regulation and the standard clauses in their contracts. The General Dynamics decision shows the latent potency of those clauses. So I thought it might be useful to review the standard terms of IDIQ contracts to see how we can answer the questions.
In this piece, when I write ?task order? I?m including delivery orders.
Key Terms of IDIQ Contracts
FAR 16.504, which describes Indefinite-Delivery contracts, prescribes their content and establishes rules for their use. FAR 16.504(a)(4)(i) provides, without further explanation, that an IDIQ contract must:
What is ?the period? of an IDIQ contract? In order to answer that question we must look first to the standard FAR clauses. FAR 16.506 prescribes two such clauses for use in IDIQ contracts: FAR 52.216-18, Ordering (OCT 1995) and FAR 52.216-22, Indefinite Quantity (OCT 1995). The Indefinite Quantity clause provides as follows:
Note that paragraphs (a) and (d) of the Indefinite Quantity clause refer to a period within which the contract is ?effective,? and which I?ll call the effective period. The clause provides no space in which to insert the start and end dates of the effective period, but indicates that the dates are ?in the Schedule.? When using the Uniform Contract Format described in FAR 14.201-1 and 15.204-1, the Schedule includes contract sections A through H.
Paragraph (d) of the Indefinite Quantity clause provides a space in which the contracting officer is supposed to insert the last date on which the government can require the contractor to perform or deliver, which I?ll call the last date of required performance. (See FAR 52.104(d) and (e) about making insertions in clauses.)
Note three things about paragraph (d): first, it implies that the contracting officer can issue an order requiring performance or delivery after the expiration of the effective period; second, it says that if the order is not to be completed within the effective period the terms of the contract will be extended ?with respect to that order?; and third, it indicates that the last date of required performance can also be later than the expiration of the effective period.
The Ordering clause provides as follows:
Note that the Ordering clause provides for the establishment of a period within which the government may issue task orders, which I will call the ordering period. The government may not issue task orders after expiration of the ordering period. The contracting officer is supposed to specify the ordering period by inserting dates in the space provided in paragraph (a). (This clause was central to the ASBCA?s General Dynamics decision.)
The Five Dates In An IDIQ Contract
Let?s review: Based exclusively on the texts of the Indefinite Quantity clause and the Ordering clause, an IDIQ contract is supposed to contain the following five dates:
1. somewhere in the Schedule, the date on which the effective period begins;
2. also in the Schedule, the date on which the effective period ends;
3. in paragraph (d) of the Indefinite Quantity clause, in Section I, the last date of performance;
4. in paragraph (a) of the Ordering clause, in Section I, the date of which the ordering period begins; and
5. also in paragraph (a) of the Ordering clause, the date on which the ordering period ends.
The contracting officer is supposed to insert the dates in the contract, but it is my impression that contracts are often awarded without the insertion of one or more of those sets of dates.
In addition to the five dates listed above, there will be the dates associated with each task order, such as the period of performance of services or the delivery dates for supplies.
If the contract contains the clause at FAR 52.217-9, Option to Extend the Term of the Contract (MAR 2000), then in addition to the above dates there will be the period within which the contracting officer may exercise each such option, the deadline for giving the contractor preliminary notice of the government?s intent to exercise the option, and the dates of the option period(s). The boards of contract appeals and the Court of Federal Claims strictly enforce dates associated with the power to exercise options, and they may treat the issuance of a task order as the exercise of an option in that regard. See the General Dynamics decision:
Thus, the interplay among all of the dates discussed above might in some cases become problematical.
The Effective Period And The Ordering Period: One And The Same?
It is possible that the author(s) of the Indefinite Quantity clause and the Ordering clause meant for the effective period and the ordering period to be one and the same. But the Indefinite Quantity clause puts the effective period in the Schedule and the FAR clause matrix puts the Ordering clause in Section I of the Uniform Contract Format, which is not part of the Schedule. If we assume that the author(s) of the two clauses knew what they were doing and meant to put the effective period and the ordering period in different sections of the contract, it seems likely that they did not mean for them to be one and the same. Thus, the ordering period might start after the first date of the effective period and end before the expiration date of that period.
The Mysterious ?Effective Period?
What is the contractual significance of the effective period mentioned in the Indefinite Quantity clause? In what sense is an IDIQ contract ?effective?? What is the operative relationship between the effective period and the ordering period, between the effective period and the performance period or delivery date(s) of an order, and between the effective period and option-related dates? The answers to those questions are not immediately apparent to me.
Presumably, the effective period is the time within which the rights and obligations of the parties are in effect. Do those rights and obligations expire with the effective period? For example, does the contractor?s obligation to take affirmative action in the employment of disabled workers end when the effective period expires? What about the contractor?s obligation to pay Service Contract Act wages or to comply with change orders? Are contract prices no longer in effect after expiration of the effective date? Remember that paragraph (d) of the Indefinite Quantity clause says:
Emphasis added. However, the paragraph goes on to say:
Thus, the contract terms and the rights and obligations of the parties with respect to a ?not completed? order do not expire with the effective period, but continue in effect until the order is completed, provided that completion is not later than the last date of performance.
When is an order ?completed?? Does ?completed? refer to the contractor?s work or to something else? Is an order ?completed? when the contractor delivers or finishes the work, i.e., when the contractor?s performance is completed? The phrase ?shall be completed by the contractor? seems to suggest so. Or does ?completed? mean when the government has accepted performance, or when the government has made final payment? Does it mean ?physically completed,? as described in FAR 4.804-4 with reference to the closeout of contract files:
Absent some express definition of when an order is ?completed,? the meaning will depend on a reading of the contract as a whole, including the order, so that no term is rendered meaningless and without effect, which means that it cannot be defined in any abstract sense.
The Indefinite Quantity clause says that the terms of the contract continue to apply to uncompleted orders after expiration of the effective period, but what about orders completed within the effective period? Suppose that a fixed-price order requires the contractor to deliver supplies on a date prior to the expiration date of the effective period and that the contractor delivers accordingly. Suppose further that the government does not inspect the supplies before the expiration of the effective period. Finally, suppose that after expiration of the effective period the government discovers a patent defect in the delivered supplies. If the order was ?completed? upon the delivery of the supplies and the contract effective date has expired, can the government still invoke the terms of the fixed-price inspection clause, FAR 52.246-2, Inspection of Supplies⎯Fixed-Price (AUG 1996), and demand that the contractor correct the defects at no additional cost?
What if the contractor has completed an order and is still performing under another order when the effective period expires? Does the fact that one order remains uncompleted mean that the terms of the contract continue in effect with respect to ?completed? orders? The Indefinite Quantity clause says that the terms of the contract remain in effect ?with respect to that order,? not all orders.
Of course, these questions are of less concern when a clause expressly provides for the survival of rights and obligations after completion or final payment, such as in the clause at FAR 52.215-2, Audit and Records (JUN 1999), or a warranty clause. Note in that regard that the inspection clause for cost-reimbursement contracts requires the contractor to take corrective action for up to six months ?after acceptance.?
There are likely many other such possibilities as to the contractual significance of the effective period of an IDIQ contract. I have not tried to think them through and I have done no legal research, so I encourage readers of this blog to speculate or inform the rest of us of anything they may know or learn in that regard. In any case, contracting officers should be thoughtful when establishing the myriad dates in an IDIQ contract and be especially thoughtful about the potential effect of the effective date. It might be wise to ensure that timely administrative action is taken with respect to orders completed prior to the expiration of the contract effective period. It might not hurt to write special clauses to state the significance of the effective period and to define order ?completion? for purposes of the Indefinite Quantity clause.
One way to cope with the effective period problem would be to write a clause like the following and put it in Section H:
The effective period of this contract begins on the date of contract award and ends on the date following the date of final payment under this contract.
Options In IDIQ Contracts
The government may put options in IDIQ contracts to extend the effective period, the ordering period, and the last day of required performance. Note, however, that the standard clause at FAR 52.217-9, Option to Extend the Term of the Contract (MAR 2000), makes no express mention of ?effective period,? ?ordering period,? or last date of required performance. Thus, contracting officers should modify the clause when using it in an IDIQ contract to make express mention of those dates. (The preface to the standard option clause permits the use of a clause that is ?substantially the same.? See FAR 52.104 (a) through ? about modifying clauses.) Presumably, when establishing option line items, the contracting officer will want to stipulate the new effective period, new ordering period, and new last date of required performance associated with each option.
If an order is valued at less than $10,000,000 at the time of issuance, but an option in the order would increase the cumulative value of the order to in excess of $10,000,000, would the GAO consider a protest against the award of the order under FAR 16.505(a)(9)(i)(, which does not say ?including options?? Probably. Keep in mind that FAR 1.108? says that options are to be included when applying dollar thresholds. Again, I know of no case law that directly answers the question.
Options in Task Orders
What about options in task orders? I know of no rule in FAR that prohibits the use of options is task orders. Presumably, the policies in FAR Subpart 17.2 apply to such options. Agencies may have policies of their own, as well. See, e.g., GSA?s policy with respect to Federal Supply Schedule contracts:
There are questions about the use of options in task orders:
1. Can you put an option in a task order that is to be exercised
the expiration of the effective period and that would extend performance beyond that period?
2. If so, can such an option require performance after the last day of required performance stipulated in paragraph (d) of the Indefinite Quantity clause?
3. Can you put an option in a task order that can be exercised
the expiration of the effective period?
4. If so, can the option require performance after the last date of required performance?
The answer to the first question appears to be yes, since the Indefinite Quantity clause makes express provision for orders that require performance after the expiration of the effective period.
The answer to the second question should be yes if the option is written so as to extend the last date of required performance for the purposes of the order in question. Otherwise, there might be an issue. An agency should state its intent to use such options in the solicitation for the contract, and the contract should make express provision for the issuance of orders that include such options, otherwise, the use of such an option might be an expansion of the scope of the contract and subject to protest.
The answer to the third question is problematical. It would be best to extend the contract effective period prior to exercising such an option in a task order, just to avoid any issues about the viability of the option. Since extension of the effective period would expand the scope of the contract, the intention to do so in connection with such task order options should be stated in the solicitation for the contract and provided for in the contract.
The answer to the fourth question is also problematical. There might be an issue, unless the task order option expressly requires the contractor to work after the last date of required performance, thereby effectively extending that date for the task order in question. The contract should make provision for extension of the last date of contract performance in connection with such task order options.
What happens if the contracting officer issues an order containing an option that would permit its extension beyond the effective date or the last date of required performance? Can the contractor object and refuse to accept such an order? I think the contractor would have grounds to object and reject if, at the time of award, the contract did not expressly permit the issuance of such an order, such that the contractor was not or could not have been aware that it could happen. If the contractor did not object when the order was issued, can it later object to the exercise of the option? Again, I think so, if the contract or the order did not expressly permit such an extension, such that the contractor was not and could not have been aware. It seems likely that a court would require the contractor to perform if it knowingly accepts the order without objection.
What if, at the time of award, the contract did not expressly permit the issuance of such an order, but the contractor is willing to accept it? Would that make it okay? Probably not, because the exercise of such an option would enlarge the scope of the contract by effectively extending the effective period and the last date of contract performance, thus opening the way to a protest. Would it be okay to add such an option to a task order after its issuance? Again, doing so would enlarge the scope of the contract and open the way to a protest.
Is exercising an option to extend a task order tantamount to issuing a new order? I don?t know, but I think it is possible that a court, a board of contract appeals, or the Government Accountability Office (GAO) might consider it so. If so, can a contracting officer exercise such an option after the expiration of the ordering period or the last day of required performance? I think it?s possible that a court a board or the GAO would say no. I am aware of no case law that directly answers those questions.
Coordinate Those Dates!
Contracting officers should carefully coordinate all contract dates and task order dates in order to avoid potential conflicts and disputes. If a contracting officer wants to use options in task orders to permit their extension, then he or she should include options in the basic contract to extend the contract effective period and to change the last date of required performance. If such options are not included in the contract at the time of award, later changes in those dates will be outside the scope of the contract and open to protest.
Anyone who thinks that these matters are mere technicalities had better read the ASBCA?s General Dynamics decision, cited above. The board rejected that notion.
I have not attempted to make a detailed or comprehensive, much less exhaustive, analysis of these questions. My objective here is to raise questions that smart people will consider when writing IDIQ contracts and task orders.
Just a little word to the wise.
A signal feature of source selection under FAR Part 15 as conducted today is solicitation and evaluation of “technical” (and/or “management”) proposals. Although FAR 2.101 conflates proposals with offers, that attributes more dignity to “technical” proposals than they deserve.
Under FAR Part 15, contracts are formed through offer and acceptance. Offers are promises—prospectively binding commitments to act or refrain from acting in a specified way. “Technical” proposals are packages of information, the specific content of which depends on the instructions in RFPs. “Technical” proposals may contain promises, to be sure, but if they do they also contain illusory promises and nonpromissory statements: assertions of fact, descriptions, estimates, statements of expectation and contingent intention, sales pitches, and so forth.
In most cases the various kinds of statements in proposals are so intermingled and worded as to make it hard to distinguish between what is being promised and what it not. As explained by one commentator:
See also the Restatement (Contracts) Second § (2)(1):
And § 2, Comment e:
So when an agency awards a contract to an offeror, it will not be contractually entitled to everything that is in the winner’s “technical” proposal. It will be entitled only to that offeror’s performance as its contractor and to what that offeror promised to do or deliver.
Unfortunately, what is so often found in “technical” proposals is the product of what is little more than an essay-writing contest. That is because essays are what agencies instruct offerors to submit. Consider the following proposal preparation instruction in an RFP for sign language interpreter services:
Those instructions do not call for promises. They call for “demonstrations”, i.e, persuasive descriptions of various things, i.e., a sales pitch. Even if incorporated into a contract, they will not bind the contractor if not written as promises.
The “technical” proposal approach to source selection, in which offerors describe (but do not necessarily promise) how they intend to do this or that during contract performance and submit various plans for facets of performance—such as systems engineering, safety management, staffing, use of agile software development techniques, task order management, cost control, schedule control, risk management, and quality assurance—is in widespread use in source selection. Such content usually is not subjected to a thorough legal analysis. Instead, “technical” evaluators with no legal training read offerors’ submissions and judge them largely on subjective bases. The evaluators react to what they read by tagging certain statements in proposals as “strengths,” “weaknesses,” or “deficiencies” and assigning what they consider to be an appropriate adjectival rating—outstanding, good, acceptable, marginal, unacceptable, and the like—much like a professor grading a college test essay. The result of this method of source selection is decisions that are based on what is essentially advertising copy. Such proposals may not have high predictive value, and such practices do not ensure that the Government will be entitled to, or will receive, “best value.”
The value to which the Government will be entitled will be obtained, if at all, from the things that the agency will be entitled to receive under contract. What it will be entitled to receive is (a) fulfillment of the promises the winning offeror made and (b) competent performance by that offeror. Thus, the proper things to evaluate are not essays in “technical” proposals, but offerors and their offers (promises). The offerors and their offers are the proper objects of evaluation. Evaluation of offers determines the value that each offeror promises. Evaluation of offerors determines the likelihood that each offeror will deliver on its promises. Source selection planners must ensure that evaluations are based on the attributes of offerors and their offers and not merely on creative writing. When offers include descriptions of the products to be delivered or the services to be performed, they must be the objects of “technical” evaluation, but they should also be the objects of a legal analysis to determine whether the statements in them constitute promises and to detect vagueness, ambiguity, and loopholes, intentional or otherwise.
When planning a source selection the first thing an agency must decide is what to evaluate, i.e., what are to be the objects of its evaluation. In common parlance and according to the FAR, agencies evaluate proposals. But such parlance is based on a misconception. Proposals are not the things to be evaluated. They are merely packages of information. The things to be evaluated are offerors and their offers. Unfortunately, rather than thinking matters through on the basis of clear concepts and sound principles, many agencies take a cut-and-paste approach to source selection, uncritically borrowing schemes used in past acquisitions and cutting and pasting text from past RFPs. The result is that many half-baked ideas and poor practices are deeply embedded in acquisition culture and are passed on to future generations of acquisition personnel through on-the-job training. Regrettably, acquisition culture and the bid protest system are very forgiving, despite catastrophes. No one knows how such practices have affected the value actually received from contract outcomes.
The solution to these problems begins with better understanding and thinking, better source selection planning, and better choices of evaluation factors for award.
 See FAR 2.101 definition of “offer”: Offer’ means a response to a solicitation that, if accepted, would bind the offeror to perform the resultant contract. Responses to invitations for bids (sealed bidding) are offers called ‘bids’ or ‘sealed bids’; responses to requests for proposals (negotiation) are offers called ‘proposals’; however, responses to requests for quotations (simplified acquisition) are ‘quotations,’ not offers.”
 Restatement ( Second) of Contracts § 2(1) and § 24, Comment a.
 Shearer, “How Could It Hurt To Ask? The Ability To Clarify Cost/Price Proposals Without Engaging in Discussions,” 39 Pub. Cont. L.J. 583, 596–97 (Spring 2010) (footnotes omitted).
 See Edwards, “Streamlining Source Selection by Improving the Quality of Evaluation Factors,” 8 N&CR ¶ 56; and Edwards, “Still Waiting for a Reformed and Streamlined Acquisition Process: Another Essay-Writing Contest,” 22 N&CR ¶ 47, asserting that source selection too often is based on essay-writing contests.
 See Jacobs Tech., Inc., v, United States, 131 Fed. Cl. 430 (2017); EDC Consulting, LLC, Comp. Gen. Dec. B-414175.10, 2017 CPD ¶ 185.
Two of my students, who work for a very large government contractor, told me that the contracting officers (COs) who administer their contracts unilaterally update contract clauses from time to time when they add funds to the contract or when they exercise options. They wondered if that was okay.
It's not okay.
More than a few people believe that the government must update contract clauses when the government changes the Federal Acquisition Regulation (FAR). Some of them think that the government may do so unilaterally. Others believe that contracts are “automatically” updated when the government changes the FAR. Those beliefs are false.
Once the government and a contractor enter into a contract a deal is a deal, and the government and the contractor are bound by the clauses in the awarded contracts until the contracts are completed. Nothing in FAR and no standard FAR clause authorizes a CO to unilaterally update, add, or delete clauses in a contract after award. None of the five Changes clauses, FAR 52.243-1 through -5, empower a CO to do that.
Thus, with a few exceptions, which are discussed below, changes to FAR clauses — revisions, additions, and deletions — must be accomplished through supplemental agreement [(bilateral modification). See FAR 43.103(a)(3). Any such supplemental agreement must be supported by consideration in order to be contractually enforceable.
In this blog entry I will address two questions:
1. What FAR clauses must COs insert in their contracts and purchase orders?
2. What happens after contract award when a Federal Acquisition Circular (FAC) revises, adds, or deletes a clause that is applicable to a contract of the type awarded, or changes a portion of FAR that has been incorporated into the contract by a clause?
FAR contract clauses
The FAR and agency FAR supplements prescribe the use of standard contract clauses to implement the statutes, regulations, and policies that apply to government contracts. FAR clauses implement the statutes, regulations, and policies that are in effect on (1) the date the solicitation for the contract was issued, (2) the date of contract award, or (3) some other date, depending on the terms of the clause. See, e.g., FAR 52.202-1, “Definitions (JAN 2012),” which incorporates into contracts the FAR definitions in effect “at the time the solicitation was issued.” See also FAR 52.216-7, “Allowable Cost and Payment (JUN 2011),” subparagraph (a)(1), which incorporates the text of FAR Subpart 31.2 that is in effect “on the date of this contract.” And see FAR 52.227-11, “Patent Rights—Ownership by the Contractor (DEC 2007), which incorporates the procedures in 37 C.F.R. § 401.6 and agency supplements in effect “on the date of contract award.” The language in those clauses fixes the version of the statute, regulation, or policy for the duration of the contract, unless the contract expressly provides otherwise.
What FAR clauses must COs insert in purchase orders and solicitations?
A purchase order or solicitation states the government’s terms, and quoters or offerors are expected to base their quotes and proposals on those terms. A purchase order or a solicitation for a contract must include the clauses prescribed by the various parts of the FAR. See, generally:
For commercial items, FAR 12.301(a):
12.301 Solicitation provisions and contract clauses for the acquisition of commercial items.
(a) In accordance with Section 8002 of Public Law 103-355 (41 U.S.C. 264, note), contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses—(1)
Required to implement provisions of law or executive orders
applicable to the acquisition of commercial items
For purchase orders issued pursuant to simplified acquisition procedures, FAR 13.302-5:
(a) Each purchase order (and each purchase order modification (see 13.302-3)) shall incorporate
all clauses prescribed
for the particular acquisition.
For acquisitions conducted using sealed bidding, FAR 14.201-3:
14.201-3 Part II—Contract clauses.
Section I, Contract clauses. The contracting officer shall include in this section
the clauses required by law
or by this regulation and any additional clauses expected to apply to any resulting contract, if these clauses are not required to be included in any other section of the uniform contract format.
For acquisitions conducted by negotiation, FAR 15.204-3:
15.204-3 Part II—Contract Clauses.
Section I, Contract clauses.
The contracting officer shall include in this section
the clauses required by law
or by this regulation and any additional clauses expected to be included in any resulting contract, if these clauses are not required in any other section of the uniform contract format. An index may be inserted if this section’s format is particularly complex.
What does all of that mean? It means that a CO must include in a purchase order or solicitation all clauses that FAR prescribes for a prospective contract and that are in effect on the date the solicitation is issued. When an offeror bases its offer on the solicitation, and the government accepts that offer, the contract includes the clauses that were in the solicitation and the parties are bound by those clauses. A CO cannot change (revise, add, or delete) any clauses in a contract document after the offeror has signed it without the agreement of the offeror. Any such agreement would constitute a new offer.
What happens when a Federal Acquisition Circular (FAC) containing a clause change is issued before or after a solicitation is released, but the change does not take effect until after the solicitation has been released?
Suppose that a CO is preparing a solicitation for a firm-fixed-price supply contract that is expected to exceed $10 million and that the CO plans to issue the solicitation on June 1 and award the contract on December 1. Now suppose that on May 15, a Federal Acquisition Circular (FAC) comes out that adds a new clause to FAR that must be inserted in all FFP contracts that will exceed $5 million. The FAC states that the new clause will become applicable on August 15. Now suppose further that the agency office reviewing the solicitation before its release insists that since the prospective contract will be awarded after the clause becomes applicable the CO should include the new clause in the solicitation. According to FAR 1.108(d)(1), the new clause does not apply to the solicitation and need not be included, but according to FAR 1.108(d)(2) the CO may include it in the solicitation as long as the contract will be awarded after the new clause becomes applicable.
Thus, purchase orders and solicitations must include the contract clauses that are applicable on the date the solicitation is issued, and they may include any clauses that become applicable after that date as long as they are expected to be applicable on or after the date of contract award.
What happens when a clause change takes effect after contract award?
Assuming that the CO included all applicable clauses when soliciting offers, after contract award the government and the contractor are bound by the clauses in their contract throughout the period of performance. In the absence of a contract clause that expressly authorizes the CO to revise, add, or delete a clause without the contractor’s consent, any attempt to bind a contractor to a unilateral clause change would be a breach of contract. See General Dynamics Corp. v. U.S., 47 Fed. Cl. 514, 544 - 547 (2000) and United States v. Winstar Corp., 518 U.S. 839 (1996).
However, FAR 1.108(d)(3) permits COs to include FAR changes in existing contracts “with appropriate consideration.” Thus, changes to the contract clauses must be on the basis of supplemental agreement (bilateral modification), not unilateral action by the CO. The consideration would flow from the party seeking inclusion of the clause to the party agreeing to the inclusion. The amount of the consideration is negotiable.*
Automatic Updating Of Clauses?
There are some contract clauses that provide for automatic updating of contract terms following a change in law or regulation. For example, FAR 52.222-43, “Fair Labor Standards Act and Service Contract Act — Price Adjustment (Multiple Year and Option Contracts) (SEP 2009)” and 52.222-44, “Fair Labor Standards Act and Service Contract Act — Price Adjustment (SEP 2009) provide for automatic updating in response to a change in the minimum wage pursuant to the Fair Labor Standards Act of 1938. FAR 52.230-2, “Cost Accounting Standards (May 2012),” 52.230-5, “Cost Accounting Standards—Educational Institution (May 2012),” and 52.230-6, “Administration of Cost Accounting Standards (JUN 2010)” provide for automatic updating following a change to the Cost Accounting Standards. All such changes apply prospectively, not retroactively. See FAR 52.230-2:
(a) Unless the contract is exempt under 48 CFR 9903.201-1 and 9903.201-2, the provisions of 48 CFR Part 9903 are incorporated herein by reference and the Contractor, in connection with this contract, shall…
* * *
(3) Comply with all CAS, including any modifications and interpretations indicated thereto contained in 48 CFR Part 9904, in effect on the date of award of this contract or, if the Contractor has submitted certified cost or pricing data, on the date of final agreement on price as shown on the Contractor’s signed certificate of current cost or pricing data. The Contractor shall also comply with any CAS (or modifications to CAS) which hereafter become applicable to a contract or subcontract of the Contractor. Such compliance shall be required prospectively from the date of applicability to such contract or subcontract.
(4)(i) (Agree to an equitable adjustment as provided in the Changes clause of this contract if the contract cost is affected by a change which, pursuant to paragraph (a)(3) of this clause, the Contractor is required to make to the Contractor’s established cost accounting practices.
(ii) Negotiate with the Contracting Officer to determine the terms and conditions under which a change may be made to a cost accounting practice, other than a change made under other provisions of paragraph (a)(4) of this clause; provided that no agreement may be made under this provision that will increase costs paid by the United States.
(iii) When the parties agree to a change to a cost accounting practice, other than a change under subdivision (a)(4)(i) of this clause, negotiate an equitable adjustment as provided in the Changes clause of this contract.
May COs unilaterally update contract clauses when exercising options?
No. The clauses that apply to option periods are locked in at the time of contract award. FAR does not require that COs update clauses when exercising options. Moreover, the law of contracts does not permit COs to unilaterally change the terms of an option once they have been set. Absent express agreement to the contrary, the government must exercise options in strict accord with their terms. See Chemical Technology, Inc., ASBCA No. 21863, 80-2 BCA ¶ 14728:
The general rule governing the exercise of an option has been clearly stated by this Board in
General Dynamics Corporation
, ASBCA No. 20882, 77–1 BCA ¶ 12,504 at 60,622:
An option is an offer couched in specific terms, the acceptance of which must be unconditional and in exact accord with the terms offered. The general attitude of the courts is to construe strictly this legal requirement
Williston on Contracts
, Third Edition, Secs. 61B; 61D;
United States v. T. W. Corder, Inc.
, 208 F.2d 411, 413 (1953);
International Telephone and Telegraph, ITT Defense Communications Division v. The United States
, [17 CCF ¶81,071], 197 Ct. Cl. 11 (1972).
McArthur et al. v. Rosenbaum Company of Pittsburg
, 180 F.2d 617, 620 (3rd Cir., 1950). Even substantial compliance with the terms of an option is insufficient. See 17 CJS, Contracts, Section 42, n. 83(2) at 676.
Any attempt by the government to impose new terms on a contractor when exercising an option would be breach of contract and would invalidate the option. See New England Tank Industries of New Hampshire, Inc. v. U.S., 861 F. 2d 685 (Fed. Cir. 1988):
It is well-settled that to properly exercise [an] option, the government’s acceptance of the offer [must] be unconditional and in exact accord with the terms of the contract being renewed.
* * *
The dispositive question is whether the government's exercise of its option to renew the contract was valid or invalid. As above noted, the board recognized that an attempt to alter the contract terms would “render ineffective the purported exercise of an option,” and that insertion of an “availability of funds” clause renders the option exercise “invalid”, see 88–1 BCA at 103,166, and neither party quarrels with those statements of the law.
The rule that exercise of an option must be in accordance with the terms of the option as awarded is reflected in FAR 17.207(e), which requires that before exercising an option the CO must make a written determination that the exercise “is in accordance with the terms of the option….” Thus, unless a contract contains an express term to the contrary, COs have no authority to unilaterally update contract clauses when exercising options.**
What is the effect of changes to parts of the FAR that were incorporated into a contract by reference?
Several FAR contract clauses incorporate parts of the FAR into contracts by reference. See e.g., FAR 52.202-1, which incorporates FAR definitions “in effect at the time the solicitation was issued,” and 52.216-7(a)(1), which incorporates the version of FAR Subpart 31.2 “in effect on the date of this contract.” In those examples, the terms of the FAR are fixed in time and cannot be altered without mutual agreement of the parties and consideration.
But what if the clause does not fix the terms of the FAR? See e.g., FAR 52.211-15, “Defense Priority and Allocation Requirements (APR 2008).” It requires the contractor to comply with “15 C.F.R. 700,” without further qualification. See also the various small business clauses that require the contractor to comply with Title 19 of the C.F.R., and the labor law clauses that require the contractor to comply with Title 29. If those regulations change after contract award the contractor is always bound by the current regulation. In such cases the updating is automatic and does not require a contract modification unless the clause provides for an adjustment of some kind, equitable or otherwise.
As I mentioned above, some clauses, such as the Cost Accounting Standards clause, provide for automatic updating with price adjustment.
Can Congress enact a law that changes existing contracts?
Yes, but they might breach the contract if they do. That was the holding of the Supreme Court in United States v. Winstar Corp., cited above, in which Congress changed a law, and the agency changed its regulations accordingly, after entering into contracts with financial institutions:
When the law as to capital requirements changed in the present instance, the Government was unable to perform its promise and, therefore, became liable for breach. We accept the Federal Circuit's conclusion that the Government breached these contracts when, pursuant to the new regulatory capital requirements imposed by FIRREA [Financial Institutions Reform, Recovery, and Enforcement Act of 1989], 12 U.S.C. § 1464(t), the federal regulatory agencies limited the use of supervisory goodwill and capital credits in calculating respondents' net worth. 64 F.3d, at 1545. In the case of Winstar and Statesman, the Government exacerbated its breach when it seized and liquidated respondents' thrifts for regulatory noncompliance.
In Winstar, the court quoted its decision in Sinking Fund Cases, 99 U.S. 700 (1879):
The United States are as much bound by their contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that terms implies, as it would be if the repudiator had been a State or a municipality or a citizen.
Getting back to my two students, absent express language in the contract to the contrary, a CO may not unilaterally change the clauses in a contract when funding the contract or exercising an option. He or she may change clauses only with the assent of the contractor and with consideration for the change.
I asked my two students how they responded when their COs unilaterally updated the clauses in their contracts. They said that they went along with it, because so far none of the changes had much if any effect. That is too bad, because they are teaching the COs in question that what they are doing is okay. It is not okay. And it is not wise for one party to a contract to let the other party violate its rights by unilaterally imposing new terms.
*Note that “consideration” is not the same as an “equitable adjustment.” An equitable adjustment is a fair increase or decrease in the contract price or estimated cost and fee and the time required for contract performance, as required by a contract clause, such as a Changes clause or Differing Site Conditions clause. The amount of the equitable adjustment is based on the estimated or actual effect of the change on the cost or time required for performance. When the parties to a contract agree to modify it on the basis of mutual agreement, and not in accordance with a contract clause that provides for equitable adjustment, the parties are making a new bargain and the bargain must be supported by consideration in order to be enforceable in court. Consideration is necessary whether or not there is any effect on cost or time. The amount of the consideration is not determined or limited on the basis of the effect on cost or time, but is determined through bargaining. The consideration would flow from the party that will benefit from inclusion of the clause to the party that agrees to its inclusion.
**However, the parties may change the terms of a future option period pursuant to the terms of contract clauses, such as the Changes clause, or pursuant to a justification for other than full and open competition.
All proposal managers and writers should read a recent GAO bid protest decision: CR/SWS LLC, GAO B-414766.2, Sept. 13, 2017. In that case the agency was buying a commercial item--integrated solid waste management services at an Air Force base.
The solicitation required offerors to submit a “technical proposal” that was to consist entirely of a “Mission Essential Contractor Services Plan” (MECSP). The proposal preparation instructions said:
That’s it. There were no supplemental instructions and no formatting or page limitations.
The solicitation said that the agency would evaluate proposals and select a contractor in a series of steps. The first step would be to evaluate the technical proposal (the Mission Essential Contractor Services Plan) for acceptability on a pass or fail basis. It said:
The solicitation defined acceptable and unacceptable as follows:
The solicitation said that only those offerors whose technical proposals (the Plan) were determined to be acceptable would move on to the next phase of the evaluation, which would entail a past performance/price tradeoff analysis and decision. The solicitation said that the agency planned to award without discussions.
Here is the text of DFARS 252.237-7024:
Note that despite the capital letter at the beginning of each subparagraph, paragraph (b) is one long sentence.
(Whether such a requirement was properly imposed in an acquisition of commercial item solid waste management services is a matter that I will not address in this blogpost.)
The agency rated both the successful offeror’s and the protester’s plans to be acceptable. The successful offeror’s plan was less than two pages long. The protester’s plan was 14 pages long. The successful offeror won based on its lower price and past performance rating of “satisfactory confidence”.
The protester, which had a higher price but a better past performance rating, complained that the successful offeror’s plan did not address all the topics required by DFARS 252.237.7024 paragraphs (b)(2)(ii) and (b)(2)(iii), “time lapses” and “training issues”. The GAO agreed, sustained the protest, and recommended that the agency either reject the successful offeror’s proposal or conduct discussions, solicit revised proposals, and make a new source selection decision. It also recommended that the agency reimburse the protester’s costs of filing and pursuing the protest.
Yes, the agency was dumb. It did not take its own proposal preparation requirement seriously or plan its evaluation carefully. But that’s not the point of this blog post. The point of this blog post is that proposal managers and writers better pay close attention when reading and complying with proposal preparation instructions. They better dissect each and every sentence and phrase and identify each and every submission requirement. Details matter.
Now, look back at DFARS 252.237.7024 paragraph (b)(2), which specifies the topics that a Mission Essential Contractor Services Plan must “address”. How many are there? At first glance, there are five, specified in subparagraphs (i) through (v). But, in fact, there are many more than five. Here is my phrase-by-phrase analysis of what DFARS 252.237.7024, paragraph (b)(2), requires offerors to “address”;
1. challenges associated with maintaining essential contractor services during an extended event;
2. time lapse associated with:
2.1. the initiation of the acquisition of essential personnel
2.2. the initiation of the acquisition of essential resources
2.3. the actual availability of essential personnel on site;
2.4. the actual availability of essential resources on site;
3. components for:
3.1. identification of personnel who are capable of relocating to alternate facilities
3.2. identification of personnel who are capable of performing work from home
3.3. training of personnel who are capable of relocating to alternate facilities
3.4. training of personnel who are capable of performing work from home
3.5. preparedness of personnel who are capable of relocating to alternate facilities
3.6. preparedness of personnel who are capable of performing work from home
4. processes for:
4.1. identification of personnel who are capable of relocating to alternate facilities
4.2. identification of personnel who are capable of performing work from home
4.3. training of personnel who are capable of relocating to alternate facilities
4.4. training of personnel who are capable of performing work from home
4.5. preparedness of personnel who are capable of relocating to alternate facilities
4.6. preparedness of personnel who are capable of performing work from home
5. requirements for:
5.1. identification of personnel who are capable of relocating to alternate facilities
5.2. identification of personnel who are capable of performing work from home
5.3. training of personnel who are capable of relocating to alternate facilities
5.4. training of personnel who are capable of performing work from home
5.5. preparedness of personnel who are capable of relocating to alternate facilities
5.6. preparedness of personnel who are capable of performing work from home
6. any established alert procedures for mobilizing identified “essential contractor service” personnel
7. any established notification procedures for mobilizing identified “essential contractor service” personnel
8. approach for:
8.1. communicating expectations to contractor employees regarding their roles during a crisis.
8.2. communicating expectations to contractor employees regarding their responsibilities during a crisis.
By my count there are 27 planning topics to be addressed, not just five.
(By the way, what’s in a “plan”? Some persons would think that a plan specifies who, what, when, where, and how.)
My kind of analysis might accomplish three things.
First, it will ensure that your proposal addresses each and every proposal preparation requirement. Agency personnel are not always aware of just what their proposal preparation instructions require of offerors. Read the convoluted instructions in some of the RFPs floating around out there. Read the sentences. There can be a lot of hidden eddies in bureaucratic stream-of-consciousness writing, as the Air Force learned in CR/SWS LLC.
Second, it might alert complacent agency evaluators as to what they should be looking for in all proposals. This will give you a leg up if the competition has not been as thorough as you.
Third, if you lose, it might give your attorney a basis for assessing whether the agency adhered to its evaluation criteria and ammunition for a protest, as it did in CR/SWS LLC. The protester was more conscientious than both its competitor and the agency, and so it won.
Did the Department of Defense really intend for offerors to plan mission-essential contractor services in great detail? Was it practical to ask offerors to do so before contract award, i.e., before they understood what performance would actually be like on the Air Force base? What did the agency really want and expect from offerors? Who knows? It did not matter. Neither the agency nor the successful offeror took the proposal preparation instructions seriously, and it cost them.
As for you agency personnel--you better think when you write proposal preparation instructions, and you better read what you’ve written when you plan your evaluations, and you better take what you’ve written seriously. And you better supplement and explain lousy boilerplate instructions like those in DFARS 252.237-7024.
I assume that the Air Force will do as the GAO recommended: conduct discussions, seek proposal revisions, and make a new source selection decision. I wonder if it will supplement and clarify DFARS 252.237-7024. I wonder how comprehensive and how long the offerors’ Mission-Essential Contractor Services Plans will be in the second go-round.
On April 24, the Under Secretary of Defense for Acquisition, Technology and Logistics issued a memorandum about implementation of the “Better Buying Power” initiative, phase 2.0. You can find it at:
Sigh, another acquisition improvement memo.
But, reading the thing, I came upon this interesting paragraph:
“Think”! Now that’s something you don’t often see in an official memo. You’re much more likely to see something like, Just do it. Why did the Under Secretary write that? Does he believe that people haven’t been thinking, or was “Think” just a rhetorical exhortation? Let’s give him the benefit of the doubt and assume that he really isn’t happy with the present state of acquisition thinking. He shouldn’t be.
What Is Thinking?
What does “Think” mean? Let’s think about this. “Think.” What is thinking, exactly? It’s a mental activity, we all know that. Is it something that must be accomplished, or is it a method of accomplishing something? Is it a function — a set of tasks directed towards a general purpose, like maintenance, or is it a specific task? Is it a method? If so, is it a specific method or is there more than one way to think? If there is more than one method, how many more, and in what ways do they differ? Is thinking the same as reasoning? Can one think without reasoning, or reason without thinking? Is there unreasoning thinking, or unthinking reasoning?
As I pondered thinking I recalled a book that might help and rummaged around in my library until I found it: What Is Called Thinking? (English trans., 1968) by Martin Heidegger. I shuddered as I recalled the college course (oh, so long ago) in which it was assigned reading. I frankly don’t remember much about the book, and my old underlining didn’t help. But the very first two paragraphs were a bad omen:
That book is sitting on my nightstand now, like the raven on Poe's bust of Athena. It’s time to pull out a dictionary.
One of the definitions for think in the American Heritage Dictionary of the English Language, 5th ed., is as follows:
A Dictionary of Philosophy, Rev. 2d ed. (1979), by Anthony Flew, provides something a little more expansive on pp. 352 - 353:
I found a longer entry about thinking in Volume 8 of The Encyclopedia of Philosophy, Reprint Edition (1972), pp. 100 – 103, which contains the following:
Despite their obvious shortcomings, I like those last two explanations, because I can relate them to things that contracting personnel do at work. For instance thinking about what evaluation factors to use in a source selection is deliberation. Thinking about what kind of thing an evaluation factor is and what kinds of evaluation factors there are is contemplation. Deliberation is practical. Contemplation is theoretical. You deliberate in order to decide what to do. You contemplate in order to understand and develop ideas.
So, what is thinking? (The definitions that I quoted are from lexicographers and philosophers. A psychologist might answer differently. See Thinking, Fast and Slow (2011), by Daniel Kahneman.) I believe thinking is a debate with yourself — a purposeful process of asking yourself questions about something and then trying to answer them. You ask, you answer, you challenge, you respond, and you decide, just you and yourself, in foro interno. For example: What is an evaluation factor? Answering entails definition, induction, analysis, classification, deduction, and argument. Each of those operations should be performed according to exacting standards of rigorous thought. You will get a different answer from other people. It is something to think about. But right now I like the contemplation/deliberation distinction and will run with it.
Contemplation and Deliberation
It seems to me that in order to deliberate well, you must contemplate first. You cannot deliberate well about what contract type to use until you first contemplate the concept of contract types until you understand what they are and how they are supposed to work. In order to do that you must read more than the summary descriptions in FAR Part 16 or in a set of PowerPoint slides. You must read the standard contract clauses peculiar to each type and think about how the clauses work together and with what results. You must then figure out how each contract type differs from the others. You must also contemplate contract type theory, which holds that the right distribution of cost risk “will provide the contractor the greatest incentive for efficient and economical performance.” Is that true? In order to contemplate contract type theory, you have to contemplate risk: What is it? What causes it? Can you measure it? If so, how? And on, and on. It’s never done.
In order to deliberate well a professional must have a head full of well developed professional ideas gained through contemplation, as many as possible. You will need them in your deliberations. Much deliberating is done in cooperation with others, and you can better communicate and be understood when your ideas are well-developed and deep, so that you can explain them clearly and answer questions.
Where do you get such ideas? You get them by going to school, reading, talking things over with colleagues, and, especially important, by going into a quiet corner and asking yourself questions and developing answers about the things that you have been taught, that you have read, that you have heard, and that you have worked out for yourself. It takes quite a lot of effort, and it takes a long time, a professional lifetime. It’s never done.
Understand Simple Things Deeply
According to The 5 Elements of Effective Thinking (2012) by Edward B. Burger and Michael Starbird, the first key to effective thinking is to master the fundamentals by understanding simple things deeply. “The most fundamental ideas in any subject can be understood with ever-increasing depth.” If asked to explain cost, as used in cost estimate, cost analysis, and should cost, what would you say? If asked to define cost on the spot, could you do it? A cost estimate is an estimate of what, exactly? How much and how good of an explanation could you give to someone who doesn’t know anything about it? How deeply could you go into that concept? Could you anticipate the inevitable questions? Could you answer them?
If you are a contract specialist, how much do you know about the concept of contract? Can you go beyond “an agreement that the courts will enforce” or offer, acceptance, mutual assent, consideration, competent parties, legal purpose, etc., or the definition in FAR 2.101? How long can you talk about What is a contract? Five minutes? Fifteen minutes? An hour? Longer? How much do you know about, and how deeply do you understand, the thing in which you specialize?
In his memo, the Under Secretary alludes to the importance of contemplation:
Contemplation is professional preparation for deliberation. Deliberation is the practical application of professional ideas to professional problems. You cannot deliberate well if you have not first contemplated well, and in order to contemplate well you have to put in a lot of work. And it’s never done.
The Perils of Deliberation without Prior Contemplation
What happens when you deliberate before you contemplate? Consider: The Department of Defense IG recently issued a report that is critical of the way DOD contracting personnel awarded and administered performance based payments (PBP). See DOD Inspector General Report No. DODIG-2013-063, Award and Administration of Performance Based Payments in DOD Contracts, April 8, 2013, and FAR Subpart 32.10, Performance Based Payments.
According to the DODIG:
In order to award performance based payments (instead of progress payments based on costs), contracting officers must identify and select performance events (aka, milestones) and then pay contractors based on the predetermined value of the occurrence of the event. See FAR 32.1004(a)(1). FAR doesn’t explain the concept of an event, but says that contracting officers may not use as events such occurrences as (1) the signing of contracts or modifications, (2) the exercise of options, and (3) the mere passage of time.
Maybe what the DODIG found happened because the contracting personnel deliberated about what events to use before they had contemplated the concept of an event. Perhaps they did not ask and answer some basic questions:
· What is an
· What is a performance event in the context of performance-based payments?
· Are there different kinds of events and, if so, how many kinds are there, and what are the differences?
· Of the various kinds of events, which are appropriate to use as bases for performance based payments?
Perhaps they should have contemplated those matters and identified the attributes common to (1) the signing of contracts or modifications, (2) the exercise of options, and (3) the passage of time that make those events unsuitable. Then, when deliberating about what events to use, they could have made sure not to choose any that had those attributes.
Now consider this: Suppose that a source selection team must decide what evaluation factors to use. See FAR 15.304. The team sets to thinking about their choices, and decides to look at old RFPs for examples. They then choose certain ones and cut and paste. They don’t stop to ask themselves:
· What is evaluation?
· What is an evaluation factor?
· Are there different kinds of evaluation factors?
· If so, how do they differ from one another, and what is the significance of each of those differences to the tasks of proposal preparation and proposal evaluation?
If the agency’s acquisition personnel don’t devote some time to contemplating those things, if they cut and paste from old RFPs, they may end up making bad choices and being unsuccessful or less efficient and economical than they could have been in identifying the firm that offers best value. See Vernon J. Edwards, “Streamlining Source Selection by Improving the Quality of Evaluation Factors,” The Nash and Cibinic Report, October 1994.
Is Anyone Thinking?
How good are acquisition personnel at thinking? Do they contemplate before they deliberate, and do they contemplate and deliberate well? Are they professionally prepared to do those things, as the Under Secretary says that they must be in order for their thinking to be of any use and to have a good outcome?
Based on extensive personal experience in the classroom, I believe that acquisition personnel could do much better at professional level thinking. They are not alone in that. It is often asserted that today’s undergraduate education does not prepare students to think well. The private sector has long recognized this problem. See “Executives to new grads: Shape up!” by Anne Fisher, accessible on line at CNNMoney:
See also “What are most students learning in college? Not enough, study says,” by Sara Rimer in The Hechinger Report, January 18, 2011:
Many public and private universities and some institutions of professional military education offer courses about thinking. Harvard even has a course called “Thinking about Thinking.” The National Defense University, in conjunction with the Defense Acquisition University, offers a two part, two semester course entitled, Critical Thinking and Decision Making in Defense Acquisition, ICAF 6152-1 and 6153-1, but it is available only to those who already have a Level III certification and who are enrolled in the Senior Acquisition Course. If thinking is so important in acquisition, why isn’t there a course more widely available for those in earlier phases of their professional development? Why wait until someone is a decision maker to offer them such training? Many mature students have complained to me that they didn’t get the right kinds of training early enough in their careers. Why is that so?
Assuming that acquisition personnel know what thinking is and are able to do it well, do they have enough time to think, given their professional workload and their reporting, data entry, and other clerical duties? Do they have enough administrative and clerical support?
The workload has been crushing over the last decade, and the rules keep getting more and more complex. In October 1995, the rule in FAR 16.505( b ) governing the multiple award task order contract “fair opportunity” process was 565 words long. By May 2012 the rule had grown to 2,203 words. There was a similar development in the rule in FAR Subpart 8.4 governing the placement of orders against GSA Federal Supply Schedule contracts. That kind of development means more work to process a contract action. Also, the issuance of new reporting requirements has become practically routine. Administrative and clerical support is virtually nonexistent, yet, every year, Congress and senior officials in the Executive Branch pile more reporting and data entry tasks onto the shoulders of contracting personnel. I believe that I know what a random sample of GS-1102s would say if asked whether they have enough time to think deeply about anything at work.
Thinking, however, can produce troublesome thoughts, and I wonder if the Under Secretary realizes what he has asked for and, if so, whether he means it. What if people begin to think and their thinking leads them to question fundamental tenets of acquisition dogma? For example, what if contemplation leads them to question the efficacy of proposal-based competition for development contracts? What if they argue that such competitions encourage the submission of inflated promises and foster unrealistic expectations? What if they begin to question the utility of contract incentives and to argue that they cost more to plan and administer than they yield in terms of reductions in cost and improvements in performance?
Will such thinkers be welcomed and their thoughts given serious consideration? Or will they face professional “excommunication” and see their thoughts rejected out of hand? How open will the higher ups be to their ideas? Will they encourage and support such thoughts?
Consider the DOD Source Selection Procedures issued under the previous Under Secretary on March 4, 2011:
Italics added. “All” -- no exceptions. Waivers require the “express permission” of the Director of Defense Procurement. In short: Don’t think. We’ve already done the thinking. Just do what we say. Use the standardized rating tables, whether they make sense in your case or not, whether or not you think there is a better scheme. That’s ironic in light the Under Secretary’s memo: “Our workforce should be encouraged by leaders to think and not to automatically default to a perceived school solution just because it is expected to be approved more easily.”
Yet, we need thinkers in acquisition, and good ones. I recently read the following in “Education for Critical Thinking,” by Col. Thomas M. Williams, in Military Review, January-February 2013, pp. 49- 54:
Substitute acquisition for “war” and “operational,” and I think his statement applies equally well to the work of acquisition professionals.
Acquisition is a squishy field. While there are acquisition laws, regulations, and dogma, to be sure, most of the big problems involve fuzzy logic, and experts can and do disagree about solutions. Critical thinking is an essential skill. So it makes sense that the Under Secretary demands that DOD acquisition professionals think, but it is ironic that his office has issued directives like the source selection memo.
I wonder whether the Under Secretary is serious about wanting acquisition personnel to think. If he is serious, I wonder what he is going to do about it. A memo isn’t an accomplishment. Is it? Well, is it?
This blog post is adapted from an article I wrote for the June 2017 issue of The Nash & Cibinic Report.
Copyright 2017 is by Thomson Reuters.
After the attack on Pearl Harbor on December 7, 1941, it took the United States 1,366 days to defeat Japan and receive its formal surrender on the U.S.S. Missouri on September 2, 1945. Thus far, it has taken the United States Army 1,416 days and counting to award a contract for support services at its Yuma Proving Ground. In the course of that procurement the Army has so far made three source selection decisions and suffered four protests to the Government Accountability Office and four protests to the U.S. Court of Federal Claims. The Army has taken corrective action twice and has proposed to do so a third time. It has had two different source selection authorities, two different chairs of the source selection evaluation board, and three contracting officers. The source selection was still underway as of the end of March 2017. The Yuma Proving Ground service procurement is evidence of two problems that plague Government contracting: first, a failure of professional competence and second, the continuation in the 21st Century of a 19th Century procurement system under the Competition in Contracting Act of 1984 (CICA) as amended.
As described in the latest protest decision in this saga, Jacobs Technology, Inc. and TRAX International Corp., --- Fed. Cl. ---, 2017 WL 1291795, March 31, 2017, the request for proposals, issued on May 16, 2013 and amended six times, called for a cost-plus-award-fee contract with a one-year performance period and three one-year extension options. The contractor’s job would be to support military testing. Historically, the incumbent contractor’s staff had consisted of approximately 1,234 full-time equivalents.
The source selection evaluation factors were mission capability, past performance, small business participation, and cost. The three non-cost factors were approximately equal in importance to each other and, in the aggregate, approximately equal to cost. The RFP required offerors to submit “limited” written proposals and make oral presentations. The Army received four proposals, including one from the incumbent contractor, TRAX International Corp. It took the Army until September 10, 2014—483 days after issuance of the RFP—to make its first award, to Jacobs Technology, Inc., which it determined to have “the lowest priced offer of the most highly rated proposals.” Jacob’s evaluated probable cost was $411,678,388. The contracting officer found the incumbent’s higher evaluated cost to be unreasonable.
A Nineteenth Century Procurement Process
It is in the CICA requirement to evaluate cost that we find a 19th Century procurement system at work to the Government’s detriment. In order to ensure that offerors had a common basis for estimating cost, the RFP required offerors to base their estimates on an historical labor “baseline” established by the Army and included with the RFP. Unfortunately, the baseline did not include crucial information, the result being that the offerors did not, in fact, estimate costs on the same basis. The Army discovered the problem during the proposal evaluation.
That’s when the contracting officer should have called a halt, amended the RFP to provide the missing information to offerors, instructed offerors to modify their proposals if they wished to do so, and then allowed the evaluation to proceed. Instead, the Army pressed on.
When TRAX, the incumbent, discovered the baseline problem after contract award, it protested to the GAO on that and other grounds. The Army announced that it would take corrective action and the GAO dismissed the protest. And then, astoundingly, the Army did not fix the problem.
TRAX again protested the Army’s failure to evaluate provide a common cost baseline. The Army again announced that it would take corrective action and issued Amendments 7 and 8 to the RFP. The GAO again dismissed the protest. TRAX and Jacobs then protested the amendments and the Army issued Amendment 9, cancelling them. TRAX and Jacobs submitted revised cost proposals, and guess what?
TRAX protested yet again. This time it complained not only about the failure to establish a common baseline, but also that the Army had allowed Jacobs to change its oral presentation slides without requiring it to make another oral presentation, as required by the RFP. The Army implemented a CICA stay in accordance with FAR 33.104(c). Jacobs filed suit at the Court of Federal Claims complaining that the Army should have overridden the stay. The Army announced that it would take a third corrective action. The GAO again dismissed TRAX’s protest, but Jacobs filed suit to block the Army from taking its proposed corrective action. TRAX then sued complaining about the Army’s continuing failure to solve the common baseline problem and alleging bias on the part of Army officials. The court denied the protests, freeing the Army to proceed with a third corrective action. That is where things stood as of last March 31.
The Army got into trouble because it tried to find a way to provide offerors with a basis to estimate what could not be estimated—the annual cost of a complex, long term, frequently changing service requirement, a problem that the court described beautifully at the end of its decision.
There was no way for any of the offerors to estimate what it would cost to provide support services at Yuma Proving Ground for a year. As the Army had explained to the court:
The only way that the Army could comply with CICA and evaluate cost was develop a common cost baseline, tell the contractors to plug in some numbers, and compare results as if they were meaningful indicators of what the offerors’ performance costs would be. But the resulting cost estimates probably bore little if any meaningful relationship to what would happen after contract award. They probably had little if any meaningful predictive value. The apparent cost difference between Jacobs and TRAX may have been illusory. The Army used the numbers so it could “include cost or price to the Federal Government as an evaluation factor that must be considered in the evaluation of proposals,” as required by10 U.S.C.A. § 2305(a)(3)(A)(ii) and 41 U.S.C.A. § 3306(c)(1)(B).
Orders are orders. Onward the Light Brigade. A lot of wasted effort, time, money, and litigation, the waste being attributable to a 19th Century obsession with cost competition, abetted by incompetent people. In today’s world of procurements of long-term, complex support services, CICA must be amended to permit source selection without evaluation of price or cost in appropriate circumstances, followed by one-on-one negotiations with the selectee before contract award.
A Better Approach To Support Services Contracting
A better way to have contracted for the Yuma Proving Grounds support services would have been to award a contract with two line items. One line item would be for a firm-fixed-price contract with award-fee for day-to-day general management and supervision services and for administrative services such as safety, quality control and assurance, purchasing and materials management, property management, human resources management, and accounting. The other line item would be for a cost contract (no fee) for materials, labor, and other direct costs to be incurred for performance of support services. Under such a contract, with a day-to-day contractor management team in place and an advance agreement on any indirect cost rates applicable to the cost (no fee) line item, the parties would jointly plan and manage performance. The contractor would make its best effort to execute the plan by performing the support services under the cost (no fee) line item.
Instead of pretending that the contractor would independently plan, manage, and execute performance in accordance with an unavoidably incomplete "performance work statement," the parties would jointly plan the work to be done and its scheduling, budget, required materials, labor staffing, and labor compensation. The Government would have the final say on planning decisions. The Government would obligate funds for the firm-fixed-price with award-fee line item upon contract award, but it would fund the cost (no fee) line item in the amount required on a quarterly basis. The contractor would then execute through day-to-day performance.Such an approach to contracting would be relational, rather than transactional. See Edwards and Nash, “A Proposal for a New Approach to Performance-Based Services Acquisition,” Defense Acquisition Review Journal (September 2007), and Vitasek and Frydlinger, “Are You Suffering From the Contracting Paradox? Introducing the Relational Contract,” Contract Management (May 2017).
An agency would choose the contractor for such a contract on the basis of the best-qualified offeror with a fair and reasonable price, as described in “Postscript: Highest Technically Rated Offerors With Fair and Reasonable Pricing—The GAO’s Sevatec Decision,” The Nash & Cibinic Report (March 2017). The agency would evaluate only the offerors’ qualifications--based primarily on experience, past performance, and a brief oral presentation about their company and proposed contract management organization--and the fairness and reasonableness of their proposed firm-fixed-price and award fee for the day-to-day management services. Price evaluation would not involve nonprice/price tradeoffs or direct comparisons of offerors' prices. Since offerors would not propose estimated costs for performance of the support services under the cost (no fee) line item there would be no need to establish a common cost estimating baseline, and no need to evaluate the realism and reasonableness of offeror estimated costs. The agency would get a contract that is better adapted to the realities of long-term complex service contracting, and they would get it through a simpler source selection process.
A little innovation can go a long way.
The FAR has gotten lengthier every year. It never stops growing. I compared the Commerce Clearing House (CCH) edition of the FAR dated January 1, 2016 with the one dated January 1, 2017. The first was 2,208 pages long; the second is 2,296. And so it goes. The deeper that ocean gets, the murkier its depths become.
Now, perhaps in response to Executive Order 13777, Feb. 24, 2017, the Defense Acquisition Regulations Council (DARC) and the Civilian Agency Acquisition Council (CAAC) want to “streamline” the FAR. The DARC has distributed a “case management record” within DOD calling for suggestions:
The case management record goes on to say that any recommendations for cuts should state (1) whether a proposed cut implements statute or executive order, (2) the rationale for the recommendation, and (3) any potential cost savings or “burden reductions.”
Good idea. I'm all for it. But the project needs a guiding principle or two. Let me make four suggestions.
Do not recommend cutting or editing anything that implements statute or executive order. It would be complicated and take up too much time in debate.
Delete everything that is merely tutorial or informative, not directive--everything that does not include the words must, shall, or may not or that includes one of those terms only in connection with a general policy statement.
Delete everything that duplicates rules promulgated by other agencies that have the primary statutory authority to do so and that is already covered in another place in the Code of Federal Regulations (CFR).
Don’t bother clipping words, phrases, or sentences here and there in a lengthy text. Too much trouble. Focus on long passages that don’t require detailed editing.
Now for an example. Consider FAR 16.104, “Negotiating Contract Type.” Here it is, with the text that I would delete in red.
The “shall” in the first sentence of 16.103(b) is an example of what I call a nonspecific shall. It does not direct the contracting officer to do anything specific in any given instance, but only instructs him or her to keep a general principle in mind.
Here is another example of what I would delete, from FAR 15.404-1, “Proposal Analysis Techniques”:
Note the nonspecific shalls in paragraph(b)(1).
The material in red, which is merely tutorial, is already covered in the Contract Pricing Reference Guides, and Government personnel can be made familiar with it in training and directed to it by general reference.
Now, here are two examples of text that needlessly covers ground already covered by other agencies in other places in the CFR:
The text in red is already (and better) covered in 13 CFR Part 121. Although Title 13 uses the term “fair market price,” it does not define the term, so the definition in FAR 19.001 might be useful and should be retained.
Now look at FAR 19.101, “Explanation of Terms,” which explains affiliates, annual receipts, and number of employees:
I would delete the entire section. By statute, SBA gets to define those terms, which are better and more appropriately explained in 13 CFR §§ 121.102, 121.104, and 121.106.
There are several other such texts in FAR. Look at FAR Part 22, in which the DARC and CAAC have sometimes done little more than restate rules promulgated by the Department of Labor, which are already stated in other titles of the CFR. For a specific example FAR 22.1003-4, “Administrative limitations, variations, tolerances, and exemptions.” That material is already covered in 29 CFR 4.123(e). All that is needed in FAR is a reference to the appropriate regulations and supplemental directives about what contracting officers must do in application and compliance.
Cutting the duplicate text will save the FAR councils from having to revise the FAR every time another agency changes its regulation. As it is now, every time the statutorily responsible agency changes its rules the FAR councils must then publish in the Federal Register to change the FAR, which is needless work. It will also prevent the possibility of conflicts between the FAR and the regulations promulgated by the statutorily responsible agencies and the confusion that is likely to ensue. Cutting the tutorial stuff will save paper. It will also make it clearer that rules are rules, but other stuff is just stuff.
As for cutting the tutorials, the FAR should be a rulebook, not a textbook or guide for the perplexed.
There will of course be people who will argue against such cuts on grounds that it will require contracting folk to look up other sources, and it is more convenient to include the information in the FAR to provide one-stop shopping, so to speak. There is merit to that argument, if you don’t mind navigating an ever increasingly voluminous and sometimes strange mixture of rules and stuff (guidance and tutorials) and if you don’t worry about conflicts in the coverage.
Status quo is always available.
Feel free to comment with your own recommendations.
Official contracting terminology and general legal terminology can push you off at the deep end if you aren't careful. Consider the term "multiple-award contract."
The Federal Acquisition Regulation uses the term "multiple-award contract" (MAC) in 21 places. FAR 2.101 defines "multiple-award contract" as follows:
Thus, as used in (3), a "multiple-award contract" is "a" (singular) contract with two or more contractors. FAR 16.504(c)(1)(ii)(D) says:
So a single contract must be awarded to more than one source? Does that mean there must be at least two company names in Block 7 of Standard Form 26 or Block 13 of SF 1447? I doubt that anybody who has been around for a while thinks so, so why say it like that, or seem to? Why not be clear? We've got a lot of new people getting involved in government contracts every day. In order to avoid confusing them, shouldn't we express ourselves as clearly as possible?
Is the terminology "multiple award contract" appropriate? Is what we call "a multiple-award contract" (singular) a single contract with two or more contractors, or is "it" (singular) really several separate contracts with separate contractors? Each contract has its own number and bears the name of only one contractor. In most cases the terms of the separate contracts are not entirely identical, e.g., labor rates, indirect cost rates, and prices differ. When there are both large and small business contractors under a "multiple-award contract," the small business contractors might have to comply with limitations on subcontracting that do not apply to the large business contractors.
"Multiple-award contracts" are not "joint contracts," as that term is used in contract law and defined in Black's Law Dictionary 4th ed.:
Some authorities make a distinction between joint and several contracts. See Contracts, Specifications, and Law for Engineers, 4th ed,, by Bockrath, p. 20:
Emphasis added. Or, as put in Calamari and Perillo on Contracts, 6th ed., by Perillo, in the chapter entitled, "Joint and Several Contracts," p. 697, the question is:
All of those are instances of a single contract document that bears the names of more than one contractor.
Based on the entries above, it seems clear that a government "multiple-award contract" is not a joint contract. There is no single contract document bearing the names of multiple contractors. While all of the contractors have made similar (not identical) promises--to perform as ordered at stipulated prices or rates--it is clear that they are obligated under separate contracts. Failure to perform by Contractor A does not make Contractor B subject to termination for default.
Now consider FAR 19.502-4:
Does the phrase "part of parts of a multiple-award contract" mean (a) part or parts of a single contract (in the sense of one of two line items, or two of the ten tasks in a statement of work), (b) separate contracts under a single acquisition, or (c) both?
It strikes me that "multiple-award contract" is inappropriate and potentially confusing. What we call "a multiple award contract" is really a set of entirely separate contracts--each with its own contract number, each bearing only one contractor's name and address, and each separately funded, each awarded to fulfill separate requirements that will be specified in task or delivery orders. What we call "a multiple-award contract" is really a multiple-award acquisition--i.e., an acquisition that results in two or more separate IDIQ contract awards for all or part of specified requirements for supplies, services, or construction. The contractors who receive awards then compete for orders.
Why do we contracting folk create and use inappropriate terminology? We just confuse ourselves. Or maybe we start out confused and that confusion shows up in our terminology. The key to better terminology is better understanding of basic concepts. Inappropriate terminology reflects confusion about concepts. And we spread our confusion through the use of inappropriate terminology.
Am I quibbling? Well, yes, maybe. But you can't master a subject like contracting, if you ever can, if you don't master it's specialized terminology.
Some other time I'll discuss the concept of a "severable contract," which Black's defines as follows:
Is a contract for severable services a severable contract?
DOD has announced the names of the 18 appointees to its Section 809 Advisory Panel on Streamlining and Codifying Acquisition Regulations. You can see their names and qualifications here:
The panel's congressionally mandated mission is as follows:
I have to say that I'm disappointed by the appointments. It's not that the appointees are not qualified or that I object to anyone's inclusion. They're distinguished and eminently qualified. The problem is that, unless I'm mistaken, they're old.
Yes, I said old.
Was there not even one GS-15 or SES in their early 30s with recent working-level experience who is sufficiently well qualified to provide advice and make recommendations for the amendment and repeal of regulations? Not one person in their late 20s or early 30s? Not one? The panel is comprised entirely of people whom I'd call, no offense intended, the usual suspects. I know some of them and like the ones I know, but that makes no difference.
Look, I don't expect much. The panel will work hard and produce a glossy report in 2018 (2018???!!!--why so far off?) that will be much discussed, I'm sure, for at least a month, maybe even two. We've had a lot of reform panels over the years and, ultimately, their work hasn't really come to much. (Anyone remember the SARA panel?) Oh, the 809 Panel is very likely to recommend at least some changes that will be made, but they won't change the system's ultimate character and outcomes, because reforms rarely address the system's fundamental problems. It's been more than 20 years since the Federal Acquisition Streamlining Act of 1994, yet I just saw a 47-page solicitation for 12 sleeper sofas, a buy that’s probably worth less than $18,000, yet incorporates something like 200+ pages of text by reference. Any little money saved by competition will be consumed by the cost of the process.
What we need from the 809 Panel is a final report that shows just how looney the system has become. We also need a final report that makes really radical recommendations. How about taking DOD out of the FAR system and letting it go back to having its own Defense Acquisition Regulation? (The two-council system is a mess.) How about freeing the Defense acquisition regulations from Paperwork Reduction Act reviews? (Congress and the President are imposing most of the paperwork, so what’s the point?) How about raising the simplified acquisition threshold to $1 million and taking simplified acquisition procedures out of the regulation and putting them into a separate guidebook so people doing simplified will be less regulation-obsessed? How about exempting simplified acquisitions from some socio-economic laws and programs? How about raising the dollar threshold for the submission of certified cost or pricing data to an amount at which the likely benefit will exceed the requirement's costs. ($50 million is about right. Maybe even $100 million.) How about applying the cost accounting standards only to contracts under which there is a likelihood of requests for equitable adjustment and significant claims worth more than, say, $5 million? How about recommending that certain contractor selections be based on qualifications, rather than technical proposals and price, and followed by unrestricted, in-depth, one-on-one negotiations (not "discussions") with the selectee?
But I fear that such a distinguished panel will consider such recommendations to be too far out. Only the young would be so radical and indecorous.
The future belongs to the young. It's they who will be tomorrow's acquisition (and national) leaders, and so it’s they who should take the lead in recommending changes. The folks of my generation have had our chances. We need to step aside and lend the young a hand. The old heads need to be there mainly to tell the young about their experiences, how they’ve been there and done that and why it didn't work the last few times, so that the young can go forward without making the same mistakes. (It would be trite at this point to quote Bob Dylan, so I won't do it. But most of you know the song I'm thinking about.)
I wish that Deirdre Lee, the panel chair, would prevail upon DOD to find and appoint at least two young radicals to the panel--persons in their late 20s or early 30s. I wish that the panel would actively seek the ideas and opinions of today's young chiefs of contracting offices and section chiefs. I wish that they'd hand over the task of writing the final report to young thinkers and firebrands.
I understand how the system works and why it works the way it does. Sadly, I do understand. I’m not naïve. But isn’t it time for subversive leadership from the old? What will they have to lose in 2018? Why not let the young set Congress’s hair on fire?
It’s time, at long last, long past time, for the old timers to bring people to the front who don't care how and why the system works the way it does, who want to take a new path, and who don’t mind kicking dirt on some shoes.
It's long past time.
An article in today's (Sept. 27, 2016) Wall Street Journal, "Amazon's Newest Ambition: Competing Directly with UPS and FedEx," the paper reports that Amazon is creating its own delivery system in response to rising shipping costs. An interesting comment:
This seems to be a departure from the business model that developed in the 1980s and 1990s, in which a business identifies and focuses on its core competencies and outsources everything else. https://www.caycon.com/blog/2012/10/focus-on-core-competencies-and-outsource-the-rest/
There has even been talk about outsourcing core competencies. http://www.supplychain-forum.com/documents/articles/Premus & Sanders.pdf
Goodness knows, the military has been accused of doing core competencies during the wars in Afghanistan and Iraq. https://www.brookings.edu/articles/outsourcing-war/
The government has pursued the outsourcing model (in its governmental way) for three decades now, and not without problems, as reflected in the misguided foray into "performance-based" contracting. Outsourcing has been administratively costly and time-consuming and has produced somewhat dubious results.
Does the article about Amazon and its comment about the willingness of powerful tech companies to defy traditional business constraints suggest that we might be witnessing the return of an old business model within some industries?
We've had the revolution. Are we seeing the beginnings of reaction? Has the cycle come full circle? Or are we just seeing a bold move by a bold entrepreneur, the kind of thing the government can't do.
Say, isn't the OFPP Administrator going to Amazon? Maybe some of you should check to see if she's accepting resumes.
Contracting officers are charged with ensuring that contracts are awarded in compliance with the law. See FAR 1.602-1(. Consider, for example, FAR 6.101(a):
Almost everyone in contracting knows that U.S.C. is the abbreviation for United States Code. Almost everyone, but I recently taught a contracting class in which 12 out of 26 students did not know what U.S.C. stood for. (One person, a contracting officer, thought it meant United States Court. Another person thought it meant United States Circular.) Most of the students did not know that the ?10? and ?41? refer to titles of the code, what a "title" is, or how many there are. Most did not know that ?2304? and ?253? refer to sections. Very few people knew why the U.S.C. is a ?code? or what that means. And even fewer people could accurately describe the content of the U.S.C.
What is the United States Code and what does it contain? In order to understand the answers to those questions, we have to know something about how our laws are enacted at the Federal level.
When both houses of Congress pass a bill, they send the ?enrolled bill? to the President printed on ?parchment or paper of suitable quality.? See 1 U.S.C. 107. The Constitution gives the President 10 days to sign it into law or veto it, not counting Sundays. If the President does nothing, the bill becomes law by default. (I won?t go into vetoes and ?pocket vetoes, but you can look it up.)
Assuming that the President signs the bill into law, it is sent to the Office of the Federal Register within the National Archives and Records Administration, where it is given a public law number. (There are also private laws, but they have no bearing on this topic, so I won?t go into that.) A public law number contains the number of the Congress which enacted the law and the number of the law itself, e.g., Public Law (Pub.L. or P.L.) 111-23, the 23rd law enacted during the 111th Congress. That law is called the ?Weapons Systems Reform Act of 2009,? which is its ?popular name.?
From the Office of the Federal Register the law goes to the Government Printing Office, where it is published as a pamphlet called a ?slip law.? That is the first publication of the new law.
At the end of each session of a Congress, the laws enacted during that session are published in book-form as a volume of the United States Statutes at Large, in which the laws appear in the order of their enactment. Title 1 U.S.C. 112 provides as follows concerning the Statutes at Large:
In short, the Statutes at Large are ?positive law,? meaning that they are the law as enacted by Congress.
Now, here?s the problem with the Statutes at Large. Think about the Truth in Negotiations Act (TINA), which was enacted during the second session of the 87th Congress, signed into law on September 10, 1962, as Public Law 87-653, and published in Volume 76 of the Statutes at Large at page 528, cited 76 Stat. 528. (TINA is now implemented by FAR 15.403, 15.406-2, and 15.407-1, and by several FAR clauses.) The original law has been amended several times, and the law making each amendment appears in its own place in some volume of the Statutes at Large. If you want to find out what that law says today by searching through the Statutes at Large and then collating the original law and all of the amendments, you are going to have quite a job on your hands. You will have to work your way through several volumes, cutting and pasting in order to take the amendments into account. Who wants to do that? Hence, the United States Code, the U.S.C.
The purpose of the U.S.C. is to make legal life a little easier. The Office of the Law Revision Counsel of the U.S. House of Representatives ?codifies? the general and permanent public laws enacted by Congress by cutting and pasting the laws together to form topical sets called ?titles.? There are 50 titles in the U.S.C. The topical re-arrangement of existing laws eliminates the work of finding the laws in the Statutes at Large and collating the ones that apply in a given subject area. For example, the laws pertaining to the military are, for the most part, but not entirely, collected in Title 10 of the U.S.C., Armed Forces, and arranged into subject matter chapters and sections. Many, but not all, of the laws about Government contracts are collected in Title 41, Public Contracts. Many, but not all, of the laws about labor are collected in Title 29, Labor. And so on.
Not every law gets codified, only general and permanent laws. ?General? means applicable to the public, not just to specific persons. ?Permanent? means that the law continues in effect for an indefinite time. (However, some ?permanent? laws have ?sunset? provisions, which provide for their expiration at a specified point in time unless extended.) Appropriations are examples of laws that are not permanent. (However, appropriations laws often contain provisions that enact, amend, or repeal permanent laws.)
There is a problem, however, with codification. In order to cut and paste intelligibly, the Office of the Law Revision Counsel sometimes has to make minor changes in the text of the laws, which means that they no longer read as enacted by Congress and signed by the President, and they sometimes make mistakes. They do not intend to change the meaning of any law, but even minor changes or errors could affect meaning. What if there is a conflict between the wording of the law in the Statutes at Large and the U.S.C.? See 1 U.S.C. 204(a), which provides in part as follows:
The U.S.C. is "prima facie" evidence of the law. According to Black?s Law Dictionary, prima facie evidence is ?Evidence that will establish a fact or sustain a judgment unless contradictory evidence is produced.? Thus, language in the U.S.C. is subject to challenge by comparison with the language in the Statutes at Large, with the Statutes at Large taking precedence. But if Congress enacts a title into positive law, it repeals earlier versions of the laws and the language in the title becomes the law in fact and is no longer subject to challenge by comparison with the Statutes at Large. See the rest of 1 U.S.C. 204(a):
See Office of the Law Revision Counsel, Positive Law Codification in the United States Code, which may be found at http://uscode.house.gov/codification/Posit...odification.pdf.
According to the Office of the Law Revision Counsel, the following titles have been enacted into positive law: 1, 3, 4, 5, 9, 10, 11, 13, 14, 17, 18, 23, 28, 31, 32, 35, 36, 37, 38, 39, 40, 44, 46, and 49. A bill pending before Congress, H.R. 1101, would enact Title 41, Public Contracts, into positive law. Projects are underway codify other laws and enact five new titles, which would raise the total to 55. The new titles would be:
51, National and Commercial Space Programs
52, Voting and Elections
53, Small Business
54, National Park System
The Government Printing Office publishes the U.S.C. every six years, which makes determination of its current content somewhat difficult. See Kelly, "Legal Research on the Internet: A Primer and an Update to the United States Code on the Web," Arkansas Law Notes, 1999, 1999 ALRN 27. However, two private publishers print their own editions⎯the Unites States Code Annotated (USCA.), published by West, and the United States Code Service (USCS), published by LexisNexis. The annotations in those additions are very helpful to legal researchers.
So that?s the Unites States Code, a collection of 50 topical sets of the general and permanent laws of the United States. It is prima facie evidence of the law, unless enacted into positive law, in which case it is the law.
There is a very good and much more comprehensive discussion of this topic in an article by Mary Whisner in the Fall 2009 issue of Law Library Journal, 101 Law Libr. J. 545, entitled, ?The United States Code, Prima Facie Evidence, and Positive Law.? Another good article is Tress, "Lost Laws: What We Can't Find in the United States Code," in the Winter 2010 edition of Golden Gate University Law Review, 40 Golden Gate U. L. Rev. 129. Those are very much worth reading, and I recommend that all contracting officers do so.
"A question. Since before your sun burned hot in space and before your race was born, I have awaited a question."
Star Trek, the Guardian in “The City on the Edge of Forever.”
Early on in college I realized that questions were the gateway to learning. I didn’t put questions to my professors very often. I asked them mainly of myself, then learned by looking for answers. It took time, which was murder under the quarter system of the University of California. (I swear, I don’t think they were trying to teach us anything, just move us through the process.)
I learned that I had to ask good questions. Dumb questions (and there is such a thing as a dumb question) were the gateway to nowhere.
But what’s a good question?
I have long believed that the ability to ask good questions is one of the most important skills that a contract specialist must master. The ability to ask good questions is essential to learning the various facets of the work and to doing the work well.
Suppose you are planning to negotiate a sole source contract price and you have received a price proposal and certified cost or pricing data. You’ve conducted a preliminary cost analysis and developed a list of questions. The time has come for face-to-face fact-finding.
Your philosophy is that cost analysis is just reverse cost estimating. In order to develop a pre-negotiation objective you intend to disassemble the contractor’s cost estimate and profit objective, understand them, assess their reasonableness, put them back together and see what you get, then develop your negotiation plan.
You’re sitting in the contractor’s facility, across from their lead negotiator and the other members of its team. They are waiting for you. The intend to be honest. They will answer you truthfully, but they are not going to help you ask and they are not going to be forthcoming. If you want information, you are going to have to ask for precisely what you want.
So, what’s your first question?
* * *
Wifcon Forum long ago transitioned from a true discussion forum into a Q&A website, and much like someone passing through Elizabeth Kubler Ross’s stages of grief at the prospect of death, I have transitioned from shock, through anger and annoyance, to disappointment and depression, and finally to acceptance of what seem to me to be a lot of poor quality questions. I'm not the only one who thinks so. Some of us discuss the problem often, but behind the scenes.
What do I mean by “poor quality”? The best way to answer that is to show you some examples, all asked by persons who posted anonymously, without any user name, more than a decade ago. Here’s one from early 2003:
Here is another, from December, 2000:
Here is another, also from 2000:
All punctuation as in originals.
I wish I could say that those are rare examples, but they are all too common. I could have used a few from last week, but I didn’t want to hurt anyone’s feelings.
I’m sure that those questions made perfectly good sense to those who asked them. They might make good sense to some of you who are reading this blog post. But not to me.
Okay, so what makes a question “good”? As it turns out, that is not as easy a question to answer as you might think.
I wanted to write a well-reasoned answer to my own question, which itself might be a dumb question, so over the course of the past several months I have read extensively and sometimes deeply in the theory of questions. (The theory has a name: erotetics) and the practice of questioning. It is an important part of logic, science, rhetoric, law, and semantics, and works range from the highly technical, such as Belnap, The Logic of Questions and Answers (Yale, 1976) and Harrah, “A Logic of Questions and Answers,” Philosophy of Science, Vol. 28 (1961) pp. 267-273, to those that are more readily accessible to nonspecialists, such as the entry, “Questions,” at the Stanford Encyclopedia of Philosophy, http://plato.stanford.edu., the entry “Questions,” in The Encyclopedia of Philosophy, Vol. 7 – 8, and in The Theory of Questions: Erotetics through the Prism of its Philosophical Background and Practical Applications, by Anna Brożek (Rodopi, 2011).
A search of the internet led me to a lot of advice about how to ask a good question. You can find an example of such advice (a pretty decent one) at this site:
You can find another example here:
The advice strikes me as sound, though not entirely satisfying.
Recently, however, I came across something that stopped me in my tracks -- a short article by Wendell Johnson (1906 – 65), “How to Ask a Question,” published in Journal of General Education in April, 1947, republished in ETC: A Review of General Semantics (Winter 1948), and published again in a retrospective in ETC: A Review of General Semantics (Fall 1983). You can find it here: http://www.jstor.org/stable/42576616?seq=1#page_scan_tab_contents, but you need a subscription or access through a university or public library.
It’s very short, only five pages, but dense. The author packed a lot of thinking into those pages. You have to read deeply. I have added it to my list of essential reading for contracting practitioners.
Because it may not be readily accessible by all, here are a few quotes to give you the flavor of the thing:
But my favorite quote in the piece, and one of my all-time favorite quotes, is this:
Yep, my question, "What is a good question?", was a fool’s question. So I’m going to refine it. That might take me a while. In the meantime, give Wendell Johnson's article a read. It will be well worth your time and thought.
I just read an online column in which the author (1) asserted that the government neglects contract performance management to its detriment and (2) called for the devotion of more resources to that acquisition function. I don’t know on what basis the assertion was made or whether it is true, but I would not be surprised to learn that it is. My impression is that most contracting people devote most of their time to acquisition planning, contractor selection, contract award, and to unavoidable contract mods and postaward administrative matters. I suspect that most have little or no time for actual contract performance oversight and management.
If that is true, why would it be so? I am not sure, but I believe that a major contributing factor is the multiple-award task order contract. (By “task order contract” I mean an indefinite-delivery indefinite-quantity (IDIQ) contract for services.)
We spend more on services than supplies, and we conduct a lot of competitions in order to spend that money. We conduct competitions under FAR Part 13, FAR Part 14 (a few), FAR Part 15, FAR Subpart 8.4, and FAR Subpart 16.5. The reason for conducting Part 13, 14, and 15 competitions is obvious and understandable, but the Subpart 8.4 and 16.5 task order competitions are competitions on top of competitions. We do them because Congress wants agencies to continue the pursuit of lower prices after contract award and keep pressure on contractors to perform well.
Competition is resource intensive, time-consuming, and costly to all involved. How much time and money do all the 8.4 and 16.5 competitions cost and how much money, if any, do they actually save in the long run? Do they, in fact, result in better quality than could be had through effective contract management? No one knows, because no one keeps track.
The preference for multiple awards of task order contracts was a provision of the Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355, §§ 1004 and 1054. The FAR councils implemented the statutory preference in FAR 16.504 and 16.505. FAC 90-33, 60 FR 49723, Sep. 26, 1995.
I commented on the proposed rule, 60 FR 14346, Mar. 16, 1995, in an article for The Nash & Cibinic Report entitled, “The New Rules for Multiple Award Task Order Contracting” (June 1995, 9 N&CR ¶ 35). In that article, I said:
[T]he proposed rule is significant because of the policy preference for multiple awards and task order competition. Presumably, multiple awards and competition among the awardees for task orders would pressure the awardees to continuously increase their productivity and the quality of their output. But multiple awards and task order competition could also increase the administrative cost and lead time associated with the issuance of task orders, and those effects could cancel out or even overwhelm the advantages accruing from task order competition. Although the idea of awarding multiple task order contracts for the same service and requiring that the awardees compete for individual task orders is not new (a few agencies have been doing this for many years), the vast majority of task order contracts have been single awards. Thus, the new policy can be expected to have a significant effect on procurement operations.
I also said:
The multiple award preference policy states that every awardee must be given a “fair opportunity” to be considered for the award of each task order in excess of $2,500. The proposed rule leaves the choice of evaluation factors to the CO's discretion. The CO need not publish a synopsis, solicit written proposals, or conduct discussions with awardees prior to the award of a task order, proposed FAR 16.505
(1). The rule precludes protests against task order award decisions. Agencies must appoint task order “ombudsmen” to handle complaints from awardees about task order selections, proposed FAR 16.505
Notwithstanding these liberal policies, it is not difficult to imagine Government procurement officials conducting a mini-source selection before the issuance of each task order. Some will almost certainly consider a more formal procedure to be necessary to ensure fairness. One can easily imagine requests for proposed task order “performance” plans or “management” plans, especially for task orders of significant dollar value. One can also imagine requests for extensive cost breakdowns, certified cost or pricing data, and proposal audits. If too complex and demanding, such procedures would significantly increase an agency's administrative costs, extend the lead time associated with task order issuance, and force awardees to incur significant costs in the preparation and negotiation of task order proposals.
And I concluded:
The objectives of the proposed rule about the task order contract multiple award policy preference are unstated, but one objective is undoubtedly to lower the cost of services provided under task order contracts by maintaining competitive pressure on contractors throughout the life of the contract. This may be a reasonable expectation based on theory, but there are many reasons to believe that it will not work as intended. The proposed rule of March 16, 1995, if issued unchanged as a final rule, will not increase the policy's prospects for success. It simply fails to address all the issues that the policy creates in ways that will assist working-level procurement officials to implement the policy in an intelligent manner.
Well, we all know what happened after FASA and FAC 90-33. The number and dollar value of acquisitions of services under multiple-award task order contracts (and GSA FSS contracts) soared. There was a lot of misuse and sloppy practice. In reaction, Congress and the FAR councils made the once liberal rules more voluminous and restrictive, not only for task order contracts under FAR Subpart 16.5, but also for orders against GSA Federal Supply Schedule contracts under FAR Subpart 8.4.
Competition is an essential part of acquisition policy, but competitions clog the acquisition system by absorbing a lot of human resources, taking a lot of time, and costing a lot of money. I believe that the multiple-award preference has made for a lot of unnecessary and ineffective competitions. It is not at all clear that the contracting results have been better than they would have been had agencies been allowed to make single awards without hectoring by the GAO, review teams, IGs, and other critics. Would America really be worse off if agencies simply conducted one competition for a task order contract, chose one contractor, awarded one contract, and focused on getting the best performance from that firm under that contract?
Multiple awards can be useful and have a place in acquisition practice, but I think that the statutory and regulatory preference for multiple awards has been one of the worst things that has happened to postaward contract management. It has diverted precious human resources to processes of dubious effectiveness and away from work that, if done well, would likely have a much more direct and immediate impact on results.
If anyone believes that better contract performance management yields better results and is looking for more resources to devote to that work, start by seeking the elimination or moderation of the multiple-award preference.
Four ideas to make elimination or moderation of the multiple-award preference more palatable to Congress:
1. Limit the duration of ordering periods under single-award task order contracts to three years, including options.
2. Amend the applicable statutes to expressly allow agencies to renegotiate prices and rates in single award contracts and prices and rates in contract extension options after contract award, without conducting a new competition.
3. Allow agencies to negotiate and award a new contract of up to three years duration with one of the original competitors without conducting a new competition if the original awardee's contract is terminated for convenience or default during the first year of the ordering period.
4. Develop a special course in services pricing and price negotiation for all COs who manage task order contracts and require them to attend and successfully complete the course within the first year of their assignment to such a contract.
Innovation: How Not To Go Down In Flames
The role of each member of the acquisition team is to exercise personal initiative….
Contracting officers should take the lead in encouraging business process innovations….
There’s guns across the river aimin’ at ya
Lawman on your trail, he’d like to catch ya
Bounty hunters, too, they’d like to get ya
Billy, they don’t like you to be so free
—Bob Dylan, “Billy 1”
In a thread in the Wifcon Forum Contracting Workforce category entitled, “Personal Initiative: Who Has Used It?”, Bob Antonio asked for answers to four questions:
I’m especially interested in the answers to the first question: “Have you ever tried personal initiative but you were shot down by ‘higher ups’ because the FAR did not authorize something?”
So far, Bob has received seven responses. Five of the seven were “Yes.” The “yes” answers are the ones that interest me. I wonder why the would-be personal initiators got shot down, given the persistent calls for innovation these days. Even some blockheaded bureaucrats say that they want to change their world.
My complaint about all the presidential appointee/career management calls for initiative and innovation is that they they’re not honest about just how hard it is to move a bureaucracy in a new direction, even if by only a compass point or two. Such faithless calls risk alienating the very people the bosses claim to want to motivate, especially newcomers, who might react badly when their initiatives are rejected. The bosses may be preparing fertile ground in which to grow a new generation of cynics.
In my experience, many, maybe most, working level proposals for innovation fail, because the initiators didn’t know what they were in for, didn’t understand the need for intelligence and tactical planning, and made a poor presentation. They wanted to beneficially change their agency’s behavior, but they didn’t know how to go about it in the right way.
* * *
Suppose that you are a journeyman contract specialist in a “conservative” Government contracting office. Suppose further that you have just completed a three-day seminar in source selection in which a charismatic instructor argued persuasively that you could streamline and speed up the source selection process by asking for oral presentations from offerors instead of written technical proposals. The instructor even pointed out that the technique is expressly authorized by FAR 15.102.
You have no hands-on experience with oral presentations. You’ve never seen one, and you haven’t read much about them. But, newly enthused, you go back to your office, make some inquiries, and learn that your agency has never used them in place of written technical proposals. So you go to your boss and propose asking for oral presentations instead of written technical proposals in an upcoming source selection to which you have been assigned.
Your boss, the Contracting Officer, who has not used oral presentations and who is not really expert at source selection (though he thinks he is), cuts you off. He says that oral presentations will expose the agency to protests about improper discussions. He also says that there’s no good way to document the presentations or the evaluations of them. Bad idea. Forget about it.
You visit an attorney in the legal office, who says much the same.
You talk to colleagues, but none of them have used oral presentations and don’t know much about them.
You approach the program manager, who is not expert in source selection, has no experience with oral presentations, and doesn’t understand how oral presentations can replace written technical proposals, even though she says that written proposals are a time-consuming pain to read, evaluate, and score. She worries about how you would incorporate oral presentations into a contract. She asks a lot of questions about the process, to which you have no definite answers.
Finally, by happenstance, you run into the director of contracts, your boss’s boss, at lunch in a nearby sandwich joint. You mention your ideas to her. She listens politely, but says that she hasn’t the time right then to discuss the matter. She tells you to make an appointment to come to her office. Later that afternoon your boss fusses at you for going over his head. He tells you again to forget about it.
You’ve gone down in flames, crashed, burned. So you cut and paste the traditional proposal preparation instructions and grumble about the higher-ups and the lawyers.
What have you learned? Well, if you paid attention, you should have learned that you just tried to sell the idea of using a bicycle to people who’ve never seen a wheel.
* * *
Before we go any further, it’s a good idea to keep in mind that many of today’s established contracting rules and procedures were once innovations. The Truth in Negotiations Act was an innovation of the late 1950s, as was the source selection tradeoff process, sophisticated numerical proposal scoring, and the modern concept of discussions with offerors within a competitive range. The formal evaluation of past performance was an innovation of the mid-1960s that failed and was revived in the 1990s. The imposition of Cost Accounting Standards was an innovation of the 1970s, as was the proposal color-rating system, which was designed to solve problems created by misuse of numerical scoring. The Competition in Contracting Act was an innovation of the early 1980s. Electronic proposal evaluation software was an innovation of the 2000s.
Another thing to keep in mind is that managers and staffs in organizations involved in Government contracting are geared for rule compliance. Failure to comply can have consequences, sometimes serious ones. It would be one thing if the rules were clear and unambiguous, but they’re not. The rules are badly written and subject to lawyerly interpretation games and to time-consuming and costly litigation. The compliance mind casts a shadow over all proposals to innovate. Compliance is not risky. Innovation might be very risky. These realities tend to make managers and staffs conservative and reluctant to embrace change that is promoted from the bottom up.
What makes me mad at political appointees and career managers who call for innovation is that they fail at one of their most important leadership functions—teaching their people. If you want people in a compliance-oriented organization to innovate, you must teach them how and pave the way through the bureaucracy. Senior managers who encourage people to innovate without giving them navigation charts for the Sea of Bureaucracy and a reliable course heading deserve a kick in the pants. Some of their best people will end up lost.
Most of you initiator/innovators don’t have good senior managers, so you will have to plot your own course. Suppose that you want to innovate with oral presentations in source selection. Start by asking yourself some questions:
1. How well do you know and understand the applicable source selection rules and practices —not just as they appear in FAR, your agency supplement and policy documents, and in your agency’s handbooks and manuals, but also as interpreted and applied by the GAO and the Court of Federal Claims? What do you know about the history of those rules and practices, where they came from and why? How deeply have you thought about them?
2. What do you know about the concept of the technical proposal and about their typical content? What do you know about preparing them? What do you know about the actual experience of evaluating them? What do you know about their legal role in contract formation and administration? What have you read about the criticisms of them?
3. What have you read about oral presentations in the professional literature, in publications such as Public Contract Law Journal and Contract Management magazine? Did you Google <oral presentations in source selection> and read what you found?
4. Do you know how many protest decisions there have been in which oral presentations were an issue? How many of them have you read? Did you take notes about the kinds of acquisitions in which oral presentations were used, the particular methods that were used, and the issues involved? Did you compile won/lost statistics and reasons?
5. Did you check the past year’s listings at FedBizOpps to find acquisitions in which oral presentations were employed? Did you get the solicitations? Did you call the contracting officers to ask how they went about it, how it came out, and lessons learned?
6. Did you conduct market research to find out whether oral presentations or something similar (marketing presentations or “sales pitches”) are used in the industry with which your agency will engage in the upcoming acquisition?
7. Did you do a pro and con analysis? What would your office gain, if anything, by evaluating oral presentations instead of written technical proposals? What might it lose, if anything, not just in terms of potential protests, but also in terms of information necessary to make a sound a source selection decision? What are the risks? What are the benefits? What are the tradeoffs?
8. Did you develop a detailed plan and process for using oral presentations? Does it reflect what you have learned? Is it practical? Will it show the decision maker and others that you’re not just winging it?
9. Do you know the bureaucratic structure of your headquarters organization, its history, and its temper? Do you know the backgrounds of the decision maker and other affected and influential staff? Do you know their likely issues, questions, and objections, and are you ready with detailed responses? Do you have allies? Do you know your opponents?
10. Did you assemble pertinent and verifiable facts, prepare a persuasive written argument and appropriate presentation, and choose the right time, place, and audience at which to present them? Did you invite the right people to attend? Did you rehearse?
11. Did you think tactically about how to work your way through the layers of bureaucracy: whom to approach first, whom next, and how to build support and momentum toward your objective before hitting up the decision maker? Did you think about how to prepare for attacks by opponents against your argument's flanks and rear?
Sound very formal and like a lot of work? Well, it is. And it might require some or all of that if you want to initiate an significant innovation. While some innovations are produced by flashes of insight and inspiration, most, especially big and important ones, are produced by fact gathering, analysis, deep thinking, careful planning, and good tactics.
You probably won’t have to go to all that trouble when proposing minor innovations that effect only one routine, relatively small dollar acquisition in only one office. For that kind of thing you might be able to walk into the boss’s office and simply say: “I’d like to try something…” But when proposing a “major” change in policy or procedure, get into the research, planning, and persuasion mode.
Every working-level proposal for innovation is a sales pitch that, hopefully, will lead to a negotiation. A famous expert in negotiation once arrived home from a business trip only to be pounced upon by his teenage son, who presented him with all sorts of ideas that he wanted his father to buy into right away. According his son’s recollection, the father was quiet for a moment, then said:
“My ideas are my old friends and your ideas are your old friends. You may have some very good friends. But you cannot expect me to throw away my friends and adopt your friends at a moment’s notice, as soon as you introduce them to me. Give me time to get used to them and I may adopt them. But I need that time—I need that acceptance time.”
See Gary Karrass, Negotiate to Close: How to Make More Successful Deals (1987).
Mid and senior-level bureaucrats, who are not always up to speed on the latest and greatest ideas, and who tend to be conservative, will need a persuasive introduction to your friends. Selling innovation takes time, thought, tactics, preparation, and guts. By the way, that’s half the fun. And keep in mind that a well-done study, plan, proposal, and presentation might attract the attention of a higher-up and be a big career boost, even if the proposal is rejected.
I just read a very strange blog entry by Steven Kelman, former OFPP administrator, writing at Federal Computer Week online on November 20. The title of the entry is: “Improving statements of work to improve contract management.” You can access it at:
I don't ordinarily read Kelman's FCW blog, "The Lectern," but someone sent it to me and I was intrigued by the title of the entry. i thought I might learn something.
Kelman begins by saying he’s been looking for ideas about how to improve contract management and had a conversation with the CEO of a small company whose ideas focused on writing and managing statements of work. She said that in her experience statements of work were often “poor.” Regrettably, she wasn't more specific about what makes them “poor,” because Kelman doesn’t provide any details.
The CEO complained to Kelman that it is often the case that statements of work are written by talented but busy program staff who do not end up working on the contract. Instead, the statement of work is handed over to an unenthusiastic contracting officer’s representative who is not a subject matter expert. Meanwhile, the contracting people are too busy to get involved unless there is a crisis.
The CEO’s specific suggestion? Have contracting officers use the “advisory downselect procedure” (advisory multi-step process) described in FAR 15.202 to reduce the pool of competitors to a “small number of finalists” with which the contracting folk could then work to develop a good statement of work. “[H]aving several contractors work on the joint SOW would guard against rigging the specs in favor of any one contractor’s solution.” The agency would then go on with a source selection.
That’s it. Anyone who has ever written a statement of work for a complex contract and been involved in committee work will understand why I think that would be a project to avoid like a mine field.
Kelman concludes his blog post by asking readers to “join the dialogue” by posting comments or contacting him at his office email address.
Here is my comment:
What is a statement of work? What kind of document is it in a contract for complex services? Is it like a hardware specification? Should it specify the work that the contractor must do, or should it describe the work in general terms and explain how the parties will work together to specify the work on an ad hoc basis over the term of the contract? What makes a statement of work "good"? What is the role of a contract in a complex and dynamic business relationship?
Kelman, who is known for his insistent calls for innovation, doesn’t seem to realize that in order to innovate one has to understand the problem. Kelman and the CEO don't understand statements of work and their role in service quality management.
As OFPP administrator in the 1990s, Kelman did a lot of damage by pushing the half-baked "performance-based contracting" policy, which called for writing "performance work statements" (see the current definition in FAR 2.101) that specify measurable "outcomes" or “results” instead of how-to. The policy was the product of professional ignorance and a failure of professional thought and imagination. Pushing it the way he did wasted precious energy, time, and money without achieving much of anything. I have written a few thousand words in The Nash & Cibinic Report explaining why that policy was dumb.
The problem with service contract management is that the policy people in government and academia who are supposed to be critical thinkers haven’t thought about it long enough and deeply enough. I don't think they read. You cannot specify services like you specify supplies. People like T. P. Hill and Avedis Donabedian wrote enlightening works that provide food for thought about the unique problem of specifying services. Ian R. Mcneil and others have written about the limitations of contract law in complex business relationships. I have cited them in the past.
Ralph Nash and I wrote a comprehensive piece about how to contract for complex services, which was published in the Defense Acquisition Review Journal (Defense ARJ), a publication of the Defense Acquisition University, in September 2007. The piece is entitled, “A Proposal for a New Approach to Performance-Based Services Acquisition.” You can access it here:
In that piece we discuss the reasons for the failure of performance-based contracting in pages 355 – 358. We make specific and detailed recommendations for change in pages 358 - 361.
Apparently, Kelman never read our piece, or read it and forgot about it, or read it and didn’t understand it, or read it and didn’t like it. In any case, it goes into much more detail than he and his CEO friend about the challenges and problems of specifying and managing complex services, and it proposes a much more imaginative scheme of innovation. It calls for a complete rethinking of the rules for the acquisition of complex services.
Why call for suggestions for improving contract management if you won't look at the ones that have been made and critically examine them? If you don't agree with what you read, state your reasons. That's the way to have a dialogue.
Until policy makers and former policy makers get a clue and convince Congress that the current service contracting statutory, regulatory, and policy-memo regime makes no sense at all, service contract management will continue to disappoint. There is a small window of opportunity now with the study panel that Congress has foisted upon DOD. See the FY 2016 NDAA, Sec. 809. I have no hopes or expectations for such panels anymore, but maybe something good could come out of it if somebody who knows something -- and who has done some serious thinking and who still has some patience left for putting up with acquisition reform hoo-rah and nonsense -- would take the matter in hand.
Alice Wonderly has read the article given to her by Mr. Ewing. She shared it with other trainees in her program and they’ve discussed it, but they have questions. So Alice telephones Mr. Ewing to set up a meeting.
Alice: Hi Mr. Ewing. I read the article you gave me and I wonder if you’d have some time to talk with me about it. I wrote down some questions. And, well, I shared the article with some other trainees in my program office, and they’d like to know if they can come, too. They have questions, too. And I shared my notes of our last conversation with them, the one about evaluation factors.
Ewing: Okay. Good. That’s fine. Patrick told me you’d be calling. How about tomorrow at 11 a.m.? We can work through lunch, so bring brownbag lunches. Patrick will be here, too, with some other trainees in our program.
A: That sounds great. I’ll see you then.
E: Okay. And bring your copies of the article and your reading notes.
A: Will do.
Wednesday, 11 a.m., Mr. Ewing’s conference room.
A: Hi Mr. Ewing.
E: Alice. Come in.
A small troop of seven trainees enters the room and take seats at the conference table.
E: Introduce your colleagues.
A: Mr. Ewing, this is Denise Clare, a second-year intern. This is Jack Dixon, a first-year intern, like me. And this is Jane Mera, also a first-year intern.
Patrick: And Alice, I’ve brought Carol Spicer and Sotero Dominquez, both first-year interns.
E: Hi all. And you’ve all read the article?
E: And did you make reading notes?
E: And do you all have questions?
A: We consolidated our questions and made sure they were clear as to subject, query, and presuppositions.
E: Where did you learn about those elements of questions?
A: From the reading materials you gave to Patrick.
E: Good. Very good. How was the article? Did you find it difficult?
Denise: A little. Lots of academic language and a technical style. But we got some things sorted out through a little internet research and discussion. For instance, we found some illustrations and explanations of “value trees” that helped a lot. And we found some stuff about “swing weighting.”
E: Very good. Before you ask your questions, let me give you some background that might make my answers easier to understand. Sound okay? You might want to take some notes.
All nod and take out notebooks and pens.
E: Economists have long tried to understand how people make important choices. After World War II, economists, psychologists, and systems analysts and engineers began intensive study and theorizing about how people do and should make important decisions. They were especially interested in how people make important and complex policy and business decisions when there is uncertainty about the consequences of any particular decision. They wanted to figure out the best way to make such decisions.
By the 1950s, researchers at Harvard, University of Michigan, Stanford, Rand Corporation, Johns Hopkins and other institutions were very active in the study of decision making. They read, theorized, conducted experiments, and proposed procedures, and they wrote technical papers and books about their findings. Much of their research was funded by the Department of Defense, which was very interested in systematic, rational decision making.
By the mid-1960s this field of study had became known as “decision analysis,” and its prescriptions were being applied in all kinds of government and business endeavors, including acquisition. Another name for the field is Multiple Attribute Utility Theory or MAUT.
The key problem in decision analysis was to determine the best way to go about making a decision when the decision maker has multiple and conflicting objectives and must consider multiple evaluation factors and make tradeoffs. How do you do it consistently and rationally rather than by instinct, which can be hard to explain and defend?
As you know, the article you read was by Dr. Ward Edwards, a psychologist and a pioneer and leading figure in the science of decision analysis. He died in 2005.
He had taught at Johns Hopkins University, the University of Michigan, and the University of Southern California. He did research in decision making for the Advanced Research Projects Agency, the Air Force, the Navy, and Rand, and wrote a very large number of scholarly papers, around 100, and a couple of important books. He was the co-author of the 1986 magnum opus on decision analysis, Decision Analysis and Behavioral Research. The research in that book was sponsored in part by the Navy’s Office of Naval Research.
Shows them a thick, well-worn volume.
Dr. Edwards wrote a good background paper and summary of the early research in 1954, “The Theory of Decision Making." That paper was funded by the Office of Naval Research and Johns Hopkins University. He wrote an update in 1961, entitled, “Behavioral Decision Theory,” which was funded by the Air Force. In 2001 he wrote “Decision Technology,” about the impact on computers and the web on decision making. All of those papers are available on the internet.
In the 1950s and 60s we were in the middle of the Cold War with the Soviet Union. We faced many technical and economic challenges. What kinds of systems did we need to counter the threat? What kinds of technologies should we develop and use? What design concepts should we choose? What economic choices should we make?
In 1961, Charles Hitch, the Assistant Secretary of Defense (Controller) and Roland McKean, a Rand research economist, discussed decision making challenges in a famous book, The Economics of Defense in the Nuclear Age. They discussed the problems in detail in Part II. Chapter 9, “The Criteria Problem,” is especially interesting. Actually, if you read that book you’ll see that some of the authors’ points still apply today.
Shows them another thick, well-worn volume.
Among DoD’s challenges was figuring out how to evaluate proposals for the complex new weapon and space systems we needed and how to select a concept and a contractor. DoD wanted to know how to choose the right evaluation factors, how to rank the factors in importance, how to evaluate proposals and document evaluation findings, and how to make and justify selection decisions. And when you track the development of the source selection process you can detect the influence of decision theorists and systems engineers.
You can see the influence of decision analysis in source selection in the description of the Air Force source selection for the Tactical Fighter Experimental or TFX, conducted in 1961 and 1962. The TFX became the FB-111 fighter-bomber. After evaluating proposals, the Air Force chose Boeing, but Secretary of Defense McNamara rejected the Air Force’s decision and gave the contract to General Dynamics, instead.
That was extremely controversial and distressed certain members of the U.S. Senate, which held lengthy hearings in 1963 about the Secretary’s action. In testimony before the Senate, Colonel Charles Gayle, who chaired the evaluation panel, described the proposal evaluation process in detail.
Shows them a volume of the Senate hearing testimony.
Over the course of several days Colonel Gayle provided what is probably the most interesting insider description of a major source selection that’s ever been given. What he described was an instance of the application of decision analysis methods, though not the specific method Dr. Edwards described in the paper you read.
He described the evaluation panel (about 200 people). He described aspects of the operational requirement and the work statement. He described the evaluation criteria, and in that description you would recognize a “value tree.” He described some of the evaluation findings – proposed costs, most realistic costs, and nonprice strengths, deficiencies, and weaknesses. He explained raw scores, importance weights, and weighted scores, and he explained the panel’s recommendation.
The procedure used by the Air Force in 1961-62 was very similar to procedure it used in 2008 to select the air tanker contractor. One difference was that in the TFX source selection the Air Force used numerical scoring, while in the air tanker source selection it used the current DOD color rating system.
Here’s an old official document, “Guide for Proposal Evaluation and Source Selection,” dated July 1966, 52 pages long, and published by the Systems Development Division of the U.S. Army Aviation Materiel Laboratories. It includes a sample evaluation plan. It’s right out of the TFX source selection playbook, complete with the same 0 to 10 point numerical scoring system. It’s an early decision analysis approach, but it never explicitly mentions decision analysis, and neither did Colonel Gayle in his Senate testimony.
Shows them the guide.
My pitch is this: In order to truly understand the source selection proposal evaluation process, explain the process to others, and lead a team in planning and executing major source selection, you need to understand something about decision analysis concepts and processes.
In 1991, two professors at the Air Force Academy wrote a paper entitled, “The Application of Decision Analysis Methods to Source Selection in the United States Air Force.” They cited Edwards’s 1986 book Decision Analysis and Behavioral Research and his 1977 paper describing the SMART method, which was cited in the paper that you read. The authors claimed that source selection could be improved by greater application of decision analysis, specifically, the Analytical Hierarchy Process, which is a decision analysis method. By the way, they were critical of the color rating method.
In 2006, an Air Force officer submitted a master’s thesis to the Graduate School of Engineering and Management at the Air force Institute of Technology entitled, “A Decision Analysis Tool For The Source Selection Process.”
There are at least one hundred papers catalogued by the Defense Technical Information Center, DTIC, that discuss the application of decision analysis in source selection, dating from the 1970s to the recent 2000s.
Decision analysis methods are useful not only for source selection, but for all kinds of nontrivial acquisition decision making, and COs are decision makers or, at least, they’re supposed to be. Here are some papers that provide examples:
A 1974 study report submitted to the Defense Systems Management College was entitled, “Decision Analysis for the Program Manager.”
A 1981 master’s thesis submitted to the Naval Postgraduate School was entitled, “Multi-Attribute Utility Theory To Assist Top-Level Acquisition Decision-Making.”
A master’s thesis submitted to the Graduate School of Engineering and Management at the Air Force Institute of Technology in 2005 was entitled, “Decision Analysis Using Value-Focused Thinking To Select Renewable Alternative Fuels.”
A 2010 paper by a professor at the Naval Postgraduate School about the use of decision analysis in acquisition was entitled, “Economic Evaluation of Alternatives.”
And there’s a 2008 paper entitled, “Integrated Decision Technology for Acquisition and Contracting” that was published by the Naval Postgraduate School.
Decision analysis can be used in business case development. Here is a handbook, Better Business Cases: Guide to Developing the Detailed Business Case, 28 February 2014, written by Treasury office in the United Kingdom.
You can even use decision analysis in negotiation and in claim decision making. Here's an article from a 2004 issue of Marquette Law Review, entitled, "Decision Analysis in Negotiation." Here's a chapter from The Handbook of Dispute Resolution (2005), entitled, "Finding Settlement with Numbers, Mays, and Trees." And here's a 1996 article from the Harvard Negotiation Law Review entitled, "Decision Analysis As A Mediator's Tool."
The paper that I gave you to read, which was published in 1994, is a relatively recent contribution to decision analysis. Contributions are still coming in.
There are many academic journals today that are devoted to decision making, such as Journal of Multi-Criteria Decision Analysis, International Journal of Management and Decision Making, Journal of Behavioral Decision Making, Judgment and Decision Making, Decision, and Decision Analysis. The current issue of Decision Analysis, has an article entitled, “Search Before Tradeoffs Are Known.” I haven’t read it yet, but the abstract says [reaching and thumbing through a stack of papers, choosing one, and reading aloud]:
uncertainty about trade-offs is likely to occur, especially in settings that involve parallel search (e.g., vendor selection, new product development, innovation tournaments). We show that incorporating uncertainty about trade-offs into a model changes its search strategy recommendations. Failing to account for such uncertainty, which is likely in practice, leads to suboptimal search and potentially large losses.
That sounds interesting, since it mentions vendor selection.
Now, look -- all the stuff in those journals is academic, technical, and hard for non-specialists to understand. The journals are pricey. I don’t subscribe to them, and I don’t think you need to read them. But you can find nontechnical articles about decision making in publications like the Harvard Business Review and the MIT Sloan Management Review.
The May 2015 of HBR issue has four articles about decision making, and the HBR website has a recent digital article entitled, “How You Make Decisions is as Important as What You Decide.”
The MIT Sloan Management Review website has posted many articles about decision making. A Spring 2015 article is entitled, “When Consensus Hurts the Company.” Those are the kinds of things you might want to read.
An especially good article for contracting folk is “Even Swaps: A Rational Method for Making Trade-offs,” which was in the March-April 1998 issue of HBR. It was written by three prominent decision analysts.
So, why did I give you Ward Edwards’s technical article? Because you have a career choice to make. Contracting is a combination of professional, administrative, and clerical work. The most interesting part of it is the professional work. The administrative and clerical work is necessary and unavoidable, but boring. If that’s all there was to contracting, I would have changed careers long ago.
One of the jobs of a contracting pro is to explain professional issues and methods to laypersons like engineers and other requirements personnel. Source selection is a contracting task, which is why FAR makes the contracting officer the default source selection authority. That means that one of the jobs of the contracting officer is to be able to explain the proposal evaluation process to those who must do it. In order to be able to do that, the contracting officer must have what I call “deep conceptual understanding.” And that kind of understanding comes only after a struggle. You have to read, think, read some more, and think some more.
Official guidance, such as the DoD source selection procedures, explain procedures, but not the reasons for them and the concepts that underlie them. It’s likely that the people who write such manuals don’t know about the reasons and concepts. You have to read other things, things like Dr. Edwards’s paper, in order to see and understand the deep stuff. And, as you now know, reading that kind of thing is real work.
Now, look -- you can do good work in contracting without knowing the deep stuff. You can study the FAR and GAO decisions and learn the rules, you can cut and paste, and you can get promoted. But you’ll never be a leader and innovator. You’ll never be the person that they won’t start the meeting without, unless all they want to hear about is rules. And you won’t be able to teach the next generation, except by talking to them about rules and giving them something to cut and paste.
Anyone can learn to read FAR, read GAO decisions, and cut and paste a source selection plan. But you can’t learn underlying concepts that way or how to apply those concepts in different types of acquisitions. What you learn by cutting and pasting won’t help you brief and explain proposal evaluation and tradeoff analysis to a trainee or an inexperienced source selection team. Cutting and pasting won’t teach you how to be an expert professional advisor to a program manager and how to be an acquisition leader and innovator. Cutters and pasters can only be advisors and leaders in the art of cutting and pasting. They can only be expert followers.
By reading the article I gave you and coming here today, you proved to me that you’re willing to do the hard professional work in pursuit of deep understanding.
So far, at least.
Okay. End of the introductory briefing and sermon. Take out your copy of the article and your reading notes.
Having read the article, you know that Dr. Edwards’ SMARTS and SMARTER methods of decision analysis entail:
Step 1. Identifying who will participate in the decision process and determining what their objectives are with respect to the decision to be made.
Steps 2 and 3. Identifying the choice alternatives you’re going to evaluate and the evaluation factors.
Step 4. Creating an object/factor matrix and entering factor values into the cells.
Step 5. Eliminating any “dominated” alternatives.
Step 6. Converting raw measurements on various scales to a common “uitility” scale.
Steps 7 and 8. Ranking the evaluation factors and assigning specific weights, then calculating the total “utility” weighted scores.
Step 9. Making the decision.
There are several variations on this method, such as the Analytical Hierarchy Process and others. But they are generally based on the same kind of “additive weighting” approach.
Now, what are your questions?
To be continued…
Alice Wonderly, a contracting trainee, has been given the job of “putting together” a source selection plan and has some questions for her supervisor, Mr. Sagesse, a contracting officer with an unlimited warrant.
TRAINEE: Hi, Mr. Sagesse. May I come in?
SUPERVISOR: Hi Alice. Of course, of course. Always happy to talk to you. Sit down.
A: Thanks. I’ve been told to develop a source selection plan for the Foochi-Minooli Project, but I’ve never done one before. I’ve read FAR Subpart 15.3, and someone gave me an old plan to cut and paste from, but I’d like to understand what I’m doing.
S: That’s commendable. I like a thinker.
A: Well, could you answer a question? What is an evaluation factor?
S: I’m pretty busy right now [stands and begins gathering papers from his desk and stuffing them into his briefcase]. Look, just go to the office of the evaluation team and tell them you need some evaluation factors. When you get them, plug them into the template.
A: Template? You mean the cut-and-paste version?
A: Well, I went to the evaluation team’s office, and they said they’ve never done a source selection, and they asked me to explain the process to them.
S: Just print out FAR Part 15 and give them copies.
A: But, they'll only ask me questions, and I don’t understand FAR Part 15 well enough to explain it to someone else. FAR 15.304 and 15.305 talk about evaluation factors and give some examples, like past performance, experience, and cost or price, but they don’t provide any information about the underlying concept.
S: Concept? What don’t you understand?
A: Well, for instance, what exactly is an evaluation factor?
S: It’s a criterion you consider when you score--oops, I meant rate--and compare proposals.
A: What do you mean by “criterion”? The dictionary says a criterion is a standard.
S: Exactly. A standard.
A: What kind of standard?
S: Something you measure something else against.
A: That's what the dictionary said. But what is it that you measure?
S: That depends on what the criterion is. You measure against the criterion.
A: So we’re back to criterion, but you still haven’t told me what an evaluation factor is in source selection. According to what you’ve said, an evaluation factor is a criterion, and a criterion is a standard, and a standard is a criterion, and a criterion is an evaluation factor.
S: Exactly! Now you’ve got it!
A: But, I’m just right back where I started. I still don’t know what an evaluation factor is. Please, tell me, what is an evaluation factor?
S: It's something like past performance.
A: Well, I know that FAR 15.304 and 15.305 talk about past performance, but that doesn’t help me to understand the concept of an evaluation factor. What kind of thing is an evaluation factor?
S: I just told you--it’s a criterion for comparison.
A: But calling an evaluation factor a criterion or a standard doesn’t tell me what an evaluation factor is. I want to know what it is. What do all source selection evaluation factors have in common that makes them source selection evaluation factors?
S: I don’t understand what you don't understand. Look, it's simple. An evaluation factor is something you consider when you evaluate and compare proposals. But you don't evaluate them by comparing them, except to the evaluation factors.
A: What? Wait...
S. FAR 15.305 explains it all.
A: Not really. Forgive me, Mr. Sagesse, but we’re still going in circles. Do you have another example of an evaluation factor?
S: Sure. Technical acceptability.
A: What is that?
S: Being technically acceptable.
A: What makes a proposal technically acceptable?
S: Being technically good enough.
A: What makes a proposal “good enough”?
S: That depends on what the criteria are for technical acceptability.
S: It’s something that satisfies the requirement by meeting the standard for acceptability.
A: So, being technically acceptable is being good enough and being good enough is satisfying the requirement, which is meeting the standard for technical acceptability?
S: Now you're catching on.
A: So, technical acceptability is proposing to do what the requirement requires, based on the standard for that, which is a criterion, which is an evaluation factor? Is that it?
S: Exactly! Well, that, and explaining how they’re going to do it.
A: So, it’s not enough for an offeror to say that they propose to satisfy the requirement? They have to explain how they’re going to do it?
S: Yes. We’re talking best value, not sealed bidding.
A: So, if they promise to satisfy the requirement, and if they tell you how they’re going to do it, then they’ll be technically acceptable?
S: Yes. Well, assuming that their approach is sound.
A: So, technical acceptability is promising to satisfy the requirement, and describing how they’re going to do it, and having a sound approach?
S: Yes. That’s it.
A: “Approach.” I know you’re busy, so I’ll look that word up in FAR. But what makes an approach “sound”?
S: Being good enough to get the job done.
A: But what makes an approach good enough to get the job done?
S: That depends on the criteria.
S: Well, among other things, a realistic estimate of the cost. That sort of thing.
A: So a sound approach is one that comes with a realistic cost estimate?
S: Well, that, and things like the right kinds and amounts of labor and materials.
A: What makes the kinds and amounts of materials “right”?
S: Well, being right for the job.
A: What job?
S: The job of satisfying the requirement.
A: What does that job entail?
S: That depends on how they’re going to do the work.
A: So, if they promise to satisfy the requirement, and tell you how they’re going to do it, and propose the “right” kinds and amounts of labor and materials, and give you a “realistic” cost estimate, then they’ll be technically acceptable?
S: Yes. Well, assuming that their description of how they’re going to do it will actually get it done.
A: How will we know that?
S: Well, that’ll be up to the evaluators to decide.
A: How will they decide?
S: They’ll compare the proposed approach to their evaluation standards.
A: To their standards?
S: Yes, to their criteria for soundness.
A: To their criteria?
S: Yes--to the evaluation factors. Their evaluation must be based on the factors in the RFP. They can’t consider anything else. Unless something else is reasonably encompassed by the those factors.
A: What? Wait… Oh, never mind. Mr. Sagesse, we’ve come around in a circle again, and I still don’t know what all source selection evaluation factors have in common that makes them source selection evaluation factors.
S: What they have in common is that they will be used to evaluate and score--I mean rate--proposals.
A: Yes, but Mr. Sages, what kind of thing do you use as evaluation factors? What do all evaluation factors have in common?
S: I think you’re being a little argumentative.
A: I don’t mean to be. I just want to understand.
S: Well, I have explained it to you.
A: Okay. I guess I’ll read FAR some more. May I ask one more question?
S: What is it, Alice? I have to get to my car pool.
A: What, exactly, is rating, and how does it differ from scoring?
S: That’s two questions, and I have to go now. You’d better get started on that source selection plan. Just use the template. Can't go wrong that way. [Leaves.]
To be continued...
Alice Wonderly, a contracting trainee, is walking back to her cubicle after talking with her OJT supervisor, Mr. Sagesse, a contracting officer with an unlimited warrant. She has been tasked with developing a source selection plan and has been given an old one from which to cut and paste. But she wants to understand what she’s doing. She especially wants to understand the concept of “evaluation factor,” instead of just having "samples" and learning the rules in FAR about their use. She wants to understand what kind of things they are and what they all have in common. She thinks that may be the key to understanding the evaluation process. She asked Mr. Sagesse about evaluation factors, but did not get a helpful answer. All he said was that they are “criteria” and “standards.” To Alice, that was nothing more than referring to evaluation factors by a different name, without explaining what they are.
Discouraged, Alice is walking down a corridor when she runs into her friend and fellow trainee, Patrick Moore, who works in the Optimum Momentum Program. They stop to chat.
Patrick: Hi Alice, what’s going on with you?
Alice: I’ve been told to prepare a source selection plan. I’m working with the typical cut-and-paste “template” they give you, but I’d sure like to understand what I’m doing for once.
P: Wouldn’t we all. How’s it going?
A: Not well. I just went to Sagesse to see if I could get some answers, but I got nothing.
P: [Chuckling.] Yeah, well... I did a training rotation with Sagesse. Good luck getting anything from him.
A: Who’s your OJT boss?
P: Mr. Ewing. He’s great. I was pretty lucky to draw him at the last trainee assignment lottery.
A: Good OJT?
P: The best. If you have questions and do your homework before going to him, you’ll get a clear and concise explanation and plenty of references for stuff to read. But heaven help you if you didn’t do your homework first.
P: Demanding. He expects you to think. Half the time, when I go to him with a question, he asks me questions before he answers my question. He’s checking to see if I did my homework before asking for help. He reads my documentation closely and asks me questions to test my thinking and conclusions. He insists on good writing. He says people think in words and sentences and when a person writes poorly it's either because he thinks poorly or is lazy. I graduated with honors and thought I was a good writer until I went to work for him. He makes me rewrite things a lot. He will pick out words that I’ve used in a memo and ask for a definition. If I don’t spit it out right away he says that a person who can’t define a word he’s used literally doesn’t know what he's talking about. And he’s a punctuation fanatic. It made me angry at first. He saw the anger in my face once and he said, “I’m here to teach you. You’re here to learn. Work at learning, or go to the training office and tell them you want to work for someone else.”
P: Yeah, he intimidates some of the trainees. You know, some people are always talking about being intimidated by this or that. Fragile flowers. But I can see that my thinking and writing have improved a lot since I came to work for him, and I feel like I’m really learning the business. A lot of his former trainees are GS-14s and 15s now. There are even a couple of generals that were former trainees of his. They stop in to visit from time to time.
A: So Ewing is actually training you.
P: You bet. He says that training is one of a manager’s most important personal responsibilities. He personally conducts weekly one-hour training sessions every Wednesday during lunch. He calls them “brown baggers.” Attendance is voluntary, but I know he keeps track of who comes and who doesn’t. He’s looking for commitment. Every week he covers a topic chosen by someone in the office, like data rights, cost analysis, cost estimating, performance-based payments, or cost allowability. He explains concepts, principles, rules, and practices. He doesn’t just tell you. He shows you. But you’ve got to put in the time to study on your own, too. He won’t hand-hold you.
A: You’re lucky. I think.
P: I'm lucky. Look, let’s go see him, and you can ask him your question.
A: But I haven’t done much research. I’ve read the FAR and our supplement and the source selection manual. I’ve looked in dictionaries and a couple of contracting books, but I haven’t found anything helpful. I don’t want to get trashed for not being ready.
P: A fraidy-cat? You? Look, he can kill you, but he won’t eat you. Come on. I think he’ll be okay with it, since you don’t work for him.
They go to Ewing’s office. One wall of the office is covered with small picture frames, 5 by 7 inches, in each of which there is a piece of rag paper on which a quote has been typed on a manual typewriter. Some of the sayings are:
“Reflective thinking is always more or less troublesome because it involves overcoming the inertia that inclines one to accept suggestions at their face value; it involves willingness to endure a condition of mental unrest and disturbance. Reflective thinking, in short, means judgment suspended during further inquiry; and suspense is likely to be somewhat painful. As we shall see later, the most important factor in the training of good mental habits consists in acquiring the attitude of suspended conclusion, and in mastering the various methods of searching for new materials to corroborate or to refute the first suggestions that occur. To maintain the state of doubt and to carry on systematic and protracted inquiry—these are the essentials of thinking.”
“Never be afraid to sit awhile and think.”
-- Lorraine Hansberry, playwright
“Knowledge of the product or service, and its use, is essential to sound pricing.”
-- Armed Services Procurement Regulation 3.802-1, “Product or Service”
“Managing is getting paid for home runs someone else hits.”
-- Casey Stengel
“I get angry about things, then go on and work.” -- Toni Morrison, Nobel laureate
The best advice I ever got was that knowledge is power and to keep reading."
-- David Bailey, fashion photographer
“Improvise. Adapt. Overcome."
-- Unofficial motto of the U.S. Marine Corps
“The question isn’t who’s going to let me; it’s who’s going to stop me.” -- Ayn Rand, novelist and philosopher
“Consider yourself an enemy, and be on the lookout for ambushes.”
-- Epictetus, philosopher, 2d Cent. C.E.
“Don't feel entitled to anything you didn't sweat and struggle for.”
-- Marian Wright Edelman, social activist
“In this outfit, officers jump first and eat last.” -- Maj. Gen. James M. Gavin, Commander, 82d Airborne Division, WWII.
“He that wrestles with us strengthens our nerves and sharpens our skill. Our antagonist is our helper.” -- Edmund Burke, politician, statesman, and philosopher
“We are all born ignorant, but one must work hard to remain stupid.”
-- Benjamin Franklin
“If you obey all the rules, you miss all the fun.” -- Katherine Hepburn
There is a bookcase. Alice sees the Cibinic and Nash series and about 100 other books, shelved alphabetically by title. Some of the titles are:
The Acquisition of Defense Systems
The Cambridge Dictionary Of Space Technology
The Cambridge Grammar Of The English Language
Challenges in Managing Large Projects
The Craft of Argument
Decision Analysis for Management Judgment
Defective Pricing Handbook
Dictionary of Modern Legal Usage
Dictionary of Statutory Interpretation
Elements of Contract Interpretation
Elements of Spacecraft Design
Garner’s Modern American Usage
Government Contract Changes
Government Contract Cost & Pricing Handbook
Guide To Federal Agency Rulemaking
Handbook Of Technical Writing Practices
How Spacecraft Fly
How To Read A Government Contract
Introduction To Decision Analysis
It’s Only Rocket Science: An Introduction in Plain English
Licensing Software And Technology To The Government
The Mind And Heart Of The Negotiator
The Negotiation Game
The Polaris System Development
Probability Methods For Cost Uncertainty Analysis
Rights In Technical Data and Computer Software
The Science and Technology Dictionary
Tacit & Explicit Knowledge
The U.S. Air Force And The Culture of Innovation
The Visual Display Of Quantitative Information
There is a notebook on top of the bookcase bearing a label that says:
“If you want to borrow a book, write (1) your name, (2) your office symbol, (3) the date that you’re checking a book out, and (4) the date that you will return it. You can’t borrow any book for more than two weeks.”
“These books are mine, not the Government’s. You can borrow a book, but the penalty for not returning one of my books is death. Don’t write or highlight in one of my books. If I have to call you to get a book back, you won’t be able to borrow any more books.”
Ewing is sitting with his back to the door at a small table that is separate from his desk and computer. There is nothing on the table but a pad of blank paper and a pencil. He appears to be thinking.
P: Mr. Ewing?
Ewing: [Turning and looking up.] Ummm? Oh, Hi, Patrick.
P: I’d like to introduce a friend, another trainee, Alice Wonderly.
A: Hello, Mr. Ewing.
E: Nice to meet you, Ms Wonderly. What are you doing here in the Optimum Momentum Program Office? Visiting Pat?
A: Well, not actually. I’ve been looking for an answer to a question, but I’m having a little trouble, so Patrick suggested I come see you.
E: [Hesitates.] Well, who do you work for? Have you spoken with him or her?
A: My boss is Mr. Sagesse.
E: Oh, I see. Well, Jack Sagesse has a lot of experience.
A: Yes, I know. Sorry to bother you.
E: You’re not bothering me. Out of curiosity, what is your question?
A: I’m working on the Foochi Minooli Program and I have to prepare a source selection plan. I want to understand the concepts, not just cut and paste.
E: Well, that’s good, but please state your question.
A: [Hesitating… thinking.] What kind of thing is an evaluation factor? I know that they’re also called criteria and standards, but I want to know what kind of thing they are.
E: Ah. You don’t want a lexical definition. You want a stipulative definition.
A: I’m not sure what those are.
Ewing reaches to the bookcase, pulls out a slim volume, and hands it to Alice. The title is Definition by Richard Robinson.
E: Read in this. Before you leave, put your name and office address in the notebook and read the lending rules. Return the book by the end of next week.
According to the author, a lexical definition tells you the words to which a word or phrase refers. A stipulative definition explains the thing to which a word or phrase refers.
A: Oh. Well, that’s exactly what I want, an explanation of “evaluation factor.”
E: What research have you done?
A: I’ve read FAR Part 15. And I read in the Cibinic and Nash books, Formation and Competitive Negotiation. But they tell you the rules and the case law about evaluation factors. That’s not what I’m looking for.
E: It’s rare to meet someone who asks about concepts. Are you sure you want to know?
A: Uhhhh, yes. Why do you ask?
E: I ask because knowing the answer might make your thoughts clearer, but it won’t make your job easier. It would be much easier to let your question lie and just cut and paste. That’s why people do it. You know what they say: “Ignorance is bliss,” and “Why reinvent the wheel.”
A: How can knowing more make my job harder?
E: Because once you know the answer, you and your team will have to choose between doing a professional job and thinking very hard or doing a cut and paste job and not thinking much at all. I consider that a moral decision. Your technical clients might enjoy thinking hard about technical matters, but they might not like having to think hard about mere contracting matters.
A: I still want to know.
E: Ever taken a class in decision analysis?
E: Okay. Do you have total recall, or do you want to take notes?
A: Oh, yes, I’ll take notes. [Hurriedly takes a spiral notebook and a pen out of her brief case.] Ready.
E: An evaluation factor is an attribute of an offeror or of its offer--a feature, property, or characteristic of an offeror or of its offer that provides value to the government by its presence or its absence.
A: [Writing furiously.]
E: Anything else?
A: [Hesitating.] Well, could you elaborate just a little on “attributes”?
E: Sure. All things and ideas have features, properties, or characteristics that are either inherent in them or that are ascribed to them on the basis of subjective judgments. Some of those features, properties, and characteristics are desirable because they are useful or, as we say, “valuable” and so the more of them the better. Some are undesirable, because they’re damaging and detract from value, so the less of them the better. The word “attributes” refers to those features, properties, and characteristics. When we in the government decide to evaluate offerors and their offers on the basis of such attributes, we call them “evaluation factors,” which is a term of art in government contracting.
A: [Writing furiously.]
E: [Continuing.] We choose contractors by comparing offerors and their offers on the basis of the value provided by “evaluation factors.” “Value” is a general attribute that we ascribe to offerors and their offers on the basis of evaluation factors. Consideration of individual attributes yields various measures of value, which can be weighted for importance to our objectives and “synthesized” or “integrated,” as we say, to yield the summary attribute that we call “total value.” The competitor that ends up having the highest total value will be what we call the “best value.”
Formally, what we call “source selection” is a version of what is called “multiple attribute decision making,” which is a collection of several formal methods for making rational choices from among alternatives.
A: [still writing] Could you provide some specific examples of attributes?
E: Of course. Let’s say we’re buying hammers and we decide to evaluate offers for hammers. Hammers have certain attributes: functional design features, such as the claw on a claw hammer, which is for extracting nails, and the ball on a ball peen hammer, which is for working metal; material composition—some have wooden handles, others have graphite core or fiberglass handles; weight; size; durability; et cetera. They also have properties that buyers ascribe to them subjectively, such as “balance,” “heft,” and “feel.” And they come with “assigned” properties, such as price, availability, and warranty.
In order to evaluate offers, we must determine which attributes are important to us. We must then somehow determine how much of each attribute is found in each offered hammer. Then we must compare and rank the offered hammers to determine which is best.
A: So that’s how we evaluate proposals.
E: Actually, we don’t evaluate proposals.
A: Huh? I don’t understand.
E: We don’t evaluate proposals. We evaluate offerors and their offers. Think of a proposal as a package that contains (1) information about the company that submitted it and (2) statements of the promises that the company is offering. You don’t evaluate the proposal, per se. You evaluate the offeror and the offer described in the proposal based on offeror attributes and offer attributes.
A: But everybody says we evaluate proposals.
E: Yes, well, "everybody" says all kinds of things. That’s not what matters. What matters is what's true and what's not. Saying that we evaluate proposals is just a careless way of saying that we evaluate offerors and their offers based on the information in their proposals. When we say that a company submitted an excellent proposal, we’re really saying that the offeror and the offer described in the proposal were excellent. At least, that's what we should be saying.
A: That’s an entirely new way of thinking. No one has said that to me before.
E: Think it over.
A: I will. Can I ask more questions?
E: You've got enough to think about for a while. When learning concepts, it’s best to proceed methodically. You do want concepts, right? You’re not looking for a manual of source selection, are you?
A: No, I’ve read the manual. I want to understand the underlying concepts.
E: Good, but are you willing to struggle a little?
A: Yes, sir.
Ewing opens his desk drawer, flips through some files, pulls out a paper, and hands it to Alice. The 20-page paper is entitled, "SMARTS and SMARTER: Improved Simple Methods for Multiattribute Utility Measurement," by Ward Edwards (1994).
E: Read this. Think. Then write down any questions you have and come back in a week.
Patrick: May I have a copy, too?
E: [Hands a copy to Patrick and smiles.] If you hadn’t asked, I would have wanted to know why not.
A: Mr. Ewing, thank you so much. I really appreciate your time and answers.
E: The best way to thank me and to show your appreciation is to read the paper, think hard about it, and come back with some good questions. Okay, you two, I have to get back to work now.
Ewing turns back to his table, pencil, and blank pad of paper. Alice and Patrick leave.
P: [As they walk.] Alice, if you come back, those questions had better be good ones and well-written. He has high standards for questions. Topic and query had better be clear and show that you did some thinking and made reasonable presuppositions.
P: He conducted a “brown bagger” on questions and questioning strategy and tactics, and he gave us assigned readings. Come to my office, and I’ll give you copies of the readings.
To be continued…
I received entries from the following Wifcon members:
Here_2_Help also submitted one, but it was received after the deadline.
The entries were posted for all to see. I also posted my own definitions.
With help from a couple of friends I reviewed the entries and chose... all of them.
I could not pick a winner among them. So I declared all of them to be winners, including Here_2_Help. I know, I know, but it was impossible to declare one set of entries better than the others, and I want to do something to thank people who went through the trouble. As hereiskim said, it was harder than you might think.
I will contact everyone through Wifcon to obtain mailing information and will send each a copy of the newest edition of The Government Contracts Reference Book.
An assortment of books that I've looked at during the past year and that you might find to be of interest. Listed within each category by date.
1. The Art of Thinking Clearly, Dobelli (2013)
An informal, nontechnical, anecdotal presentation of good thinking practices. Short chapters with titles like: "Why You Should Visit Cemeteries: Survivorship Bias," "Why We Prefer a Wrong Map to No Map at All: Availability Bias," "Why You Systematically Overestimate Your Knowledge and Abilities: Overconfidence Effect," "Less is More: the Paradox of Choice," "The Difference Between Risk and Uncertainty: Ambiguity Aversion," and my favorite, "Never Pay Your Lawyer by the Hour: Incentive Super-Response Tendency." Fun read.
2. Asking the Right Questions, 9th ed., Browne and Keeley (2010)
Something you'd better learn how to do if you're going to be a manager or a contracting officer. An essential skill for critical thinkers.
3. A Rulebook for Arguments, 4th ed., Weston (2009)
Short and to the point. A useful handbook.
4. How We Reason, Johnson-Laird (2008)
A lengthy, detailed treatment.
5. Informal Logic: A Pragmatic Approach, 2d ed., Walton (2008)
This is simply an indispensable text for anyone who has to write a D&F, a justification for other than full and open competition, a source selection decision document, a request for equitable adjustment or a claim, or a contracting officer's final decision.
6. Logic and Contemporary Rhetoric: The Use of Reason in Everyday Life, 10th ed., Kahane and Cavender (2006)
7. The Craft of Argument, 3d ed., Williams and Columb (2006)
8. The Writing of Economics, McCloskey (1987)
We could all write better than we do. A nice little handbook. Check it out.
9. GPS Declassified: From Smartbombs to Smartphones, Easton and Frazier (2013)
The story of one of the greatest and most successful systems of all time. They had a sign over the entrance to the Air Force program office: "Our Mission is to Drop Two Bombs in the Same Hole. Period." If they'd only known.
10. A Fiery Peace in a Cold War: Bernard Schriever and the Ultimate Weapon, Sheehan (2009)
The story of the beginning of program management as we know it and of one of the most important programs of the 20th Century -- the Atlas intercontinental ballistic missile.
11. Project Vanguard: The NASA History, Green and Lomask (2009)
12. Sidewinder: Creative Missile Development at China Lake, Westrum (1999)
On time, within budget, and performance as promised. Perhaps THE most successful system development in U.S. history.
ANALYSIS AND DECISION MAKING
13. Decision Analysis for Management Judgment, 4th ed., Goodwin and Write (2009)
Decision analysis is one of the formal rational analytical methods that were developed after World War II. First named in 1966, it is distantly related to game theory, and related to tradeoff analysis and systems analysis. Decision analysis is prescriptive, not descriptive. it tells you how you ought to make decisions, not how people actually make them. This book is an excellent, nontechnical introduction to the topic. Should be studied by everyone who has to make important choices.
14. The Failure of Risk Management, Hubbard (2009)
15. Understanding Uncertainty, Lindley (2007)
A fine, nontechnical explanation of the concept.
16. Risk, Ambiguity and Decision, Ellsberg (2001)
A largely nontechnical exposition of the topics.
17. Probability Methods for Cost Uncertainty Analysis, Garvey (2000)
Very technical. You'll need some advanced math to follow it closely, but well-worth a look.
18. How to Read a Government Contract, Allen (2013-2014)
A handy book. Sadly, it's one of those super-expensive legal texts.
19. Calamari and Perillo on Contracts, 6th ed., Perillo (2010)
The most recent edition of the venerable textbook.
20. Contracts in a Nutshell, 9th ed., Rohwer and Skrocki (2010)
The most recent edition of the handy Nutshell series.
21. Elements of Contract Interpretation, Burton (2009)
An affordable treatment of an important topic.
22. Dictionary of Untranslatables: A Philosophical Lexicon, Cassin, ed. (2014)
I love dictionaries, and this 1,297 page book is a very interesting one. Entries run from a paragraph to several pages in length and include terms like: Abstraction, Economy, Geisteswissenschaften, Kitsch, Nonsense, Principle, Proposition, Reality, Structure, Subject (very long entry), Word, Word Order, and Work. Great browsing.
23. Plato at the Googleplex: Why Philosophy Won't Go Away, Goldstein (2014)
Great, and great fun. Socrates lives!
24. Reflections on Judging, Posner (2013)
By the famous appellate court judge and public intellectual. He wrote an article for The New Republic entitled, "The Incoherence of Antonin Scalia," and Justice Scalia responded to it by calling him a liar. And you thought Wifcon Forum was tough.
25. Naked Statistics: Stripping the Dread from the Data, Wheelan (2013)
Very successful popular treatment of statistics.
26. The Demon of Writing: Powers and Failures of Paperwork, Kafka (2012)
About the phenomenon of paperwork. Very interesting, and short.
27. The Thinker's Thesaurus: Sophisticated Alternatives to Common Words, Expanded 2d ed., Meltzer (2010)
Handy reference for writers.
28. Bureaucracy and Administration, Farazmand, ed. (2009)
For future SESs. Contains academic articles such as "Bureaucratic Links between Administration and Politics," "Bureaucracy: A Profound Puzzle for Presidentialism," "Public Service Ethics and Professionalism: A Primer for Public Officials," "The Wright Brothers Contract: Lessons in Ambiguity and Bureaucracy" (which cites my Wifcon article), and "The American President as a Bureaucratic Leader." Also includes articles about bureaucracy in other countries. Interesting stuff.
29. How Judges Think, Posner (2008)
Another interesting `book by the prolific Judge Posner.
We are evaluating the entries and will announce a decision later this week. Thanks to all who made submissions. In the meantime, here are my definitions of the 20 terms.
1. audit (as in proposal audit)
Audit (n.) means an examination of a contractor’s records in order to verify information provided by the contractor in a proposal, invoice, voucher, request for equitable adjustment, or claim or to determine costs incurred.
2. competition (as in competition improves quality and reduces prices)
Competition (n.) means  a formal contest in which two or more firms contend on a head-to-head basis for the award of a Government contract;  a market state in which multiple firms independently sell goods or services that are close substitutes for one another in specific applications.
3. complex (as in she’s working on a large, complex acquisition)
Complex (adj.) means comprised of many interdependent parts that combine to perform as a whole, such that the performance of any one affects the performance of the whole.
4. condition (as in terms and conditions)
Condition (n.) means a contract term that requires that an event occur, or not occur, before a specific contractual obligation is imposed or a specific contractual right is conferred.
5. contract term (as in they won’t accept that contract term)
Contract term (n.) means any part of a contract that imposes an obligation or confers a right.
6. cost (as in cost estimate)
Cost (n.) means a measure, expressed in monetary terms, of resources that a contractor uses or consumes or of expenses that it incurs in the performance of a contract.
7. dispute (as in a dispute must be handled under FAR 33.2)
Dispute (n.) means a disagreement between the Government and a contractor that they have been unable to resolve.
8. equitable adjustment (as in they want an equitable adjustment)
Equitable adjustment (n.) means a modification of a contract term — usually, but not necessarily, the price, the estimated cost and fee, or the delivery schedule — that is made in order to compensate one of the parties for the effect of an act or omission by the other party.
9. evaluation factor (as in source selection evaluation factor)
Evaluation factor (n.) means an attribute (feature, quality, or characteristic) of an offeror or of its offer that provides value to the Government, either through its presence or its absence.
10. fairly (as in COs must treat contractors fairly)
Fairly (adv.) means in a manner that is considered to be in accordance with widely accepted customs and standards applicable to the business at hand and to be appropriate under the circumstances.
11. incentive (as in contractual incentive)
Incentive (n.) means a contract term that is designed to motivate a contractor to do something or to refrain from doing something.
12. need (as in an acquisition should fulfill the Government’s needs)
Need (n.) means the absence of something that is necessary for the fulfillment of an agency mission or specific task.
13. profit (as in we offered them a fair profit)
Profit (n.) means the difference between a contract price and the cost of contract performance.
14. purchase request package (as in the purchase request package was inadequate)
Purchase request package (n.) means the information and documentation required from a requisitioner or requiring activity in order for a contracting officer to award a contract in compliance with applicable laws and regulations.
15. rating (as in evaluators will assign a proposal rating)
Rating (n.) means a symbolic expression — usually, but not necessarily, adjectival or numerical — that concisely summarizes more detailed information about how well or how poorly an offeror or its offer has performed in terms of an evaluation factor or set of evaluation factors.
16. relative importance (as in evaluation factor relative importance)
Relative importance (n.) means the degree of an agency’s preference for one evaluation factor over others, assuming that the agency cannot get as much as it wants of each and that more of one means less of one or more of the others.
17. requirement (as in the program office specified its requirements)
Requirement (n.) means what an agency specifies that it wants from a contractor in its performance of a contract.
18. risk (as in contract performance risk)
Risk (n.) means the exposure to a harmful possibility, formally expressed in terms of (1) a description of a specific contingent event, (2) a statement of the probability that the event will occur, and (3) a statement of the measure of harm that would be suffered if the event does occur.
19. tradeoff (as in source selection tradeoff analysis)
Tradeoff (n.) means a decision to forego getting some of one or more evaluation factors in order get more of another when it is not possible to get as much as is wanted of each.
20. uncertainty (as in uncertainty about performance outcomes)
Uncertainty (n.) means doubt about whether an event will occur, often expressed in terms of the probability that the event will occur (e.g., “a 50-50 chance”).
I am launching a contest. I will give a copy of The Government Contracts Reference Book, 4th ed., by Nash, O’Brien-DeBakey, and Schooner, published by Wolters Kluwer Law & Business and The George Washington University Law School, to the Wifcon member who writes the best set of definitions of the 20 terms (words and phrases) listed below. The Reference Book retails for $80.
The following words and phrases are commonly used by contracting practitioners and frequently used in regulations, guidebooks, handbooks, and contracts. A parenthetical entry beside the word or phrase gives usage context.
1. audit (as in proposal audit)
2. competition (as in competition improves quality and reduces prices)
3. complex (as in she’s working on a large, complex acquisition)
4. condition (as in terms and conditions)
5. contract term (as in they won’t accept that contract term)
6. cost (as in cost estimate)
7. dispute (as in a dispute must be handled under FAR 33.2)
8. equitable adjustment (as in they want an equitable adjustment)
9. evaluation factor (as in source selection evaluation factor)
10. fairly (as in COs must treat contractors fairly)
11. incentive (as in contractual incentive)
12. need (as in an acquisition should fulfill the Government’s needs)
13. profit (as in we offered them a fair profit)
14. purchase request package (as in the purchase request package was inadequate)
15. rating (as in evaluators will assign a proposal rating)
16. relative importance (as in evaluation factor relative importance)
17. requirement (as in the program office specified its requirements)
18. risk (as in contract performance risk)
19. tradeoff (as in source selection tradeoff analysis)
20. uncertainty (as in uncertainty about performance outcomes)
None of those words and phrases is defined in FAR.
I will not accept dictionary or otherwise published definitions. The definitions must explain in your own words what you mean when you use those terms.
The qualities I am looking for in the definitions are:
(1) contextual appropriateness,
(3) definiteness (neither vague nor ambiguous),
(4) simplicity, and
Write enough to be clear, but don’t write dissertations. Write something that would make clear to a non-contracting person what you, as a contracting practitioner, mean when you use the selected words and phrases. Don’t substitute one vague word or phrase for another. Don’t define by giving examples. State attributes common to all instances of use.
For some background about definitions go to:
Here are my rules for the contest:
1. Participation is open to all Wifcon members.
2. You must define all 20 of the listed words and phrases.
3. You must post your definitions here, as a comment on this blog entry, for all to see. Do not submit your comments directly to me via email.
4. The deadline for submission is June 18 at midnight. The date and time of your submission are the date and time on the posted comment. Minor post-deadline edits are permitted, but not wholesale rewrites. I'll be the sole judge of whether a post-deadline edit is actually a rewrite.
5. Begin each definition as follows: [Word or phrase] means…
6. Each definition must be in your own words. You may collaborate with others in your office, but you cannot quote or reword a definition found in a published source, including government publications and board, court or GAO decisions. I’ll use the internet to check for quotes and close paraphrases.
7. In evaluating the submissions I will seek input from Don Mansfield and Emptor Cautus, two other Wifcon bloggers. However, I reserve the right to pick the winner based on my own opinion and to pick no winner if I think that none of the submissions is good enough.
8. By participating you agree that participation gives you no legal right to anything.
What would you say if someone were to ask you what you mean when you use any of those words or phrases? Could you answer immediately, or would you have to think about it for a while and maybe do some research?
Take a shot. What have you got to lose? It might be worth the effort just to develop your own thinking. Most of you post anonymously, so don't worry. Have fun with it and maybe you'll win an expensive book.
The DAU Director for the Center for Contracting, Mr. Leonardo Manning, posted a short, one-paragraph blog entry on February 10 entitled, “Is your Acquisition a Supply or a Service?”
It's interesting, but it doesn't analyze the problem in enough detail. It's more complicated than presented.
FAR 2.101 defines supplies as follows:
Supplies means all property except land or interest in land. It includes (but is not limited to) public works, buildings and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration and installation of the foregoing.
There is no definition of services or service contract in FAR Part 2, which means that there is no definition of those terms that applies throughout the FAR. See FAR 2.101(a). However, there are several definitions pertaining to services and service contract scattered about in various places.
FAR 2.101 defines personal services contract as follows:
Personal services contract means a contract that, by its express terms or as administered, makes the contractor personnel appear to be, in effect, Government employees (see 37.104).
FAR 37.101 defines nonpersonal services contract as follows:
Nonpersonal services contract means a contract under which the personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the Government and its employees.
FAR 37.101 defines service contract as follows:
Service contract means a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a nonpersonal or a personal contract. It can also cover services performed by either professional or nonprofessional personnel whether on an individual or organizational basis. Some of the areas in which service contracts are found include the following:
(1) Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment.
(2) Routine recurring maintenance of real property.
(3) Housekeeping and base services.
(4) Advisory and assistance services.
(5) Operation of Government-owned equipment, real property, and systems.
(6) Communications services.
(7) Architect-Engineering (see Subpart 36.6).
(9) Transportation and related services (see Part 47).
(10) Research and development (see Part 35).
That definition applies only in FAR Part 37. It does not apply in any of the other 52 parts. It does not apply to Part 22. See FAR 2.101(a).
FAR 22.001 defines service contract as follows:
Service contract means any Government contract, or subcontract thereunder, the principal purpose of which is to furnish services in the United States through the use of service employees, except as exempted by the Service Contract Act (41 U.S.C. chapter 67; see 22.1003–3 and 22.1003–4). See 22.1003–5 and 29 CFR 4.130 for a partial list of services covered by the Act.
There are also definitions of advisory and assistance services, architect-engineer services, child care services, and utility service.
The purpose of the FAR definitions is to provide a basis for applying appropriate policies, solicitation provisions, and contract clauses when conducting acquisitions. They are not meant to define supplies and services in and of themselves.
There is no definition of service per se; the FAR does not tell us what a service is. The closest we get is that part of the definition of service contract that refers to performance of an identifiable task rather than to furnish an end item of supply. That’s an odd criterion, and it makes the definition of service contract somewhat problematical. If you buy a product of a company’s own design that the company makes, stocks, and sells, you are clearly buying an item of supply. But what if a CO hires a contractor to make and deliver an item of the government’s design? Is the CO buying an item of supply or the time and effort of performing an identifiable task? Seems to me that making something is an identifiable task and that hiring someone to make something for you is hiring them to perform such a task. However, I think that most of us would agree that such a contract would be a supply contract. Right?
If you award a contract to someone to manufacture something to your specifications, have you bought an item of supply or have you hired the contractor to expend time and effort to perform an identifiable task? Surely, the custom manufacture of something to your design is different than contracting with a firm to sell you a standard item that it makes to its own design and stocks or makes on order for sale. Moreover, doesn’t the maintenance, overhaul, repair, servicing, rehabilitation, etc., of items of supply entails the alteration of those supplies, which, according to the definition of supplies, is supplies?
Which brings us to the Service Contract Act. FAR 22.1003-1 says that FAR Subpart 22.10, “Service Contract Act of 1965, As Amended,” applies to all government contracts awarded for the principle purpose of acquiring services to be provided by service employees. It then says:
The nomenclature, type, or particular form of contract used by contracting agencies is not determinative of SCA coverage.
FAR Subpart 22.10 makes no mention of the definition of service contract in 37.101, but 22.1003-5 contains a list of examples of contracts covered by the SCA that includes many that are similar to the list of examples in that definition.
The Department of Labor regulations at 29 C.F.R. Part 4, Labor Standards for Federal Service Contracts, does not define service or service contract, but provides as follows at § 4.111(a), which says, in part:
This remedial Act is intended to be applied to a wide variety of contracts, and the Act does not define or limit the types of services which may be contracted for under a contract the principal purpose of which is to furnish services. Further, the nomenclature, type, or particular form of contract used by procurement agencies is not determinative of coverage. Whether the principal purpose of a particular contract is the furnishing of services through the use of service employees is largely a question to be determined on the basis of all the facts in each particular case. Even where tangible items of substantial value are important elements of the subject matter of the contract, the facts may show that they are of secondary import to the furnishing of services in the particular case. This principle is illustrated by the examples set forth in §4.131.
As for the examples in § 4.131:
(a)… A procurement that requires tangible items to be supplied to the Government or the contractor as a part of the service furnished is covered by the Act so long as the facts show that the contract is chiefly for services, and that the furnishing of tangible items is of secondary importance
* * *
( c ) [An] example of the application of the above principle is a contract for the recurrent supply to a Government agency of freshly laundered items on a rental basis. It is plain from the legislative history that such a contract is typical of those intended to be covered by the Act. S. Rept. 798, 89th Cong., 1st Sess., p. 2; H. Rept. 948, 89th Cong., 1st Sess., p. 2. Although tangible items owned by the contractor are provided on a rental basis for the use of the Government, the service furnished by the contractor in making them available for such use when and where they are needed, through the use of service employees who launder and deliver them, is the principal purpose of the contract.
Okay, but then the regulation says:
In general, contracts under which the contractor agrees to provide the Government with vehicles or equipment on a rental basis with drivers or operators for the purpose of furnishing services are covered by the Act. Such contracts are not considered contracts for furnishing equipment within the meaning of the Walsh-Healey Public Contracts Act. On the other hand, contracts under which the contractor provides equipment with operators for the purpose of construction of a public building or public work, such as road resurfacing or dike repair, even where the work is performed under the supervision of Government employees, would be within the exemption in section 7(1) of the Act as contracts for construction subject to the Davis–Bacon Act. (See § 4.116.)
I presume that equipment rental for other purposes is covered by the Walsh-Healey Public Contracts Act, which applies to contracts for the "manufacture or furnishing" of materials, supplies, articles, and equipment. See FAR 22.602.
If you Google <car rental service> you’ll get the websites for Hertz, National Car, etc. They rent cars without drivers, and Hertz’s corporate profile says that they have provided “Quality Car Rental Service” for over 90 years. So in the commercial marketplace, car rental is a service, as is equipment rental generally. It’s not immediately clear to me why renting laundry is different from renting vehicles without drivers and other equipment.
Assuming that you want to award a fixed-price contract for the recurrent supply of fresh laundry, would you specify the laundering process, the properties of the fresh laundry to be delivered, or both? Would you insert the clause at FAR 52.243-1, Changes--Fixed Price (AUG 1987) (ALT I) (APR 1984), which is the one for services, or would you insert the basic clause which is for supplies? Or would you insert (ALT II) (APR 1984), which is for services and supplies? Would you insert the clause at FAR 52.246-4, Inspection of Services--Fixed-Price (AUG 1996), or the one at FAR 52.246-2, Inspection of Supplies--Fixed-Price (AUG 1996)? There is no alternate inspection clause for both supplies and services. So would you include both clauses and assign them to separate line items or subline items for services and supplies? Would you separately priced the items?
Would those questions occur to you? Would the answers matter to you? Do you think that all practitioners would answer them the same way?
I do not think this is a big problem. My point is that contracting regulations are written over the course of time to implement laws and policies that are often developed on an ad hoc basis in response to particular problems as they arise. They tend to be formulaic in the sense of mandating that when X then Y. A formula specified in one part of the FAR may make perfect sense within its policy domain, but no sense at all within another. (That’s one of the reasons for the definitions rule at FAR 2.101.) Thus, it is possible that a contract might appropriately be thought to be for supplies when selecting clauses, but for services when selecting labor laws.
Veteran practitioners tend to take these things for granted, mainly because they were told how to think about them during their early training. This is supplies. That is services. They know that the regulations do not always answer questions definitively and that, sometimes, practitioner experience is all you have to go on. But newcomers to our business can get hung up on some of these logical inconsistencies.
And now: Is painting the walls of a building a service or is it construction? Does the Service Contract Act apply or the Davis Bacon Act? And while we’re at it, what about elevator repair?
What follows is a draft that I have written for general descriptive and explanatory purposes on the topics: "What is a contract?" and "What is contract management?" It is intended to be brief and introductory in nature. The intended audience is contract managers, prospective contract managers, and personnel managers in both the public and private sectors and in Government and private sector contracting.
I invite you to submit comments on the substance of it. What do you like, agree with, if anything. What do you dislike, disagree with? (This is a first draft, so don't address typos, format, etc.) You can comment publicly, here at the blog, or you comment privately via the Wifcon member channel.
Thanks in advance for your time.
What is a Contract?
What is Contract Management?
What Is A Contract?
The concept of contract is extraordinarily complex. One can define the word broadly and in general terms, or narrowly, in legal terms, depending on your purpose.
Common Dictionary Definitions
According to current edition of The Oxford English Dictionary (OED Online March 2014), the ultimate source of the English noun is the Latin verb contrahere, which means to draw together, collect, unite. The word came into English via Old French, and its first recorded use in English was by Geoffrey Chaucer, who used it in The Canterbury Tales in the year 1386 (and spelled it “contractes”).
According to the OED, contract (noun) means:
Similar definitions appear in the American Heritage Dictionary of the English Language, 5th and in Webster’s Third New International Dictionary (Unabridged).
Restatement of the Law of Contracts 2d, § 1, defines contract as follows:
Black’s Law Dictionary 9th (2009) devotes 11 pages to the definition of contract, defining the basic word and many variations, such as adhesion contract, bilateral contract, blanket contract, consensual contract, cost-plus contract, fixed-price contract, gratuitous contract, informal contract, parol contract, requirements contract, service contract, subcontract, unilateral contract, and void contract.
The basic definition in Black’s is:
(Note the distinction made between the actual agreement between the parties and the document that memorializes it.)
Definitions in Statute and Regulation
The word contract is used (but not defined) in the U.S. Constitution in Article I, Section 10, and in Article VI, and both used and defined in many ways for different purposes in hundreds of places throughout the United States Code (U.S.C.) and the Code of Federal Regulations (C.F.R.). See, for example, the regulations of the Office of Management and Budget at 5 C.F.R. § 1315.2:
A much more common definition, which appears in several places in the C.F.R., is given in Department of Agriculture regulations, at 7 C.F.R. § 3016.3:
See Department of Energy regulation, 10 C.F.R. 784.12:
The Federal Acquisition Regulation (FAR), 48 C.F.R. Chapter 1, § 2.101, defines contract as follows:
(That definition refers to what is sometimes called a “procurement contract” for the purchase of property or services. See 31 U.S.C. § 6303.)
Perhaps the most sensible answer ever given to the question, “What is a contract?” was written by John D. Calamari and Joseph M. Petrillo and appears in their legal textbook (hornbook), Calamari and Petrillo on Contracts 6th (2009) on page 1:
The Core Concept
The core concept is that of agreement between two or more parties about promises they have made. Such an agreement might be referred to as a bargain, deal, meeting of the minds or, more formally, mutual assent. A contract can be for an undertaking as simple as an immediate purchase-sale transaction between individuals, in which nothing is written and little if anything is said, or as complex as a years-long relationship between a team of corporations and a government agency that attracts national or even international attention and in which thousands of managers and workers are employed, millions of pages of documents are prepared, and hundreds of meetings are conducted.
Some persons categorize contracts as either discrete or transactional on one hand and relational on the other. See, for example, Macneil, "The Many Futures of Contracts," Southern California Law Review, (1973 - 1974), 47 S. Cal. L. Rev. 691, 693-4:
Contracts are created through an often complex and lengthy process that is sometimes referred to as contract formation or as offer and acceptance. The process might take place more or less as follows: One party, an offeror, makes an offer, which is a promise, to another party, an offeree, seeking to get something in exchange, usually a return promise. The promise might be to do something or to refrain from doing something. If the offeree agrees to the offeror’s terms for the exchange of promises, then he or she is said to have accepted the offer, thereby making a promise in return. The offeree’s return promise is deemed consideration for the offer — something that the offeror bargained for and that “seals the deal” between the parties. Assuming that both parties are legally competent to engage in such an exchange, and assuming that the promises exchanged are lawful, the parties’ agreement is mutual assent to the terms of the exchange and forms a contract. The parties are now bound to one another, and the courts will enforce the contract. (For a more complete discussion of the process, see Joseph M. Perillo, Calamari and Perillo on Contracts 6th (2009) Ch. 2.)
The specialized role of professional contract manager developed when contracts became complex, the rules governing them became voluminous and difficult to understand, and the work of making and maintaining them became specialized. Contract managers view contracts as business relationships that require great care and attention to detail in planning, creation, maintenance, and in closing out when completed. That process is called contract management.
What is Contract Management?
Contract management is the professional art of negotiating mutually beneficial business agreements and of forging and maintaining mutually rewarding business relationships. Contracts involving anything more than simple and immediate purchase and sale transactions are relationships. While contract management entails compliance with laws, regulations, policies, court decisions, etc., it is not primarily a legal process. Contract management is, first and foremost, a relationship management process. Contract managers enable and assist people and organizations to unite and cooperate to their mutual benefit.
Business is regulated in most countries, so contract managers must know and ensure compliance with many statutes, regulations, policies, and judicial and administrative decisions (collectively, “the rules”) that govern the contracting process, and they must be able to advise others in their organizations concerning the proper interpretation and application of the rules. This is especially true of Government contracting. The rules are complex and often written in arcane language using officially defined words and specialized terms of art. (The FAR alone contains more than 800 officially defined words and terms.) In order to be able to interpret and apply the rules properly and advise others how to do so, contract managers must be prodigious readers, so they can stay abreast of the latest developments in the law, in the industries and markets in which they do business, and in their profession.
The contract management process plays out in four phases: (1) research and planning, (2) contract formation, (3) contract execution, and (4) contract closeout.
The Research and Planning Phase
During the research and planning phase, the buyer determines its acquisition objectives — what it lacks and what its specific requirements are, decides how to proceed through the contract formation and contract execution phases, and establishes a budget and a schedule for the accomplishment of its objectives.
As generalists, contract managers should have, or be able to obtain through market research, information about the products or services to be acquired under contract. Generally, this will be the knowledge of an educated layperson, rather than a technical expert. They should be sufficiently familiar with the industries that produce or provide those products or services and the markets in which they are sold to be able to review specifications or statements of work for clarity, suitability, and general adequacy, to negotiate product or service specific contract terms, and to negotiate prices, estimated costs and fees, or hourly labor rates. They should have a general understanding of the methods of production or performance and of quality control and quality assurance used by the industry.
Contract managers who support projects or programs should understand the fundamentals of project management and some of the tools used by project managers, such as Work Breakdown Structures, Earned Value Management Systems, the Program Evaluation and Review Technique, and the Critical Path Method. (See A Guide to the Project Management Body of Knowledge (PMBOK Guide) 2000 Edition), ANSI/PMI 99-001-2000.) They should understand project funding and contract financing arrangements. And they should understand the fundamentals of intellectual property law, policy, and practice regarding patents, rights in technical data, and copyrights.
Contract managers must be effective relationship designers and builders. In order to unite people and organizations, contract managers must investigate and understand their respective points of view, objectives, needs, requirements, concerns, perceptions of risk, and differences. They must analyze the business strategies of their own organizations and of prospective business partners, determine how they mesh and conflict, if at all, and then must estimate, predict, and plan accordingly. They must choose and employ ethical and appropriate tactics to achieve the parties’ respective objectives in mutually acceptable ways. They must know how to use the arts of explanation and persuasion to acknowledge and resolve differences, and know how to draft agreements that impose reasonable obligations and fairly allocate business risks.
The Contract Formation Phase
The crucial phase in contract management is contract formation, the process of offer and acceptance. The objective is mutual assent — a meeting of the minds. The judgments, decisions, plans, proposals, and agreements made during contract formation will set the stage for all that follows. A well-managed and conducted contract formation process greatly increases the likelihood of successful contract execution and reduces the risk of disappointment or failure. For that reason, seasoned contract managers should play the lead role in contract formation. If someone else is chosen to play that role — perhaps a program or project manager — the contract manager should be that person’s key advisor.
In Government contracting, the contract formation process is managed under extensive and complex rules — statutes, regulations, policies, and protest case law — and contract managers engaged in Government contract formation must be thoroughly familiar with them. The Government’s contracting officer is the process manager, responsible for ensuring that it is conducted in strict accordance with the rules and that all offerors are treated fairly. See FAR 1.602-1( b ):
In Government contracting, more regulation is devoted to contract pricing than to any other single topic, and contract managers involved in proposal analysis and contract negotiations should have an expert understanding of the pricing rules, which include rules about the submission and certification of cost or pricing data, cost allowability, cost accounting standards, cost and price analysis, and subcontract pricing. In order to engage in proposal analysis and contract pricing, contract managers must be knowledgeable of the fundamentals of cost estimating and of product and service pricing, and of pricing laws, regulations, and policies. They must be competent in the use of basic arithmetic and at least basic business mathematics. Such competence is essential to an understanding of the fundamentals of cost estimating, cost uncertainty analysis, cost risk, and contract pricing.
The Contract Execution Phase
During contract execution, contract managers must ensure that the parties fulfill their obligations to each other and respect each other's rights. This requires that they be thoroughly familiar with the contract terms and understand the basics of contract interpretation.
Reality does not always match expectations, and contract managers must know how to adapt when plans do not work out and when the worst case turns out to be the real case. Contract managers must be problem solvers par excellence. They must know how to ease tensions and avoid conflicts or resolve them when they occur. When problems arise, as they almost inevitably will from time to time, contract managers must come to the conference table with coherent and rational analyses, persuasive, evidence-based answers and explanations, and a menu of appropriate solution alternatives. In complex undertakings, unexpected events and change are inevitable, and contract managers must manage the change process so as to facilitate smooth transitions from old to new plans and contract terms, control costs and maintain schedules, if possible, and prevent misunderstandings and disputes.
While there will often be some tension between buyers and sellers, especially under fixed-price contracts, the parties should try to meet on common ground, and to create common ground when necessary, in order to make their relationship as productive as possible and to prevent it from becoming a zero-sum game. The contract execution phase should not be a period in which the parties race to see who comes out best. The goal should be to reach the finish line at the same time through honesty, mutual respect, cooperation, good faith, and fair dealing.
If disputes do arise, contract managers must prevent them from becoming disruptive to the point of putting the entire relationship at risk. In government contracting, the disputes process is governed by statute (41 U.S.C. §§ 7107 et seq.) and regulation (FAR Subpart 33.3). In settling disputes, the contracting officer must play the crucial role of impartial judge and make a decision based on his or her own independent judgement, an especially demanding task, but one that the courts and boards of contract appeals have found the contracting officer to be contractually bound to perform. See Atkins North American, Inc. v. United States, 106 Fed. Cl. 491 (2012).
The Contract Closeout Phase
Once a contract has been fully performed (“executed”), the parties may have some final administrative actions to take in order to complete their records and “close out” the business file. In Government contracting, FAR § 4.804 specifies a number of closeout tasks to be performed. Statute or regulation may require that the parties retain and store certain of their records for specified periods of time. See, for example, FAR Subpart 4.7. This work might be done by a contract manager or by administrative or clerical staff. Whoever does it, it must be done promptly and attentively.
The Requisite Skills of the Contract Manager
In order to do their work, contract managers must be skilled in oral and written communication.
Contract managers must be confident and persuasive presenters, able to describe and explain complex ideas to others, either with preparation or extemporaneously, to both informed colleagues and to those with little understanding of the issues, to both supporters and to skeptics or even opponents. They must be wise and skilled fact-finders and negotiators.
Contract managers often must write letters, emails, plans, and various memoranda that describe, explain, and justify their judgments, recommendations, decisions, and actions in order to establish compliance with statutes, regulations, policies, and contracts. So they must be competent writers of descriptive and advocatory business prose, because governments at all levels demand that businesses create and maintain often extensive records of their transactions and business relationships. Assessments of the quality of their work and of their professional and personal integrity will rest in no small measure on the contemporaneous documentation they create. Their documentation must be truthful, accurate, complete, and demonstrative.
In conclusion, the contract management process entails forging and maintaining mutually beneficial relationships. It requires thorough research and planning, sound contract formation, cooperative contract execution, and prompt and attentive contract closeout. In order for contract managers to do that work effectively, they must know laws, regulations, and policies, industries and markets, business principles, procedures, and techniques, and be effective communicators.
We have a new blogger at Wifcon, who calls himself Emptor Cautus. Since I've known him for 40 years, he asked me to write an intro for him, and this is it.
E.C. will remain anonymous, which is a good sign. He retired from Government service after a 30+ year career in which he held several high level posts, and he is still working in the field, so I figure he might say something that might get someone excited, and he doesn't want it held against him. That's good news.
E.C. spent most of his career with the Department of Defense as a contracting officer, contracting director, headquarters staffer, chief procurement officer, and even as an assistant commander in major systems acquisition offices. He worked some very big and important programs and there are not many people alive who know as much about contracting as he does. He is a detail man, which means that he will look closely at your official work and hold you to a very high standard in that regard. He is a thinker, and in a conversation, if you say something unsupported, inconsistent, or just plain wrong, you are likely to hear the dread, "Well, now, wait a minute." Which is the prelude to a Socratic examination of your logic. I can tell based on personal experience that alcohol seems to have little if any effect on his reasoning powers. If you say something about a professional topic, be ready.
E.C. is a prolific and thoughtful writer, and if you do much reading in our field, you have probably read some of his articles in various professional publications. He is a Certified Professional Contract Manager and a Fellow of the National Contract Management Association.
We are close friends, and I hold him in the highest personal and professional esteem. I think you will enjoy reading what he posts.