I am launching a contest. I will give a copy of The Government Contracts Reference Book, 4th ed., by Nash, O’Brien-DeBakey, and Schooner, published by Wolters Kluwer Law & Business and The George Washington University Law School, to the Wifcon member who writes the best set of definitions of the 20 terms (words and phrases) listed below. The Reference Book retails for $80.
The following words and phrases are commonly used by contracting practitioners and frequently used in regulations, guidebooks, handbooks, and contracts. A parenthetical entry beside the word or phrase gives usage context.
1. audit (as in proposal audit)
2. competition (as in competition improves quality and reduces prices)
3. complex (as in she’s working on a large, complex acquisition)
4. condition (as in terms and conditions)
5. contract term (as in they won’t accept that contract term)
6. cost (as in cost estimate)
7. dispute (as in a dispute must be handled under FAR 33.2)
8. equitable adjustment (as in they want an equitable adjustment)
9. evaluation factor (as in source selection evaluation factor)
10. fairly (as in COs must treat contractors fairly)
11. incentive (as in contractual incentive)
12. need (as in an acquisition should fulfill the Government’s needs)
13. profit (as in we offered them a fair profit)
14. purchase request package (as in the purchase request package was inadequate)
15. rating (as in evaluators will assign a proposal rating)
16. relative importance (as in evaluation factor relative importance)
17. requirement (as in the program office specified its requirements)
18. risk (as in contract performance risk)
19. tradeoff (as in source selection tradeoff analysis)
20. uncertainty (as in uncertainty about performance outcomes)
None of those words and phrases is defined in FAR.
I will not accept dictionary or otherwise published definitions. The definitions must explain in your own words what you mean when you use those terms.
The qualities I am looking for in the definitions are:
(1) contextual appropriateness,
(3) definiteness (neither vague nor ambiguous),
(4) simplicity, and
Write enough to be clear, but don’t write dissertations. Write something that would make clear to a non-contracting person what you, as a contracting practitioner, mean when you use the selected words and phrases. Don’t substitute one vague word or phrase for another. Don’t define by giving examples. State attributes common to all instances of use.
For some background about definitions go to:
Here are my rules for the contest:
1. Participation is open to all Wifcon members.
2. You must define all 20 of the listed words and phrases.
3. You must post your definitions here, as a comment on this blog entry, for all to see. Do not submit your comments directly to me via email.
4. The deadline for submission is June 18 at midnight. The date and time of your submission are the date and time on the posted comment. Minor post-deadline edits are permitted, but not wholesale rewrites. I'll be the sole judge of whether a post-deadline edit is actually a rewrite.
5. Begin each definition as follows: [Word or phrase] means…
6. Each definition must be in your own words. You may collaborate with others in your office, but you cannot quote or reword a definition found in a published source, including government publications and board, court or GAO decisions. I’ll use the internet to check for quotes and close paraphrases.
7. In evaluating the submissions I will seek input from Don Mansfield and Emptor Cautus, two other Wifcon bloggers. However, I reserve the right to pick the winner based on my own opinion and to pick no winner if I think that none of the submissions is good enough.
8. By participating you agree that participation gives you no legal right to anything.
What would you say if someone were to ask you what you mean when you use any of those words or phrases? Could you answer immediately, or would you have to think about it for a while and maybe do some research?
Take a shot. What have you got to lose? It might be worth the effort just to develop your own thinking. Most of you post anonymously, so don't worry. Have fun with it and maybe you'll win an expensive book.
I just read a very strange blog entry by Steven Kelman, former OFPP administrator, writing at Federal Computer Week online on November 20. The title of the entry is: “Improving statements of work to improve contract management.” You can access it at:
I don't ordinarily read Kelman's FCW blog, "The Lectern," but someone sent it to me and I was intrigued by the title of the entry. i thought I might learn something.
Kelman begins by saying he’s been looking for ideas about how to improve contract management and had a conversation with the CEO of a small company whose ideas focused on writing and managing statements of work. She said that in her experience statements of work were often “poor.” Regrettably, she wasn't more specific about what makes them “poor,” because Kelman doesn’t provide any details.
The CEO complained to Kelman that it is often the case that statements of work are written by talented but busy program staff who do not end up working on the contract. Instead, the statement of work is handed over to an unenthusiastic contracting officer’s representative who is not a subject matter expert. Meanwhile, the contracting people are too busy to get involved unless there is a crisis.
The CEO’s specific suggestion? Have contracting officers use the “advisory downselect procedure” (advisory multi-step process) described in FAR 15.202 to reduce the pool of competitors to a “small number of finalists” with which the contracting folk could then work to develop a good statement of work. “[H]aving several contractors work on the joint SOW would guard against rigging the specs in favor of any one contractor’s solution.” The agency would then go on with a source selection.
That’s it. Anyone who has ever written a statement of work for a complex contract and been involved in committee work will understand why I think that would be a project to avoid like a mine field.
Kelman concludes his blog post by asking readers to “join the dialogue” by posting comments or contacting him at his office email address.
Here is my comment:
What is a statement of work? What kind of document is it in a contract for complex services? Is it like a hardware specification? Should it specify the work that the contractor must do, or should it describe the work in general terms and explain how the parties will work together to specify the work on an ad hoc basis over the term of the contract? What makes a statement of work "good"? What is the role of a contract in a complex and dynamic business relationship?
Kelman, who is known for his insistent calls for innovation, doesn’t seem to realize that in order to innovate one has to understand the problem. Kelman and the CEO don't understand statements of work and their role in service quality management.
As OFPP administrator in the 1990s, Kelman did a lot of damage by pushing the half-baked "performance-based contracting" policy, which called for writing "performance work statements" (see the current definition in FAR 2.101) that specify measurable "outcomes" or “results” instead of how-to. The policy was the product of professional ignorance and a failure of professional thought and imagination. Pushing it the way he did wasted precious energy, time, and money without achieving much of anything. I have written a few thousand words in The Nash & Cibinic Report explaining why that policy was dumb.
The problem with service contract management is that the policy people in government and academia who are supposed to be critical thinkers haven’t thought about it long enough and deeply enough. I don't think they read. You cannot specify services like you specify supplies. People like T. P. Hill and Avedis Donabedian wrote enlightening works that provide food for thought about the unique problem of specifying services. Ian R. Mcneil and others have written about the limitations of contract law in complex business relationships. I have cited them in the past.
Ralph Nash and I wrote a comprehensive piece about how to contract for complex services, which was published in the Defense Acquisition Review Journal (Defense ARJ), a publication of the Defense Acquisition University, in September 2007. The piece is entitled, “A Proposal for a New Approach to Performance-Based Services Acquisition.” You can access it here:
In that piece we discuss the reasons for the failure of performance-based contracting in pages 355 – 358. We make specific and detailed recommendations for change in pages 358 - 361.
Apparently, Kelman never read our piece, or read it and forgot about it, or read it and didn’t understand it, or read it and didn’t like it. In any case, it goes into much more detail than he and his CEO friend about the challenges and problems of specifying and managing complex services, and it proposes a much more imaginative scheme of innovation. It calls for a complete rethinking of the rules for the acquisition of complex services.
Why call for suggestions for improving contract management if you won't look at the ones that have been made and critically examine them? If you don't agree with what you read, state your reasons. That's the way to have a dialogue.
Until policy makers and former policy makers get a clue and convince Congress that the current service contracting statutory, regulatory, and policy-memo regime makes no sense at all, service contract management will continue to disappoint. There is a small window of opportunity now with the study panel that Congress has foisted upon DOD. See the FY 2016 NDAA, Sec. 809. I have no hopes or expectations for such panels anymore, but maybe something good could come out of it if somebody who knows something -- and who has done some serious thinking and who still has some patience left for putting up with acquisition reform hoo-rah and nonsense -- would take the matter in hand.
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?
Two of my students, who work for a very large government contractor, told me that the contracting officers (COs) who administer their contracts unilaterally update contract clauses from time to time when they add funds to the contract or when they exercise options. They wondered if that was okay.
It's not okay.
More than a few people believe that the government must update contract clauses when the government changes the Federal Acquisition Regulation (FAR). Some of them think that the government may do so unilaterally. Others believe that contracts are “automatically” updated when the government changes the FAR. Those beliefs are false.
Once the government and a contractor enter into a contract a deal is a deal, and the government and the contractor are bound by the clauses in the awarded contracts until the contracts are completed. Nothing in FAR and no standard FAR clause authorizes a CO to unilaterally update, add, or delete clauses in a contract after award. None of the five Changes clauses, FAR 52.243-1 through -5, empower a CO to do that.
Thus, with a few exceptions, which are discussed below, changes to FAR clauses — revisions, additions, and deletions — must be accomplished through supplemental agreement [(bilateral modification). See FAR 43.103(a)(3). Any such supplemental agreement must be supported by consideration in order to be contractually enforceable.
In this blog entry I will address two questions:
1. What FAR clauses must COs insert in their contracts and purchase orders?
2. What happens after contract award when a Federal Acquisition Circular (FAC) revises, adds, or deletes a clause that is applicable to a contract of the type awarded, or changes a portion of FAR that has been incorporated into the contract by a clause?
FAR contract clauses
The FAR and agency FAR supplements prescribe the use of standard contract clauses to implement the statutes, regulations, and policies that apply to government contracts. FAR clauses implement the statutes, regulations, and policies that are in effect on (1) the date the solicitation for the contract was issued, (2) the date of contract award, or (3) some other date, depending on the terms of the clause. See, e.g., FAR 52.202-1, “Definitions (JAN 2012),” which incorporates into contracts the FAR definitions in effect “at the time the solicitation was issued.” See also FAR 52.216-7, “Allowable Cost and Payment (JUN 2011),” subparagraph (a)(1), which incorporates the text of FAR Subpart 31.2 that is in effect “on the date of this contract.” And see FAR 52.227-11, “Patent Rights—Ownership by the Contractor (DEC 2007), which incorporates the procedures in 37 C.F.R. § 401.6 and agency supplements in effect “on the date of contract award.” The language in those clauses fixes the version of the statute, regulation, or policy for the duration of the contract, unless the contract expressly provides otherwise.
What FAR clauses must COs insert in purchase orders and solicitations?
A purchase order or solicitation states the government’s terms, and quoters or offerors are expected to base their quotes and proposals on those terms. A purchase order or a solicitation for a contract must include the clauses prescribed by the various parts of the FAR. See, generally:
For commercial items, FAR 12.301(a):
12.301 Solicitation provisions and contract clauses for the acquisition of commercial items.
(a) In accordance with Section 8002 of Public Law 103-355 (41 U.S.C. 264, note), contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses—(1)
Required to implement provisions of law or executive orders
applicable to the acquisition of commercial items
For purchase orders issued pursuant to simplified acquisition procedures, FAR 13.302-5:
(a) Each purchase order (and each purchase order modification (see 13.302-3)) shall incorporate
all clauses prescribed
for the particular acquisition.
For acquisitions conducted using sealed bidding, FAR 14.201-3:
14.201-3 Part II—Contract clauses.
Section I, Contract clauses. The contracting officer shall include in this section
the clauses required by law
or by this regulation and any additional clauses expected to apply to any resulting contract, if these clauses are not required to be included in any other section of the uniform contract format.
For acquisitions conducted by negotiation, FAR 15.204-3:
15.204-3 Part II—Contract Clauses.
Section I, Contract clauses.
The contracting officer shall include in this section
the clauses required by law
or by this regulation and any additional clauses expected to be included in any resulting contract, if these clauses are not required in any other section of the uniform contract format. An index may be inserted if this section’s format is particularly complex.
What does all of that mean? It means that a CO must include in a purchase order or solicitation all clauses that FAR prescribes for a prospective contract and that are in effect on the date the solicitation is issued. When an offeror bases its offer on the solicitation, and the government accepts that offer, the contract includes the clauses that were in the solicitation and the parties are bound by those clauses. A CO cannot change (revise, add, or delete) any clauses in a contract document after the offeror has signed it without the agreement of the offeror. Any such agreement would constitute a new offer.
What happens when a Federal Acquisition Circular (FAC) containing a clause change is issued before or after a solicitation is released, but the change does not take effect until after the solicitation has been released?
Suppose that a CO is preparing a solicitation for a firm-fixed-price supply contract that is expected to exceed $10 million and that the CO plans to issue the solicitation on June 1 and award the contract on December 1. Now suppose that on May 15, a Federal Acquisition Circular (FAC) comes out that adds a new clause to FAR that must be inserted in all FFP contracts that will exceed $5 million. The FAC states that the new clause will become applicable on August 15. Now suppose further that the agency office reviewing the solicitation before its release insists that since the prospective contract will be awarded after the clause becomes applicable the CO should include the new clause in the solicitation. According to FAR 1.108(d)(1), the new clause does not apply to the solicitation and need not be included, but according to FAR 1.108(d)(2) the CO may include it in the solicitation as long as the contract will be awarded after the new clause becomes applicable.
Thus, purchase orders and solicitations must include the contract clauses that are applicable on the date the solicitation is issued, and they may include any clauses that become applicable after that date as long as they are expected to be applicable on or after the date of contract award.
What happens when a clause change takes effect after contract award?
Assuming that the CO included all applicable clauses when soliciting offers, after contract award the government and the contractor are bound by the clauses in their contract throughout the period of performance. In the absence of a contract clause that expressly authorizes the CO to revise, add, or delete a clause without the contractor’s consent, any attempt to bind a contractor to a unilateral clause change would be a breach of contract. See General Dynamics Corp. v. U.S., 47 Fed. Cl. 514, 544 - 547 (2000) and United States v. Winstar Corp., 518 U.S. 839 (1996).
However, FAR 1.108(d)(3) permits COs to include FAR changes in existing contracts “with appropriate consideration.” Thus, changes to the contract clauses must be on the basis of supplemental agreement (bilateral modification), not unilateral action by the CO. The consideration would flow from the party seeking inclusion of the clause to the party agreeing to the inclusion. The amount of the consideration is negotiable.*
Automatic Updating Of Clauses?
There are some contract clauses that provide for automatic updating of contract terms following a change in law or regulation. For example, FAR 52.222-43, “Fair Labor Standards Act and Service Contract Act — Price Adjustment (Multiple Year and Option Contracts) (SEP 2009)” and 52.222-44, “Fair Labor Standards Act and Service Contract Act — Price Adjustment (SEP 2009) provide for automatic updating in response to a change in the minimum wage pursuant to the Fair Labor Standards Act of 1938. FAR 52.230-2, “Cost Accounting Standards (May 2012),” 52.230-5, “Cost Accounting Standards—Educational Institution (May 2012),” and 52.230-6, “Administration of Cost Accounting Standards (JUN 2010)” provide for automatic updating following a change to the Cost Accounting Standards. All such changes apply prospectively, not retroactively. See FAR 52.230-2:
(a) Unless the contract is exempt under 48 CFR 9903.201-1 and 9903.201-2, the provisions of 48 CFR Part 9903 are incorporated herein by reference and the Contractor, in connection with this contract, shall…
* * *
(3) Comply with all CAS, including any modifications and interpretations indicated thereto contained in 48 CFR Part 9904, in effect on the date of award of this contract or, if the Contractor has submitted certified cost or pricing data, on the date of final agreement on price as shown on the Contractor’s signed certificate of current cost or pricing data. The Contractor shall also comply with any CAS (or modifications to CAS) which hereafter become applicable to a contract or subcontract of the Contractor. Such compliance shall be required prospectively from the date of applicability to such contract or subcontract.
(4)(i) (Agree to an equitable adjustment as provided in the Changes clause of this contract if the contract cost is affected by a change which, pursuant to paragraph (a)(3) of this clause, the Contractor is required to make to the Contractor’s established cost accounting practices.
(ii) Negotiate with the Contracting Officer to determine the terms and conditions under which a change may be made to a cost accounting practice, other than a change made under other provisions of paragraph (a)(4) of this clause; provided that no agreement may be made under this provision that will increase costs paid by the United States.
(iii) When the parties agree to a change to a cost accounting practice, other than a change under subdivision (a)(4)(i) of this clause, negotiate an equitable adjustment as provided in the Changes clause of this contract.
May COs unilaterally update contract clauses when exercising options?
No. The clauses that apply to option periods are locked in at the time of contract award. FAR does not require that COs update clauses when exercising options. Moreover, the law of contracts does not permit COs to unilaterally change the terms of an option once they have been set. Absent express agreement to the contrary, the government must exercise options in strict accord with their terms. See Chemical Technology, Inc., ASBCA No. 21863, 80-2 BCA ¶ 14728:
The general rule governing the exercise of an option has been clearly stated by this Board in
General Dynamics Corporation
, ASBCA No. 20882, 77–1 BCA ¶ 12,504 at 60,622:
An option is an offer couched in specific terms, the acceptance of which must be unconditional and in exact accord with the terms offered. The general attitude of the courts is to construe strictly this legal requirement
Williston on Contracts
, Third Edition, Secs. 61B; 61D;
United States v. T. W. Corder, Inc.
, 208 F.2d 411, 413 (1953);
International Telephone and Telegraph, ITT Defense Communications Division v. The United States
, [17 CCF ¶81,071], 197 Ct. Cl. 11 (1972).
McArthur et al. v. Rosenbaum Company of Pittsburg
, 180 F.2d 617, 620 (3rd Cir., 1950). Even substantial compliance with the terms of an option is insufficient. See 17 CJS, Contracts, Section 42, n. 83(2) at 676.
Any attempt by the government to impose new terms on a contractor when exercising an option would be breach of contract and would invalidate the option. See New England Tank Industries of New Hampshire, Inc. v. U.S., 861 F. 2d 685 (Fed. Cir. 1988):
It is well-settled that to properly exercise [an] option, the government’s acceptance of the offer [must] be unconditional and in exact accord with the terms of the contract being renewed.
* * *
The dispositive question is whether the government's exercise of its option to renew the contract was valid or invalid. As above noted, the board recognized that an attempt to alter the contract terms would “render ineffective the purported exercise of an option,” and that insertion of an “availability of funds” clause renders the option exercise “invalid”, see 88–1 BCA at 103,166, and neither party quarrels with those statements of the law.
The rule that exercise of an option must be in accordance with the terms of the option as awarded is reflected in FAR 17.207(e), which requires that before exercising an option the CO must make a written determination that the exercise “is in accordance with the terms of the option….” Thus, unless a contract contains an express term to the contrary, COs have no authority to unilaterally update contract clauses when exercising options.**
What is the effect of changes to parts of the FAR that were incorporated into a contract by reference?
Several FAR contract clauses incorporate parts of the FAR into contracts by reference. See e.g., FAR 52.202-1, which incorporates FAR definitions “in effect at the time the solicitation was issued,” and 52.216-7(a)(1), which incorporates the version of FAR Subpart 31.2 “in effect on the date of this contract.” In those examples, the terms of the FAR are fixed in time and cannot be altered without mutual agreement of the parties and consideration.
But what if the clause does not fix the terms of the FAR? See e.g., FAR 52.211-15, “Defense Priority and Allocation Requirements (APR 2008).” It requires the contractor to comply with “15 C.F.R. 700,” without further qualification. See also the various small business clauses that require the contractor to comply with Title 19 of the C.F.R., and the labor law clauses that require the contractor to comply with Title 29. If those regulations change after contract award the contractor is always bound by the current regulation. In such cases the updating is automatic and does not require a contract modification unless the clause provides for an adjustment of some kind, equitable or otherwise.
As I mentioned above, some clauses, such as the Cost Accounting Standards clause, provide for automatic updating with price adjustment.
Can Congress enact a law that changes existing contracts?
Yes, but they might breach the contract if they do. That was the holding of the Supreme Court in United States v. Winstar Corp., cited above, in which Congress changed a law, and the agency changed its regulations accordingly, after entering into contracts with financial institutions:
When the law as to capital requirements changed in the present instance, the Government was unable to perform its promise and, therefore, became liable for breach. We accept the Federal Circuit's conclusion that the Government breached these contracts when, pursuant to the new regulatory capital requirements imposed by FIRREA [Financial Institutions Reform, Recovery, and Enforcement Act of 1989], 12 U.S.C. § 1464(t), the federal regulatory agencies limited the use of supervisory goodwill and capital credits in calculating respondents' net worth. 64 F.3d, at 1545. In the case of Winstar and Statesman, the Government exacerbated its breach when it seized and liquidated respondents' thrifts for regulatory noncompliance.
In Winstar, the court quoted its decision in Sinking Fund Cases, 99 U.S. 700 (1879):
The United States are as much bound by their contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that terms implies, as it would be if the repudiator had been a State or a municipality or a citizen.
Getting back to my two students, absent express language in the contract to the contrary, a CO may not unilaterally change the clauses in a contract when funding the contract or exercising an option. He or she may change clauses only with the assent of the contractor and with consideration for the change.
I asked my two students how they responded when their COs unilaterally updated the clauses in their contracts. They said that they went along with it, because so far none of the changes had much if any effect. That is too bad, because they are teaching the COs in question that what they are doing is okay. It is not okay. And it is not wise for one party to a contract to let the other party violate its rights by unilaterally imposing new terms.
*Note that “consideration” is not the same as an “equitable adjustment.” An equitable adjustment is a fair increase or decrease in the contract price or estimated cost and fee and the time required for contract performance, as required by a contract clause, such as a Changes clause or Differing Site Conditions clause. The amount of the equitable adjustment is based on the estimated or actual effect of the change on the cost or time required for performance. When the parties to a contract agree to modify it on the basis of mutual agreement, and not in accordance with a contract clause that provides for equitable adjustment, the parties are making a new bargain and the bargain must be supported by consideration in order to be enforceable in court. Consideration is necessary whether or not there is any effect on cost or time. The amount of the consideration is not determined or limited on the basis of the effect on cost or time, but is determined through bargaining. The consideration would flow from the party that will benefit from inclusion of the clause to the party that agrees to its inclusion.
**However, the parties may change the terms of a future option period pursuant to the terms of contract clauses, such as the Changes clause, or pursuant to a justification for other than full and open competition.
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.
DOD has announced the names of the 18 appointees to its Section 809 Advisory Panel on Streamlining and Codifying Acquisition Regulations. You can see their names and qualifications here:
The panel's congressionally mandated mission is as follows:
I have to say that I'm disappointed by the appointments. It's not that the appointees are not qualified or that I object to anyone's inclusion. They're distinguished and eminently qualified. The problem is that, unless I'm mistaken, they're old.
Yes, I said old.
Was there not even one GS-15 or SES in their early 30s with recent working-level experience who is sufficiently well qualified to provide advice and make recommendations for the amendment and repeal of regulations? Not one person in their late 20s or early 30s? Not one? The panel is comprised entirely of people whom I'd call, no offense intended, the usual suspects. I know some of them and like the ones I know, but that makes no difference.
Look, I don't expect much. The panel will work hard and produce a glossy report in 2018 (2018???!!!--why so far off?) that will be much discussed, I'm sure, for at least a month, maybe even two. We've had a lot of reform panels over the years and, ultimately, their work hasn't really come to much. (Anyone remember the SARA panel?) Oh, the 809 Panel is very likely to recommend at least some changes that will be made, but they won't change the system's ultimate character and outcomes, because reforms rarely address the system's fundamental problems. It's been more than 20 years since the Federal Acquisition Streamlining Act of 1994, yet I just saw a 47-page solicitation for 12 sleeper sofas, a buy that’s probably worth less than $18,000, yet incorporates something like 200+ pages of text by reference. Any little money saved by competition will be consumed by the cost of the process.
What we need from the 809 Panel is a final report that shows just how looney the system has become. We also need a final report that makes really radical recommendations. How about taking DOD out of the FAR system and letting it go back to having its own Defense Acquisition Regulation? (The two-council system is a mess.) How about freeing the Defense acquisition regulations from Paperwork Reduction Act reviews? (Congress and the President are imposing most of the paperwork, so what’s the point?) How about raising the simplified acquisition threshold to $1 million and taking simplified acquisition procedures out of the regulation and putting them into a separate guidebook so people doing simplified will be less regulation-obsessed? How about exempting simplified acquisitions from some socio-economic laws and programs? How about raising the dollar threshold for the submission of certified cost or pricing data to an amount at which the likely benefit will exceed the requirement's costs. ($50 million is about right. Maybe even $100 million.) How about applying the cost accounting standards only to contracts under which there is a likelihood of requests for equitable adjustment and significant claims worth more than, say, $5 million? How about recommending that certain contractor selections be based on qualifications, rather than technical proposals and price, and followed by unrestricted, in-depth, one-on-one negotiations (not "discussions") with the selectee?
But I fear that such a distinguished panel will consider such recommendations to be too far out. Only the young would be so radical and indecorous.
The future belongs to the young. It's they who will be tomorrow's acquisition (and national) leaders, and so it’s they who should take the lead in recommending changes. The folks of my generation have had our chances. We need to step aside and lend the young a hand. The old heads need to be there mainly to tell the young about their experiences, how they’ve been there and done that and why it didn't work the last few times, so that the young can go forward without making the same mistakes. (It would be trite at this point to quote Bob Dylan, so I won't do it. But most of you know the song I'm thinking about.)
I wish that Deirdre Lee, the panel chair, would prevail upon DOD to find and appoint at least two young radicals to the panel--persons in their late 20s or early 30s. I wish that the panel would actively seek the ideas and opinions of today's young chiefs of contracting offices and section chiefs. I wish that they'd hand over the task of writing the final report to young thinkers and firebrands.
I understand how the system works and why it works the way it does. Sadly, I do understand. I’m not naïve. But isn’t it time for subversive leadership from the old? What will they have to lose in 2018? Why not let the young set Congress’s hair on fire?
It’s time, at long last, long past time, for the old timers to bring people to the front who don't care how and why the system works the way it does, who want to take a new path, and who don’t mind kicking dirt on some shoes.
It's long past time.
"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.
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.
Despite the plain language of the FAR definition of claim and an overwhelming amount of case law, many contracting practitioners falsely believe that claims and requests for equitable adjustment (REA) under a contract clause are categorically different, that a contractor must submit an REA before it can submit a claim, and that there can’t be a claim until the parties have reached an impasse or are in dispute. Those beliefs are untrue. My objective in this blog entry is to explain why.
What Is a "claim"?
The Contract Disputes Act, 41 U.S.C. 7101 – 7109, does not define claim. The only official definition is in FAR 2.101, which defines "claim" as follows:
“Claim” means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. However, a written demand or written assertion by the contractor seeking the payment of money exceeding $100,000 is not a claim under the Contract Disputes Act of 1978 until certified as required by the Act. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. The submission may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.
Reading that definition closely, we see that there are four sentences. The first sentence defines claim as: (1) a written demand or assertion, (2) by the prime contractor or the government, (3) seeking "relief" to which the contractor or the government believes it is entitled pursuant to the terms of a contract clause or due to breach of contract by the other party. (See Note 1.) In order to be a claim a contractor's request for contractual relief must have all of the elements stated in the first sentence.
The second sentence requires certification of claims for more than $100,000. (See Note 2.) A contractor request for more than $100,000 that is not certified is not a claim.
The third sentence says that routine requests for payment must be in dispute when submitted in order to be a claim. Thus, a request for payment upon completion of performance and acceptance of the work or a request for a progress payment is not a claim unless it was in dispute when submitted.
The fourth sentence says that a routine request for payment may be converted to a claim under certain circumstances.
We need to dig still deeper. First, the words "assertion" and "demand" in the first sentence are legal terms of art for requests for what one believes he or she is entitled to. See Blacks Law Dictionary 9th (2009). They should not be understood to mean that a contractor’s request must be strident, angry, or vehement, or be the product of strife or dispute.
Second, "sum certain" means a specific amount. There can be no equivocation using language such as “approximately,” “at least,” “in excess of,” “well over,” or “no less than.” However, the sum certain requirement can be met through the use of a formula that permits the amount to be determined mathematically. (See Note 3.)
Third, although the FAR definition does not say so, the CDA and the boards and courts require that in order to be a claim a contractor's request for relief must ask the CO for a decision on the matter. See 41 U.S.C. Sec. 7103( a ). The request need not be explicit, but may be implied from the context of the assertion or demand. See James M. Ellett Construction Co. v. United States, 93 F.3d 1537, 1543 (Fed. Cir. 1996); BLR Group of America, Inc. v. United States, 96 Fed. Cl. 9, 13 (2010).
Fourth, although the second sentence in the definition says that contractors must certify claims “seeking payment of money” in excess of $100,000, the CDA requires certification of any monetary claim in excess of $100,000, whether for immediate payment or price adjustment. See 41 U.S.C. 7103( b ).
Contracting practitioners must be able to recognize a claim when they see one.
The submission and receipt of a claim have four important legal consequences:
1. Interest begins to accrue when the CO receives a claim, but not when he receives a non-claim request for contractual relief. See FAR 33.208. (But see also Note 4.)
2. COs must make final decisions on claims within statutory deadlines, see FAR 33.211( c ), but they face no deadline for responding to non-claim requests for contractual relief.
3. Contractors cannot recover the costs of claim preparation and prosecution, but they can recover the costs of the preparation of non-claim requests for contractual relief. See FAR 31.205-33( b ) and 31.205-47( f )(1).
4. The jurisdiction of the boards of contract appeals and the U.S. Court of Federal Claims to adjudicate a contractor's appeal under the CDA is predicated upon ( a ) the submission of a CDA "claim" and ( b ) issuance of a CO final decision. See Reflectone, Inc. v. Dalton, Secretary of the Navy, 60 F.3d 1572, 1575 (Fed, Cir. 1995), and James M. Ellett Construction Co. Inc. v. United States, 93 F.3d 1537, 1541 - 42 (Fed. Cir. 1996). Unless a contractor has submitted a claim and the CO has issued a final decision, the boards and the Court of Federal Claims have no jurisdiction under the CDA. They have no jurisdiction under the CDA over non-claim submissions, not even if the CO mistakenly issued a final decision when none was required. See Agility Defense & Government Services, Inc. v. United States, 103 Fed. Cl. 366 (2012). In that case the contractor submitted a document that did not possess the required elements of a claim as defined in FAR 2.101. Nevertheless, the CO issued a "final decision." The contractor appealed the decision, but the court dismissed the appeal for lack of subject matter jurisdiction, because the contractor's submission did not have all of the elements of a claim as defined in FAR 2.101. The court said:
"For the above reasons, the Court finds that it does not have jurisdiction to adjudicate Agility's complaint. The Court makes this ruling with some reluctance, given the contracting officer's contribution to a confused set of circumstances."
Thus, acquisition practitioners must know when they are submitting or when they have received a claim. Claims are not always easy to recognize, however.
A claim need not be in any particular format or use any particular language.
The definition of claim specifies no format for a claim and does not require the use of specific words of terms, except for the claim certification. The courts and boards have consistently held over the course of many years that a claim need not be in any particular format or stated in any particular language. A claim need not be labeled "Claim." See Contract Cleaning Maintenance, Inc. v. United States, 811 Fed. 2d 586, 592 (Fed. Cir. 1987):
We know of no requirement in the Disputes Act that a “claim” must be submitted in any particular form or use any particular wording.
All that is required is that the contractor submit in writing to the contracting officer a clear and unequivocal statement that gives the contracting officer adequate notice of the basis and amount of the claim.”
See also SITCO General Trading and Contracting Co. v. United States, 87 Fed. Cl. 506, 508 (2009).
A submission need not include a cost breakdown or other supporting cost data in order to be a claim. See H.L. Smith, Inc. v. Dalton, Secretary of the Navy, 49 F.3d 1563, 1564 (Fed. Cir. 1995):
“[N]either the CDA nor its implementing regulations, the Federal Acquisition Regulations (FAR), requires submission of a detailed cost breakdown or other specific cost-related documentation with the claim.”
Thus, a claim could be a simple letter. See Transamerica Insurance Corp. v. United States, 973 F.2d 1572, 1576 (Fed.Cir.1992):
“This court will not require contractors to do more than to comply as fully and reasonably as possible with the statutory requirements of the CDA when this court has definitively stated that certain “magic words” need not be used and that the intent of the “claim” governs.”
A simple claim under $100,000 might be stated in a single sentence. See Cibinic, Nash & Nagle, Administration of Government Contracts 1264 (4th ed., 2006):
"As long as the contractor's assertion contains the minimum information necessary to inform the contracting officer of what is being claimed and the grounds of the claim, the contracting officer must act on the claim and deny it if the information is insufficient to approve it,
Fred A. Arnold, Inc
., ASBCA 27151, 83-3 BCA para. 17,517."
Thus, a request for relief without supporting data might be a claim, but without the supporting data it might not be sufficient to prove the contractor's entitlement to the relief sought.
In pointing these things out I am not suggesting that contractors submit undocumented claims. My only purpose is to show that a contractor's submission need not be thoroughly documented in order be a claim and thus trigger the legal consequences of submitting a claim. Best practice is, of course, to prepare claims carefully and document them as thoroughly as possible.
The content is what matters, not what you call it.
The determination of whether a contractor’s submission to a CO is or is not a claim does not depend on what the parties call it. The mere fact that a contractor calls its submission a claim will not make it a claim if it lacks any necessary element of a claim. And calling a submission an REA does not mean that it is not a claim if it possesses all of the necessary elements of a claim. Claims and REAs are not categorically different things. It is the content of a submission, not what the parties label it or call it, that determines whether it is a claim.
In Zafer Taahhut Insaat ve Ticaret A.S., ASBCA 56770, 11-2 BCA ¶ 34841 (2011), the government argued that a contractor’s REA was not a claim because the contractor used the word “request” instead of claim in its claim certification. The board rejected that argument:
“The government objects to Zafer's 1 August 2007 REA as the basis for our jurisdiction, alleging that the document is a preliminary request for equitable adjustment, and does not adhere to CDA certification requirements because 'request' is twice substituted for 'claim' and the authority of the certifier is not stated. We find that the REA is a cognizable claim, as it adequately informs the government of the basis and precise amount of the claim and that the use of the word 'request' in lieu of 'claim' is inconsequential.”
Request for reconsideration denied, Zafer Taahhut Insaat ve Ticaret A.S., ASBCA 56770, 12-1 BCA ¶ 34951 (2012). See also Saco Defense, Inc., ASBCA 44792, 93-3 BCA ¶ 26029:
“[T]he threshold question is whether that submission constituted a “claim” under the CDA. To that end, it does not matter if the submission is styled as a ‘claim,’ a ‘proposal,’ a ‘request for equitable adjustment,’ or something else. What matters is that the submission satisfies the definition of ‘claim’ prescribed in applicable implementing regulations and contract clauses, as interpreted by the Federal Circuit.”
What is an REA?
The CDA does not mention REAs. Although the term REA appears in 31 places in the FAR System -- ten places in the FAR itself, the rest in seven agency FAR supplements -- the FAR does not define REA.
"Request for equitable adjustment" is a term of art for just what the name indicates: (a ) a request ( b ) for an equitable adjustment to one or more contract terms. REAs are grounded on contract clauses that provide for such relief, such as the "Changes" clauses, FAR 52.243-1 through - 5; the "Differing Site Conditions" clause, FAR 52.236-2; and the "Government Property" clause, FAR 52.245-1.
Contractors doing business with the Department of Defense that submit non-claim REAs valued at more than the simplified acquisition threshold must certify them as required by DFARS 243.204-71 and 252.243-7002. The certification reads as follows:
“I certify that the request is made in good faith, and that the supporting data are accurate and complete to the best of my knowledge and belief.”
An REA valued at more than the simplified acquisition threshold that includes the REA certification, but not the claim certification, is an REA that is not a claim, because it lacks one of the necessary elements of a claim. If the same REA is certified as a claim, and has the other necessary elements of a claim, then it is an REA that is a claim.
What if a contractor includes both the REA certification and the claim certification? Assuming that the REA has all of the other necessary elements of a claim, it is an REA that is a claim, notwithstanding the inclusion of the REA certification. However, the dual certification might indicate some confusion on the part of the contractor and make its intentions unclear.
Bottom line: An REA is a claim if it has the required elements of a claim as defined in FAR 2.101. An REA that lacks any required element of a claim is not a claim.
An impasse or dispute is not necessary for an REA to be a claim.
Many contracting practitioners think that there must be an impasse in negotiations or that the parties must be in dispute before REAs can be claims. That is not true, as determined in the landmark decision Relectone, Inc. v. Dalton, Secretary of the Navy, 60 F.3d 1572, 1577 (Fed. Cir, 1995):
"[W]e hold that FAR 33.201 does not require that 'a written demand ... seeking, as a matter of right, the payment of money in a sum certain' must already be in dispute when submitted to the CO to satisfy the definition of 'claim,'
where that demand or request is a 'voucher, invoice or other routine request for payment.' This interpretation, based on the plain language of the FAR, examines and reconciles the text of the entire regulation, not simply isolated sentences."
Reflectone is must reading for all practitioners. (At the time of that decision the definition of claim was in FAR 33.201. It has since been moved to FAR 2.101.)
See also Systems Development Corp. v. McHugh, Secretary of the Army, 658 F.3d 1341, 1346 - 47 (Fed. Cir. 2011):
"SDC contends that our precedent holds that a claim does not accrue until there is an impasse in negotiations between the contractor and the government. SDC, however, misapprehends our precedent. Impasse is not required for SDC's equitable adjustment claims to accrue.
In support of its impasse theory, SDC points to
Rex Systems, Inc. v. Cohen,
224 F.3d 1367 (Fed.Cir.2000). In
we considered when a submission by a contractor to a CO meets the definition of a 'claim' for the purposes of the CDA.
See also James M. Ellett Constr. Co. v. United States,
93 F.3d 1537 (Fed.Cir.1996). We acknowledged that not all contractor submissions to a CO are claims.
224 F.3d. at 1372 ('[A]ny non-routine submission by a contractor meets the definition of a claim if it is: (1) a written demand; (2) seeking as a matter of right; (3) the payment of money in a sum certain.'). In this line of cases, we clarified that termination settlement proposals submitted under the termination for convenience clause of the FAR generally are not CDA claims. Under certain circumstances, however, a termination settlement proposal may ripen into a claim.
For example, as we explained in
a termination settlement proposal may ripen into a CDA claim when the parties' negotiations reach an impasse. 93 F.3d at 1543–44. Contrary to SDC's assertion, nothing in these cases addressed situations beyond termination settlement proposals. Indeed, we emphasized that the FAR “anticipate
the submission of claims independently of the termination settlement proposal.”
at 1548. We have never indicated that such independently submitted claims require an impasse.
* * *
SDC's equitable adjustment claims were wholly separate from its termination settlement proposal.
Nothing precluded SDC from presenting them to a CO as soon as SDC knew of their basis as provided in the FAR."
An REA is not a "routine request for payment."
According to the definition of claim in FAR 2.101, the only thing that has to be in dispute in order to be a claim is a “[a] voucher, invoice, or other routine request for payment,” and REAs are not routine requests for payment. That was settled by the Federal Circuit 17 years ago, in the landmark decision Reflectone, Inc. v. Dalton, 60 F.2d 1572, 1577 (Fed. Cir. 1995):
“[A]n REA is anything but a ‘routine request for payment.’ It is a remedy payable only when unforeseen or unintended circumstances, such as government modification of the contract, differing site conditions, defective or late-delivered government property or issuance of a stop work order, cause an increase in contract performance costs.
Pacific Architects and Eng'rs Inc. v. United States
, 491 F.2d 734, 739, 203 Ct.Cl. 499 (1974). A demand for compensation for unforeseen or unintended circumstances cannot be characterized as “routine.” The Supreme Court has confirmed the non-routine nature of an REA by equating it with assertion of a breach of contract.
Crown Coat Front Co. v. United States
, 386 U.S. 503, 511, 87 S.Ct. 1177, 1181, 18 L.Ed.2d 256 (1967) (‘With respect to claims arising under the typical government contract, the contractor has agreed in effect to convert what otherwise might be claims for breach of contract into claims for equitable adjustment.’). Thus, an REA provides an example of a written demand for payment as a matter of right which is not ‘a routine request for payment’ and, therefore, it satisfies the FAR definition of ‘claim’ whether or not the government's liability for or the amount of the REA was already disputed before submission of the REA to the CO.”
Some contracting practitioners think that REAs are routine because "they happen all the time." Indeed, they are common in some contracting offices. However, the boards and courts do not interpret "routine" on the basis of frequency, but on the basis of the nature of the cause. See Parsons Global Services, Inc., ex rel. Odell International, Inc. v. McHugh, Secretary of the Army, 677 F.3d 1166, 1170 (Fed. Cir. 2012):
"The distinction between a routine and non-routine request for payment is a factual one, dependent on the circumstances in which the requested costs arose. A routine request is one incurred and submitted ‘in accordance with the expected or scheduled progression of contract performance.’
., 93 F.3d at 1542–43. Such requests are ‘made under the contract, not outside it’ and include invoices, vouchers, progress payments, and other requests for costs under the contract's terms.
, 60 F.3d at 1577. By contrast, a non-routine request is one ‘seeking compensation because of unforeseen or unintended circumstances.’
., 93 F.3d at 1543;
, 60 F.3d at 1577. Such requests include requests for equitable adjustments for costs incurred from “government modification of the contract, differing site conditions, defective or late-delivered government property or issuance of a stop work order” and other government-ordered changes,
, 60 F.3d at 1577; for damages resulting from the government's termination for convenience and termination settlement proposals that have reached an impasse,
., 93 F.3d at 1542–43; for compensation for additional work not contemplated by the contract but demanded by the government,
Scan–Tech Sec., L.P. v. United States
, 46 Fed.Cl. 326, 333 (2000); for the return of contractor property in the government's possession,
J & E Salvage Co. v. United States
, 37 Fed.Cl. 256, 261 n. 4 (1997),
, 152 F.3d 945 (1998) (table); and for damages stemming from the government's breach of contract or cardinal change to the contract,
Ky. Bridge & Dam, Inc. v. United States
, 42 Fed.Cl. 501, 518–19 (1998). A common thread among these examples is the presence of some unexpected or unforeseen action on the government's part that ties it to the demanded costs."
So why the persistent belief in the need for a dispute? It may due to the fact that claims are addressed in FAR clause 52.233-1, "Disputes." The reasoning goes that since claims are discussed in the Disputes clause if follows that there has to be a dispute in order for there to be a claim. Not so. The Disputes clause prescribes the procedure for submitting and processing claims and issuing CO final decisions. The clause does not state that a dispute must precede the submission of a claim, nor does anything in the CDA or in FAR Subpart 33.2, "Disputes."
FAR 33.204, "Policy," might be another reason for the mistaken belief in the need for a dispute. It states, in pertinent part, “Reasonable efforts should be made to resolve controversies prior to the submission of a claim.”
That’s the government’s policy, and it makes good sense from the government's perspective. It is designed to avoid the accrual of interest by encouraging settlement before the contractor submits a claim, on which interest accrues. However, the government’s policy in no way restricts what contractors can do. It does not require that contractors submit non-claim REAs before they submit claims. The CDA requires only that contractors believe they have a right to what they want in order to submit claims. Contractors do not have to first submit a non-claim REA and then wait while the government takes its own sweet time to evaluate the submission and to make repeated requests for more information before getting down to business.
To avoid confusion about claims and REAs, read the definition of claim.
Some of my students express shock and disbelief when I tell them that an REA can be a claim. "Are you saying that all of those REAs we get are claims and have to be treated like claims?" No, I'm not saying that. Here is what I'm saying:
First, when COs receive contractor requests for relief they should use the FAR 2.101 definition of claim as a checklist. No matter what the contractor calls it, a contractor’s request should be treated as a claim if it has all of the elements of a claim as defined in FAR 2.101. If it lacks any element of a claim it need not be treated as a claim.
Second, some inexperienced contractors may not understand that "claim" is an officially defined term with legal implications. If for any reason a CO is not sure about a contractor’s intention the CO should ask the contractor. If the contractor says that it meant to submit a claim, and if the submission lacks any element of a claim, then the CO should tell the contractor so it can correct its submission. The CO should explain the implications with respect to preparation costs if the contractor says it intended to submit a claim. If an REA has the elements of a claim, but the contractor says that it did not intend to submit a claim, the CO should ask for confirmation in writing.
Finally, contractors should check the definition of claim when submitting REAs and make sure that they understand what they are submitting -- either an REA that is not a claim or an REA that is a claim -- and the consequences of submitting it. They should make their intentions clear to COs. A warning: If your intention as a contractor is to submit a claim, then make sure that you get it right. Prepare the claim document well and document it fully. That improves the chances of a successful settlement. The government will not hesitate to challenge board or court jurisdiction over the slightest flaw in your submittal. If they succeed it will result in a significant loss of time and money. If your claim is significant, hire an attorney who knows the rules to assist in its preparation.
Every year we see board and court decisions in which one of the parties disputed the tribunal's jurisdiction on the ground that an REA was not a claim. The government does so to force the parties back to the negotiating table and avoid interest. Contractors do so to retain their entitlement to submission preparation costs. Such litigation is a needless and avoidable waste of money and time.
Knowledge, clear communication, good faith, and good will can prevent misunderstandings and needless jurisdictional litigation. But knowledge must come first.
Note 1: Relief, as used in the context of the CDA, is a legal term of art that means "The redress or benefit, esp., equitable in nature, ... that a party seeks in court." Black's Law Dictionary, 9th ed. (2009). According to FAR 33.213( a ), a claim for relief` "arising under a contract" is a claim that can be resolved under a contract clause other than the Disputes clause, FAR 52.233-1. A claim for relief "relating to a contract" is a claim for which no contract clause except for the Disputes clause provides for the relief sought. It is a breach of contract claim.
The certification for claims in excess of $100,000 is stated in FAR 33.207 as follows:
I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of the contractor.
The dollar value of a claim for certification purposes is the absolute value of increases and decreases. See FAR 33.207( d ).
Note 3: Professor Ralph C. Nash, Jr. discusses the sum certain requirement in the August 2012 edition of The Nash & Cibinic Report: “Contract Disputes Act claims: the 'sum certain' requirement." 26 N&CR para. 41.
Note 4: FAR 33.208(a) says that interest begins to accrue when the CO receives the claim or when payment otherwise would be due, whichever is later. The FAR is wrong. The U.S. Court of Appeals for the Federal Circuit has thrice ruled that there is a single “red letter date” for the accrual of interest, and that is the date that the CO receives the claim. Furthermore, interest on a claim can accrue even before the contractor incurs any cost. See Richlin Security Service Co. v. United States, 437 F.3d 1296 (Fed. Cir. 2006) (rehearing and rehearing en banc denied); Caldera v. J.S. Alberici Construction Co., 153 F.3d 1381 (Fed. Cir. 1998); and Servidone Construction Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991).]
I have long argued that the structure of the contracting workforce is out of balance. Most contracting work is simple and repetitive, and includes a large amount of administrative and clerical work, yet most of the 29,000+ people in the contracting workforce (excluding 1101s) are 1102 contract specialists, with 1105 purchasing agents being a very small minority and 1106 procurement technicians/clerks being virtually nonexistent. I have proposed that the government reduce the number of 1102s and hire more 1105s and procurement technicians/clerks (1106s).
It looks like I have won over one very important person. See Steve Kelman's blog at Federal Computer Week, the entry entitled, "A practical way to spice things up for new contracting employees," http://fcw.com/Blogs/Lectern/2010/03/A-pra...sting-work.aspx.
I wrote at some length about this topic in the August 12, 2009 issue of The Government Contractor, in an article entitled, ?Throwing People At The Problem⎯Massive Hiring Will Not Revitalize The Acquisition Workforce.? In that piece I focused on workforce structure, job design, and training, and said the following about workforce structure:
The most populous pay grade in the 1102 workforce is GS-12, followed by GS-13 and GS-11, in that order. The average 1102 pay grade is 11.75. The average grade among 1105s is 7.11. Among 1106s the average grade is 6.14. Our threadbare government is paying relatively high salaries for the performance of relatively simple work. In more than one agency, GS-14s are dong simplified acquisitions.
1102s should be doing complex contracting work, such as strategizing, writing or editing statements of work, analyzing risk, writing plans and special contract clauses, writing proposal preparation instructions and developing evaluation factors for award, advising evaluation teams and reviewing evaluation documentation, performing tradeoff analyses, developing pre-negotiation objectives, negotiating prices and equitable adjustments, resolving claims and disputes, writing final decisions under the Disputes clause, determining cost allowability, negotiating data rights, and developing solutions to contracting problems. They should not have to write synopses and do routine solicitation tasks, like identifying prescribed contract clauses. They definitely should not have to spend significant amounts of time entering data into fields on a computer screen. When 1102s have to spend time doing administrative and clerical tasks instead of being active participants in contract formation and contract administration decision-making and giving contracting advice to others in acquisition, the career field loses prestige and influence.
Some object to the idea of bringing ?low-skilled? 1105s and 1106s back into contracting offices. (One commenter at Steve's blog accused Steve and me of reading "dusty" books and living in the past.) They worry about a return of the old ?caste system? which divided office members into those with college degrees and those without. No one should think of 1105s and 1106s as "low-skilled." That may have been true in the past, but in the future they will have to be very well trained. Consider the military, which uses noncommissioned officers to do purchasing agent work. OJT programs for military personnel are quite good. No one who has known and worked with those personnel, as I have, would consider them ?low-skilled.? They are among the most highly skilled and motivated people I know. For good people without college degrees, the return of 1105 and 1106 positions would open many career opportunities. And those jobs would be a good place to learn some contracting while working on a degree part time. Upon graduation, qualified 1105s and 1106s should be welcomed to compete for entry level 1102 positions.
A different idea is that the government should hire more 1105s and 1106s, but keep 1102 numbers at the current levels of about 29,000+. The government must assign the right people to the right work. Large acquisitions do account for most of the contracting dollars, but they account for very few of the contract actions above the micropurchase threshold. If we assign the simpler work to purchasing agents and the administrative and clerical work to procurement technicians/clerks, we will not need nearly so many 1102s, which means that we could hire proportionately more 1105s and 1106s. Even for large acquisitions, much of the paperwork could be done by procurement clerks. Many actions which show up as large dollar acquisitions are relatively simple, such as exercises of options and funding mods. Procurement clerks could do most of the paperwork associated with such actions, subject to 1102 contracting officer review and signature. Procurement clerks could prepare synopses and do all of the reporting. No, we need to replace 1102s with 1105s and 1106s. This will free 1102s to do the more challenging work and increase their prestige. Retention of all 29,000+ 1102s would neither be necessary nor cost effective. The workload data do not support it.
In a private communication with Steve Kelman, I wrote:
Workforce restructuring would be painful and slow. There is no central workforce management organization in the Executive Branch. Each agency is a kingdom and each contracting office is a fiefdom within. There are many reasons not to restructure. Many managers will not like to admit that their office does mainly simple work. They will prefer to say that they conduct ?complex? acquisitions. Managing a staff of 1105s is not as prestigious as managing a staff of 1102s, and management grades are lower. Moreover, managers simply don't like giving up what they already have. It will take top-level leadership to prompt agencies and contracting offices to assign the right people to the right work, and leadership in contracting is in short supply these days. If you oppose restructuring, don't worry. Nothing is going to happen any time soon. 1102s and the work that they are supposed to do will continue to suffer.
It is hard for today's young 1102s to imagine a world in which 1102s do mainly professional and complex work, assisted by others who do the routine administrative and clerical work and in which 1105s do the relatively simple buys. The world in which they work today is all that they know and it does not seem strange to them. But I and others like me have watched the career field lose the prestige and organizational influence that it once had, and we are troubled and saddened. If I were looking for a career today, I would not choose contracting. I would be bored to death. If a bright young person whom I know and care for were to ask me about an 1102 job, I would advise against it. Except for the challenge of having to do too much with too little, most of the work simply is not very interesting. I know that this is not true in every office, but it is true in far too many offices.
If you are an 1102 with a long time to serve until retirement, you cannot be neutral about this. This is your career I'm talking about.
A Minor League Kerfluffle
Steve Kelman and I have been involved in a minor league kerfluffle over a comment I made in response to a blog post he wrote entitled, “A new way to use past performance in contracting.” He proposed a new contracting incentive. Here is how he described it:
I commented, “I cannot tell you how awful I think the ‘fee’ return idea is. Truly awful.” I let it go at that. But feeling guilty about not explaining myself, I posted a detailed explanation in a later comment. You can read the whole thing here: http://fcw.com/Blogs...re-results.aspx.
Steve responded with a later blog post entitled, “A response to my critics,” later retitled, “How to think about new policy proposals -- feedback on my feedback.” He cited a “fascinating” paper by a Harvard Business School professor to insinuate that what he sees as my negativism is a way for me to feel better about myself. I responded by telling him that he seems to think that acquisition problems can be solved by new policies and procedural gimmicks, but that that the only way to fix deep seated problems in acquisition is to improve the workforce, and I tried to enlist him in that struggle. You can read that here: http://fcw.com/Blogs...m.aspx#Comments.
The Policy-Making Imperative
Here is the problem in acquisition today as I see it:
When someone is unhappy with something, for instance, if they think the government pays too much for goods and services, some official launches an “initiative” and issues a policy memorandum with a snappy title directing that acquisition personnel do things a certain way:
From now on, write performance work statements.
Negotiate fixed-price incentive contracts with a 50/50 share line and a 120 percent ceiling.
Set negotiation objectives for service contracts at 2010 price levels.
Definitize undefinitized contractual actions within 180 days.
They then usually provide for waivers under certain circumstances.
In short, the standard approach to problem solving is to issue policy and procedure directives. Sometimes the policy is called a policy innovation, or an innovative policy. (Innovate is second only to dream as America’s favorite magic word. If alien archeologists visit this planet after we’re gone and examine our surviving records, they will dub us the Dreaming Innovators. They will say that our civilization might have survived if we had spent less time dreaming and innovating and more time seeing reality and using our heads.)
Reactions To Policy
So what happens after a new policy is issued? First, the people in the field (or in the trenches, as some like to say, but really in the cubicles) roll their eyes and sigh. Then they start asking questions:
What do you mean, exactly?
Do you mean this or do you mean that?
Does the new policy apply to this or to that circumstance?
Does the dollar threshold include options?
What is the waiver procedure?
Who can approve waivers?
How long will it take to get a waiver?
Are you going to delegate waiver authority?
And, finally, the ultimate question: How do I do that?
The policy makers go on the conference circuit and hold virtual chautuaquas. Their staffs prepare PowerPoint presentations. They issue additional guidance about the policy and write manuals (which prompt more questions). The trade press write stories and trade associations issue cautionary white papers.
Some in the field, glad to see something new, anything new, get on board and design the innovative implementations of the policy maker’s dreams in the hope of recognition and maybe a silver hammer. Those are the Positivists. The Negativists write skeptical critiques or scathing condemnations, or simply foam at the mouth. Consultants set up shop and write slight “how to” pieces in trade and professional publications, hoping for new business. Some are dubbed “gurus” of the new policy and conduct pricey seminars devoid of details. The most ambitious write a book, or arrange for someone else to write it and then take author credit.
The policy makers set up a reporting scheme. Reporting is late and inaccurate. Ultimately, it is found that surveillance has been poor and implementation has been spotty. Congress holds hearings, complains about the spotty implementation, and enacts the new policy into law, apparently in the belief that everyone respects and fears them and will thus comply. Congress demands reports. Reports are late and inaccurate. The GAO finds that implementation of the law is spotty and ineffective or not as effective as it could be if everyone followed GAO’s recommendations.
Time passes. The policy maker moves on. The no-longer-new policy dims and may fade away entirely. It is ignored by the original policy maker’s successor, who wants her own initiative. It is mentioned no more at conferences. Seminars are offered no longer. Reporting continues, but no one really cares anymore. In time, some future official will launch an initiative that dotty old timers will say seems familiar. And then some crotchety paper hoarder will come in waving a copy of the original memo from a decade or two earlier, proving once again that there is no new thing under the sun.
The Great Game
Policy making is the great game in acquisition. We are being overwhelmed by laws, regulations, case law, policy memos, manuals, and handbooks. Policy making is the only power of the otherwise impotent. Senior officials, especially political (excuse me, I meant presidential) appointees, are touted as successes because they issued a couple of policy memos and attended a lot of meetings before moving on to better jobs on the strength of their newly padded resumes. They then write articles and make speeches about their policy memos and meetings and speak of things still to be done, even though they did not stay on to do them. The mere issuance of a policy memo is deemed a success, regardless of whether it is proven to be effective. If the policy maker is really bold, he or she will simply claim or imply success for the policy even in the absence of verifiable data. If they are modest at all they will claim limited success, which validates their theory, and say that it would have been more effective if implemented properly at the working level.
This has been going on for decades. The real way to improve acquisition is to improve the acquisition workforce -- really, seriously, improve it. But that would be hard and take time, and would be expensive. When most officials talk about improving the acquisition workforce they mean hiring more people. Oh, they will talk about improving the quality of the workforce, but they think that means ensuring that more people get to the official PowerPoint sessions ("training courses"). They have no idea what to do and how to do it. They don’t even have dreams. Innovation is putting the PowerPoint sessions online.
Acquisition works reasonably well if what you care about is that paper gets processed and stuff gets bought. Stuff does get bought. Whether we pay good prices and get good quality within a reasonable period of time is another matter. We often do and we often don’t. The vast majority of buys are for commodities and commodified services, and those go reasonably well, although there will always be something for the GAO and the IGs to complain about -- poor implementation or regulatory violations that, if fixed, might produce better results. As for the big stuff -- major defense systems and large information technology programs -- things are generally a mess, but they have been a mess pretty much throughout history. We know what the problems are, we just can’t fix them. We never will. We work in a cloud of mediocrity.
The Way To Real Improvement
In a complex system like acquisition, any attempt to fix deep seated system faults through policy will fail. The only way to get at the deep seated problems in acquisition is through workforce improvement, and I don’t mean numbers. We need well-educated, superbly trained people for the big stuff, and we do not have enough of them. Mismanagement and poor leadership will prompt many of the best of the new recruits to leave. The problems are beyond the reach of management in the organizational structure we have now for the simple reason that no one is in charge. Only someone with the power and the ruthlessness of a Stalin could fix the system. A few purges might be just the thing.
Here’s how to have a good career in contracting: First, study. Read a lot, read widely, and think about what you read. Next, find a contracting office to work for that does demanding work, like the Air Force Space and Missile Systems Center in El Segundo, California, which is doing really interesting work, is staffed by people of very high quality, and is very well led. Work, learn, and grow. If that is not enough, write articles and books. That will keep you busy. Ignore the rest, because you cannot do anything about it. Roll with the punches. Practice a wry smile.
I’ve heard that some call me the prophet of doom (or maybe it was gloom, I’m not sure). I’m not, really. I just do not rest my hopes on the system. I rest them on people, individuals. The only hope for our system is that committed individuals will never stop trying to be the best that they can be and to bring out the best in their colleagues. If enough individuals will do that, good things will happen. Try it. You’re going to like the way you feel.
Here is an in-house training exercise for new acquisition personnel. The objectives are to: (a) give the participants a good overview of the acquisition process and ( introduce them to the FAR and to the language of acquisition. These objectives are achieved by requiring the participants to actively engage with acquisition language and concepts.
The exercise entails directing the trainees to (1) read FAR Subpart 7.1, Acquisition Plans, (2) look up officially defined words and terms in FAR Part 2 and in an official glossary of acquisition terms, and (3) develop a list of questions for discussion. It then entails conducting a discussion/Q&A session.
The teacher must be a competent professional with a thorough understanding of the acquisition process and better than average knowledge of the FAR. He or she must conduct two meetings one week apart. These will take a total of five hours. The trainees' work will require between six and ten hours of private study time, the actual length depending on the abilities and diligence of the individual trainee.
Unlike the passive lecture-cum-PowerPoint-slides approach to training, this exercise requires the trainees to work and struggle at learning. Making them work and struggle will deepen their knowledge and improve their retention of the knowledge gained. There are few things more pointless and less enjoyable to bright people than a turn-off-your-brain-sit-in-your-chair-read-the-slides briefing-style "lecture," and nothing less likely to yield pleasure, learning, and retention.
Why FAR Subpart 7.1? Why not Subpart 8.4, Part 13, or Part 15? Wouldn't a reading of any of those parts be more practical? Not in light of the objectives, which are introductory in nature and not "how-to." Making newcomers plunge into parts of the FAR which are associated with so much controversy and disagreement would be to send them into the heart of darkness. FAR 7.1 is a better starting place. It covers the entire acquisition process, is not too long, and doesn't require an understanding of complex acquisition concepts.
The exercise can serve as a launching pad for further training exercises.
STEP 1. PRE-MEETING PREPARATION BY THE TEACHER
a. The teacher should download the Defense Acquisition University Glossary of Acquisition Acronyms and Terms, 12 ed. (July 2005) and print one for each trainee. (Use the DAU glossary even if you work for a civilian agency, because the Federal Acquisition Institute version apparently has not been updated since 1998, which makes it too old to be used today.)
b. The teacher should download the pdf version of the current FAR from www.acquisition.gov and print out FAR Part 2, Definitions of Words and Terms; FAR Subpart 7.1, Acquisition Plans; and the contract clause at FAR 52.202-1, Definitions (July 2004). Print a copy of each for each trainee.
c. The teacher should be (or become) thoroughly familiar with the reading materials and do the work the trainees will have to do before the first meeting with them.
STEP 2. THE FIRST MEETING
The teacher meets with the trainees on a Monday morning for two hours. There need be no limit to the number of trainees at this meeting. The trainees will need a highlighter, a ballpoint pen, and a notebook.
The teacher must:
a. Explain the exercise and its objectives.
b. Distribute the copies of FAR Part 2 and 52.202-1 and then lead the trainees through FAR Section 2.000 and the introductory paragraphs of 2.101. Then lead them through FAR 52.202-1 and explain its importance during contract formation and contract performance. Point out that definitions appear throughout the FAR, but that the only ones they must look up for the exercise are the ones in FAR Part 2 and the DAU glossary.
Emphasize the importance of knowing the language of acquisition, using some examples of words and terms defined in FAR Part 2, such as contract, cost or pricing data, day, executive agency, and United States to show them how even familiar words and terms can take on special meanings in the context of acquisition.
c. Instruct the trainees to go through FAR Part 2 and highlight every word or term that is defined (not the complete definitions), telling them not to take time to read the definitions and giving them 20 minutes to complete the task.
d. Distribute the copies of FAR Subpart 7.1 and instruct the trainees to read FAR sections 7.101 through 7.106⎯3,925 words, about five and one-half pages. Tell them not to bother with sections 7.107 and 7.108. Tell them to read briskly to get an overall sense of the contents, but not for understanding--more than a scan, but less than a careful read. Tell them that they have one hour.
e. After they have read FAR Subpart 7.1 through the first time, instruct them to go through it again and place a forward slash (/) at the end of every sentence. Do not tell them to do this until after they have read the material through the first time. Tell them that they have 30 minutes to complete that task.
Why make them do that? The participants must learn that they cannot read regulations, the FAR in particular, the way that they read newspapers, magazines, and novels. They must read in a state of heightened attention. Making them place a forward slash at the end of every sentence will force them to be consciously analytical and reveal to them that sentences in the FAR are sometimes quite long and complex. The act of placing the slashes will reveal the structure of the text, the slashes being more striking than the periods. The syntactic effect of periods is sometimes diminished in text that uses a lot of abstract words and terms. The slash helps them to focus on sentences as units of meaning, each with its own subject and predicate.
f. After they have read the material through the second time and placed slashes at the end of every sentence, tell them that they have a week to read the material through a third time for complete understanding. Tell them not to bother reading the parts of FAR that are referenced in Subpart 7.1. (Some of those references can be the basis for future exercises.)
g. Instruct them to (1) look up the definitions of abbreviations, acronyms, words, and terms in FAR Part 2 and the DAU glossary, (2) type a list of all words and terms that they looked up, and (3) type a list of any questions they have about what they read. Tell them that they must turn in their two lists on the following Monday morning. Instruct them to write their questions in complete sentences, properly punctuated. Tell them that you will evaluate them on the basis of the clarity of their questions.
STEP 3. ORGANIZE THE DISCUSSION GROUPS
If there are more than 10 trainees, then organize them into discussion groups of 10 or less. As a general rule, no discussion group should include more than 10 people. Notify the trainees of their group assignments.
STEP 4. RECEIVE, REVIEW, SORT, AND CONSOLIDATE THE LISTS
The trainees are to turn in their lists on the Monday morning after the first meeting. The teacher then must review, sort, and consolidate the lists of words and terms and the lists of questions into single lists for each discussion group. If there are too many questions for a three-hour meeting, select a reasonable number (about 10) of the best. Eliminate any incoherent questions. Make a copy of each of the two discussion group lists for each group member.
Don't reward people who write incoherent questions by spending time trying to figure their questions out. Don't baby trainees that way. Reject poor work. The trainees are presumably college-educated persons who ought to be able to read the material, do the research on definitions, think about what they have read, figure out what they understand and what they don't, and write intelligent and coherent questions. Don't accept any excuses based on "the material unfamiliar to me" or "I'm new." Of course it's unfamiliar to them. Of course they're new. The purpose of the exercise is for new people to begin to familiarize themselves with acquisition and the FAR. They must familiarize themselves, and that's not easy, but they are being paid to learn. Make them earn their paychecks by thinking hard and writing clearly. Do not molly-coddle trainees. Acquisition is a business for tough-minded people who spend other people's money. Demand first-rate work from day one. This is an important part of the training and of workforce conditioning and development.
You can learn a lot about the attentiveness, intellectual curiosity, diligence, reading and writing ability, and relative need for hand-holding of each of the trainees from their two lists and their participation at the second meeting. This is a chance to separate the thoughtfully clueless from the clueless-without-a-thought.
STEP 5. THE SECOND MEETING
On the Wednesday after the submissions of the lists, meet with the trainees in groups of 10 or less for three hours (no more than that) to discuss the definitions and questions. (Don't wait too long after the submissions to hold the second meeting. You want the trainees to have the materials freshly in mind.) Hand out the copies of the two consolidated lists for the group and use the list of questions as an agenda.
The purpose of this meeting is not for the teacher to answer the questions, but to get the trainees to think about and discuss them. Think of the meeting as more of an "exploration" session than a Q&A session. Also, remember that you are not teaching about acquisition plans or acquisition planning, per se, but using the FAR coverage of those topics to teach about the acquisition process and acquisition language in general. Don't turn the meeting into an acquisition planning how-to session.
Handle this meeting like a graduate school seminar meeting. The teacher should prepare thoroughly and not try to wing it. Have a discussion plan for each question; don't just ask for "thoughts," comments, or additional questions. The teacher should bring his or her own list of words or terms in FAR Subpart 7.1 that are defined in FAR Part 2 or in the DAU glossary, and also a list of words or terms that are defined elsewhere in the FAR, e.g., multi-year contracting.
The teacher should not act as though every question has a definitive answer. There are lots of "unsolved" mysteries in acquisition, such as the definition of subcontract and of subcontractor as used in FAR 52.215-12, which are problematical. The trainees must learn of the existence of such problems and learn to be prepared to cope with them.
Bring additional materials for further reading after the meeting. For example, the teacher could prepare a set of one-page elaborations or "fact-sheets," and bibliographies for selected topics, such as FAR 7.105(a)(1), statement of need; 7.105(a)(4), capability or performance; 7.105(a)(7), risks; 7.105((2) competition; and 7.105((5), budgeting and funding. Subpart 7.1 is an especially rich source of training topics.
It is crucially important when going over the questions to point out any officially defined words and terms that the students missed. Emphasize again that learning the language of acquisition is an important part of their early career development. Point out the numerous references throughout Subpart 7.1 to other parts of FAR and emphasize the scope and complexity of the acquisition process. Point out how much there is for them to learn and the importance of developing and maintaining their own personal learning plan.
It would be extremely beneficial for each trainee to bring a copy of the FAR to the meeting, so that the teacher can refer to it when discussing the questions. If the three-ring binder version is too unwieldy, then the small CCH or West editions will do, but since they are always out of date by the time they are published the teacher should use a three-ring binder version and alert the students to changes.
This exercise should not be too demanding for college graduates and will serve as a good kickoff to an acquisition education.
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.
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?
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?
Alice Wonderly has read the article given to her by Mr. Ewing. She shared it with other trainees in her program and they’ve discussed it, but they have questions. So Alice telephones Mr. Ewing to set up a meeting.
Alice: Hi Mr. Ewing. I read the article you gave me and I wonder if you’d have some time to talk with me about it. I wrote down some questions. And, well, I shared the article with some other trainees in my program office, and they’d like to know if they can come, too. They have questions, too. And I shared my notes of our last conversation with them, the one about evaluation factors.
Ewing: Okay. Good. That’s fine. Patrick told me you’d be calling. How about tomorrow at 11 a.m.? We can work through lunch, so bring brownbag lunches. Patrick will be here, too, with some other trainees in our program.
A: That sounds great. I’ll see you then.
E: Okay. And bring your copies of the article and your reading notes.
A: Will do.
Wednesday, 11 a.m., Mr. Ewing’s conference room.
A: Hi Mr. Ewing.
E: Alice. Come in.
A small troop of seven trainees enters the room and take seats at the conference table.
E: Introduce your colleagues.
A: Mr. Ewing, this is Denise Clare, a second-year intern. This is Jack Dixon, a first-year intern, like me. And this is Jane Mera, also a first-year intern.
Patrick: And Alice, I’ve brought Carol Spicer and Sotero Dominquez, both first-year interns.
E: Hi all. And you’ve all read the article?
E: And did you make reading notes?
E: And do you all have questions?
A: We consolidated our questions and made sure they were clear as to subject, query, and presuppositions.
E: Where did you learn about those elements of questions?
A: From the reading materials you gave to Patrick.
E: Good. Very good. How was the article? Did you find it difficult?
Denise: A little. Lots of academic language and a technical style. But we got some things sorted out through a little internet research and discussion. For instance, we found some illustrations and explanations of “value trees” that helped a lot. And we found some stuff about “swing weighting.”
E: Very good. Before you ask your questions, let me give you some background that might make my answers easier to understand. Sound okay? You might want to take some notes.
All nod and take out notebooks and pens.
E: Economists have long tried to understand how people make important choices. After World War II, economists, psychologists, and systems analysts and engineers began intensive study and theorizing about how people do and should make important decisions. They were especially interested in how people make important and complex policy and business decisions when there is uncertainty about the consequences of any particular decision. They wanted to figure out the best way to make such decisions.
By the 1950s, researchers at Harvard, University of Michigan, Stanford, Rand Corporation, Johns Hopkins and other institutions were very active in the study of decision making. They read, theorized, conducted experiments, and proposed procedures, and they wrote technical papers and books about their findings. Much of their research was funded by the Department of Defense, which was very interested in systematic, rational decision making.
By the mid-1960s this field of study had became known as “decision analysis,” and its prescriptions were being applied in all kinds of government and business endeavors, including acquisition. Another name for the field is Multiple Attribute Utility Theory or MAUT.
The key problem in decision analysis was to determine the best way to go about making a decision when the decision maker has multiple and conflicting objectives and must consider multiple evaluation factors and make tradeoffs. How do you do it consistently and rationally rather than by instinct, which can be hard to explain and defend?
As you know, the article you read was by Dr. Ward Edwards, a psychologist and a pioneer and leading figure in the science of decision analysis. He died in 2005.
He had taught at Johns Hopkins University, the University of Michigan, and the University of Southern California. He did research in decision making for the Advanced Research Projects Agency, the Air Force, the Navy, and Rand, and wrote a very large number of scholarly papers, around 100, and a couple of important books. He was the co-author of the 1986 magnum opus on decision analysis, Decision Analysis and Behavioral Research. The research in that book was sponsored in part by the Navy’s Office of Naval Research.
Shows them a thick, well-worn volume.
Dr. Edwards wrote a good background paper and summary of the early research in 1954, “The Theory of Decision Making." That paper was funded by the Office of Naval Research and Johns Hopkins University. He wrote an update in 1961, entitled, “Behavioral Decision Theory,” which was funded by the Air Force. In 2001 he wrote “Decision Technology,” about the impact on computers and the web on decision making. All of those papers are available on the internet.
In the 1950s and 60s we were in the middle of the Cold War with the Soviet Union. We faced many technical and economic challenges. What kinds of systems did we need to counter the threat? What kinds of technologies should we develop and use? What design concepts should we choose? What economic choices should we make?
In 1961, Charles Hitch, the Assistant Secretary of Defense (Controller) and Roland McKean, a Rand research economist, discussed decision making challenges in a famous book, The Economics of Defense in the Nuclear Age. They discussed the problems in detail in Part II. Chapter 9, “The Criteria Problem,” is especially interesting. Actually, if you read that book you’ll see that some of the authors’ points still apply today.
Shows them another thick, well-worn volume.
Among DoD’s challenges was figuring out how to evaluate proposals for the complex new weapon and space systems we needed and how to select a concept and a contractor. DoD wanted to know how to choose the right evaluation factors, how to rank the factors in importance, how to evaluate proposals and document evaluation findings, and how to make and justify selection decisions. And when you track the development of the source selection process you can detect the influence of decision theorists and systems engineers.
You can see the influence of decision analysis in source selection in the description of the Air Force source selection for the Tactical Fighter Experimental or TFX, conducted in 1961 and 1962. The TFX became the FB-111 fighter-bomber. After evaluating proposals, the Air Force chose Boeing, but Secretary of Defense McNamara rejected the Air Force’s decision and gave the contract to General Dynamics, instead.
That was extremely controversial and distressed certain members of the U.S. Senate, which held lengthy hearings in 1963 about the Secretary’s action. In testimony before the Senate, Colonel Charles Gayle, who chaired the evaluation panel, described the proposal evaluation process in detail.
Shows them a volume of the Senate hearing testimony.
Over the course of several days Colonel Gayle provided what is probably the most interesting insider description of a major source selection that’s ever been given. What he described was an instance of the application of decision analysis methods, though not the specific method Dr. Edwards described in the paper you read.
He described the evaluation panel (about 200 people). He described aspects of the operational requirement and the work statement. He described the evaluation criteria, and in that description you would recognize a “value tree.” He described some of the evaluation findings – proposed costs, most realistic costs, and nonprice strengths, deficiencies, and weaknesses. He explained raw scores, importance weights, and weighted scores, and he explained the panel’s recommendation.
The procedure used by the Air Force in 1961-62 was very similar to procedure it used in 2008 to select the air tanker contractor. One difference was that in the TFX source selection the Air Force used numerical scoring, while in the air tanker source selection it used the current DOD color rating system.
Here’s an old official document, “Guide for Proposal Evaluation and Source Selection,” dated July 1966, 52 pages long, and published by the Systems Development Division of the U.S. Army Aviation Materiel Laboratories. It includes a sample evaluation plan. It’s right out of the TFX source selection playbook, complete with the same 0 to 10 point numerical scoring system. It’s an early decision analysis approach, but it never explicitly mentions decision analysis, and neither did Colonel Gayle in his Senate testimony.
Shows them the guide.
My pitch is this: In order to truly understand the source selection proposal evaluation process, explain the process to others, and lead a team in planning and executing major source selection, you need to understand something about decision analysis concepts and processes.
In 1991, two professors at the Air Force Academy wrote a paper entitled, “The Application of Decision Analysis Methods to Source Selection in the United States Air Force.” They cited Edwards’s 1986 book Decision Analysis and Behavioral Research and his 1977 paper describing the SMART method, which was cited in the paper that you read. The authors claimed that source selection could be improved by greater application of decision analysis, specifically, the Analytical Hierarchy Process, which is a decision analysis method. By the way, they were critical of the color rating method.
In 2006, an Air Force officer submitted a master’s thesis to the Graduate School of Engineering and Management at the Air force Institute of Technology entitled, “A Decision Analysis Tool For The Source Selection Process.”
There are at least one hundred papers catalogued by the Defense Technical Information Center, DTIC, that discuss the application of decision analysis in source selection, dating from the 1970s to the recent 2000s.
Decision analysis methods are useful not only for source selection, but for all kinds of nontrivial acquisition decision making, and COs are decision makers or, at least, they’re supposed to be. Here are some papers that provide examples:
A 1974 study report submitted to the Defense Systems Management College was entitled, “Decision Analysis for the Program Manager.”
A 1981 master’s thesis submitted to the Naval Postgraduate School was entitled, “Multi-Attribute Utility Theory To Assist Top-Level Acquisition Decision-Making.”
A master’s thesis submitted to the Graduate School of Engineering and Management at the Air Force Institute of Technology in 2005 was entitled, “Decision Analysis Using Value-Focused Thinking To Select Renewable Alternative Fuels.”
A 2010 paper by a professor at the Naval Postgraduate School about the use of decision analysis in acquisition was entitled, “Economic Evaluation of Alternatives.”
And there’s a 2008 paper entitled, “Integrated Decision Technology for Acquisition and Contracting” that was published by the Naval Postgraduate School.
Decision analysis can be used in business case development. Here is a handbook, Better Business Cases: Guide to Developing the Detailed Business Case, 28 February 2014, written by Treasury office in the United Kingdom.
You can even use decision analysis in negotiation and in claim decision making. Here's an article from a 2004 issue of Marquette Law Review, entitled, "Decision Analysis in Negotiation." Here's a chapter from The Handbook of Dispute Resolution (2005), entitled, "Finding Settlement with Numbers, Mays, and Trees." And here's a 1996 article from the Harvard Negotiation Law Review entitled, "Decision Analysis As A Mediator's Tool."
The paper that I gave you to read, which was published in 1994, is a relatively recent contribution to decision analysis. Contributions are still coming in.
There are many academic journals today that are devoted to decision making, such as Journal of Multi-Criteria Decision Analysis, International Journal of Management and Decision Making, Journal of Behavioral Decision Making, Judgment and Decision Making, Decision, and Decision Analysis. The current issue of Decision Analysis, has an article entitled, “Search Before Tradeoffs Are Known.” I haven’t read it yet, but the abstract says [reaching and thumbing through a stack of papers, choosing one, and reading aloud]:
uncertainty about trade-offs is likely to occur, especially in settings that involve parallel search (e.g., vendor selection, new product development, innovation tournaments). We show that incorporating uncertainty about trade-offs into a model changes its search strategy recommendations. Failing to account for such uncertainty, which is likely in practice, leads to suboptimal search and potentially large losses.
That sounds interesting, since it mentions vendor selection.
Now, look -- all the stuff in those journals is academic, technical, and hard for non-specialists to understand. The journals are pricey. I don’t subscribe to them, and I don’t think you need to read them. But you can find nontechnical articles about decision making in publications like the Harvard Business Review and the MIT Sloan Management Review.
The May 2015 of HBR issue has four articles about decision making, and the HBR website has a recent digital article entitled, “How You Make Decisions is as Important as What You Decide.”
The MIT Sloan Management Review website has posted many articles about decision making. A Spring 2015 article is entitled, “When Consensus Hurts the Company.” Those are the kinds of things you might want to read.
An especially good article for contracting folk is “Even Swaps: A Rational Method for Making Trade-offs,” which was in the March-April 1998 issue of HBR. It was written by three prominent decision analysts.
So, why did I give you Ward Edwards’s technical article? Because you have a career choice to make. Contracting is a combination of professional, administrative, and clerical work. The most interesting part of it is the professional work. The administrative and clerical work is necessary and unavoidable, but boring. If that’s all there was to contracting, I would have changed careers long ago.
One of the jobs of a contracting pro is to explain professional issues and methods to laypersons like engineers and other requirements personnel. Source selection is a contracting task, which is why FAR makes the contracting officer the default source selection authority. That means that one of the jobs of the contracting officer is to be able to explain the proposal evaluation process to those who must do it. In order to be able to do that, the contracting officer must have what I call “deep conceptual understanding.” And that kind of understanding comes only after a struggle. You have to read, think, read some more, and think some more.
Official guidance, such as the DoD source selection procedures, explain procedures, but not the reasons for them and the concepts that underlie them. It’s likely that the people who write such manuals don’t know about the reasons and concepts. You have to read other things, things like Dr. Edwards’s paper, in order to see and understand the deep stuff. And, as you now know, reading that kind of thing is real work.
Now, look -- you can do good work in contracting without knowing the deep stuff. You can study the FAR and GAO decisions and learn the rules, you can cut and paste, and you can get promoted. But you’ll never be a leader and innovator. You’ll never be the person that they won’t start the meeting without, unless all they want to hear about is rules. And you won’t be able to teach the next generation, except by talking to them about rules and giving them something to cut and paste.
Anyone can learn to read FAR, read GAO decisions, and cut and paste a source selection plan. But you can’t learn underlying concepts that way or how to apply those concepts in different types of acquisitions. What you learn by cutting and pasting won’t help you brief and explain proposal evaluation and tradeoff analysis to a trainee or an inexperienced source selection team. Cutting and pasting won’t teach you how to be an expert professional advisor to a program manager and how to be an acquisition leader and innovator. Cutters and pasters can only be advisors and leaders in the art of cutting and pasting. They can only be expert followers.
By reading the article I gave you and coming here today, you proved to me that you’re willing to do the hard professional work in pursuit of deep understanding.
So far, at least.
Okay. End of the introductory briefing and sermon. Take out your copy of the article and your reading notes.
Having read the article, you know that Dr. Edwards’ SMARTS and SMARTER methods of decision analysis entail:
Step 1. Identifying who will participate in the decision process and determining what their objectives are with respect to the decision to be made.
Steps 2 and 3. Identifying the choice alternatives you’re going to evaluate and the evaluation factors.
Step 4. Creating an object/factor matrix and entering factor values into the cells.
Step 5. Eliminating any “dominated” alternatives.
Step 6. Converting raw measurements on various scales to a common “uitility” scale.
Steps 7 and 8. Ranking the evaluation factors and assigning specific weights, then calculating the total “utility” weighted scores.
Step 9. Making the decision.
There are several variations on this method, such as the Analytical Hierarchy Process and others. But they are generally based on the same kind of “additive weighting” approach.
Now, what are your questions?
To be continued…
I just read an online column in which the author (1) asserted that the government neglects contract performance management to its detriment and (2) called for the devotion of more resources to that acquisition function. I don’t know on what basis the assertion was made or whether it is true, but I would not be surprised to learn that it is. My impression is that most contracting people devote most of their time to acquisition planning, contractor selection, contract award, and to unavoidable contract mods and postaward administrative matters. I suspect that most have little or no time for actual contract performance oversight and management.
If that is true, why would it be so? I am not sure, but I believe that a major contributing factor is the multiple-award task order contract. (By “task order contract” I mean an indefinite-delivery indefinite-quantity (IDIQ) contract for services.)
We spend more on services than supplies, and we conduct a lot of competitions in order to spend that money. We conduct competitions under FAR Part 13, FAR Part 14 (a few), FAR Part 15, FAR Subpart 8.4, and FAR Subpart 16.5. The reason for conducting Part 13, 14, and 15 competitions is obvious and understandable, but the Subpart 8.4 and 16.5 task order competitions are competitions on top of competitions. We do them because Congress wants agencies to continue the pursuit of lower prices after contract award and keep pressure on contractors to perform well.
Competition is resource intensive, time-consuming, and costly to all involved. How much time and money do all the 8.4 and 16.5 competitions cost and how much money, if any, do they actually save in the long run? Do they, in fact, result in better quality than could be had through effective contract management? No one knows, because no one keeps track.
The preference for multiple awards of task order contracts was a provision of the Federal Acquisition Streamlining Act of 1994, Pub. L. 103-355, §§ 1004 and 1054. The FAR councils implemented the statutory preference in FAR 16.504 and 16.505. FAC 90-33, 60 FR 49723, Sep. 26, 1995.
I commented on the proposed rule, 60 FR 14346, Mar. 16, 1995, in an article for The Nash & Cibinic Report entitled, “The New Rules for Multiple Award Task Order Contracting” (June 1995, 9 N&CR ¶ 35). In that article, I said:
[T]he proposed rule is significant because of the policy preference for multiple awards and task order competition. Presumably, multiple awards and competition among the awardees for task orders would pressure the awardees to continuously increase their productivity and the quality of their output. But multiple awards and task order competition could also increase the administrative cost and lead time associated with the issuance of task orders, and those effects could cancel out or even overwhelm the advantages accruing from task order competition. Although the idea of awarding multiple task order contracts for the same service and requiring that the awardees compete for individual task orders is not new (a few agencies have been doing this for many years), the vast majority of task order contracts have been single awards. Thus, the new policy can be expected to have a significant effect on procurement operations.
I also said:
The multiple award preference policy states that every awardee must be given a “fair opportunity” to be considered for the award of each task order in excess of $2,500. The proposed rule leaves the choice of evaluation factors to the CO's discretion. The CO need not publish a synopsis, solicit written proposals, or conduct discussions with awardees prior to the award of a task order, proposed FAR 16.505
(1). The rule precludes protests against task order award decisions. Agencies must appoint task order “ombudsmen” to handle complaints from awardees about task order selections, proposed FAR 16.505
Notwithstanding these liberal policies, it is not difficult to imagine Government procurement officials conducting a mini-source selection before the issuance of each task order. Some will almost certainly consider a more formal procedure to be necessary to ensure fairness. One can easily imagine requests for proposed task order “performance” plans or “management” plans, especially for task orders of significant dollar value. One can also imagine requests for extensive cost breakdowns, certified cost or pricing data, and proposal audits. If too complex and demanding, such procedures would significantly increase an agency's administrative costs, extend the lead time associated with task order issuance, and force awardees to incur significant costs in the preparation and negotiation of task order proposals.
And I concluded:
The objectives of the proposed rule about the task order contract multiple award policy preference are unstated, but one objective is undoubtedly to lower the cost of services provided under task order contracts by maintaining competitive pressure on contractors throughout the life of the contract. This may be a reasonable expectation based on theory, but there are many reasons to believe that it will not work as intended. The proposed rule of March 16, 1995, if issued unchanged as a final rule, will not increase the policy's prospects for success. It simply fails to address all the issues that the policy creates in ways that will assist working-level procurement officials to implement the policy in an intelligent manner.
Well, we all know what happened after FASA and FAC 90-33. The number and dollar value of acquisitions of services under multiple-award task order contracts (and GSA FSS contracts) soared. There was a lot of misuse and sloppy practice. In reaction, Congress and the FAR councils made the once liberal rules more voluminous and restrictive, not only for task order contracts under FAR Subpart 16.5, but also for orders against GSA Federal Supply Schedule contracts under FAR Subpart 8.4.
Competition is an essential part of acquisition policy, but competitions clog the acquisition system by absorbing a lot of human resources, taking a lot of time, and costing a lot of money. I believe that the multiple-award preference has made for a lot of unnecessary and ineffective competitions. It is not at all clear that the contracting results have been better than they would have been had agencies been allowed to make single awards without hectoring by the GAO, review teams, IGs, and other critics. Would America really be worse off if agencies simply conducted one competition for a task order contract, chose one contractor, awarded one contract, and focused on getting the best performance from that firm under that contract?
Multiple awards can be useful and have a place in acquisition practice, but I think that the statutory and regulatory preference for multiple awards has been one of the worst things that has happened to postaward contract management. It has diverted precious human resources to processes of dubious effectiveness and away from work that, if done well, would likely have a much more direct and immediate impact on results.
If anyone believes that better contract performance management yields better results and is looking for more resources to devote to that work, start by seeking the elimination or moderation of the multiple-award preference.
Four ideas to make elimination or moderation of the multiple-award preference more palatable to Congress:
1. Limit the duration of ordering periods under single-award task order contracts to three years, including options.
2. Amend the applicable statutes to expressly allow agencies to renegotiate prices and rates in single award contracts and prices and rates in contract extension options after contract award, without conducting a new competition.
3. Allow agencies to negotiate and award a new contract of up to three years duration with one of the original competitors without conducting a new competition if the original awardee's contract is terminated for convenience or default during the first year of the ordering period.
4. Develop a special course in services pricing and price negotiation for all COs who manage task order contracts and require them to attend and successfully complete the course within the first year of their assignment to such a contract.
Innovation: How Not To Go Down In Flames
The role of each member of the acquisition team is to exercise personal initiative….
Contracting officers should take the lead in encouraging business process innovations….
There’s guns across the river aimin’ at ya
Lawman on your trail, he’d like to catch ya
Bounty hunters, too, they’d like to get ya
Billy, they don’t like you to be so free
—Bob Dylan, “Billy 1”
In a thread in the Wifcon Forum Contracting Workforce category entitled, “Personal Initiative: Who Has Used It?”, Bob Antonio asked for answers to four questions:
I’m especially interested in the answers to the first question: “Have you ever tried personal initiative but you were shot down by ‘higher ups’ because the FAR did not authorize something?”
So far, Bob has received seven responses. Five of the seven were “Yes.” The “yes” answers are the ones that interest me. I wonder why the would-be personal initiators got shot down, given the persistent calls for innovation these days. Even some blockheaded bureaucrats say that they want to change their world.
My complaint about all the presidential appointee/career management calls for initiative and innovation is that they they’re not honest about just how hard it is to move a bureaucracy in a new direction, even if by only a compass point or two. Such faithless calls risk alienating the very people the bosses claim to want to motivate, especially newcomers, who might react badly when their initiatives are rejected. The bosses may be preparing fertile ground in which to grow a new generation of cynics.
In my experience, many, maybe most, working level proposals for innovation fail, because the initiators didn’t know what they were in for, didn’t understand the need for intelligence and tactical planning, and made a poor presentation. They wanted to beneficially change their agency’s behavior, but they didn’t know how to go about it in the right way.
* * *
Suppose that you are a journeyman contract specialist in a “conservative” Government contracting office. Suppose further that you have just completed a three-day seminar in source selection in which a charismatic instructor argued persuasively that you could streamline and speed up the source selection process by asking for oral presentations from offerors instead of written technical proposals. The instructor even pointed out that the technique is expressly authorized by FAR 15.102.
You have no hands-on experience with oral presentations. You’ve never seen one, and you haven’t read much about them. But, newly enthused, you go back to your office, make some inquiries, and learn that your agency has never used them in place of written technical proposals. So you go to your boss and propose asking for oral presentations instead of written technical proposals in an upcoming source selection to which you have been assigned.
Your boss, the Contracting Officer, who has not used oral presentations and who is not really expert at source selection (though he thinks he is), cuts you off. He says that oral presentations will expose the agency to protests about improper discussions. He also says that there’s no good way to document the presentations or the evaluations of them. Bad idea. Forget about it.
You visit an attorney in the legal office, who says much the same.
You talk to colleagues, but none of them have used oral presentations and don’t know much about them.
You approach the program manager, who is not expert in source selection, has no experience with oral presentations, and doesn’t understand how oral presentations can replace written technical proposals, even though she says that written proposals are a time-consuming pain to read, evaluate, and score. She worries about how you would incorporate oral presentations into a contract. She asks a lot of questions about the process, to which you have no definite answers.
Finally, by happenstance, you run into the director of contracts, your boss’s boss, at lunch in a nearby sandwich joint. You mention your ideas to her. She listens politely, but says that she hasn’t the time right then to discuss the matter. She tells you to make an appointment to come to her office. Later that afternoon your boss fusses at you for going over his head. He tells you again to forget about it.
You’ve gone down in flames, crashed, burned. So you cut and paste the traditional proposal preparation instructions and grumble about the higher-ups and the lawyers.
What have you learned? Well, if you paid attention, you should have learned that you just tried to sell the idea of using a bicycle to people who’ve never seen a wheel.
* * *
Before we go any further, it’s a good idea to keep in mind that many of today’s established contracting rules and procedures were once innovations. The Truth in Negotiations Act was an innovation of the late 1950s, as was the source selection tradeoff process, sophisticated numerical proposal scoring, and the modern concept of discussions with offerors within a competitive range. The formal evaluation of past performance was an innovation of the mid-1960s that failed and was revived in the 1990s. The imposition of Cost Accounting Standards was an innovation of the 1970s, as was the proposal color-rating system, which was designed to solve problems created by misuse of numerical scoring. The Competition in Contracting Act was an innovation of the early 1980s. Electronic proposal evaluation software was an innovation of the 2000s.
Another thing to keep in mind is that managers and staffs in organizations involved in Government contracting are geared for rule compliance. Failure to comply can have consequences, sometimes serious ones. It would be one thing if the rules were clear and unambiguous, but they’re not. The rules are badly written and subject to lawyerly interpretation games and to time-consuming and costly litigation. The compliance mind casts a shadow over all proposals to innovate. Compliance is not risky. Innovation might be very risky. These realities tend to make managers and staffs conservative and reluctant to embrace change that is promoted from the bottom up.
What makes me mad at political appointees and career managers who call for innovation is that they fail at one of their most important leadership functions—teaching their people. If you want people in a compliance-oriented organization to innovate, you must teach them how and pave the way through the bureaucracy. Senior managers who encourage people to innovate without giving them navigation charts for the Sea of Bureaucracy and a reliable course heading deserve a kick in the pants. Some of their best people will end up lost.
Most of you initiator/innovators don’t have good senior managers, so you will have to plot your own course. Suppose that you want to innovate with oral presentations in source selection. Start by asking yourself some questions:
1. How well do you know and understand the applicable source selection rules and practices —not just as they appear in FAR, your agency supplement and policy documents, and in your agency’s handbooks and manuals, but also as interpreted and applied by the GAO and the Court of Federal Claims? What do you know about the history of those rules and practices, where they came from and why? How deeply have you thought about them?
2. What do you know about the concept of the technical proposal and about their typical content? What do you know about preparing them? What do you know about the actual experience of evaluating them? What do you know about their legal role in contract formation and administration? What have you read about the criticisms of them?
3. What have you read about oral presentations in the professional literature, in publications such as Public Contract Law Journal and Contract Management magazine? Did you Google <oral presentations in source selection> and read what you found?
4. Do you know how many protest decisions there have been in which oral presentations were an issue? How many of them have you read? Did you take notes about the kinds of acquisitions in which oral presentations were used, the particular methods that were used, and the issues involved? Did you compile won/lost statistics and reasons?
5. Did you check the past year’s listings at FedBizOpps to find acquisitions in which oral presentations were employed? Did you get the solicitations? Did you call the contracting officers to ask how they went about it, how it came out, and lessons learned?
6. Did you conduct market research to find out whether oral presentations or something similar (marketing presentations or “sales pitches”) are used in the industry with which your agency will engage in the upcoming acquisition?
7. Did you do a pro and con analysis? What would your office gain, if anything, by evaluating oral presentations instead of written technical proposals? What might it lose, if anything, not just in terms of potential protests, but also in terms of information necessary to make a sound a source selection decision? What are the risks? What are the benefits? What are the tradeoffs?
8. Did you develop a detailed plan and process for using oral presentations? Does it reflect what you have learned? Is it practical? Will it show the decision maker and others that you’re not just winging it?
9. Do you know the bureaucratic structure of your headquarters organization, its history, and its temper? Do you know the backgrounds of the decision maker and other affected and influential staff? Do you know their likely issues, questions, and objections, and are you ready with detailed responses? Do you have allies? Do you know your opponents?
10. Did you assemble pertinent and verifiable facts, prepare a persuasive written argument and appropriate presentation, and choose the right time, place, and audience at which to present them? Did you invite the right people to attend? Did you rehearse?
11. Did you think tactically about how to work your way through the layers of bureaucracy: whom to approach first, whom next, and how to build support and momentum toward your objective before hitting up the decision maker? Did you think about how to prepare for attacks by opponents against your argument's flanks and rear?
Sound very formal and like a lot of work? Well, it is. And it might require some or all of that if you want to initiate an significant innovation. While some innovations are produced by flashes of insight and inspiration, most, especially big and important ones, are produced by fact gathering, analysis, deep thinking, careful planning, and good tactics.
You probably won’t have to go to all that trouble when proposing minor innovations that effect only one routine, relatively small dollar acquisition in only one office. For that kind of thing you might be able to walk into the boss’s office and simply say: “I’d like to try something…” But when proposing a “major” change in policy or procedure, get into the research, planning, and persuasion mode.
Every working-level proposal for innovation is a sales pitch that, hopefully, will lead to a negotiation. A famous expert in negotiation once arrived home from a business trip only to be pounced upon by his teenage son, who presented him with all sorts of ideas that he wanted his father to buy into right away. According his son’s recollection, the father was quiet for a moment, then said:
“My ideas are my old friends and your ideas are your old friends. You may have some very good friends. But you cannot expect me to throw away my friends and adopt your friends at a moment’s notice, as soon as you introduce them to me. Give me time to get used to them and I may adopt them. But I need that time—I need that acceptance time.”
See Gary Karrass, Negotiate to Close: How to Make More Successful Deals (1987).
Mid and senior-level bureaucrats, who are not always up to speed on the latest and greatest ideas, and who tend to be conservative, will need a persuasive introduction to your friends. Selling innovation takes time, thought, tactics, preparation, and guts. By the way, that’s half the fun. And keep in mind that a well-done study, plan, proposal, and presentation might attract the attention of a higher-up and be a big career boost, even if the proposal is rejected.
Training is costly and hard to do well. You have to pay for a knowledgeable instructor who is good at teaching, a decent classroom, and good instructional materials. You also have to pay for the students to travel. When you have all of that you must cram a lot of material into one or two weeks of day-long classroom sessions for 20 to 30 persons.
If you?re bringing in 20,000 new people, the dollars can add up. But what are the alternatives?
One possibility is structured reading/study groups. Here is how one might work:
1. You decide on a well-defined topic that you want the students to learn, and you develop a curriculum.
2. You select a textbook or another set of readings.
3. You organize structured reading groups at various work locations. Each group should include no more than ten people.
4. You assign a senior person at the organization to monitor each group and ensure that they do the work. No bull----. The course is a work assignment and part of each attendee?s salary is paid for successful completion of training. Failure should draw a severe reprimand.
5. You develop a scheduled course of readings and discussion topics and questions.
6. The group members read each topical assignment and then meet once a month to discuss the topic and answer the questions.
7. Each group member is required to complete at least two graded writing assignments.
8. Each member must pass a final examination.
You could easily build such a curriculum using Formation of Government Contracts or Administration of Government Contracts as textbooks. The students would read the text on some topic and some of the cases cited therein, and then discuss them. They could submit their questions to a remote instructor, who could answer by email.
There are a lot of practical objections to such a plan, I know. There are practical objections to almost everything.
Such programs are only as good as their designers, participants, and the participants' managers. But look, if we?re going to demand performance from contractors maybe we should demand it from the people we hire and pay to administer contracts. They should do as good a job of training as anything else.
Of course, managers don?t have to wait for DAU or FAI to develop good training. If I had even just four or five new interns, I would put them through the following reading program about the fundamentals of contract formation, using Formation of Government Contracts (FGC), 3d ed., by Cibinic and Nash as the main text, supplemented by readings in the statutes, FAR, selected GAO, board, and court decisions, and other materials:
First reading: Transactions and Agencies, FGC pp. 1-34.
Second reading: Contracting Powers, FGC pp. 35 ? 79.
Third reading: Authority of Government and Contractor Personnel, FGC pp. 80 ? 134.
Fourth reading: Contract Formation Principles, FGC pp. 203 ? 260.
Fifth reading: Competition Requirements, and Selection of Contracting Method, FGC pp. 276 ? 307 and 311 ? 320.
Sixth reading: Rules of Specification, FGC pp. 347 ? 372.
That?s a total of about 259 pages. Adding, say, 200 pages of supplementary material, you?ve got a total of 459 pages. Let?s make it 500.
How long should you allow for reading and discussing that material? Assuming that we?re talking about people with college degrees, how about six months? That strikes me as a reasonable pace. That?s less than 100 pages per month, less than 25 pages per week. How frequent should the discussion sessions be, and how long? At least one session per month and three hours per session. Session topics should be selected in advance and students should be expected to submit a list of questions to the discussion leader at least one week in advance.
You could handle other topics in the same way. The idea is not to cover everything at once, but just the basics of contract formation. Contract types, source selection, pricing, etc., can come later. Depth is more important than breadth. They get breadth from DAU and FAI courses.
If all the hiring we?re going to see during the next couple of years is to produce anything worthwhile, field level managers have to get on board and exercise some active leadership. Don?t wait for DAU and FAI, and don?t trust to OJT, which is the least reliable way of preparing the future.
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?
Barney Klehman, my friend of more than 30 years, died at his home sometime during the weekend. His office called to tell me. I was working outside when the call came. I knew something was wrong when I saw the look on my wife’s face as she came out to get me. She said Barney’s office had called with news. I was apprehensive when I went to the phone, because I was always worried about Barney’s health. I felt two ways when I was told: like a ton of bricks had fallen on me and suddenly empty inside. I kept thinking: You mean, I won’t see him again? Not ever again? Barney?
We’d had dinner in Arlington, Virginia with two other old friends the week before, and the week before that he and I had dined in Huntsville, Alabama. It didn’t seem possible. It didn’t compute. But I knew it was true. I had worried about the possibility of just this.
Barney had a close circle of intimate friends who had all worked together for the Air Force in El Segundo, California, at the Space & Missile Systems Organization (SAMSO), since the 1970s. I met him one summer when we both played on the contracting office softball team. He played softball the same way that he worked: passionately, with knowledge and skill, and with an it ain’t over ‘till it’s over commitment to success.
That commitment took him a long way. He started out working for the old Defense Contract Administration Service in Pasadena, California. Then went to SAMSO in the Air Force Systems Command. When he died he was an SES, Director of Acquisition for the Missile Defense Agency. In the course of his long career he worked on many programs and trained and mentored a lot of young contracting folks. You were very lucky if you got to work for Barney Klehman, because he cared about you and was devoted to your education and development. In return, you had to show that you cared, because Barney didn’t have much use for people who do not care and will not strive.
Even though we were both very opinionated and passionate about our work, I don’t recall us ever being angry at each other, although we sometimes did disagree. Many a disagreement ended with one of us saying, Hmm, I hadn't thought of that, or Yeah, okay, that’s right. You’re right. But we didn’t talk just work. We also talked sports (he knew a lot more than I) and life.
Barney had one fault that bothered all of his friends: He took better care of other people and of his work than he did of himself, which is why I worried about him. He did not take care of his health. Everybody complained to him about it and he always agreed, but he didn’t follow through. When I called one old friend to give him the news, he was shocked, I can’t believe this! and then furious, Blank-blank it! He didn’t take care of himself! We told him he had to take better care of himself!
Telephone calls throughout the day. Emails late into the night. Expressions of shock and grief. One friend sent us an email with photos of Barney through the years. I was glad to get those photos. They break my heart, but I can't stop looking at them.
The notice sent out by Vice Admiral Syring, Director of the Missile Defense Agency, said:
“Barney was a true professional with more than four decades of extensive contracting and acquisition leadership experience across the Air Force and Joint DoD Community. Beginning his federal service career in 1972 as a contract price analyst with what is now the Defense Contract Management Agency, he served in leadership positions in multiple program offices before joining the Missile Defense Agency in 2004. Barney dedicated his life to helping others grow professionally, and he was a passionate mentor and friend to many people throughout the Agency and DoD.”
Yes, that’s true. But what will stick with me is this one, that came in an email yesterday from a woman who had worked for him: “Barney was one of the kindest men I’ve ever known.”
There it is. One of the truest and best epitaphs I’ve ever read. That was Barney.
He was what the Irish call a darlin’ man.
Amicus vitae solatium. Amicus animae dimidium.
I just read my umpteenth summer reading list, so I thought: What the heck. I know that we?re already past the middle of summer and it?s a little late for a list, but why not? We have a month until Labor Day. Well, almost a month. Still time to get in one or more books.
Summer?s about fun reading, so no ?professional? books and no heavy reads. These are some of my favorites of this year, new and old.
Matterhorn, by Karl Marlantes (2010)
A novel about a Marine rifle company in Vietnam. Ordered to assault a hill named Matterhorn, they take it in a bloody fight and are then told to withdraw. Later they are told to take it again in an even bloodier fight. The story is told from the point of view of a young lieutenant serving as a platoon commander. It is the author?s first novel. He is a Vietnam vet and it took him 30 years to write it. It has received universally sensational reviews. I read it while in New Orleans for the French Quarter Festival and could not put it down. It was all anybody could do to get me to leave the hotel room. The characters are engaging, and the combat scenes are sensational (I won?t say realistic, because nothing but combat is realistic when it comes to combat). Gripping, sad, and ultimately inspirational.
99 Dreams of Whiskey: The Accidental Hedonist?s Quest for the Perfect Shot and the History of the Drink, by Kate Hopkins (2009)
The title speaks for itself. Two gals set out to learn about whiskey. They visit Ireland, Scotland, Canada, and the U.S. Fun and very informative. My favorite description is of Maker?s Mark: ?Maker?s Mark is like that blue-collar genius people run into from time to time. Sure, he follows Zen philosophy, and can discuss the intricacies of Nietzsche and Rousseau. But really? He prefers to be in his garage, working on his car.?
Hell in a Very Small Place: The Siege of Dien Bien Phu, by Bernard Fall (1968)
A riveting account of the 1954 battle that was a milestone in the revolts against European colonialism after World War II. In November 1953, French paratroopers jumped into the valley of the Nam Yung river in northwest Vietnam and seized the sleepy town of Dien Bien Phu. They built a fortress of strongpoints, which were given the names of the commander?s mistresses. (They were French, you see.) The Viet Minh army decided to engage in a ?set-piece? battle, surrounded the valley, and sealed off the fortress from ground reinforcement. The fight began in earnest in late March 1954 as the monsoons began, and it ended in mid-May. The fighting was continuous and desperate. Thousands were killed in a few weeks. Hand to hand fighting occurred throughout the battle. Near the end, a unit commander reports that he is about to be overrun and asks for reinforcement. He is told he will get none and, ?You are a paratrooper. You are expected to fight to the death.? The French were overrun at Dien Bien Phu, but they never raised the white flag of surrender. The author tells the story at the tactical level, thick with detail, and we see the greatly outnumbered and surrounded paratroopers and Foreign Legion infantry holding out against Viet Minh artillery and human wave attacks. One of the best military histories ever written. As you will see, America was very much involved. This was my second reading, in preparation for a trip to Dien Bien Phu early next year. There are two more recent accounts of the battle: The Last Valley: Dien Bien Phu and the French Defeat in Vietnam (2005) by Martin Windrow and Valley of Death: The Tragedy at Dien Bien Phu that Led America Into the Vietnam War (2010) by Ted Morgan. But Hell In A Very Small Place is the one to read.
Freedom Summer, by Bruce Watson (2010)
Battle takes many forms, and so does bravery. This is the story of the college students who went to Mississippi in 1964 to register Black voters. The story is scary and inspiring. Youthful idealism against what sometimes amounted to barbarism, when headlights in the rear view mirror on a dark road might mean the approach of a horrible death. I was in the Army when this happened and was totally unaware that anything like this was going on. This is the most detailed narrative of the events that I have ever read, a harrowing account of a seminal moment in American history. A fast, unputdownable read.
Empire of the Summer Moon, by S. C. Gwynne (2010)
The story of the Comanches, of the Texas frontier, and of Quanah Parker, one of the last great war chiefs. If you have never been to the southern Great Plains, you don?t know what wide open spaces really are. Vast, featureless, and from the 1600s until near the end of the 19th Century, the domain of what some historians now call the Comanche Empire. The Comanches were the fiercest and most frightening warriors on the plains. Superb horsemen, they fought other tribes (especially the Apaches) the Spanish, the Mexicans, and the Texans. They would travel 400 miles to launch a raid. A Comanche warrior could launch 20 arrows in the time it took a soldier to reload a musket. They made the Texas frontier one of the most dangerous places in the known universe. Nevertheless, white settlers pushed forward into their lands, knowing they could expect no help from their government, and formed militia that would become known as the Texas Rangers to defend themselves. Finally, a Texas governor announced a policy of annihilation. One of the things I learned: the great western move, The Searchers, is based on the true story of James Parker (the basis for John Wayne's character), who searched for his niece, Cynthia Ann Parker (on whom Natalie Wood?s character was based). Taken by the Comanches in a raid in 1836, she became the mother of Quanah Parker, one of the fiercest of all Comanche war chiefs. She became a Texas legend, and he died a famous and respected old man in 1911. He and his mother are buried in the Fort Sill Cemetery in Lawton, Oklahoma.
Adventures Among Ants: A Global Safari with a Cast of Trillions, by Mark W. Moffett (2010)
A great book about a critter that almost everyone found fascinating at one time or another. How many kids have never sat in captivation watching ants come and go from the entry of a nest? The author is a research associate at the Smithsonian. The book is entirely nontechnical and written with a sense of fascination and pleasure. Really. It?s a good read, and you don't have to read it all at once, since each chapter stands more or less alone. Good thing the little beasts aren?t bigger, like in Them! (one of my all-time favorite movies). An ant the size of a dog could move your house.
Blood Meridian, Or the Evening Redness in the West, by Cormac McCarthy (1985)
Considered by many critics, including Harold Bloom, to be one of the greatest American novels of the 20th Century. (Tommy Lee Jones owns the movie rights.) A violent, allegorical, apocalyptic story about a gang of scalphunters in the Southwest. Terrific prose. If you go to the bookstore, find the paperback, turn to page 50, and begin reading with ?The following day on the skyline to the south they saw clouds of dust that lay across the earth for miles,? and continue to page 54 and the last line, ?? the dying groaned and gibbered and horses lay screaming.? I have never read anything quite like it. You?ll never forget the eerie Judge Holden, although you may want to. I first read this book several years ago, but read it again after reading Empire of the Summer Moon. Full of action. Not for the faint of heart. The mysterious epilogue is perfect.
The Selected Poetry of Robinson Jeffers, edited by Tim Hunt (2001)
Writing at his stone house in Big Sur in the first half of the 20th Century, Robinson Jeffers wrote what many consider to be some of the finest American poetry. Out of favor for many years due to his anti-war stance during World War II and his misanthropy, he is now being remembered and celebrated. He wrote long narrative poems, like "Give Your Heart to the Hawks," "Tamar," and "The Women at Point Sur." But his most famous poems now are ?Hurt Hawks? and the profound ?Rock and Hawk,? which appear in many anthologies. His house in Big Sur is now a pilgrimage site for his fans. A shorter anthology of his works is The Wild God of the World.
The Selected Poems of Li Po, translated by David Hinton (1996)
Li Po was one of the great poets who wrote during the period known as the High Tang (712 ? 760). He is one of the revered poets of China, known as the Banished Immortal. There are many translations of his short lyric poems, but I think this is my favorite. He writes of journeys, friendships, war, and drinking. All the good stuff. My favorites in this anthology: "Looking for Yung, the Recluse Master," "Farewell to a Visitor Returning East," "Thoughts of You Unending," and the much-translated and widely anthologized "Drinking Alone Beneath the Moon":
Raising my cup, I toast the bright moon,
and facing my shadow makes friends three,
intimates forever, we?ll wander carefree
and meet again in Star River distances.
Feel free to post a comment with your own favorites and recommendations.
We have a new Office of Federal Procurement Policy (OFPP) Administrator, The Honorable Joseph Jordan.
Most OFPP Administrators served about two years and didn’t do anything that had much of a lasting remedial effect on a system with which no one is very happy. Appointees have had a variety of qualifications. If I remember rightly, only two had ever worked in a contracting office doing contracting work.
OFPP’s job is to:
41 U.S.C. 1101. (The statutory definition of “procurement” is substantially the same as the definition of “acquisition” in FAR 2.101.)
The Administrator’s job is to:
41 U.S.C. 1121. The statute says:
There is a long list of specific functions in 41 U.S.C. 1122. However, if you read the statute closely you will see that the Administrator’s powers, as opposed to his functions, appear to be limited. Two non-political appointee positions -- the Director of Defense Procurement and the Director of Defense Pricing – have more immediate and effective power, and the appointees usually stay in their jobs longer.
The new Administrator told the Senate during his confirmation hearings that his priorities are: (1) buying smarter, (2) building the right supplier relationships, (3) strengthening the acquisition workforce, and (4) remaining “mindful” of the relationship between Federal employees and contractors. He offered few specifics, which was probably appropriate at a Senate confirmation hearing. It is not immediately clear what he can and will actually do about any of those things other than to issue memos that few will read and fewer will remember two years from now. Nevertheless, what should he try to do?
In his blog for Federal Computer Week, http://fcw.com/Blogs...l-business.aspx, Steve Kelman suggested raising the micro-purchase threshold to $250,000 for limited purposes, in order to improve opportunities for “innovative” small businesses to get into the government market. That's right, the micro-purchase threshold. (Okay, stop cheering.) In what has to be the understatement of the week, he wrote: “There would be a few implementation issues that would have to be worked out.”
So what are my ideas about what the new Administrator should try to do? What things might he try to persuade Congress and agency managers to do? Well, choosing a few from a long list:
1. Restructure the contracting workforce to reflect the workload. Hire fewer contract specialists and more purchasing agents and procurement clerks, and create a new position: “acquisition data specialist” to do all that pesky data entry.
2. Establish a uniform standard of contracting officer selection, appointment, and appointment renewal. Set the standards high. We desperately need more competent people in that role. If we had more competent people we would not need so many laws and regulations.
3. Review and clarify small business law, policy, and programs and put the rules all in one place in the C.F.R. (and, yes, yes, increase opportunities for small businesses to get government contracts).
4. Change the protest system by either (preferably) eliminating the Court of Federal Claims as a protest forum or (second best) requiring protestors to choose one forum or the other and live with the result, prohibiting them from filing with the GAO and then going to the court if they lose.
5. Free the Department of the Defense from the phony “single, simplified, uniform” FAR System and allow it to publish its own acquisition regulation. Congress has written so many laws unique to DOD acquisition that it really has a separate system. The notion that we have a "single, simplified, uniform" system of acquisition regulation is absurd. Let's face facts. It would actually make life easier for everybody.
6. Remove FAR Subpart 8.4 and Part 13 from 48 CFR Chapter 1 (the FAR itself) and put them in separate chapters of their own. The idea is to give people conducting those kinds of acquisitions smaller regulations to cope with and to make it clear that they don’t have to worry about the rest of FAR and can simplify their processes.
7. Require GSA to establish a single source for the clauses in its Federal Supply Schedule contracts and to publish them in the Federal Register through the notice and public comment process. (A lot of GSA FSS COs have no idea where the clauses come from and cut and paste from old documents.)
8. Make the test program for commercial items (FAR Subpart 13.5) permanent.
That’s enough for one blog post. No point in getting carried away.
If Steve Kelman can propose raising the micro-purchase threshold to $250,000, why can’t I fantasize?
The DAU Director for the Center for Contracting, Mr. Leonardo Manning, posted a short, one-paragraph blog entry on February 10 entitled, “Is your Acquisition a Supply or a Service?”
It's interesting, but it doesn't analyze the problem in enough detail. It's more complicated than presented.
FAR 2.101 defines supplies as follows:
Supplies means all property except land or interest in land. It includes (but is not limited to) public works, buildings and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration and installation of the foregoing.
There is no definition of services or service contract in FAR Part 2, which means that there is no definition of those terms that applies throughout the FAR. See FAR 2.101(a). However, there are several definitions pertaining to services and service contract scattered about in various places.
FAR 2.101 defines personal services contract as follows:
Personal services contract means a contract that, by its express terms or as administered, makes the contractor personnel appear to be, in effect, Government employees (see 37.104).
FAR 37.101 defines nonpersonal services contract as follows:
Nonpersonal services contract means a contract under which the personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the Government and its employees.
FAR 37.101 defines service contract as follows:
Service contract means a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a nonpersonal or a personal contract. It can also cover services performed by either professional or nonprofessional personnel whether on an individual or organizational basis. Some of the areas in which service contracts are found include the following:
(1) Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment.
(2) Routine recurring maintenance of real property.
(3) Housekeeping and base services.
(4) Advisory and assistance services.
(5) Operation of Government-owned equipment, real property, and systems.
(6) Communications services.
(7) Architect-Engineering (see Subpart 36.6).
(9) Transportation and related services (see Part 47).
(10) Research and development (see Part 35).
That definition applies only in FAR Part 37. It does not apply in any of the other 52 parts. It does not apply to Part 22. See FAR 2.101(a).
FAR 22.001 defines service contract as follows:
Service contract means any Government contract, or subcontract thereunder, the principal purpose of which is to furnish services in the United States through the use of service employees, except as exempted by the Service Contract Act (41 U.S.C. chapter 67; see 22.1003–3 and 22.1003–4). See 22.1003–5 and 29 CFR 4.130 for a partial list of services covered by the Act.
There are also definitions of advisory and assistance services, architect-engineer services, child care services, and utility service.
The purpose of the FAR definitions is to provide a basis for applying appropriate policies, solicitation provisions, and contract clauses when conducting acquisitions. They are not meant to define supplies and services in and of themselves.
There is no definition of service per se; the FAR does not tell us what a service is. The closest we get is that part of the definition of service contract that refers to performance of an identifiable task rather than to furnish an end item of supply. That’s an odd criterion, and it makes the definition of service contract somewhat problematical. If you buy a product of a company’s own design that the company makes, stocks, and sells, you are clearly buying an item of supply. But what if a CO hires a contractor to make and deliver an item of the government’s design? Is the CO buying an item of supply or the time and effort of performing an identifiable task? Seems to me that making something is an identifiable task and that hiring someone to make something for you is hiring them to perform such a task. However, I think that most of us would agree that such a contract would be a supply contract. Right?
If you award a contract to someone to manufacture something to your specifications, have you bought an item of supply or have you hired the contractor to expend time and effort to perform an identifiable task? Surely, the custom manufacture of something to your design is different than contracting with a firm to sell you a standard item that it makes to its own design and stocks or makes on order for sale. Moreover, doesn’t the maintenance, overhaul, repair, servicing, rehabilitation, etc., of items of supply entails the alteration of those supplies, which, according to the definition of supplies, is supplies?
Which brings us to the Service Contract Act. FAR 22.1003-1 says that FAR Subpart 22.10, “Service Contract Act of 1965, As Amended,” applies to all government contracts awarded for the principle purpose of acquiring services to be provided by service employees. It then says:
The nomenclature, type, or particular form of contract used by contracting agencies is not determinative of SCA coverage.
FAR Subpart 22.10 makes no mention of the definition of service contract in 37.101, but 22.1003-5 contains a list of examples of contracts covered by the SCA that includes many that are similar to the list of examples in that definition.
The Department of Labor regulations at 29 C.F.R. Part 4, Labor Standards for Federal Service Contracts, does not define service or service contract, but provides as follows at § 4.111(a), which says, in part:
This remedial Act is intended to be applied to a wide variety of contracts, and the Act does not define or limit the types of services which may be contracted for under a contract the principal purpose of which is to furnish services. Further, the nomenclature, type, or particular form of contract used by procurement agencies is not determinative of coverage. Whether the principal purpose of a particular contract is the furnishing of services through the use of service employees is largely a question to be determined on the basis of all the facts in each particular case. Even where tangible items of substantial value are important elements of the subject matter of the contract, the facts may show that they are of secondary import to the furnishing of services in the particular case. This principle is illustrated by the examples set forth in §4.131.
As for the examples in § 4.131:
(a)… A procurement that requires tangible items to be supplied to the Government or the contractor as a part of the service furnished is covered by the Act so long as the facts show that the contract is chiefly for services, and that the furnishing of tangible items is of secondary importance
* * *
( c ) [An] example of the application of the above principle is a contract for the recurrent supply to a Government agency of freshly laundered items on a rental basis. It is plain from the legislative history that such a contract is typical of those intended to be covered by the Act. S. Rept. 798, 89th Cong., 1st Sess., p. 2; H. Rept. 948, 89th Cong., 1st Sess., p. 2. Although tangible items owned by the contractor are provided on a rental basis for the use of the Government, the service furnished by the contractor in making them available for such use when and where they are needed, through the use of service employees who launder and deliver them, is the principal purpose of the contract.
Okay, but then the regulation says:
In general, contracts under which the contractor agrees to provide the Government with vehicles or equipment on a rental basis with drivers or operators for the purpose of furnishing services are covered by the Act. Such contracts are not considered contracts for furnishing equipment within the meaning of the Walsh-Healey Public Contracts Act. On the other hand, contracts under which the contractor provides equipment with operators for the purpose of construction of a public building or public work, such as road resurfacing or dike repair, even where the work is performed under the supervision of Government employees, would be within the exemption in section 7(1) of the Act as contracts for construction subject to the Davis–Bacon Act. (See § 4.116.)
I presume that equipment rental for other purposes is covered by the Walsh-Healey Public Contracts Act, which applies to contracts for the "manufacture or furnishing" of materials, supplies, articles, and equipment. See FAR 22.602.
If you Google <car rental service> you’ll get the websites for Hertz, National Car, etc. They rent cars without drivers, and Hertz’s corporate profile says that they have provided “Quality Car Rental Service” for over 90 years. So in the commercial marketplace, car rental is a service, as is equipment rental generally. It’s not immediately clear to me why renting laundry is different from renting vehicles without drivers and other equipment.
Assuming that you want to award a fixed-price contract for the recurrent supply of fresh laundry, would you specify the laundering process, the properties of the fresh laundry to be delivered, or both? Would you insert the clause at FAR 52.243-1, Changes--Fixed Price (AUG 1987) (ALT I) (APR 1984), which is the one for services, or would you insert the basic clause which is for supplies? Or would you insert (ALT II) (APR 1984), which is for services and supplies? Would you insert the clause at FAR 52.246-4, Inspection of Services--Fixed-Price (AUG 1996), or the one at FAR 52.246-2, Inspection of Supplies--Fixed-Price (AUG 1996)? There is no alternate inspection clause for both supplies and services. So would you include both clauses and assign them to separate line items or subline items for services and supplies? Would you separately priced the items?
Would those questions occur to you? Would the answers matter to you? Do you think that all practitioners would answer them the same way?
I do not think this is a big problem. My point is that contracting regulations are written over the course of time to implement laws and policies that are often developed on an ad hoc basis in response to particular problems as they arise. They tend to be formulaic in the sense of mandating that when X then Y. A formula specified in one part of the FAR may make perfect sense within its policy domain, but no sense at all within another. (That’s one of the reasons for the definitions rule at FAR 2.101.) Thus, it is possible that a contract might appropriately be thought to be for supplies when selecting clauses, but for services when selecting labor laws.
Veteran practitioners tend to take these things for granted, mainly because they were told how to think about them during their early training. This is supplies. That is services. They know that the regulations do not always answer questions definitively and that, sometimes, practitioner experience is all you have to go on. But newcomers to our business can get hung up on some of these logical inconsistencies.
And now: Is painting the walls of a building a service or is it construction? Does the Service Contract Act apply or the Davis Bacon Act? And while we’re at it, what about elevator repair?
Alice Wonderly, a contracting trainee, has been given the job of “putting together” a source selection plan and has some questions for her supervisor, Mr. Sagesse, a contracting officer with an unlimited warrant.
TRAINEE: Hi, Mr. Sagesse. May I come in?
SUPERVISOR: Hi Alice. Of course, of course. Always happy to talk to you. Sit down.
A: Thanks. I’ve been told to develop a source selection plan for the Foochi-Minooli Project, but I’ve never done one before. I’ve read FAR Subpart 15.3, and someone gave me an old plan to cut and paste from, but I’d like to understand what I’m doing.
S: That’s commendable. I like a thinker.
A: Well, could you answer a question? What is an evaluation factor?
S: I’m pretty busy right now [stands and begins gathering papers from his desk and stuffing them into his briefcase]. Look, just go to the office of the evaluation team and tell them you need some evaluation factors. When you get them, plug them into the template.
A: Template? You mean the cut-and-paste version?
A: Well, I went to the evaluation team’s office, and they said they’ve never done a source selection, and they asked me to explain the process to them.
S: Just print out FAR Part 15 and give them copies.
A: But, they'll only ask me questions, and I don’t understand FAR Part 15 well enough to explain it to someone else. FAR 15.304 and 15.305 talk about evaluation factors and give some examples, like past performance, experience, and cost or price, but they don’t provide any information about the underlying concept.
S: Concept? What don’t you understand?
A: Well, for instance, what exactly is an evaluation factor?
S: It’s a criterion you consider when you score--oops, I meant rate--and compare proposals.
A: What do you mean by “criterion”? The dictionary says a criterion is a standard.
S: Exactly. A standard.
A: What kind of standard?
S: Something you measure something else against.
A: That's what the dictionary said. But what is it that you measure?
S: That depends on what the criterion is. You measure against the criterion.
A: So we’re back to criterion, but you still haven’t told me what an evaluation factor is in source selection. According to what you’ve said, an evaluation factor is a criterion, and a criterion is a standard, and a standard is a criterion, and a criterion is an evaluation factor.
S: Exactly! Now you’ve got it!
A: But, I’m just right back where I started. I still don’t know what an evaluation factor is. Please, tell me, what is an evaluation factor?
S: It's something like past performance.
A: Well, I know that FAR 15.304 and 15.305 talk about past performance, but that doesn’t help me to understand the concept of an evaluation factor. What kind of thing is an evaluation factor?
S: I just told you--it’s a criterion for comparison.
A: But calling an evaluation factor a criterion or a standard doesn’t tell me what an evaluation factor is. I want to know what it is. What do all source selection evaluation factors have in common that makes them source selection evaluation factors?
S: I don’t understand what you don't understand. Look, it's simple. An evaluation factor is something you consider when you evaluate and compare proposals. But you don't evaluate them by comparing them, except to the evaluation factors.
A: What? Wait...
S. FAR 15.305 explains it all.
A: Not really. Forgive me, Mr. Sagesse, but we’re still going in circles. Do you have another example of an evaluation factor?
S: Sure. Technical acceptability.
A: What is that?
S: Being technically acceptable.
A: What makes a proposal technically acceptable?
S: Being technically good enough.
A: What makes a proposal “good enough”?
S: That depends on what the criteria are for technical acceptability.
S: It’s something that satisfies the requirement by meeting the standard for acceptability.
A: So, being technically acceptable is being good enough and being good enough is satisfying the requirement, which is meeting the standard for technical acceptability?
S: Now you're catching on.
A: So, technical acceptability is proposing to do what the requirement requires, based on the standard for that, which is a criterion, which is an evaluation factor? Is that it?
S: Exactly! Well, that, and explaining how they’re going to do it.
A: So, it’s not enough for an offeror to say that they propose to satisfy the requirement? They have to explain how they’re going to do it?
S: Yes. We’re talking best value, not sealed bidding.
A: So, if they promise to satisfy the requirement, and if they tell you how they’re going to do it, then they’ll be technically acceptable?
S: Yes. Well, assuming that their approach is sound.
A: So, technical acceptability is promising to satisfy the requirement, and describing how they’re going to do it, and having a sound approach?
S: Yes. That’s it.
A: “Approach.” I know you’re busy, so I’ll look that word up in FAR. But what makes an approach “sound”?
S: Being good enough to get the job done.
A: But what makes an approach good enough to get the job done?
S: That depends on the criteria.
S: Well, among other things, a realistic estimate of the cost. That sort of thing.
A: So a sound approach is one that comes with a realistic cost estimate?
S: Well, that, and things like the right kinds and amounts of labor and materials.
A: What makes the kinds and amounts of materials “right”?
S: Well, being right for the job.
A: What job?
S: The job of satisfying the requirement.
A: What does that job entail?
S: That depends on how they’re going to do the work.
A: So, if they promise to satisfy the requirement, and tell you how they’re going to do it, and propose the “right” kinds and amounts of labor and materials, and give you a “realistic” cost estimate, then they’ll be technically acceptable?
S: Yes. Well, assuming that their description of how they’re going to do it will actually get it done.
A: How will we know that?
S: Well, that’ll be up to the evaluators to decide.
A: How will they decide?
S: They’ll compare the proposed approach to their evaluation standards.
A: To their standards?
S: Yes, to their criteria for soundness.
A: To their criteria?
S: Yes--to the evaluation factors. Their evaluation must be based on the factors in the RFP. They can’t consider anything else. Unless something else is reasonably encompassed by the those factors.
A: What? Wait… Oh, never mind. Mr. Sagesse, we’ve come around in a circle again, and I still don’t know what all source selection evaluation factors have in common that makes them source selection evaluation factors.
S: What they have in common is that they will be used to evaluate and score--I mean rate--proposals.
A: Yes, but Mr. Sages, what kind of thing do you use as evaluation factors? What do all evaluation factors have in common?
S: I think you’re being a little argumentative.
A: I don’t mean to be. I just want to understand.
S: Well, I have explained it to you.
A: Okay. I guess I’ll read FAR some more. May I ask one more question?
S: What is it, Alice? I have to get to my car pool.
A: What, exactly, is rating, and how does it differ from scoring?
S: That’s two questions, and I have to go now. You’d better get started on that source selection plan. Just use the template. Can't go wrong that way. [Leaves.]
To be continued...