I teach a class in which the students are given a scenario: They are told that the Government has awarded a firm-fixed-price contract for supplies and that the contracting officer changed the specification immediately after award. They are told about the contractor's original price proposal, the negotiated price, the change, and new price quotes. They are then asked to calculate the equitable adjustment, if any, that the contracting officer should make. Depending on a student's interpretation of the facts and understanding of the proper measure of an equitable adjustment, he or she might decide either that the Government is entitled to a price reduction or the contractor is entitled to a price increase. However, on many occasions students have said that there should be no equitable adjustment either way. This answer cannot be supported by any interpretation of the facts given or any understanding of the proper measure of an equitable adjustment. So, where does it come from?
Some students who answer $0.00 acknowledge that the cost of performance was affected by the change, but they cite the first sentence of FAR 16.202-1, the description of firm-fixed-price contracts, which reads as follows:
That sentence is terribly misleading. Several clauses in firm-fixed-price contracts provide for a price adjustment based on the contractor's cost experience upon the occurrence of a specified contingent event, such as the issuance of a change order. In every case, something must change in order for there to be entitlement to a price adjustment. In addition to the changes clauses, some of the clauses that provide for adjustments to firm-fixed prices based on the contractor's cost experience are:
FAR 52.211-18, Variation in Estimated Quantity (APR 1984);
FAR 52.227-21, Technical Data Declaration, Revision, and Withholding of Payment⎯Major Systems (DEC 2007);
FAR 52.233-3, Protest After Award (AUG 1996);
FAR 52.236-2, Differing Site Conditions (APR 1984);
FAR 52.236-11, Use and Possession Prior to Completion (APR 1984);
FAR 52.242-14, Suspension of Work (APR 1984);
FAR 52.242-17, Government Delay of Work (APR 1984); and
FAR 52.245-1, Government Property (JUN 2007).
There would be no problem if FAR 16.202-1 were to say: A firm-fixed-price contract provides for a price that is not subject to adjustment on the basis of the contractor's cost experience in performing the contract, except as otherwise provided by a contract clause. However, it does not say that, and newcomers to contracting (and some veterans) are misled by the FAR language.
The first time a student cited FAR 16.202-1 as the basis for a $0.00 answer, I was thrown off. It took me a few moments to understand where the student was coming from. Every time a student cites that FAR passage I cringe. It takes more than a few moments to explain things to literal-minded students, and I am sure that my explanations have left some unconvinced.
But it's not just students who get confused. Recently, while going through some old papers, I came across a copy of the September 2008 edition of Government Contract Costs, Pricing & Accounting Report, published by Thomson-West. Scanning it, I saw an article entitled, "Popular Concerns Regarding T&M and LH Contracts Are Overstated," by Darrell J. Oyer and Christyne K. Brennan. Reading the article, I came to this short paragraph:
Emphasis added. I don't know how I missed that article a year ago, but I almost came unglued when I read it, because the payment and reimbursement results are absolutely not identical. It was then that I realized that some people do not understand that the main difference between fixed-price contracts and other types is not that the price of the one is fixed and the prices of the others are not. The price of a firm-fixed-price contract is neither firm nor fixed. The main difference between the fixed-price contracts and any of the others is that under a fixed-price contract the contractor must perform successfully in order to be entitled to payment or to keep any progress payments received, but successful performance is not a condition of payment under the cost-reimbursement and T&M/LH contracts. Thus, to equate a T&M or LH contract to a fixed unit price contract is to reveal a fundamental lack of understanding of the two types of contracts.
A few paragraphs later, I read this:
I presume that the exclamation point at the end of the second sentence signals the authors' astonishment at the government's ignorance. But a T&M/LH contract is riskier to the Government than a cost-reimbursement contract, because each hourly rate includes profit, so that the more hours delivered the more profit the contractor can make, while not being obligated to finish the work in order to get paid. That is a motive to be inefficient. A cost-reimbursement contract, on the other hand, while not providing a profit motive to be efficient, also provides no profit motive to be inefficient.
T&M/LH contracts have their uses, but to equate them with fixed unit price contracts and to think them no riskier than cost-reimbursement contracts is to reveal an astonishing level of misunderstanding.
It was my realization that so many do not understand the contract types that led me to write a two-part Briefing Paper on contract types: "Contract Pricing Arrangements⎯A Primer," published in October 2009 (cited 09-11 Briefing Papers 1) and November 2009 (cited 09-12 Briefing Papers 1). The first part describes the fixed-price, cost-reimbursement, time-and-materials, and labor-hour arrangements. The second part describes the incentive arrangements. The Briefing Papers are published by Thomson Reuters.
The publications are designed to be introductory in nature. They warn against relying on general descriptions in the FAR and elsewhere and emphasize the need to study the contract clauses applicable to each particular type in order to develop a true understanding of it and of the differences between it and any of the other types.
Writing those Briefing Papers confirmed in me the belief that contracting is a much deeper subject than most practitioners realize. The path to competence in contracting passes through a working life of never-ending study, observation, and reflection. Yet, how does one learn? There is a dearth of first-rate textbooks. Almost every topic is given only superficial treatment in this or that official handbook, guidebook, and magazine article. Deeper studies are published in law journals, but they are aimed primarily at legal practitioners. On-the-job training is awful and generally perpetuates many misperceptions, misconceptions, half-baked ideas, errors, and poor practices. Most classroom training falls far short of rigorous.
This is too bad, but there are two ways of looking at it: the first is from the point of view of those who need to have their hands held, who see it as a cause of frustration; the second is from the point of view of the curious, self-motivated, investigative, studious, reflective, and ambitious, who see it as an opportunity to gain a competitive edge over their "peers" and to be valued as knowledgeable pros.
Which way do you see it?
When and why should a contracting officer go to a lawyer? The way that a contracting person answers that question will tell you what they think about the role and the responsibility of the contracting officer.
I often ask contracting personnel in my classes how they would determine what the rule is about this or that. Very often, too often, the answer is: Ask a lawyer. That answer sends old-timers like me up the wall. Most of us think it is disgraceful to go to a lawyer with such a basic question. In our view the proper answer is: You should know the rule if you?re doing something to which the rule applies. If you don't know, then you should look it up. The answer, "Ask a lawyer," is entirely unacceptable. So, when and why should a CO go to a lawyer?
I teach a class in which the students are given the following scenario:
During a source selection, the evaluators tell the CO that one offeror?s technical proposal is ambiguous on a certain point. The statement of work requires that the contractor provide a device having a capacity of X. The proposal is unclear whether the device has X capacity or one-half that amount. The evaluators need to know what the offeror is actually proposing so that they can determine whether the proposal is acceptable or not. They want the CO to call the offeror and get an answer. The call should take no more than a few moments, and the answer would permit the evaluators to wrap up their work.
The RFP had notified offerors that the government intended to award the contract without discussions. Thus, the issue: If the CO makes the inquiry, would it constitute clarification or discussion? If clarification, then the agency can ask and still award without discussions, but if discussion, then the agency must conduct discussions with all offerors within a competitive range and permit those offerors to revise their proposals before it can make an award. The extra steps would take at least another month and expose the agency to the risk of a protest about its competitive range determination. It would also expose the agency to the risk of a protest about its conduct of discussions. Since the agency put offerors on notice that it intended to award without discussions it is not obligated to inquire, but if it doesn?t inquire the offeror?s proposal must be considered unacceptable, which would make the offeror ineligible for award. That would be too bad, since the offeror is considered to be an exceptionally good contractor, its technical proposal is considered to be otherwise excellent, and it has offered a very good price. Yet, good contractors with very good proposals would remain in the competition. What should the contracting officer do?
The rules about clarification and discussion are in FAR 15.306. Any CO who conducts source selections for a living should know those rules word for word. Unfortunately, you can memorize those words and you still won?t have any idea about the distinction between clarification or discussion. You might think that you do. After all, the language in FAR 15.306(a) and 15.306(d) make the distinction seem quite clear. But the distinction between clarification and discussion has been developed mainly in GAO case law. The FAR simply does not reflect that case law.
So how do you learn about the case law? There are several sources that discuss the clarification/discussion issue in depth, e.g., Feldman, Government Contract Awards: Negotiation and Sealed Bids, and Nash, et al., Source Selection: The Competitive Negotiation Process, 2d ed. I wrote an in-depth analysis of the distinction for the September 2007 issue of The Nash & Cibinic Report, entitled, ?Postscript V: Clarifications vs. Discussions,? cited by Westlaw as: 21 N&CR ? 45. A CO who conducts source selections should be familiar with those publications, or others like them, and should read GAO and Court of Federal Claims protest decisions.
A CO who is familiar with the FAR and the GAO case law should be able to decide the issue in the scenario. The GAO would consider the inquiry to be discussion, not clarification, because resolution of the ambiguity is necessary in order to determine whether or not the proposal is acceptable. See, e.g., Nu-Way, Inc., Comp. Gen. Dec. B-296435.5, 2005 CPD ? 195:
In light of the GAO case law, the contracting officer?s legitimate choices are: (1) refuse to make the inquiry, reject the offer as unacceptable, and award without discussions, or (2) establish a competitive range, conduct discussions, and solicit and evaluate final proposal revisions. Should the CO consult the agency lawyer? If so, for what? What can the lawyer say that the CO does not already know?
The lawyer in the agency legal office functions as in-house counsel. He or she is not the CO's lawyer, but the agency's lawyer, and represents the agency, looking out for its organizational interests. In working with a CO, the lawyer is not seeking to support the CO in any personal sense, is not seeking to fulfill the CO's wishes or to get the CO what he wants. The lawyer is seeking to ensure that decisions and courses of action are good for the agency as a whole.
A CO should not assume that a lawyer will know the answer offhand. Government contract law is a specialized field. Government lawyers work in a lot of specialized fields and a particular lawyer might not have much experience practicing government contract law. Even a lawyer who practices government contract law might not have done much source selection work and might not be familiar with the case law or literature about clarification and discussion. But a lawyer is formally trained to think, especially about legal issues. Law school is a school about how to think about problems in a certain way and in an orderly manner. Lawyers understand legal principles, rules, and procedures. They know how to frame and research an issue, how to determine the current status of the case law, how to spot distinguishing facts in a particular case, and how to argue a case--skills that contracting officers are not expected to possess and ordinarily do not have. A good in-house lawyer is a counselor in the best sense of that word: a person trained to give professional guidance to a client, a source of knowledgeable, dispassionate, considered advice.
Contracting decisions are the CO?s to make, not the lawyer?s, at least in theory. Yet many COs complain that their lawyers ?won?t let me? do this or that. What has probably happened is a clash of views. The CO wants to do X. The lawyer thinks that X is unwise or illegal and not in the best interests of the agency. The CO can't proceed without the lawyer's "legally sufficient" stamp of approval. Someone at a higher level than both must ultimately decide, and the CO and the lawyer must make their cases. The CO is at an understandable disadvantage. The boss probably doesn't fully understand the issue, but her lawyer is telling her that it would be unwise to go along with the CO. Weighing the arguments of both sides and not fully understanding the issue, the boss is likely to think that deciding in favor of the lawyer is the safest course of action. This can lead some lawyers to run roughshod over COs, especially if they do not think the COs are competent. Yet the CO is responsible for any decision or contract bearing his or her signature, and when a regulation calls for a CO decision the CO cannot be directed to decide in a specified way.
Many COs are mainly administrative technicians. They process paperwork and do data entry, but are not competent to make sound decisions. Too many do not know the regulations as they should and do not read cases, books, and articles. They do not have the professional knowledge or skills they need, or the personality and personal skills, to enable them to take charge, innovate, and decide. Their leaders don?t trust them and thus tie their hands with policies and reviews and rely on the lawyers to make contracting decisions. Indeed, many government lawyers that I know are exasperated by the lack of knowledge and capability among the COs they support.
Many if not most agencies require COs to submit their files for legal review in order to establish "legal sufficiency." Such reviews have become a kind of contracting quality assurance, and some lawyers use them, perhaps unconsciously, to manage the contracting process based on their personal views about the best way to do things. (Don't use that evaluation factor. Don't use that scoring method. Don't use that procedure. Use this language in the proposal preparation instruction instead of the language you wrote.) In an ideal world, this wouldn?t happen. In that world the practice of sending every contract valued in excess of a certain dollar amount to the legal office for review would be considered unnecessary and wasteful, and COs would send files to the legal office only for input about issues such as the propriety and adequacy of a special contract clause, or a dispute settlement with far-reaching implications. But in an ideal world COs would be genuine experts and far more knowledgeable about contracting than agency lawyers.
So when and why should a CO go to a lawyer? When it's a matter of choice, a CO should never go to a lawyer for basic information or to ensure that a file reflects compliance with well-established rules. A CO should not need a lawyer for that. But when an issue is complex and the legal implications are significant, something a competent CO should be able to recognize, then a CO should go to a lawyer for professional insight and advice. A CO should make a tentative decision about what to do based on the issue, her understanding of the applicable rule, and the pertinent facts, and then visit the lawyer to discuss it and the pros and cons of one course of action versus another. The conversation might go something like this: "Hi, Jack. I?ve got a situation. This is the scenario, this is my assessment, and this is what I?m thinking of doing. I?d like your professional opinion and advice. What do you think?" And a CO shouldn't get frustrated if the lawyer says, "Well, you could do this or you could do that, and it might turn out this way or it might turn out that way." After all, the CO was seeking advice, not direction. Right?
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.
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.
Why do acquisition people love awards so much? There are all kinds of acquisition awards. For a list, go to http://www.fai.gov/acm/awards.asp. It prints out to more than three full pages, and it doesn't come close to listing all of the available awards.
How can it be that a function/process that is the focus of so much dissatisfaction and criticism hands out so many awards?
The really good people that I know don't care about awards. They can't be bothered. In my experience, people and organizations who lust for or brag about awards aren't very good. I'm thinking now of one organization that loves to trumpet its awards. It does a poor job, but once said to me that it couldn't understand my criticism of it, because it has won so many awards. There are organizations that give awards as marketing and public relations gimmicks. Many professional organizations give awards to encourage and reward dues-paying membership. (Let us now praise ourselves!) I have to laugh at the way chiefs of contracting offices hand out awards for doing a good job of planning an acquisition, preparing an RFP, or conducting a source selection. That's what contracting people are supposed to do. Why give them awards for doing it? Aren't they getting a paycheck? I cringe every time some new presidential appointee establishes a new award. I guess the idea is that people might do the jobs they're being paid to do if you offer them an award for doing it.
I enjoy giving praise more than getting it, although I don't give praise very often. When someone praises me I immediately feel like a phony, because, truth be told, I don't think I'm all that good. I think I'm just okay, and not even that sometimes. Maybe that's why I distrust people who are award-oriented and who have won a lot of awards. They are immediately suspect in my eyes, even though I know that some awards are well-deserved.
I consider myself mainly a critic of the acquisition "profession," because I am more interested in what we did wrong and in how we do better next time than in how good we maybe were in the past.
The best award is when you walk down a hallway and, as you pass, someone says to someone else, "That CO really knows her stuff." That's a great award, even if you didn't hear it. But if you're that kind of CO you're probably upset about something that you just learned that you hadn't known about, and you are wondering: How can I have lived so long without knowing that before now?
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.
I teach a lot of interns and there is one thing that I notice about them that bothers me: Most of the ones that I have met do not know how to make effective presentations. When asked to present their position on some matter, they do not make their case in an orderly way. When asked to speak, they speak haltingly and in an inaudible voice and look at the paper in their hand instead of making eye contact with their audience. When using a flip chart pad they write in teeny-weeny and often illegible letters. Some have that deer-in-the-headlights look. And this is when they're speaking to their peers. It's hard to imagine them making a presentation to an assistant secretary, to a general or an admiral, or to a crusty old salt representing a contractor. It's hard to imagine them taking charge in negotiations, at a debriefing, or in a meeting to resolve a bitter dispute without litigation. They drive me crazy.
But they're just interns. Most seasoned people are as bad if not worse. (Yes, I said "most.") I wish I had a dollar for every debriefing I've attended at which the contracting officer came across as an ill-prepared incompetent and sparked a protest instead of quelling one. Don't expect the interns to get much help from OJT.
Intelligence and knowledge are essential to first-rate contracting performance, but they are not enough if you want to stand out and rise to the top of the heap in the field. Unless you are entirely self-absorbed, knowledge is worthless if you can't make your point to other people. A year ago I had an intern in my FAR Bootcamp, a young woman fresh out of college, who was chosen by her team to present their solution to a problem to the rest of the class. Her team had the wrong answer, but that young woman got up and made a confident presentation so dazzling that she convinced the people who had the right answer to adopt her position. I was mesmerized, and that doesn't happen to me a lot. She was an anomaly. Sad to say, but when it comes to making presentations, there are more deer in the headlights than tigers.
Want to see a first-rate presenter? Watch Stanford University's short film of Carly Fiorina's presentation: The Dynamics of Change and Fear.
Here is Steve Jobs, introducing the MacBook Air at Macworld 2008. Steve Jobs (He sold one to me.)
And here's a film of a 2006 Seth Godin presentation. Seth Godin (Brilliant. Hilarious.)
The key is to have clear ideas and to be able to present them clearly and with confidence to others, whether in an auditorium, a classroom, or a conference room. Some people seem naturally better at public speaking than others, but everyone can learn to be effective, if not dazzling. When I worked for the Air Force I enrolled in a correspondence course in which I learned the principles of preparing and delivering briefings and memoranda of various types. We used a textbook called The Tongue and Quill, which is still in print, albeit in a newer edition and designated Air Force Handbook 33-337. The Tongue and Quill Chapter 10 is entitled, "Air Force Speaking." I just read the new version and it strikes me as a useful document and very much worth a read. But you cannot learn to speak well merely by reading a book or attending a PowerPoint presentation. It takes practice. If you want to learn, think about joining a Toastmasters club. Toastmasters International I never joined such a club, but I'm told it's a great experience.
If you want to make a career in contracting, if you want to someday be in charge of one of those "large and complex" acquisitions that people like to talk about, instead of just processing the paperwork, then sign up for some training in public speaking and presenting. Better yet, talk your boss into bringing such a course onsite. And buy one that forces you to speak in front of others and to endure their criticisms.
Of course, in order to make a good presentation, whether before a large audience or to only four or five people from a company that just lost a source selection, you must be able to think clearly. Do you know how to do that? Are you sure?
You can learn how to do that, too.
Every now and then somebody comes along and proves your point for you in a wonderful way. Earlier this week I wrote about gimmicky reform "initiatives." Now I have learned that as the outgoing OMB director prepares to leave office he has published a memo that claims great success for the Obama administration?s acquisition waste reduction initiatives. You can see it at www.whitehouse.gov/omb/assets/blog/Update_on_Contracting_Reforms.pdf. Here are some of its claims:
All those facts are good news, I guess. But are we supposed to believe that those wonderful things (if, indeed, they are good) are evidence that the president?s memos have had the desired and a lasting effect? In any case, we could ask a lot of probing questions about those numbers and what they indicate, but why bother? We won't get answers.
Sorry, but I think the OMB memo is a classic illustration of what logicians and rhetoricians call the ?post hoc? fallacy⎯post hoc ergo propter hoc, that is, because one event happened after another we can conclude that the second event was caused by the first. See http://www.skepdic.com/posthoc.html. Non sequitur. http://www.skepdic.com/nonsequitur.html. We don?t know why the statistics are different, but since it takes a long time to plan and award contracts, I am skeptical that the statistics prove that a couple of presidential memos are the reason for the changes in the numbers. (If only it were that easy!) There could be any number of reasons for differences from one year to the next, forces at work entirely independent of the president?s wishes. Moreover, even if the changes were the product of the president?s memos, we are a long way from knowing that we have seen a lasting change in the way we?re doing business.
The memo makes other claims:
?New contract,? you say? Then, what have we got other than expectations of savings? And how did you measure ?savings?? Savings of what from what? And were the new contracts entirely planned and awarded since the Obama memos, which were issued just last year?
We then get:
Uhhh, some questions: What do you mean by ?successfully acquired?? Were the contracts in question planned, awarded, and performed since the president published his memos? Really? Have the contracts been completed? Has all the work under them been done and accepted? If so, what is the difference between the award prices and the final prices, including settlements of requests for equitable adjustments and claims? If the contracts have not been completed, how do you know how much if anything has been ?saved?? As you say, things have been the way they've been "for many years." And you're claiming that you created all this "change" in a few months through the issuance of a couple of memos? Really? You're saying that?
OMB?s overall conclusion?
Why the hurry to take credit? Answer: a four-year election cycle, a two-year campaign cycle, and the outgoing presidential appointee wants something good for his resume. Now, I?ll be the first to admit that the general public might be naive enough to take all this at face value, but I?m not. I?m not saying that the president?s program has not, will not, and cannot work, although I have my doubts. But the OMB memo strikes me as just the kind of ?success story? bull---- that I mentioned in my last blog post.
Actually, I might as well be blunt: I think the OMB memo is presidential appointee hogwash. But I?m willing to be convinced⎯by evidence.
Does the memo reflect the kind of thinking that they teach at Princeton and Harvard, where the OMB director and the president went to school? No. So why have the OMB director and the president sent this out? Is it because they think we're naive or stupid? Is it because they don't know better? I'm not sure which would be worst. I?m more than a little disappointed in the president for this, but he?s just a politician. What else could we expect?
How about a contracting think tank?
I recently sat on a panel with Professor Emeritus Ralph Nash and Associate Professor Steve Schooner of The George Washington University Law School, and Paul Dennett, a former administrator of the Office of Federal Procurement Policy, to discuss the state of government contract administration. The consensus was that the government does not have enough people to do as good a job of contract administration as it should be doing and that the people who do it need more training. There is nothing very remarkable about that consensus, the same opinions have been expressed by nearly every observer and critic of government contracting over the past 20 years.
There is a long list of contract administration functions in FAR 42.302, but the key issue seems to be quality assurance, inspection, which FAR 2.101 defines as follows:
??Inspection? means examining and testing supplies and services (including, when appropriate, raw materials, components, and intermediate assemblies) to determine whether they conform to contract requirements.?
The critics are concerned about whether the government is getting what the contractors have promised to deliver, or, to put it another way, whether the government is getting what it is paying for. There are other concerns as well, for example: whether contractors are complying with cost accounting standards and cost principles, are fulfilling their obligations under contract clauses that implement the socio-economic programs in FAR Subchapter D, are complying with security requirements, and, generally, are obeying the laws. And there are concerns about organizational conflicts of interest, the implications of ?blending? contractor and government employees, and about contractors performing inherently governmental functions.
Now, inspection of supplies (goods) is well understood, and there are countless books on quality assurance for manufactured items and raw materials. But the government spends more on services than on supplies these days, and the inspection of services confronts us with many unsolved problems and unresolved issues. When a service produces a tangible artifact that is, in and of itself, adequate evidence of the quality of the service, then quality assurance can be handled much as it would in a contract for supplies. Thus, the quality of equipment repair services can be determined by examining and testing the items that the contractor claims to have repaired, and the quality of grounds maintenance services can be determined by examining the grounds. But how do we perform quality assurance when a service produces no tangible artifact, or no artifact that is, in and of itself, adequate evidence of the quality of the service, or when the work does not entail observable physical activity on the part of the contractor's employees? There are many such services.
Consider, for example, contracts for the services of security guards who perform entry control at government facilities. A government inspector can see people lined up at the entrance, showing their identification to the guards, and the guards looking at it and at the belongings people place in the X-ray devices. But the service work is taking place in the guards? heads, and that work cannot be observed directly. A guard may look at the identification or appear to do so, but does she see it, does she think about what she sees, and does she make the right decision based on what she sees? The government can perform tests in which it tries to get people with bad identification and contraband past the guards, but such tests have to be random. Even if the guards catch the test subject, the government cannot be sure that the guards are not letting others in who should not be admitted. Random sampling is not adequate when performance must be perfect, yet 100 percent inspection is not practical. When work takes place in peoples? heads and the output is an undocumented thought, what do you examine and test?
What about contracts for analytical services? Again, the work takes place in the heads of the service employees. Studies and reports, in and of themselves, are not adequate evidence of the quality of the underlying thought processes. While an expert reader might detect obvious errors of fact or reasoning, other errors might go undetected, and disagreements with the conclusions of the service provider are not necessarily indicative of poor quality work.
Under time-and-materials contracts, it is common practice for contracting officers to require contractors to submit their invoices to a contracting officer?s representative (COR or COTR) for ?approval.? But what does ?approval? signify? Conformity of the work to contract requirements is not a condition of payment. In any case, work under many such contracts produces no tangible artifact that is, in and of itself, evidence of the quality of the contractor?s work. As a general rule, when contract performance yields no such tangible product, the sight of a contractor employee at his or her desk does not warrant a conclusion that the employee was ?working? at the moment of observation, only that the employee was present.
In addition to the intangibility of much service output and the government's inability to directly observe the contractor's work, there are problems associated with widely dispersed locations of performance and side-by-side performance of the same duties by government and contractor personnel.
These crude examples reflect just some of the problems that are unique to service contracts. My point is not that there are no solutions to these kinds of problems or that no one has solved any of them. My point is that in many cases the government (1) has not explicitly recognized the problems, (2) has not worked systematically ether to find solutions that others have developed or to develop its own, (3) has not widely reported any solutions that it may have developed, and (4) has not developed appropriate training with respect to the problems for government quality assurance personnel. The advocates of performance-based contracting would have government inspectors use statistical quality assurance methods⎯random sampling and AQLs, methods that were developed for manufacturing. But services do not produce identical units of output. Every output is a somewhat unique response to a somewhat unique set of circumstances. We don?t strive to reduce variability in the output. In fact, we want the output to be varied as appropriate. Statistical inferences based on random sampling might not be valid for such services. In any case, Military Standard 105, Sampling Procedures and Tables for Inspection by Attributes, which described the random sampling and AQL procedures used for many services contracts was canceled because it does not reflect current thinking about quality assurance processes. It has been replaced in part by MIL-STD-1916, DOD Preferred Method for Acceptance of Product. The foreward to that document says:
?Sampling inspection by itself is an inefficient industrial practice for demonstrating conformance to the requirements of a contract and its technical data package. The application of sampling plans for acceptance involves both consumer and producer risks; and increased sampling is one way of reducing these risks, but it also increases costs. Suppliers can reduce risks by employing efficient processes with appropriate process controls. To the extent that such practices are employed and are effective, risk is controlled and, consequently, inspection and testing can be reduced? This standard complies with the DoD policy of eliminating acceptable quality levels (AQL's) and associated practices within specifications.?
So where does that leave those DOD folks who have sampling and AQLs built into their Quality Assurance Surveillance Plans? Anyway, how much should a contracting officer deduct from contract payment for that one instance out of ten thousand in which a guard let someone get in with a gun?
If you wonder where I?m going with all of this, here it is: Why don?t we have a contracting think tank to work on these kinds of issues and problems? The existing think tanks that occasionally address contracting issues, like Brookings and Rand, focus on what I call ?macro? issues⎯Does outsourcing reduce costs? How much outsourcing should the government do? What work should the government outsource? What we need is a think tank that takes on day-to-day practical issues, such as the ones I described above, and publishes its findings and recommendations for chief acquisition officers, senior procurement executives, heads of contracting activities, chiefs of contracting offices, and contracting officers. I don?t mean a policy shop. Goodness knows, we don?t need yet another policy shop. No, I mean a place where smart people spend their time thinking about ways to do contracting better than we do it now and publishing their thoughts.
Contracting is a $400 billion per year business. Per year! We have about 28,000 people working at it. When you think about all of the handwringing over a one-time $700 billion stimulus package and a one-time $25 billion rescue for the auto industry, you have to wonder why we are not rounding up first rate minds and putting them together to systematically identify contracting issues and problems and to find solutions that everyone can use.
Goodness knows⎯there would be a lot to think about.
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.
Those of you who have read what I have written over the years know that I think Steve Kelman was the best Administrator of Federal Procurement Policy that we have ever had. He had more effect on the acquisition process, mostly positive, than any Administrator before or since. But he recently wrote something in his April 8 column in the online edition of Federal Computer Week that distressed me. The entry is entitled, ?Keep your contracting staff in the loop,? and it urges program offices to include their contracting offices in their early planning and in the development of their ?procurement packages.? Here is the first sentence of the fourth paragraph of the column:
What has upset me is the disparaging phrase: ?wallowing in Federal Acquisition Regulation provisions.? Contracting officers are charged with ensuring that acquisitions are conducted in accordance with law, regulation, and policy. See FAR 1.602-1( :
A CO can be held personally responsible for knowingly violating the rules when conducting a contract action. See John Martino, Comp. Gen. Dec. B--262168, 96-1 CPD ? 256; 1996 WL 283964:
The CO had exercised an option to buy additional quantities of supplies needed by the user and deliberately did not bother to check the market price before doing so, as required by FAR. As a result, the agency paid too much for the supplies. The amount taken from the CO?s retirement fund was $88,040. I do not know why the CO didn?t check. Perhaps he knew that checking the market would take time and might have revealed that the option price was too high, which it was, and which meant that the CO would have had to conduct a new procurement or get approval to negotiate a new price without full and open competition. Maybe the CO chose not to wallow in the FAR because it would have inconvenienced the user, so he took the easy way out. If that's what happened it was a bad call, because it cost him 88 grand out of his own pocket. That's a big price to pay to support a user that maybe hadn't planned properly. Talk about customer service!
When I look in my dictionary I see that the verb wallow is defined as ?to luxuriate; revel.? I don?t know why anyone would want to luxuriate in or revel in the FAR. I urge contracting people to know it and know it well, but I don?t urge them to celebrate it. The thing is a mess. But it?s a fact of life and failing to accept that can lead to trouble. Among other things it can lead to more regulation. On the other hand, knowledge of it can reveal ways to streamline and accelerate the acquisition process.
We Americans have a peculiar relationship with regulations. We are ready to hang an official who violates one that is personally important to us, but we sneer and rail at those who insist upon following regulations that inconvenience us and that we consider petty. Paul Hein summed it up as follows: "Are we fools for obeying rules? Absolutely, yes ? and no. I am firmly committed to both sides of the question. On the other hand, are we fools to make rules? Without a doubt, except sometimes. Again, I am securely and comfortably ensconced astride the fence."
My attitude is that I'll play any game, just tell me the rules so we can get on with it and quit standing around. I want COs to know those parts of the FAR that govern their procurements so that they can get things done. Anyone who knows the FAR well knows that it is not as restrictive as ignorant people make it out to be. For instance, nothing in FAR Part 15 requires COs to conduct source selections in the mind-numbing, resource-intensive, time-consuming, costly ways in which they so often do it, and knowing the rules well enables me to come up with ways to pick the contractor, award the contract, and get on with the job in the shortest time possible and with the least unnecessary expenditure of human resources and money. COs shouldn't read the FAR in order to find a way to say no or to make a power play. COs should read the FAR in order to secure the objectives of their clients efficiently and effectively while operating within the bounds of the law.
What does ?knowing the FAR? mean? First, it means knowing what kinds of content are in the FAR. The FAR contains (1) rules, (2) guidance, and (3) solicitation provisions and contract clauses. Second, it means knowing how to find the specific rules, guidance, provisions, and clauses that apply to particular issues and problems. Third, it means know howing to read the FAR, which is not the same as reading a novel or history book. Reading regulations entails a special kind of reading that requires a very high level of attentiveness and, very often, sentence by sentence and even word by word analysis. Finally, it means understanding what the FAR means, which is not necessarily the same as knowing what it says, and which is often impossible without an extensive knowledge of case law. Consider two FAR passages: 15.306(d) and 52.243-1( . It is easy enough to know what they say, but it is very hard to know what they mean unless you are familiar with the decisions of the GAO about discussions in source selection and the decisions of the boards of contract appeals and the federal courts about equitable adjustments. Those two passages have spawned countless pages of decisions and analysis. Only a pro can really understand them.
While I don?t luxuriate or revel in the FAR, I do wallow in it, metaphorically speaking, in another sense: I read certain parts of it a lot. For example, I reread Part 15 constantly. Why? So I can know the rules about conducting negotiated procurements. Why? So I can things done in compliance with the law and without doing things that are not necessary, and so I can do what FAR 1.102-4(e) says that contracting officers should do: "take the lead in encouraging business process innovations and ensuring that business decisions are sound.? I?ve had a long career and a very successful one. Knowing the FAR (and, before it, the DAR and the ASPR) hasn?t hurt me one bit. Program managers loved me. I was a very "let's get on with it" kind of CO. I didn't say no very often, so people took me seriously when I did, and they didn't worry because they knew I'd figure something else out. Oh, and neither I nor any of my bosses ever got into trouble over one of my contract actions.
Knowledge is influence. Influence is power, the power to get things done. So wallow in the FAR. It's the professional thing to do.
A SAD STORY
On February 19, the Armed Services Board of Contact Appeals issued its decision in the matter of Bernard Cap Co., Inc., ASBCA Nos. 56679, 56703, 56705, and 56716, 10-1 BCA ? 34387, in which the board dismissed the contractor?s appeals from the deemed denial of four claims for payment. The contractor had won four indefinite-delivery indefinite-quantity contracts with Defense Supply Center Philadelphia for men?s garrison caps⎯in 1996, 1997, 1999, and 2000. The government issued several delivery orders under each of the four contracts over a span of years from 1996 to 2005. The contractor delivered and submitted DD Forms 250, Material Inspection and Receiving Report, for payment. The contracts contained the clause at FAR 52.232-25, Prompt Payment (MAR 1994). The contracts were administered by the Defense Contract Management Command⎯Orlando. The paying office was the Defense Finance and Accounting Service, presumably also in Orlando.
Under each of the contracts, DFAS paid some of the invoices, but not others. The contractor repeatedly inquired. DFAS would then make late payment of some of the invoices, but not others.
According to the board?s decision, the contractor wrote to the contracting officer about one of the four contracts in December 1999, pleading for help:
We have been trying to collect past due money from DFAS through our ACO and DCMC Orlando for the past year? We are talking about $600,000 of accounts receivable that are PAST DUE⎯some going back years and most past due over 90 days.
The contractor wrote to DCMC Orlando in January 2000:
You will note that the vast majority of these are very, very past due. Promises from DFAS have not been kept and we are not getting enough oxygen to keep breathing.
The contractor met with DFAS in 2001 and 2002, after which meetings many invoices were paid, but not all.
In 2003, the contractor wrote to DFAS:
[We] have been government contactors since the 1930?s and with all the technology that has been added to the accounting area at DFAS we cannot understand why we still have to wait, wait, and wait some more⎯all the time sending repeated evidence of shipment. HELP!!!!
In 2006, the contractor wrote to DFAS to express its ?extreme frustration? at not getting paid.
[P]lease know that from 1996-1999 we are owed $32,630 and from 2000-2005 we have $409,008 that is unpaid.
The contractor asked its congressional representative for help. DFAS then made some payments, but the contractor said it was still owed about $200,000.
This went on for years. Then, in March 2008, DFAS wrote to the contractor:
The old contracts have been reconciled to the best of our ability and the documents to include payment histories are being shipped to you. At this time, we cannot pay anything additional on the old contracts.
Finally, in October and November 2008, the contractor submitted four separate claims, ranging from a low of $13,804.66 to a high of $111,465.57 and totaling $205,078.04. The contracting officer issued no final decisions, and the contractor appealed to the ASBCA based on denial through inaction. The government did not contest any of the claims, but moved for dismissal of each on grounds that the contractor had not submitted the claims within six years of their accrual. The board held that a claim for each unpaid invoice accrued 30 days after submittal of a proper invoice, saying of one of the contracts:
By appellant?s own account ? which the government does not dispute for purposes of the motion to dismiss ? appellant made shipments and tendered proper invoices for accepted goods under this contract on or about 30 December 1996; 24 September 1997; 18 March 1998; 24 September 1998; 3 December 1998; 17 December 1998; 28 January 1999 and 29 December 1999 (SOF ?? 3-10), for which the government failed to pay in full within 30 days as required by the contract (SOF ? 2). Hence, appellant?s claims for these unpaid invoices accrued, respectively, on or about 30 January 1997; 24 October 1997; 18 April 1998; 24 October 1998; 3 January 1999; 17 January 1999; 28 February 1999; and 29 January 2000. At that point, all events fixing liability for these unpaid invoices were or should have been known, FAR 33.201. See also Oceanic Steamship Co. v. United States, 165 Ct. Cl. 217, 225 (1964) (claim against the United States, based upon a contract obligation to pay, accrues on the date when payment becomes due and is wrongfully withheld). Clearly, appellant?s claim letter to the CO for these unpaid amounts, dated 14 November 2008, was submitted more than six years from the date of the accrual of these claims. We believe they are all time barred under the [Contract Disputes Act].
The board rejected the contractor?s arguments for equitable estoppel and equitable tolling:
Appellant suggests that DFAS? general assurances that it would review and/or seek to reconcile the payment records served to equitably toll the running of the limitations period, or equitably estopped the government from relying upon the same. We do not agree. For appellant to prove equitable estoppel against the government, it must adduce facts showing some affirmative government misconduct. Frazer v. United States, 288 F.3d 1347, 1354 (Fed. Cir. 2002); Zacharin v. United States, 213 F.3d 1366, 1371 (Fed. Cir. 2000). Appellant asserts no such facts here.
As for equitable tolling, federal courts have extended such dispensation only sparingly and under limited circumstances. Irwin v. Dep?t of Veterans Affairs, 498 U.S. 89, 96 (1990) (e.g., claimant filed timely defective pleading; claimant induced or tricked by adversary, allowing deadline to pass). Former Employees of Sunoco Products Co. v. Chao, 372 F.3d 1291, 1299 (Fed. Cir. 2004); Frazer, 288 F.3d at 1354 (lateness attributable, in part, to some misleading government action). Appellant presents no such equitable basis to support the tolling of the limitation period of the statute. Rather, the record shows a claimant that failed to exercise due diligence in preserving and protecting its legal rights under the contract. As stated by the Federal Circuit in Esso Standard Oil Co. (PR) v. United States, 559 F.3d 1297, 1305 (Fed. Cir. 2009):
"The Supreme Court has warned that '[o]ne who fails to act diligently cannot invoke equitable principles to excuse that lack of diligence,' Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 151, 104 S.Ct. 1723, 80 L.Ed.2d 196 (1984), and 'the principles of equitable tolling...do not extend to what is at best a garden variety claim of excusable neglect,' Irwin v. Dep?t of Veterans Affairs, 498 U.S. 89, 96, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990)."
We have reviewed the cases cited by appellant but they are factually and legally distinguishable.
The board granted the government?s motions for dismissal.
The contractor should have submitted a claim on each invoice when the government did not pay within 30 days and did not respond promptly and definitely to inquiries. It is likely that each claim would have been less than $100,000, and the contractor thus could have demanded a decision on each within 60 days from the date that the contracting officer received each claim. Why didn?t it do so? Maybe, despite its many years as a government contractor, it did not know the rules. Maybe it was one of those contractors who are reluctant to submit claims because the contracting officer will get mad. Contractors are often intimidated by contracting officers and reluctant to demand their rights. Maybe it didn?t want its claims preparation costs to be unallowable pursuant to FAR 31.205-47, although that seems unlikely.
CLUELESS WOULD-BE CONTRACTORS
Many small to medium sized companies go into government contracting without any idea of what they are getting themselves into. That might be okay with very small sales, but, otherwise, contracting with the U.S. government is the most complex business in the world. It?s right up there with trading derivatives. There are countless rules and contract clauses, many of which are exceedingly hard to understand. Moreover, ?the Government? is not a unified organization. The contractor in this case was supplying a simple item, yet it had to deal with a PCO in Philadelphia, an ACO in a DCMC office in Orlando, and a DFAS office (presumably, also in Orlando). Appeals for help (including the pathetic plea, ?HELP!!!!?) did not resolve the payment problems, and, in the end, the government told the contractor to get lost because it could not find or make sense of its own records.
I do not know who was to blame for the payment problems. In my opinion, the ACO was responsible for sorting things out in a timely fashion, and I don?t know why he/she didn?t. Maybe it was all the contractor?s fault. Maybe it did something wrong, although the government apparently did not reject any deliveries and it does not appear that any deliveries were late. But the contractor, and only the contractor, was to blame for failing to submit claims demanding a final decision as soon as it became apparent that the government wasn?t going to fulfill its payment obligations.
I often see questions at the Wifcon discussions board from People Without A Clue (PWACs) about government contracting. And I am always of two minds about such questions: the good Vern wants to help, but the bad Vern is possessed by the spirit of John Galt (Ayn Rand?s fictional hero in Atlas Shrugged) and wants to say, ?If you can?t play with the big boys you should have stayed off the field. Too bad for you.?
Here are 14 tips for the Truly Clueless Would-Be Government Contractors who think that winning a government contract is the yellow brick road to riches:
1. If you are thinking of competing for a government contract, hire good professional help to negotiate and manage the contract, and listen to them.
2. Your technical and marketing employees are the ones who are going to get you into trouble on a government contract. Keep them on a leash.
3. Buy first-rate training for all of the people who will be involved with government contracts. If you will not invest in training you have no business doing business with the government.
4. Don?t compete for a government contract if you are not sure that you can do the job to the government?s satisfaction. Make sure that you know what it will take to satisfy the government before you submit a bid or proposal.
5. Don?t assume that the government?s representatives know what they?re talking about when they explain rules, specifications, and the contract clauses. In my experience, most of them don?t.
6. READ THE SOLICITATION. THE WHOLE THING.
7. If you win the contract, take a firm, formal, arm?s-length, businesslike approach to all aspects of the deal. Comply strictly with all contract terms and insist that the government do the same. Know all of your contractual deadlines and meet them. Know all of the government?s contractual deadlines and notify them in writing the moment that they are late. The very moment. Neither ask for nor grant exceptions except through formal processes, such as engineering change proposals, formal waivers, and change orders. Know your obligations and fulfill them. Know your rights and insist upon them. When you truly believe that the government owes you something, ask for it in writing. If you don't get favorable action within a reasonable period of time, submit a claim in accordance with the contract Disputes clause and FAR Subpart 33.2. If the contracting officer does not make a decision within the deadlines set by the Disputes clause, hire an attorney and appeal to a board of contract appeals or to the Court of Federal Claims, unless you are willing to let the government keep what you think is yours.
8. Never yield to threats from a contracting officer or a contracting officer's representative. If you do, things will only get worse. When you insist upon your rights and the contracting officer?s representative says: That cuts both ways, just say: Yes, and we can live with that.
9. Don?t rely on personal relationships with government personnel. Good personal relations are important and desirable; but, in the end, it?s a dog-eat-dog world. Never consider a government representative to be your ?friend.? Remember that government personnel are not business persons. They are government officials with limited authority, limited knowledge, a heavy workload, and lots of people looking over their shoulders. They will not (and should not) stick their necks out for you. If they do they are either stupid or dishonest and cannot be trusted. Some will make an extra effort for you, which is okay, but many will not. Assume from day one that you are on your own.
10. Keep good records. Document every telephone call and meeting. EACH AND EVERY ONE. Write down who, what, when, where, why, and how, and make your people do it as well. Check to see that they do. File every email and letter. EACH AND EVERY ONE. He or she who does not document or who skimps on documentation is a fool.
11. Promptly follow up on oral understandings and agreements in writing. Send crucially important communications by certified mail, return receipt requested, including confirmation of emailed and oral understandings and agreements.
12. It's business, not personal. When speaking with and corresponding with government personnel, always be calm and polite, no matter how badly they have behaved or how angry about it you are, but always be determined and firm.
13. Remember the 999/1,000 rule: You can do things wrongly 999 times out of 1,000 and nothing bad will happen. It?s the 1,000th time that will do you in.
14. Make sure that you have the telephone number, email address, and street address of a good government contracts attorney and a good government contracts accountant. If you can't afford that kind of help, stay away from government contracts.
Now, I know that many readers will consider some of the above to be impractical. Business people are risk takers, and many will consider what I suggest to be too formal and stern. In their experience, business doesn?t work well when there is too much formality and insistence upon strict contractual compliance. So be it. I bow and yield to your superior wisdom. I have to admit that as a government contractor I have not always followed all of my own advice. So if you don't follow my advice and things go badly for you, the good Vern will not say I told you so, but the bad Vern will laugh.
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.
"Automated" contract writing systems have been around for a long time. I recall early versions, like the Air Force's "AMIS" system, being in use since the late 1970s or early 1980s.
DOD's Standard Procurement System (SPS), Procurement Desktop Defense or PD2, has been in use for over a decade and is now in version 4.2. I have never had to work with that system. All I know about it is from (a) what I have read in GAO and DOD IG reports, and ( anecdotes from users with whom I have spoken. The information from all is mainly negative. The users with whom I have spoken have all hated PD2. Indeed, it has been my experience that the persons who are most directly affected by such information systems⎯the people who must input data into the system⎯almost always hate the systems, and the system advocates and managers spend a lot of time engaged in public relations and salesmanship. The SPS Program Office has a media relations point of contact and posts a list of rewards they have won in recent years at its website.
Advocates for PD2 sometimes call it a "tool." When I use a tool I don't like to think about the tool itself. When using a hammer I'm thinking about the nail and the structure it is going hold together. But as tools become more complex they themselves become objects of attention and drive process design. You do the work a certain way because the tool requires that you do so. I know that when I drive our beat up old Hesston mowing tractor in a hayfield on the ranch, I'm often thinking about the awful thing itself and wondering how I can wreck it "by accident" so we can talk the boss into buying a fancy new tractor, one with a CD player, like the one our neighbor bought and likes to show off, waving as she zips by the fence line, driving with one hand, while I'm out among the mosquitoes trying to unplug the conditioner.
There are a number of different jobs on a cattle ranch. In our part of the West we have buckarooin', which in other parts of the country is called "cowboyin'." That's the best job. You get to ride around on a good (if sometimes ornery) horse in wild country chasing cows and being generally irresponsible. People become ranchers so they can buckaroo. Next is "hayin'," which means cuttin', rakin', balin', and stackin' hay. Nobody likes hayin', but you have to do it. And then there's "mechanicin'," which means fixing your broken down equipment. Mechanicin's a pain and promotes cussin'. It's worse than hayin', because if you're mechanicin' the hayin's not getting done, which means that hayin' season is going to last longer, which means you can't get back to buckarooin' as soon as you would like.
Tools are supposed to help you get the job done. The better the tool, the better the job result. The job is the point, not the tool. You don't really want to think about the tool, because if you're thinking about the tool that usually means that the tool isn't working properly. So when a tractor breaks down you're not hayin', you're thinking about fixing the tool, which means that the job isn't getting done. Some tools are so complex that people start making careers out of thinking about the tool. Complex tools change the job.
I hate systems like PD2, even while I recognize that they are useful. It seems to me that what's happening is that people who should be thinking about contracting are spending too much time thinking about how to use the contracting "tool" and make it work. Each new "fix" forces them to think about it some more. Instead of writing change orders, the poor CO is trying to figure out how to get PD2 to kick out a change order in reasonably short order. The change order isn't the focus anymore. The focus is the change order writing tool. See the Wifcon Contract Administration discussions thread: Use of SF 30/Change Orders.
Maybe I've got this all wrong. Maybe I don't know what I'm talking about. Maybe SPS is wonderful and has made for better contracts and more efficient contracting.
But it doesn't matter whether I've gotten it wrong or not, because we've got this tool and we're never going back to the days of handcraftsmanship.
Oh well, back to the SPS FAQs page.
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?
Reading some of the Wifcon posts of last week, it occurred to me that a lot of people are busily doing things that they don?t know much about. That has occurred to me many times over the years, but this past week has been an especially ignorance-rich environment.
Some of us at Wifcon Forum talk by phone among ourselves about posts, and we are often astonished that people who are asking really basic (not dumb) questions are apparently in the very middle of doing something and don?t realize that their question shows that they know even less than they think they do. It is not the fact that they are asking a question that troubles me⎯everybody has to ask questions, myself included⎯it is the nature of the question asked.
I am not surprised that people do not know the rules, meaning FAR and its progeny: the supplements, handbooks, manuals, and policy statements, which is not to say that it is okay that they don?t. But much of the ignorance is of fundamental concepts. It is one thing when people do not know the rules about cost-reimbursement contracts, such as the rules of cost allowability, but it is another thing entirely when they do not understand the concept of the cost-reimbursement contract.
One poster asked if there is a rule against awarding a ?CPFF? contract with ?FFP? labor rates. The answer is no, there is no rule against it, but why would you do it? The inclusion of ceiling rates, in which the contractor is reimbursed either the ceiling rate or the actual amount paid, whichever is less, might make sense, but not ?firm-fixed-price? rates. Why not? A full understanding of the concepts of the cost-reimbursement contract and of firm-fixed-price contract should make it apparent that firm-fixed-price labor rates in a cost-plus-fixed-fee contract would be a bad business deal for the buyer, in much the same way as a time-and-materials contract is a bad business deal, but worse.
Last week someone asked me (not at Wifcon) why, in a source selection, a CO would include an unacceptable proposal in the competitive range. The question revealed ignorance of the concepts of acceptability, competitive range, and discussions in source selection. The problem was that the person who asked the question was not aware of their ignorance of those concepts, and it was the person?s very unawareness of their ignorance that caused the matter to seem paradoxical.
Conceptual ignorance is undoubtedly due in part to (1) poor quality training and (2) a shortage of knowledgeable people in the office. But it is also due to lack of study and thought.
If a person worked for me conducting source selections, I would expect them to know FAR Part 15, except Subpart 15.6, like the back of their hand, as well as the agency supplement, handbooks, manuals, and policy issuances, and to be able to quote them chapter and verse. I would also expect them to have read, at the very least, Chapter 6, Basic Negotiation Procedures, of Formation of Government Contracts, 3d ed., and any other relevant explanatory material they can get their hands on. But none of that knowledge would be any good without complete understanding of fundamental concepts: evaluation, evaluation factor, scales and scaling, score/rating, acceptability, tradeoff, rank ordering, competitive range, clarification, and discussion.
A conceptual understanding of the term evaluation factor is knowledge of what an evaluation factor is -- the essential nature of such a factor. A person who understands that concept can tell you what all evaluation factors have in common. If asked, What is an evaluation factor?, she would not just give examples, like soundness of approach, past performance, price, qualifications of key personnel. Instead, he would say something like:
An evaluation factor is an attribute of an offeror or of an offeror's promises--a feature, quality, or characteristic that contributes in some way to the value of the offeror or offer to the buyer and thus can serve as a basis for the comparison of competing offerors and their offers. Evaluation factors can be positive or negative. A positive factor is an attribute that is desired, such that the more of it there is the greater the value. In some procurements, the durability of an offered product is a positive factor. The greater the durability of an infantry rifle the greater the value. A negative factor is an undesirable attribute, such that the more of it there is the lesser the value. The weight of a rifle would be a negative factor. The greater the weight of a rifle the lesser its value. Evaluation factors can be assessed and rated or scored on a variable scale or on a pass/fail scale.
A person who has that conceptual understanding of evaluation factor is ready to learn the rules about evaluation factors and to select evaluation factors for an acquisition.
People often refer to contracting folk at the GS-11 through GS-13 level as journeymen. Webster?s Third New International Dictionary defines journeyman as follows:
I do not expect every journeyman involved in a source selection to be a master at it. I expect that from contracting officers. But I expect journeymen to know what they are doing and what they are talking about.
As for trainees (apprentices)--well, they must be trained. Training entails more than telling them to prepare some documents and giving them old ones from which to cut and paste. Training does not have to include classroom instruction, but it should include having a knowledgeable person direct the trainee's reading and explain things to them in some depth. Of course, there must be someone in the office who is capable of that, which I suspect is often not the case.
Ignorance happens, and it?s not necessarily a crime, but it is a bad thing and always the fault of the ignorant, as in the song ?Father and Son,? by Cat Stevens (now called Yusuf Islam):
When I first heard that line, many years ago, I didn?t get it. How could youth and youthful ignorance be the youth?s fault? But now I understand that each of us is responsible for knowing what we need to know. It?s true that others ought to teach us, but in the end we are the ones who have to know, which means we have to get out there and learn, whether anyone teaches us or not.
I?m not young, but there is still so much I have to know about the contracting business, and I?m mad at myself whenever I realize that I don?t know it, which happens almost every day. I feel embarrassed and a little sick, and I mope. Then I go find out. What else can we do?
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.
Here are some quotes dating from 1950 about the role of the contracting officer, snipped from various board and court decisions and law reviews:
From: Penner Installation Corp. v. U.S., 116 Ct.Cl. 550 (1950):
Some contracting officers regard themselves as representatives of the [united States], charged with the duty of protecting its interests and of exacting of the contractor everything that may be in the interest of the Government, even though no reasonable basis therefor can be found in the contract documents; but the Supreme Court has said that in settling disputes this is not his function; his function, on the other hand, is to act impartially, weighing with an even hand the rights of the parties on the one hand and on the other.
* * *
It is a duty not easily to be discharged, we know. They are the Government's representatives, charged with the duty of seeing that the Government gets what it bargained for. Many contractors, on the other hand, bent upon making as much money as they can out of the contract, are constantly seeking ways out of doing this and doing that. Frequently, it is a constant battle-the contracting officer as the Government's representative, on the one hand, and the contractor on the other. To ask the contracting officer to act impartially when he must decide a dispute between the contractor and his employer is, indeed, putting upon him a burden difficult to bear. And yet the contract requires him to do so.
From: Perlak, The Military Extraterritorial Jurisdiction Act of 2000: Implications for Contractor Personnel, Military Law Review (September 2001), 169 MILLR 92:
If contractor employees are destined to support the modern battlefield or contingency environment, then the prerogatives of command and the imperatives of mission accomplishment must find their way into the contracting process. The role of the contracting officer in this environment must include the clear realization of commanders' intent, including crafting contracts with sufficient foresight and flexibility to meet that intent. Failing this, the substitution and use of contract support for traditional soldier functions will become a false economy that ultimately may degrade U.S. ability to prosecute wars and enforce peace.
From: Loeb, The Procurement Work Force? The Final Frontier?, Procurement Lawyer (Spring 1998), 33-SPG Procurement Law 18:
Although creation of the contract specialist position by the old Civil Service Commission in 1959 (and its recognition at about the same time in the private sector) did much to upgrade the image of the stodgy purchasing agent, it was only a small beginning. As early as 1955, the Commission on Organization of the Executive Branch of the Government (the Hoover Commission) was concerned primarily with practices that constrained the contracting officer and recommended strengthening the role of the contracting officer ?in the interest of more expeditious and effective buying.?
From: Ritenberg, Postscript: Mixed Workforce Questions, The Nash & Cibinic Report (November 2006), 20 N&CR ? 54:
At least in theory, there was once a clear line of demarcation between the respective roles of the Contracting Officer and the Program Office. This was expressed in two reports of the General Accounting Office as follows:
During contract performance, program offices are responsible for monitoring the performance of the contractor, providing technical assistance to the contractor that is required for contract performance, and notifying the contracting officer about any contract performance problems. Program offices are not authorized to change contract work, costs, or completion dates or to enforce [c]ontract provisions. Only contracting officers have the authority to do that. This concentration of authority in the contracting officer is an integral part of internal control within the contracting process.
(?Civilian Agency Procurement: Improvements Needed in Contracting and Contract Administration,? GGD-89-109, at 25 (Sept. 1989).)
Unauthorized commitments by program personnel may cause the Government to be bound by terms established by someone without the same concerns or professional standards of contracting officers. Program personnel are primarily responsible for carrying out the missions of the agency, rather than observing Federal laws and regulations concerning the procurement.
(?Unauthorized Commitments: An Abuse of Contracting Authority in the Department of Energy,? EMD-81-12, at 5 (Dec. 1980).)
From: Neal & Co., Inc. v. U.S., 945 F.2d 385 (Fed. Cir., 1991):
In enacting ? 605 of the Contract Disputes Act, Congress described the flexible role of the contracting officer:
While the objective may be to make the contracting officer the focal point for decisions, practicability dictates that the extent to which the contracting officer relies on his own judgment or abides by the advice or determination of others is dependent on a variety of factors, including ... the nature of the particular procurement....
t is impossible to generalize as to what the contracting officer's role should be in all situations....
From: Grumman Aerospace Corp. ex rel. Rohr Corp., ASBCA 50090, 01-1 BCA ? 31316:
The Government has also argued that it ?logically follows? that the conclusions a contracting officer reaches while analyzing the claim prior to writing a final decision are similarly entitled to no weight. We do not agree? We recognize in this regard that a contracting officer's testimony may be based on an independent examination of the events after the fact. This is not an uncommon role for a contracting officer and the evidence is entitled to be heard since it stems from the contracting officer's responsibility to independently evaluate the merits of the contractor's claim. We may, of course, give appropriate weight to the contracting officer's evidence.
From: Thornton, Fine-Tuning Acquisition Reform?s Favorite Procurement Vehicle, the Indefinite Delivery Contract, Public Contracts Law Journal (Spring 2002), 31 PUBCONLJ 383:
A consciousness-raising is needed to better define and appreciate the role of the Contracting Officer on the acquisition team. Only then can program managers, technical experts, and end users learn to accept that only specific work statements can be well managed. This includes an appreciation that bundled, nationwide work statements are impossible to manage effectively. Otherwise, the value a Contracting Officer adds to the process erodes and the whole procurement suffers. It is time to shift focus to identify tools and adopt policies that enable Contracting Officers to contain and remedy those troubles?
The use of task and delivery order contracts to execute interagency orders has been associated with the same kinds of abuses as indefinite delivery contracting. The common denominator is the receding role of the Contracting Officer and his or her ability to enforce rules intended to preserve competition.
From: Goodman, Legal Dilemmas in the Weapon Acquisition Process: The Procurement of the SSN-688 Attack Submarine, Yale Law and Policy Review (1988), 6 YLLPR 393:
A 1987 report of the Public Contract Law Section of the American Bar Association examined their role:
The role of the DoD contracting officer is changing from the traditional to a less well-defined position of diminished significance and shared authority . . . [T]he current acquisition environment blankets the contracting officer with oversight, laws and regulations . . . Such diffusion of authority can only mean a diminished role for the contracting officer which, extended to the ultimate conclusion, will result in no identifiable Government official at the operating level being responsible for efficient contracting practices or accountable for contracting failures.
Ad Hoc Comm. on the Role of the DoD Contracting Officers, The DoD Contracting Officer, 1987 A.B.A. Sec. Pub. L. Rep. 93, cited in Report on Acquisition Policy, supra note 136, at B-15.
From: Kurtis R. Mayer and Pamela Mayer d/b/a Mayer Built Homes, HUDBCA 83-823-C20, 84-2 BCA ? 17494:
In S. Rep. No. 95-118, 95th Cong., 2d Sess. 21-22 (1978), the concern of Congress over the role of the contracting officer was clear:
Section 5 describes explicitly the decisionmaking role of the contracting officer. Equally important is a thorough knowledge by the contractor of the role and authority that the contracting officer plays in the decisionmaking process of the agency he represents . . .. While the objective may be to make the contracting officer the focal point for decisions, practicability dictates that the extent to which the contracting officer relies on his own judgment or abides by the advice or determination of others is dependent on a variety of factors, including the officer's personal knowledge, capability, and executive qualities, as well as the nature of the particular procurement. With so many variables, it is impossible to generalize as to what the contracting officer's role should be in all situations.
From: Morgan, Identifying Protected Government Acts Under The Sovereign Acts Doctrine: A Question of Acts and Actors, Public Contracts Law Journal (Winter 1993), 22 PUBCONLJ 223:
The contracting officer may be omnipotent for purposes of the contract, but his authority is considerably more limited where the implementation of directions from higher authority is involved. To presume that all actions of the contracting officer which affect the contract are somehow acts of the government in its contractual capacity stretches reason beyond recognition.
From: Schultz, Proposed Changes in Government Contract Disputes Settlement: The Legislative Battle Over the Wunderlich Case, Harvard Law Review (December 1953), 67 HVLR 217:
It may well be that the early Government contracts with which the Supreme Court dealt were as freely bargained for as were the private contracts, and the Army engineer as independent as the private engineer, architect, or other expert. But with the phenomenal growth of Government contracting, the exclusive use of the standard form contract, and the changing role of the contracting officer from expert to Government agent, neither of these assumptions holds true.
From: Wall, Surviving Commercial Pricing Rules, Public Contracts Law Journal (Summer 1994), 23 PUBCONLJ 553:
Arguably, since the passage of the Truth in Negotiations Act in 1962, the law which has had the most impact on pricing U.S. Government contracts was the Inspector General Act of 1978. The principal reason is that this Act fundamentally changed the relationships between the contracting officer, contract auditor, and contractor.
To some, the Act's implementation has confused the role of the contracting officer, who is supposed to be the U.S. Government's independent decision maker, and the role of the contract auditor, who is supposed to be the contracting officer's financial advisor. For instance, prior to the Inspector General Act, the contracting officer was unencumbered (perhaps too unencumbered) in deciding upon the disposition of an auditor's finding. Now the contracting officer must adhere to special policies and procedures? .
Note the high expectations of some of the writers, and the idealist image of the contracting officer. Are they matched by reality?
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.
In a chapter of his new book, Reforms at Risk: What Happens After Major Policy Changes Are Enacted (Princeton University Press, 2008), Associate Professor Eric M. Patashnik of the University of Virginia recounts the tale of the acquisition reforms of the 1990s⎯ the Federal Acquisition Streamlining Act of 1994, the Clinger-Cohen Act of 1996, the FAR Part 15 Rewrite; increased use of credit cards, GSA schedules, and commercial items. He argues that the reforms made acquisition less contentious and adversarial and more efficient, and improved contractor performance, but that they are threatened and being rolled back by excessive oversight from Congress and inspectors general, university law professors, and greedy protest lawyers.
The acquisition reform laws of the 1990s were themselves genuine achievements, but what did they achieve? It?s clear that some of the acquisition reforms, especially the use of credit cards, multiple-award task order contracts, and GSA schedule contracts, have had an enormous effect on government contracting. But they have also led to unwise choices and outright violations of laws and regulations, and it is far from clear that they have led to better value for the taxpayers. Is GSA schedule pricing "fair and reasonable"? Is the increased use of time-and-materials contracts cost effective? Did the change in the rule about establishing the competitive range in source selection, which was part of Clinger-Cohen, lead to speedier and less resource intensive source selections that produce better decisions? Did the rule that requires agencies to evaluate past performance actually lead to better contractor performance or did it merely add more paperwork to the source selection process and provide fertile grounds for protests? We don?t really know, because the reformers didn?t provide for data collection and analysis. Reform changed things, but it is not entirely clear that the changes were entirely for the better. In any case, they didn?t help FEMA respond effectively to Hurricane Katrina.
The truth is that the reforms provided opportunities for greater efficiency and better results, but that agencies have not taken full advantage of those opportunities. Fear of protest and criticism has been part of the problem, but professional incompetence has been a bigger part. For instance, as I predicted in a 1995 article in The Nash & Cibinic Report, "The New Rules for Multiple Award Task Order Contracting," contracting officers have not taken full advantage of the liberal rules for issuing task orders under multiple award IDIQ contracts. They have instead conducted mini-Part 15 source selections, complete with formal solicitations, written technical proposals, evaluation boards, competitive range determinations, discussions, and final proposal revisions. They even do that when conducting simplified acquisitions and placing orders against GSA contracts. This has made the use of multiple-award IDIQ contracts and simplified acquisition procedures needlessly costly, time-consuming, and labor intensive. Even so, contracting officers have too often misused, mismanaged, and abused task order contracts, which has prompted reactionary legislation and regulation.
The one thing that reform did not do, but that was critical to improving acquisition operations, was prepare contracting officers and contract specialists to take full advantage of them. We still have the half-baked classroom training and the poor quality cut-and-paste on-the-job training that we had before the reforms. Moreover, we have burdened ?professional? contracting personnel with clerical duties, such as preparing synopses, maintaining files (electronic and otherwise), and reporting to FPDS. As a result, we have contracting officers who do not know the regulations and how to do things legally, or how to design efficient acquisition processes that produce better results without breaking the rules. They do what they don't have to do and don't do what they should.
Enacting new laws and publishing new source selection regulations was not enough. Contracting officers cannot use them to full advantage because they do not understand the fundamentals, which are not addressed in the laws and regulations. In fact, had contracting officers understood those fundamentals, many of the new laws and regulations would not have been necessary. Prof. Patashnik claims that before reform "good people were trapped in bad administrative systems." The truth is that those people created those systems.
My personal hero, James M. Gavin, who commanded the 505th Parachute Infantry Regiment and then the 82d Airborne Division during World War II, speaking of his men to Dick Cavett in a television interview, said: ?Nothing was too good for them. Nothing was too much to ask of them.? He was a tough leader, first out of the door in the 82d?s combat jumps and deeply respected by his paratroopers. Gavin insisted upon demanding training and top-notch performance. And until we get acquisition leaders who think that way about contracting officers and lead accordingly, the real threat to acquisition reform will be the contracting workforce.
Sometimes, when I'm teaching a class, and after I've had a couple of days with the students and know them a little, I play a game with myself: I pretend that I've been asked to assemble a small, elite contracting office to do demanding work under pressure. I then look over the students and ask myself which of them I would choose. Here, in no particular order of importance, is an incomplete list of the qualities, skills, and knowledge that my ideal contract specialist candidate would possess.
Personal Qualities. It may be that people are born with these qualities to some extent, but I think that you can develop them in yourself if you work at it.
An energetic and inquiring mind. I want someone who is never content to simply follow instructions, but wants to know the why of everything and won't accept "Because I said so," or "Because that's the best (usual, standard, generally accepted) way to do it." I want someone who is not content to be told, but who wants to figure things out and to understand. I want someone who would not ask me (or a co-worker) what a word means or what the rule is, but who would at least try to look it up first.
Feistiness. The ideal candidate will stand up for what he or she believes, but knows the difference between standing up and arguing for the sake of arguing or out of bullheadedness. I want someone who is willing to fight, but who knows when the fight is over and will shake hands, win or lose. No grudges, please. Please don't apply if, when you lose an argument with the boss, you complain to others about how mean or unreasonable the boss is.
Independence. The ideal candidate does not have to be handheld through every step in a process. I don't want someone who shows up at the boss's door every five minutes to ask what to do next.
Diligence. I want a person who does what needs to be done when it needs to be done, without having to be reminded or prodded, and who persists until its done and done right.
Discretion. Discretion is more than "common sense." Discretion includes tact, good judgment, caution, modesty, and self-restraint. It includes knowing when to act without instructions and when to seek instructions before acting, and knowing when to talk and about what, and when to keep quiet.
Honesty. The ideal candidate knows that it's just as important to be honest with oneself as it is to be honest with others.
Integrity. The ideal candidate sticks to principles, even at personal expense, but isn't a blockhead about it. I want someone who insists on doing the right thing, but not someone who dials the IG hotline when anyone disagrees with his or her notion of what the right thing is. A person with real integrity knows the difference between an objectively ironclad principle (all bribes are wrong) and a subjectively debatable principle (the proper standard for unusual and compelling urgency).
Self-confidence and mental toughness. This is the sine qua non of a contract negotiator. I want someone who not only doesn't get upset when put on the spot, but who actually gets a kick out of it, someone who is not only willing to take the heat, but who even enjoys it. There's no crying in contracting.
Humor. The ideal candidate laughs at herself as easily or more easily than she laughs at others. I want someone who can see the humor in a desperate situation, but not someone who makes a joke out of everything. Sly, dry wit is welcome, if used with restraint, but not ostentatiously dry wit, which is tiresome. Funny and sarcastic are not the same thing.
Acquired Skills. All of the following are things that a person can learn to do. For interns, I have provided some references to books about some of the skills.
The ability to reason logically. We all do that more or less naturally, but the ideal candidate is self-conscious about it and strives to be rational, to develop valid arguments, and to evaluate arguments based on logical principles. See Informal Logic: A Pragmatic Approach, 2d ed., by Douglas Walton (Cambridge, 2008) and Logic and Its Limits, 2d ed., by Patrick Shaw (Oxford University Press, 1997).
The ability to read analytically. Reading, interpreting, and applying the Federal Acquisition Regulation is not as easy as most people seem to think it is, yet a contract specialist must be able to do it and do it well. The level of of FAR reading difficulty falls somewhere between a college political science textbook, which almost everyone can understand, and Hegel's The Phenomenology of Spirit, which hardly anyone can understand (no matter what they claim). My favorite difficult FAR passage: the cost principle at FAR 31.205-6, Compensation for Personal Services. If you can read that and pass a test about what it says and means, then you're good. If you can read it, pass the test, and suggest other interpretations, then you're my kind of contract specialist.
The ability to write well. To test for this skill I'd give a candidate a problem in equitable price adjustment and tell him to determine the proper amount according to the facts and established case law. I'd then give the candidate one hour to type a one-page explanation of the basis for his determination. I'd evaluate the explanation for grammar and punctuation, and for the ability to write a coherent explanation of the answer given. Note: My model for good writing is George Orwell. See his essays Books v. Cigarettes (1946), The Complete Works of George Orwell, and Politics and the English Language (1946), The Complete Works of George Orwell, which are polemical, and The Moon Under Water (1946), Essays and Journalism which is a fine piece of imaginative descriptive literature. A fun piece is Some Thoughts on the Common Toad (1946), The Complete Works of George Orwell. If you can learn to write even half as clearly as Orwell you need never be unemployed. The ability is in very short supply.
The ability to speak extemporaneously. A candidate must be able to stand up in front of strangers and people who are opposed to his or her point of view and speak clearly, coherently, confidently, and persuasively about something that he or she is supposed to know.
The ability to listen actively. See Wikipedia. Listening actively saves a lot of time and may prevent needless disputes and litigation.
The ability to negotiate. The ideal candidate can make a deal with a contractor or with other agency personnel. Anyone who has the qualities and skills listed above can learn to negotiate⎯to bargain, to haggle, to engage in a rational (or intentionally irrational) exchange of views in order to make a deal. Some people are better at it than others. There are hundreds of books about negotiating. Take your pick. They all have something useful to say.
A reasonable facility with mathematics. Some contracting problems entail more than simple arithmetic. You might need simple statistics, but you probably won't need trigonometry or calculus. Wouldn't hurt, though. Library of Math
The ability to design efficient and effective contracting processes. Some would say "the ability to innovate." To me, it's nothing more than the ability figure out how get things done without wasting time and resources. The ideal candidate, when confronted with a tough challenge, says: I'll figure something out.
A candidate must possess the level of basic knowledge that is necessary to work at the pay grade that he or she wants. I don't believe in paying the salary while the person learns the basics of the job. (But time must be provided to learn the particulars.) A candidate must know the rules that govern the job that he or she has been hired to do. The rules include the FAR and other official "shall," "shall not," "may," "may not," "should," and "should not" statements. When I say "know the rules," I mean know what the rules say and what they mean, which, in some cases, requires familiarity with case law.
The candidate must know other things as well, such as:
How our government is organized and how it works, for example: (a) how laws are enacted and published, ( how regulations and policies are promulgated and published, and ( c) how public and private controversies are settled or adjudicated.
How funds are appropriated, managed, obligated, and expended. See the GAO's Principles of Federal Appropriations Law (the "Redbook").
How the industries and firms that sell what is to be bought produce, price, and distribute their products and services.
How the markets in which the buying is done are structured, regulated, and behave.
So much for my game. Contract specialists who possess all of those qualities, abilities, and knowledge are hard to come by. In fact, I don't always qualify. If you're a boss and you find such persons, someone will try to take them away from you, so you had better offer interesting and challenging work, interesting coworkers, clerical support, and a decent place to work.
Of course, if you think that contracting is about sitting in a small cubicle, staring at a monitor, and klacking away at a keyboard, just ignore me.
Last week, at the 2008 Nash & Cibinic Report Roundtable, several panels addressed the issue of the quality of the acquisition workforce. The good news is that agencies are hiring some first rate interns. That?s also the bad news. We are bringing in some really smart and eager people, but we are not ready for them?to educate and train them and to prepare them to take over in the future. We are putting those bright new people into the hands of people with whom we are not entirely satisfied, into chaotic office environments that are leadership-free zones, and into an inadequate classroom training establishment. We are not ready for them, and that is a potential catastrophe, because the very best of them will not stick around if we don?t get our act together to make contracting work challenging and rewarding.
Smart people want to work with competent, inspiring people, people who know their field and who are excited and energized about their work, people who know how to mentor and develop the newcomers and are eager to do so. I have spoken with many terrific interns who were attracted to contracting by the sales pitch about being ?business advisors,? only to find that they are grinding away in a chaotic environment in which no one seems to be playing at the top of their game and working with people who spend most of their time clacking away at a computer keyboard instead of ?advising? anybody. If, when I was recruited, I had worked in the kind of office that I so often see today, I would not have stayed in the contracting field.
We need a tightly structured and closely monitored government-wide OJT system, government-wide mentoring guidelines and standards, and an entirely new classroom curriculum⎯a curriculum that emphasizes the basics. Look at the 2009 DAU Catalog course descriptions for CON 100 through CON 353, http://www.dau.mil/catalog/cat2009/catalog2009.pdf, pp. 35-46. Where among the Level I courses are the courses entitled: Introduction to Acquisition Functions and Processes, Introduction to Needs and Requirements, Introduction to Contract Types, Introduction to Contractor Selection and Contract Award, Introduction to Contract Pricing, Introduction to Commercial Pricing Practices, Introduction to Service Contract Pricing, Introduction to Contract Management? What do we have instead? We have: ?Shaping Smart Business Arrangements,? ?Mission-Support Planning,? ?Mission-Planning Execution,? ?Mission-Performance Assessment,? and ?Mission-Focused Contracting,? propagandistic bull----. CON 100, Shaping Smart Business Arrangements, is the very first course. The newbies get a grand total of four days in which to learn how to ?describe? and ?explain? various things, except how to research, understand, and apply the Federal Acquisition Regulation. And don't tell me that the content is there, even if the course titles are goofy, because it's not.
Look at the content of CON 235, Advanced Contract Pricing, which is on catalog page 42. (There is no Basic Contract Pricing.) Here are the course objectives:
Objectives: Those who successfully complete this course will be able to:
? Use inferential statistics and hypotheses testing;
? Analyze the relationship between two or more variables, describe that relationship using regression analysis, and defend the appropriateness of the model;
? Perform cost-risk analysis to support pre-negotiation objectives;
? Integrate quantitative techniques in a cost/price estimate;
? Conduct market research on a given procurement item; and
? Conduct a price analysis of a commercial item as broadly defined by Federal Acquisition Regulation criteria.
Now I ask you: What percentage of contract specialists are using inferential statistics, hypothesis testing, or regression analysis, say, even once a year? How many readers think that you can teach the average person in our innumerate society, who has not already passed a basic course in statistics, how to do all of the things listed in the course objectives in ten days, which is the length of the course? Can you show the average student how its done? Yes. Can you teach the average student how to do it? No. In any case, why do we want to teach them those things? If we want them to learn those things we should send them to college courses in probability and statistics and regression analysis. But we aren't developing social scientists, we're supposedly developing contract specialists. Instead or regression analysis (i.e., learning curves), why aren?t we teaching them how to calculate the annual cost of one service employee, including wages, fringe benefits, taxes, and insurance, and how to use that information to calculate the annual cost of a workforce comprised of X such employees. Why aren't we teaching them how various commercial sectors set the prices of their products and services? (Why aren't we making them read: Power Pricing: How Managing Price Transforms the Bottom Line and The Price Advantage?)
I could go on forever about the inadequacies of the DAU curriculum, and DAU thinks that I have. They developed a briefing about me for their Board of Visitors. One criticism of me was that, ?When all you have is a hammer, everything looks like a nail,? which I admit got a laugh out of me. There are good people teaching at DAU, people who know that DAU must change in order to be truly effective. The DAU curriculum is only a symptom, not a cause. It is a symptom of the lack of clear thinking, vision, and competent leadership in the acquisition community. Lacking those things, intern programs will ultimately fail to do anything more than put butts in chairs in front of computers, except for those very few in which first rate mentors are systematically at work. Unfortunately, there aren?t nearly enough first-rate mentors, which is why the new hiring efforts are tragic. We?re wasting our most precious possession: Our future.
If you agree, write to the Obama transition team, http://change.gov. I know, I know. But at least that?s doing something.
Bureaucracy has been a pejorative term for a long time.
Von Mises, L. Bureaucracy (Yale, 1946), p. 1. (The word is French in origin and literally means rule by bureau, i.e., by office. The Oxford English Dictionary reports the first use in English as occurring in 1818, when the novelist Syndey Owenson, Lady Morgan, wrote of the Bureaucratie, or ?office tyranny,? by which Ireland was governed.)
Early theories of bureaucracy described it favorably, as a form of social organization preferable to ?personal subjugation, nepotism, cruelty, emotional vicissitudes, and capricious judgment which passed for managerial practices in the early days of the industrial revolution.? See Bennis, W., ?Beyond Bureaucracy,? in Society, July/August 2007, p. 31. Bureaucracy has been called ?a social invention which relies exclusively on the power to influence through rules, reason, and law.?
Nowadays people associate bureaucracy with ?red tape,? and they grumble about it, sometimes bitterly. But, as Herbert Kaufman put it in his wonderful little book, Red Tape: Its Origins, Uses, and Abuses, ?One person?s ?red tape? may be another?s treasured safeguard.? Think of the Transportation Security Administration and its annoying and ever-changing rules about how to get through airport security. Annoying, that is, until you think of what might happen if there were no rules.
Bureaucracy is a fact of modern life. Whatever you think of it, bureaucracy happeneth to us all.
I think the first scholar to develop a systematic theory of bureaucracy was the German sociologist Max Weber (1864-1920), who applied the term to both public and private sector organization and considered bureaucracy an organizational advancement.
He wasn?t being ironic. These are what he described as the key characteristics of bureaucracy:
Quoted in Gerth and Mills, eds., From Max Weber: Essays on Sociology (Routledge, 2009), p. 196.
Consider Item III, ?the files.? Many contracting practitioners hate ?the files,? even the very idea of ?the files,? and they hate documenting ?the files,? even if they understand the reasons for and the necessity of doing so.
Vismann, C., ?Out of File, Out of Mind,? in Chun and Keenan, eds., New Media, Old Media: A History and Theory Reader (Routledge, 2005), p. 97.
But I am fascinated by ?the files.? The Federal Acquisition Regulation mentions ?contract file? in over 100 places, usually to require that the contracting officer document something or other. FAR Subpart 4.8 prescribes requirements for contract files and says in part:
Here is a typical documentation requirement, from FAR 17.207(f):
?The files? are the artifacts of the contracting practitioner?s work. They are all that practitioners leave behind as evidence of their knowledge and skill. The newly developed aircraft, or ship, or computer system is not the product of the contracting practitioner?s work. The practitioner is an enabler, not a developer or producer. The practitioner?s work is to make the development or production possible in a way that complies with the law and that is fair to all parties. The practitioner brings the contract into existence and furthers its execution, and the files are the evidence of that work.
I can learn almost everything I want to know about the quality of a contracting practitioner by looking at his or her files. Files are nothing less than professional autobiography. When a practitioner fills out a form, writes and/or signs a memo, a determination and findings, or a final decision; signs off on a justification for other than full and open competition; and writes a contract or a contract modification, he or she is leaving a record of their work for contemporaries and posterity. Some of us remember Captain Charles S. Wallace, U.S. Army Signal Corps, today, only because he signed the contract with the Wright brothers for the first military aircraft.
The appearance of a contract file says a lot about the practitioner?s pride and attention to detail. Is it well-organized⎯with a table of contents and tabs? Are the tabs labeled? Does it contain an introductory narrative memo? Are the documents inserted in a consistent order (oldest first? newest first?). Does it contain unsigned or undated memos? Is it bespattered with indecipherable post-it notes?
The contents of a contract file tell me about the breadth and depth of the practitioner?s knowledge and skill. They tell me about the quality of his or her thinking and judgment⎯about his or her ability to assess facts, identify the important ones, and to reason, argue, bargain, and persuade. Some file documents are especially revealing⎯price negotiation memoranda (see FAR 15.406-3), source selection decision documents (see FAR 15.308), contracting officer statements of facts relevant to protests (see FAR 33.104(a)(3)(iv)( and 4 CFR 21.3(d)), and contracting officer final decisions on claims (see FAR 33.211). The preparation of those documents gives contracting practitioners an opportunity to show brilliance, to show workmanlike competence (which is enough), or to professionally embarrass themselves.
Arguably, the solicitation and the contract itself are the most important file documents. Although much of them is boilerplate, statements of work, specifications, and special contract clauses tell me a lot. Even if the contracting officer did not write the statement of work or specification, the quality of those documents tells me what the contracting officer was willing to put into his or her contract, which is very revealing. Contract line item structure and boilerplate solicitation provision and contract clause selection are also revealing, as is the quality of proposal preparation instructions and descriptions of evaluation factors.
What matters most, of course, are not the documents themselves, but the facts that they represent and reflect: events, thoughts, conclusions, arguments, decisions, actions, resolutions, and agreements. The file tells the practitioner?s own story about his or her work. To the extent that practitioners will be judged on their work, it will largely be on the basis of their files.
Nothing is more pathetic than the practitioner who, when confronted with something in one of their old files, says: Well, that doesn?t tell the whole story, or Well, that?s not how it actually went down, or, Yes, I signed it, but I don?t agree with it, or I?m not sure what that means. A recent decision of the Armed Services Board of Contract Appeals, General Dynamics C4 Systems, Inc., ASBCA No. 54988, 2009 WL 1464387, May 8, 2009, sustained a claim of nearly $40 million because the contracting officer had not complied with the terms of the ordering clause in an indefinite-delivery indefinite-quantity contract. The contractor had contested the manner in which delivery orders had been issued⎯by email instead of by U.S. mail. One of the saddest passages in the 26 page decision is this one:
Emphasis added. Apparently, the method of issuance was not important enough to note in the file, but it was important enough to cost the government $40 million. And what can we say about protests sustained because of the inadequacy of source selection documentation? See, e.g., The Boeing Company, Comp. Gen. Dec. B-311314, 2008 CPD ? 114:
Of course, some practitioners think that the less filed the better, since files can reveal who did what and result in someone being held responsible for something.
Not too long ago I had the chance to look at the source selection files of a famous defense acquisition of the mid-1980s. I was very excited to see the files, because the acquisition is famous and had been a source of pride to the agency that had conducted it. But when I saw the files I was flabbergasted, then horrified. I did not see the quality of work that I had expected to see. The contracting officers (there were two) of that organization were not the professional giants that I had expected, but run-of-the-mill bureaucrats of clerical quality. As it later turned out, certain statements that they had made in important memos were not true, but had been inserted in the memos, not with the intent of telling lies, but pro forma. They were merely things that one said in such memos without giving it a thought, never really expecting to be asked about it. They were merely things that one said in those kinds of file documents because one was expected to say them. I will never again look up to that contracting office as I once had.
In ancient times, architects and sculptors would mark their work to make sure that everyone knew who had done it. Engraved on the entablature of the Pantheon in Rome?s Piazza della Rotonda, one of the world?s oldest buildings, is the name of the man who had it built:
M ? AGRIPPA ? L ? F ? OS ? TERTIVM? FECIT
which stands for: ?Marcus Agrippa, son of Lucius, Consul for the third time, built this.? On the Piet?, which sits in a chapel within St. Peter?s Basilica in Rome, Michelangelo carved, ?Michel Angelus Bonarotus Florent. Faciebat,? Michelangelo of Florence Made This. They were proud of their work and wanted everyone to know who did it. Of course, those are great works of art. But ordinary Roman kitchenware potters also signed their work. (See Walters, History of Ancient Pottery (1905), pp. 458-459 and 509.) I wonder how many contracting practitioners would be willing to place a label on their file saying that they had made it. THIS FILE WAS CREATED AND MAINTAINED BY JANE DOE, CONTRACT SPECIALIST, JUNE 5, 2008 - MAY 31, 2009.
None of us is a Marcus Agrippa or a Michelangelo, that?s true, and files are not works of art. But our work is our work. It?s what we have. It is part of what defines us. It says something about us. And even if ordinary citizens will never know or care who signed the contract and created the file for the next big thing, some in our community of practitioners will know. Some lawyers, judges, or historians might come to know. We will know.
On October 14, the FAR councils published an interim rule about incentive contracts. (FAC 2005-37, 74 FR 52858.) FAR 16.401(d) now requires a determination and findings signed by the head of the contracting activity (HCA) before using any incentive contract. Given the bureaucratic hassle of processing such a formal document, I think we might reasonably expect to see a decline in the use of incentives. Given the emphasis on incentives up until a few years ago, this is an interesting policy development.
Incentives have been around for a long time. In a 1980 article in National Contract Management Quarterly Journal entitled, "Incentive Contracting in the Aerospace Industy, Part I," Arthur J. Nolan wrote:
There are two main categories of incentives. First, there are the predetermined formula type incentives, which include (1) the fixed-price incentive (firm targets), (2) the fixed-price incentive (successive targets), and (3) the cost-plus-incentive-fee. (FAR 16.402.) Second, there are the subjective, after-the-fact incentives, which include the cost-plus-award-fee and the fixed-price with award fee. (FAR 16.401(e), 16.404, and 16.405-2.) The fixed-price incentive (firm targets), which is the most complex incentive, is said to have been invented by the Navy during World War II, but abandoned because of a shortage of auditors. The cost-plus-incentive-fee arrangement, which is the simplest incentive, has been in use since at least the early 1950s. The cost-plus-award-fee incentive was invented in the early 1960s, either by the Navy or NASA or both, and has since become the most popular of the incentives.
The modern era of incentives began in the 1960s when President Kennedy's Secretary of Defense, Robert S. McNamara, urged their use in lieu of cost-plus-fixed-fee contracts, claiming that they would save money. Doubters emerged right away. Influential members of Congress complained that contractors inflated their cost estimates in order to negotiate artificially high targets and then underran so as to increase their profit or fee. That concern lead to the passage of the Truth in Negotiations Act, Public Law 87-652, in 1962. (Now implemented in FAR 15.403.) The Act originally would have applied only to incentive contracts, but DOD and NASA complained that such application would make it hard to persuade contractors to accept incentives, so Congress applied it to all negotiated contracts expected to be valued in excess of $100,000. (The threshold has since been increased to $650,000.) Economists, most notably Harvard professor Frederick Scherer and Rand analyst Irving Fisher questioned the underlying assumptions of the advocates of incentives. Most serious studies concluded that there was little verifiable evidence that monetary incentives had motivated contractors to do what's necessary to reduce contract costs or that costs had in fact been reduced. In a typical report, "Incentive Versus Cost-Plus Contracts in Defense Procurement," Journal of Industrial Economics (March 1978), researchers John Hiller and Robert Tollison wrote:
By the end of the 1960s there appears to have been widespread agreement that multiple incentives⎯i.e., predetermined formula-type incentives applied to cost and to delivery or technical performance⎯were so complex as to be generally impractical, and they all but disappeared. Most formula-type incentives today are cost-only. Multiple incentives were replaced by the subjective, after-the-fact incentive⎯award-fee. Unfortunately, agencies did not think things through and never developed a clear set of principles for the use and management of award-fee incentives, resulting in misapplication and misuse.
Nevertheless, incentives are intuitively appealing. They appeal to common sense, and the use of incentive arrangements can convey the impression that an agency is being demanding and tough with its contractors, holding their feet to the fire by linking profit to results instead of awarding cost-reimbursement contracts. The intuitive appeal and agency "success stories" have been enough to persuade policymakers and Congress to push agencies to use incentives, even going so far at one point as to require their use in association with performance-based service contracting. FAC 97-1, 62 FR 44813 added coverage about service contracts that effectively mandated the use of incentives. Until 2005, FAR 37.602-4 said:
That rule, pressure from on high, and touting by various "experts" pushed a lot of agencies into using incentives despite a lack of know-how. Inspectors general began to report poor practices. The comments of the Department of Energy Inspector General in its report, Use Of Performance-Based Incentives At Selected Departmental Sites, DOE/IG-0510, July 2001, are typical:
See also NASA IG report IG-00-043, Consolidated Space Operations Contract -- Cost-Benefit Analysis and Award Fee Structure, September 2000:
We can trace the origins of the new policy in FAC 2005-37 directly to the GAO's December 2005 report, DOD Has Paid Billions in Award and Incentive Fees Regardless of Acquisition Outcomes, GAO-06-66, which severely criticized DOD's use of award-fee and formula-type incentive contracts. Most readers focused on GAO's criticism of DOD's use of award-fee incentives, but the report addressed all incentives and included this rather startling assessment:
That assessment didn't come as a surprise to anyone familiar with the serious literature on incentive contracts, but most contracting practitioners do not know that literature. What they know is what I call the popular literature, especially articles that have appeared in Contract Management magazine by any of the amateur experts that have sprung up from time to time to tout incentives on the basis of who-knows-what evidence. They passed on "success stories" published by various people who had awarded an incentive contract and who were determined to declare their effort a success even before the data were in.
(The classic "success story," told dozens of times, is about the Army's use of performance incentives in the 1908 contract with the Wright Brothers for the first military aircraft. But that contract was an incentive in form only, not in fact. As is typical of the tellers of "success stories," the people who told this one didn't check their facts. The Wrights were not motivated by the money and the incentive had no effect on their design. According to one of the Army officers who participated in the flight acceptance tests, Lt. (later Brigadier General) Frank Lahm, USA, the Wrights declined the opportunity to maximize their profit under the incentive. See Chandler and Lahm, How Our Army Grew Wings (ARNO Press 1979), p 159, and my 2002 article, The True Story of the Wright Brothers Contract: It's Not What You Think, which is available on the Wifcon Reading page.
Regardless of whether they are motivationally effective, formula incentives on cost can have practical utility if designed and managed properly. They provide alternatives to the extremes of firm-fixed-price and cost-plus-fixed-fee by establishing a sliding payment scale based on cost. Instead of fixing a price or a single fee for performance, the parties agree in advance on what the government will pay the contractor at any given cost outcome within a range. Such a scheme can be equitable if the parties share a common understanding of the costs of performance and negotiate a fair and reasonable pricing formula. But in order for a cost incentive to be effective in that way the parties must engage in detailed discussions, share information, and then establish a pricing formula that reflects the nature and sources of cost uncertainty. This simply is not possible in competitive procurements under FAR Part 15 given the way that agencies usually conduct them. Moreover, such discussions require a lot of knowledge and skill. Whether such an arrangement will motivate the contractor to reduce costs is another matter. Contractors are motivated by many things.
I think that award-fee incentives, if properly designed and managed, can improve communications between the government and its contractors, which might improve the chances of success when requirements cannot be fully defined at the time of contract award or when they are defined but it is not clear whether they can be produced. But the use of award-fee incentive is as much an art as anything, despite the current calls to make them less subjective. The key to success is a sophisticated fee determining official with intimate knowledge of the work under contract, the facts of performance, and the contractor, and with excellent judgment and first rate communication skills. I don't think those qualities are easy to come by.
So what now? Do we abandon incentives? Before we do that, we should think things through.
First, incentive arrangements are much more complex than most practitioners realize. The easiest way to confirm this is to read the 1969 DOD/NASA Incentive Contracting Guide. Although out of print, it has never been surpassed as a textbook on the use of the predetermined, formula-type incentive arrangements. The current coverage in the DOD Contract Pricing Reference Guides, Volume 4, Chapter 1, is superficial by comparison. Anyone who reads the DOD/NASA guide will be impressed by the complexity of incentives. Incentives are so complex that they should be used only by the most knowledgeable and skilled practitioners.
Second, there has never been a fully worked out theory or set of principles for award-fee incentives, and agency-published guidance focuses on organizational and procedural questions. No one has ever bothered to think things through. Indeed, there has been very little up-to-date thinking about award-fee incentives. The DOD/NASA guide discusses award-fee only briefly and the discussion is half-baked. Consider, too, that the sample award-fee criteria in the DOD Procedures, Guidance, and Instruction (PGI) at 216.405-2 (DFARS Table 16-1) have not been substantively changed for more than 30 years. That table reflects the ongoing confusion over the subjective versus objective and process versus results theories of award-fee.
Third, use of incentives makes contract management much more complex, especially when a contract is subject to changes during performance that will require equitable or other adjustments to price or cost and fee. A contracting officer must have considerable knowledge and skill in order to preserve incentive effectiveness in the face of significant or numerous pricing adjustments. It is not work for amateurs or even ordinary journeymen.
Fourth, official training about incentives is superficial, at best.
Fifth, even if incentives can "work" to motivate contractors, poor design and unskillful management makes it unlikely that they will.
In an article I wrote for The Nash & Cibinic Report in 2005, "Award Fee Incentives: Do They Work? Do Agencies Know How To Use Them?," 20 N&CR ? 26, I recommended that the FAR councils require HCA approval for the use of an award-fee incentive. The councils have gone me one better⎯they require HCA approval for the use of any incentive. It remains to be seen whether that limitation will be retained in the final rule. I hope so. We have been entirely too enamored of incentives, and reduced use will greatly simplify contract formation and management. HCAs should approve the use of incentives only after they have satisfied themselves that the people who want to use them know what they are doing. If they do, we'll see fewer incentives.
The FAR Council (the Administrator of Federal Procurement Policy, Secretary of Defense, Administrator of GSA, and Administrator of NASA) should now ask themselves a couple of questions. Do incentives work? Are they worth the trouble? If the answer to either of those questions is no, then perhaps the coverage in FAR 16.4 should be removed or drastically abridged. If both answers are yes or maybe, and the FAR Council doesn't want to eliminate the coverage on incentives, then the FAR Council should take the opportunity to (1) think through the concept of the award-fee incentive and (2) provide the incoming generation of contracting personnel first-rate training in the use of all types of incentives. The latter can be done by developing a rigorous DAU course devoted entirely to the topic. In developing such a course, DAU should look to the DOD/NASA Incentive Contracting Guide as a knowledge baseline and a foundation for a new textbook. On-the-job training in incentive contracting is no good, because the generation that is now headed for retirement does not understand incentives well-enough to train anyone in their design or use.
Have we seen the end of incentives? No. A better question is whether we have seen the beginning of a new era in the use of incentives.
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.