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Vern Edwards

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:

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.

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:

Despite these current restrictions on T&M/LH contracts, procurement professionals, Congress and others contend that the use of T&M/LH contracts should be further restricted. These concerns, however, are misplaced. After all, a fixed unit price contract gives the Government the preferred contract type, i.e., a fixed-price, and a cost-reimbursable arrangement with no fee is equally favorable to the Government. Indeed, some contracts have contract line item numbers at fixed unit prices and other CLINs for cost reimbursable items. This is apparently acceptable to T&M/LH critics because the contract is not called a T&M/LH contract although the payment and reimbursement results are identical.

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:

The publication of the final rule on commercial T&M/LH contracts emphasized Government concerns that T&M/LH contracts "pose the highest contract type risk to the Government." Apparently, the Government views T&M/LH contracts as more risky than cost-reimbursement contracts!

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?

Vern Edwards

On October 14, the FAR councils published an interim rule about incentive contracts. (FAC 2005-37, 74 FR 52858.) FAR 16.401(d) now requires a determination and findings signed by the head of the contracting activity (HCA) before using any incentive contract. Given the bureaucratic hassle of processing such a formal document, I think we might reasonably expect to see a decline in the use of incentives. Given the emphasis on incentives up until a few years ago, this is an interesting policy development.

Incentives have been around for a long time. In a 1980 article in National Contract Management Quarterly Journal entitled, "Incentive Contracting in the Aerospace Industy, Part I," Arthur J. Nolan wrote:

They called it the "bonus for savings" provision in World War I, and the "target price" contract in World War II; but contrary to popular belief, there is every evidence that what we now know as the incentive contract has had not isolated--but abundant--use in government procurement throughout the last half century. Neither is the multiple incentive contract, the more complex incentive arrangement, to be regarded as an innovation; its use dated back at least to World War II.

There are two main categories of incentives. First, there are the predetermined formula type incentives, which include (1) the fixed-price incentive (firm targets), (2) the fixed-price incentive (successive targets), and (3) the cost-plus-incentive-fee. (FAR 16.402.) Second, there are the subjective, after-the-fact incentives, which include the cost-plus-award-fee and the fixed-price with award fee. (FAR 16.401(e), 16.404, and 16.405-2.) The fixed-price incentive (firm targets), which is the most complex incentive, is said to have been invented by the Navy during World War II, but abandoned because of a shortage of auditors. The cost-plus-incentive-fee arrangement, which is the simplest incentive, has been in use since at least the early 1950s. The cost-plus-award-fee incentive was invented in the early 1960s, either by the Navy or NASA or both, and has since become the most popular of the incentives.

The modern era of incentives began in the 1960s when President Kennedy's Secretary of Defense, Robert S. McNamara, urged their use in lieu of cost-plus-fixed-fee contracts, claiming that they would save money. Doubters emerged right away. Influential members of Congress complained that contractors inflated their cost estimates in order to negotiate artificially high targets and then underran so as to increase their profit or fee. That concern lead to the passage of the Truth in Negotiations Act, Public Law 87-652, in 1962. (Now implemented in FAR 15.403.) The Act originally would have applied only to incentive contracts, but DOD and NASA complained that such application would make it hard to persuade contractors to accept incentives, so Congress applied it to all negotiated contracts expected to be valued in excess of $100,000. (The threshold has since been increased to $650,000.) Economists, most notably Harvard professor Frederick Scherer and Rand analyst Irving Fisher questioned the underlying assumptions of the advocates of incentives. Most serious studies concluded that there was little verifiable evidence that monetary incentives had motivated contractors to do what's necessary to reduce contract costs or that costs had in fact been reduced. In a typical report, "Incentive Versus Cost-Plus Contracts in Defense Procurement," Journal of Industrial Economics (March 1978), researchers John Hiller and Robert Tollison wrote:

In this paper, a theoretical analysis, based upon wide-ranging empirical studies (see footnote 2), is made of the following question: Given the out-comes of thousands of contracts over the I950s, I960s, and I970s, has there indeed been a 10% cost saving associated with the introduction of incentive contracts? Indeed, has there been any saving?

* * *

Two conclusions emerge. First, in even the most conservative cases, the McNamera claim of a minimum 10% cost saving is much exaggerated. Although in some cases it may be true, given the high variance of outcomes, it hardly serves as a reasonable evaluation of incentive contracting experience. Second, in the cases where one does not assume a reduction in wastes, but one does assume some inflation of target values, the costs under the incentive contract actually rise above the costs of the cost-plus contracts. Whether the costs are, in fact, higher is difficult to say, being subject to high variance in the parameters. However, it is quite clear that the savings due to incentive contracting are not as obvious as has been typically thought.

By the end of the 1960s there appears to have been widespread agreement that multiple incentives⎯i.e., predetermined formula-type incentives applied to cost and to delivery or technical performance⎯were so complex as to be generally impractical, and they all but disappeared. Most formula-type incentives today are cost-only. Multiple incentives were replaced by the subjective, after-the-fact incentive⎯award-fee. Unfortunately, agencies did not think things through and never developed a clear set of principles for the use and management of award-fee incentives, resulting in misapplication and misuse.

Nevertheless, incentives are intuitively appealing. They appeal to common sense, and the use of incentive arrangements can convey the impression that an agency is being demanding and tough with its contractors, holding their feet to the fire by linking profit to results instead of awarding cost-reimbursement contracts. The intuitive appeal and agency "success stories" have been enough to persuade policymakers and Congress to push agencies to use incentives, even going so far at one point as to require their use in association with performance-based service contracting. FAC 97-1, 62 FR 44813 added coverage about service contracts that effectively mandated the use of incentives. Until 2005, FAR 37.602-4 said:

Contract types most likely to motivate contractors to perform at optimal levels shall be chosen (see subpart 16.1 and, for research and development contracts, see 35.006). To the maximum extent practicable, performance incentives, either positive or negative or both, shall be incorporated into the contract to encourage contractors to increase efficiency and maximize performance (see subpart 16.4). These incentives shall correspond to the specific performance standards in the quality assurance surveillance plan and shall be capable of being measured objectively. Fixed-price contracts are generally appropriate for services that can be defined objectively and for which the risk of performance is manageable (see subpart 16.1).

That rule, pressure from on high, and touting by various "experts" pushed a lot of agencies into using incentives despite a lack of know-how. Inspectors general began to report poor practices. The comments of the Department of Energy Inspector General in its report, Use Of Performance-Based Incentives At Selected Departmental Sites, DOE/IG-0510, July 2001, are typical:

The Department did not utilize performance-based incentives in a manner that would consistently result in improved contractor performance. Twelve of nineteen performance-based incentives selected for review at the Savannah River Site and the Kansas City and Oak Ridge Y-12 Plants were not clearly designed to facilitate such improvement. Some performance incentive fees were increased without a corresponding increase in performance expectations. In other cases, the "challenge" to the contractor in the form of the performance standard was lowered while the monetary incentive remained unchanged. In all cases, these actions were taken without satisfactory explanation. Further, some incentives were established after the expected outcome had been achieved.

See also NASA IG report IG-00-043, Consolidated Space Operations Contract -- Cost-Benefit Analysis and Award Fee Structure, September 2000:

[W]e found that NASA did not properly structure the award fee for the CSOC [Consolidated Space Operations Contract] to evaluate performance of the Integrated Operations Architecture (IOA). The CSOC Award Fee Plan lacks defined criteria for measuring performance, appropriate evaluation periods, and proper emphasis on cost performance. Without these provisions, NASA cannot measure contractor performance to assess the appropriate amount of award fee and provide an effective incentive for the contractor.

We can trace the origins of the new policy in FAC 2005-37 directly to the GAO's December 2005 report, DOD Has Paid Billions in Award and Incentive Fees Regardless of Acquisition Outcomes, GAO-06-66, which severely criticized DOD's use of award-fee and formula-type incentive contracts. Most readers focused on GAO's criticism of DOD's use of award-fee incentives, but the report addressed all incentives and included this rather startling assessment:

DOD's use of monetary incentives is based on the assumption that such incentives can improve contractor performance and acquisition outcomes; however, past studies have challenged the validity of this assumption. Research on incentive fees going back to the 1960s has concluded these incentive fees are not effective in controlling cost. Studies conducted by GAO, Harvard University, and the RAND Corporation, among others, have concluded that these incentives do not motivate cost efficiency, in part because profit is not the contractor's only motivation. Other considerations, such as securing future contracts with the government, can be stronger motivators than earning additional profit. More recently, research on award fees revealed that while these fees are an intuitively appealing way to improve contractor performance, they do not always operate that way in practice. Contractor respondents in one study stated that award fees motivate performance to some extent; however, the consensus was that they do not in and of themselves increase performance significantly.

That assessment didn't come as a surprise to anyone familiar with the serious literature on incentive contracts, but most contracting practitioners do not know that literature. What they know is what I call the popular literature, especially articles that have appeared in Contract Management magazine by any of the amateur experts that have sprung up from time to time to tout incentives on the basis of who-knows-what evidence. They passed on "success stories" published by various people who had awarded an incentive contract and who were determined to declare their effort a success even before the data were in.

(The classic "success story," told dozens of times, is about the Army's use of performance incentives in the 1908 contract with the Wright Brothers for the first military aircraft. But that contract was an incentive in form only, not in fact. As is typical of the tellers of "success stories," the people who told this one didn't check their facts. The Wrights were not motivated by the money and the incentive had no effect on their design. According to one of the Army officers who participated in the flight acceptance tests, Lt. (later Brigadier General) Frank Lahm, USA, the Wrights declined the opportunity to maximize their profit under the incentive. See Chandler and Lahm, How Our Army Grew Wings (ARNO Press 1979), p 159, and my 2002 article, The True Story of the Wright Brothers Contract: It's Not What You Think, which is available on the Wifcon Reading page.

Regardless of whether they are motivationally effective, formula incentives on cost can have practical utility if designed and managed properly. They provide alternatives to the extremes of firm-fixed-price and cost-plus-fixed-fee by establishing a sliding payment scale based on cost. Instead of fixing a price or a single fee for performance, the parties agree in advance on what the government will pay the contractor at any given cost outcome within a range. Such a scheme can be equitable if the parties share a common understanding of the costs of performance and negotiate a fair and reasonable pricing formula. But in order for a cost incentive to be effective in that way the parties must engage in detailed discussions, share information, and then establish a pricing formula that reflects the nature and sources of cost uncertainty. This simply is not possible in competitive procurements under FAR Part 15 given the way that agencies usually conduct them. Moreover, such discussions require a lot of knowledge and skill. Whether such an arrangement will motivate the contractor to reduce costs is another matter. Contractors are motivated by many things.

I think that award-fee incentives, if properly designed and managed, can improve communications between the government and its contractors, which might improve the chances of success when requirements cannot be fully defined at the time of contract award or when they are defined but it is not clear whether they can be produced. But the use of award-fee incentive is as much an art as anything, despite the current calls to make them less subjective. The key to success is a sophisticated fee determining official with intimate knowledge of the work under contract, the facts of performance, and the contractor, and with excellent judgment and first rate communication skills. I don't think those qualities are easy to come by.

So what now? Do we abandon incentives? Before we do that, we should think things through.

First, incentive arrangements are much more complex than most practitioners realize. The easiest way to confirm this is to read the 1969 DOD/NASA Incentive Contracting Guide. Although out of print, it has never been surpassed as a textbook on the use of the predetermined, formula-type incentive arrangements. The current coverage in the DOD Contract Pricing Reference Guides, Volume 4, Chapter 1, is superficial by comparison. Anyone who reads the DOD/NASA guide will be impressed by the complexity of incentives. Incentives are so complex that they should be used only by the most knowledgeable and skilled practitioners.

Second, there has never been a fully worked out theory or set of principles for award-fee incentives, and agency-published guidance focuses on organizational and procedural questions. No one has ever bothered to think things through. Indeed, there has been very little up-to-date thinking about award-fee incentives. The DOD/NASA guide discusses award-fee only briefly and the discussion is half-baked. Consider, too, that the sample award-fee criteria in the DOD Procedures, Guidance, and Instruction (PGI) at 216.405-2 (DFARS Table 16-1) have not been substantively changed for more than 30 years. That table reflects the ongoing confusion over the subjective versus objective and process versus results theories of award-fee.

Third, use of incentives makes contract management much more complex, especially when a contract is subject to changes during performance that will require equitable or other adjustments to price or cost and fee. A contracting officer must have considerable knowledge and skill in order to preserve incentive effectiveness in the face of significant or numerous pricing adjustments. It is not work for amateurs or even ordinary journeymen.

Fourth, official training about incentives is superficial, at best.

Fifth, even if incentives can "work" to motivate contractors, poor design and unskillful management makes it unlikely that they will.

In an article I wrote for The Nash & Cibinic Report in 2005, "Award Fee Incentives: Do They Work? Do Agencies Know How To Use Them?," 20 N&CR ? 26, I recommended that the FAR councils require HCA approval for the use of an award-fee incentive. The councils have gone me one better⎯they require HCA approval for the use of any incentive. It remains to be seen whether that limitation will be retained in the final rule. I hope so. We have been entirely too enamored of incentives, and reduced use will greatly simplify contract formation and management. HCAs should approve the use of incentives only after they have satisfied themselves that the people who want to use them know what they are doing. If they do, we'll see fewer incentives.

The FAR Council (the Administrator of Federal Procurement Policy, Secretary of Defense, Administrator of GSA, and Administrator of NASA) should now ask themselves a couple of questions. Do incentives work? Are they worth the trouble? If the answer to either of those questions is no, then perhaps the coverage in FAR 16.4 should be removed or drastically abridged. If both answers are yes or maybe, and the FAR Council doesn't want to eliminate the coverage on incentives, then the FAR Council should take the opportunity to (1) think through the concept of the award-fee incentive and (2) provide the incoming generation of contracting personnel first-rate training in the use of all types of incentives. The latter can be done by developing a rigorous DAU course devoted entirely to the topic. In developing such a course, DAU should look to the DOD/NASA Incentive Contracting Guide as a knowledge baseline and a foundation for a new textbook. On-the-job training in incentive contracting is no good, because the generation that is now headed for retirement does not understand incentives well-enough to train anyone in their design or use.

Have we seen the end of incentives? No. A better question is whether we have seen the beginning of a new era in the use of incentives.

Vern Edwards

Why does anyone think that a long-standing administrative problem can be solved by writing reports, memos, and regulations? In a report issued in September, GAO 09-921, Extent of Federal Spending under Cost-Reimbursement Contracts Unclear and Key Controls Not Always Used, the GAO made the following recommendation to the Office of Federal Procurement Policy:

To help ensure that analysis is conducted to determine whether to continue using cost-reimbursement contracts when experience may provide a basis to transition to firmer pricing, we recommend that the Administrator of OFPP take steps to amend the FAR. Specifically, we recommend that the Administrator require procedures for contracting officers (in conjunction with the requiring activity) to analyze, before the award of a new contract or at other appropriate times during a contract's period of performance, the agency's requirement and determine if its experience with a procurement provides a basis for firmer contract pricing. The results and findings of this analysis should be documented in the contract file. If the analysis indicates that a basis for firmer pricing does exist, the procedures should require consideration, modification, and implementation, if feasible, of an acquisition plan to transition to a contract type with firmer pricing.

OFPP will write a memo, of course, and a blurb will be added to FAR Part 16, but nothing will change, at least not much and not for long.

The reason that contracting personnel do not conduct the kinds of analyses that GAO wants more often, if at all, is that they do not have the time or because they lack the know-how, and because they do not have the organizational go-power to stand up to the folks in the requiring activities. Cost-reimbursement and time-and-materials contracts can make life easier for requiring activities that are unable to, or simply will not, fully determine and specify their requirements. They want the cost or T&M contract because the contractor will be easier to work with than it would under a fixed-price contract, and they will bring pressure to bear in order to get what they want. It has been my experience that when a program or project manager or functional area chief tells the Big Boss that they have to have something in order to get the mission done, the Big Boss tends to listen to them more sympathetically than to some contracting officer. Why anyone thinks that new memos and regulations would fix this is hard to understand, but I suppose you have to do something even when you know it won't be effective. I don't blame GAO for issuing the report. After all, what else can they do? They can't make anything happen.

What we get instead of real fixes to problems is impotent incrementalism. I'm using incrementalism somewhat as defined by the late Prof. Aaron Wildavsky--a process in which limited progress is achieved by agreeing not to attempt fundamental change. Everything is done at the margins, because the core problems are too complex to solve. Wildavsky was writing about the federal budget process, in which negotiations and decisions are about spending money. We're talking about acquisition processes. In acquisition, our incrementalism is impotent. There will be a flurry of activity⎯memos, admonishments, and follow-up reports⎯but nothing will change as intended and in any fundamental and lasting way.

What might actually fix such problems is a competent, truly professional, and independent corps of contracting officers. But the creation of such a corps is mission impossible. Implementing that fix would entail crossing too many functional and organizational boundaries. You would have to get OFPP, the Office of Personnel Management, agency heads and their subordinate managers, employee unions, and maybe Congress to work together to raise standards and re-imagine the acquisition world. That will not happen, unless someone decides to create an all-powerful, cross-functional, trans-organizational acquisition czar⎯a veritable czar of all the acquisitions. Of course, that person would have to be an organizational genius with ideas and a vision, which means we couldn't go through the usual presidential appointment process. Assuming that you could find such a person, you would have to appoint him or her for a term of at least 15 years, like the Comptroller General, and give him or her plenipotentiary powers over everything acquisition. Too controversial. Can't happen. Won't happen. Too hard.

In order to create a professional contracting officer corps we would have to do some things that would be very hard to do in today's America. We would have to set very high standards for competence and performance⎯much, much higher than we have now. We would have to have a true and strict meritocracy. We would have to appoint only experts to be contracting officers. We would have to base appointments on achievement rather than on promise or longevity. We would have to tell some people that they just don't have what it takes to be a contracting officer and then take on their lawyers. We would have to tell successful candidates that if they accept a contracting officer appointment they will be held personally responsible for any negligence, but that we want them to be innovative, like pioneering doctors and engineers. Then we would have to find people who will take such a job and back them when they make reasonable decisions that aggravate requiring activities. And we would have to support them when they make reasonable decisions to experiment in ways that turn out badly through no fault of their own. We would have to refrain from giving everybody a trophy and tell people in no uncertain terms when they screw up.

For a hundred reasons, none of that is going to happen.

Of course, nothing stops us from setting high standards of competence for ourselves. We should be our fiercest and most relentless critics. We shouldn't need the GAO or some IG to tell us what we're doing wrong and what we could be doing better.

But since real change is not going to happen--in fact, can't happen under the prevailing acquisition culture of impotent incrementalism--I fear that all we can look forward to is more reports, more memos, and more regulations. I guess everybody gets one revolution and we got ours in 1776.

Or do we really get only one?

Vern Edwards

Warning: This is going to be cranky.

In testimony before the Commission on Wartime Contracting in Iraq and Afghanistan, John Hutton of the GAO said that DOD had to do a better job of tracking contracts. Specifically, he said that DOD had to do a better job of keeping track of "the number of personnel employed on each contract in Iraq and Afghanistan." I have a question: Why? Who the hell cares?

The answer of course is that Congress passed a dumb law requiring DOD to keep track of the number⎯the National Defense Authorization Act of 2008. But why? I didn't look up the legislative history, but I'm willing to bet that they did it because some bean counter said they should.

Odd. On the one hand, COs are supposed to do performance-based contracting and specify and evaluate results rather than how-to. On the other hand, the CO is supposed to hound contractors about how many people are employed under their contracts, a number that will undoubted change from time to time. Of course, asking contractors to keep track costs money. I'm not sure what else it does. What do we do with the information? GAO thinks the information is useful for all kinds of management and oversight purposes. As everyone knows, managers and overseers have an insatiable appetite for numbers, whether they know what they're going to do with them or not, whether they measure the usefulness of the information or not, or do a cost-benefit analysis⎯something GAO wants everybody else to do.

DOD, the Department of State, and USAID have developed a system for keeping track of contracts: SPOT, or Synchronized Predeployment and Operational Tracker. (Don't you love it?) GAO sees all kinds of promise in SPOT:

SPOT is designed to track contractor personnel by name and record information such as the contracts they are working under, deployment dates, and next of kin.

Why should the government worry about that? Let the contractors worry about it. I'm sure GAO can come up with all kinds of reasons.

The agencies' lack of complete and accurate information on contractors supporting contingency operations may inhibit planning, increase costs, and introduce unnecessary risk? .

Like anybody is really going to use the data to manage anything. Like they have time. Like it would make a difference in anything that matters.

Absent robust contractor personnel data in SPOT, DOD, State, and USAID have relied on surveys of their contractors to obtain information on the number of contractor personnel. However, we determined the resulting data from these surveys are similarly incomplete and unreliable and, therefore, should not be used to identify trends or draw conclusions about the number of contractor personnel in each county. Additionally, officials from all three agencies stated that they lack the resources to verify the information reported by the contractors, particularly for work performed at remote sites where security conditions make it difficult for U.S. government officials to regularly visit.

Surprise, surprise. Let's throw more resources into bean-counting.

I'm not opposed to keeping records on war-support contracts. We should know how many there are, what each of them is for, and how much money they cost in the end. But I can't for the life of me see the value in keeping track of the number of contractor employees. Contractors should keep track of U.S. citizens employed in those awful places and tell the CO when one of them is killed or injured. But otherwise, who cares? Employees come and go. Their numbers rise and fall, depending on what's going on. Any number the CO gets is likely to be a snapshot, so why bother with the counts⎯so GAO can complain that the numbers obtained in the past weren't accurate when the GAO did some kind of audit?

This is a little thing, but the little things add up. Frankly, I think we have gone a little nuts. War is messy. It's one gigantic screw-up that hopefully turns out all right in the end. We should keep track of what's going on, but let's focus on the important thing: Are we getting what we're paying for?

SPOT⎯I wonder what George Patton would say.

Probably couldn't print it.

Vern Edwards

In a memo released today and addressed to Chief Acquisition Officers and Senior Procurement Executives, the Office of Federal Procurement Policy issued "guidelines" to agencies about how to increase the use of competition and use fewer cost-reimbursement and time-and-materials/labor-hour contracts. Honestly, you have to wonder.

The memo begins by reiterating President Obama's March 4 memo. So we have a memo about a memo. The March 4 memo told federal agencies to (1) get more competition and (2) use fewer cost-reimbursement contracts. Now, you would think that Chief Acquisition Officers and Senior Procurement Executives would know how to do that without advice from OFPP. What are the guidelines?

INCREASING COMPETITION

In order to get more competition, OFPP suggests that agencies use requests for information and industry days to find sources. They should use "the full range of market research tools" (whatever they are). They should use "an" advisory process--presumably the process set out in FAR 15.202. They should use contract review boards and peer reviews.

Now, all of this is exactly the wrong advice. Agencies like sole source because it's fast and administratively inexpensive. Agencies don't like competition because (1) it is too resource intensive, (2) it takes too long, and (3) it is too vulnerable to nuisance protests. If OMB really wants to increase competition is should address those complaints by telling agencies to simplify their source selection processes, including selection procedures for task and delivery orders. The objective should be to use fewer people and speed up the process by no longer asking for needlessly voluminous paper proposals. Simpler source selections will be less susceptible to protests. But OFPP suggests the use of processes that take time and people. Brilliant.

OFPP also urges the use of performance-based contracting. That's a loser and has been a loser for more than 40 years, ever since the Air Force invented it in 1969. Agencies have never figured out how to write performance work statements and quality assurance surveillance plans and have proven themselves to be immune to training about how to do it, assuming it can be done. OFPP won't make competition more attractive by pushing performance-based contracting.

Lacking anything more specific, OFPP then discusses "competition strategies" and "strategic sourcing." Whenever anyone in procurement starts talking about strategy, I go to sleep. So does almost everyone else.

Finally, OFPP urges agencies to maximize competition for task and delivery orders. Again, the solution is to simplify. But what does OFPP suggest? Apply "greater competitive rigor," whatever that means. It will undoubtedly be interpreted to mean, "Make it more formal and complicated." OFPP then amusingly suggests "using data generated by new FPDS reports to evaluate in new competitions the extent to which task and delivery order competition is being achieved." That's funny, aside from the fact that the sentence doesn't make sense. Use FPDS data to "evaluate in new competitions the extent to which competition is being achieved"?

USING FEWER COST-REIMBURSEMENT AND TIME-AND-MATERIALS CONTRACTS

As for contract types, OFPP gives the entirely unoriginal advice to (1) do a better job of defining requirements, (2) determine the level of cost uncertainty when selecting contract type and (3) use incentives. The suggestion to use incentives is especially interesting in light of the fact that the FAR councils just issued FAC 2005-37, which contains a rule requiring the preparation of a D&F signed by the head of the contracting activity before using any incentive. That's a mixed message. If you want people to use incentives, don't make them harder to use.

What OFPP ignores is that the use of indefinite-delivery indefinite-quantity and cost-reimbursement and T&M/L-H contracts is directly associated with the unwillingness or inability of agencies to define and specify their requirements in advance. Defining requirements is a lot of trouble. Cost and T&M contracts let agencies make it up as they go along, which is what government managers prefer to do, being apparently incapable of thinking and planning before going on contract. The history of contracting since at least the late 1980s is about finding ways to make careful planning and specification unnecessary. The trouble began with information technology requirements and has spread through the system like a virus. While cost and T&M contracts have a legitimate use, contracting people have had their arms twisted to use them to help requiring activities that can't get their acts together. Contracting people lack the know-how and standing within their organizations to demand better requirements definition and planning from their "customers."

OUR INCOMPETENT GOVERNMENT

The older I get and the longer I am in acquisition, the more I despair of bringing any kind of discipline to the discipline. It is hopeless. We have too many presidential appointees and not enough informed thinkers and skilled doers. Training is pathetic and contracting officer certificates of appointment are handed out like candy on Halloween.

Federal appellate judge Richard Posner said it all in the title of an article he wrote for The New Republic in 2005: "Our Incompetent Government." http://www.tnr.com/article/politics/our-in...tent-government In that article he talks of "governance by cheap, showy gestures." I think that describes the OFPP memo perfectly.

Vern Edwards

Anyone who has conducted onsite training is familiar with the scenario. A student's supervisor lets her attend a training course, but demands that she come into the office before and after class to get a solicitation or a contract modification "out of the door." Sometimes the supervisor pulls the student out of class to attend a meeting or a telephone conference. The result is that the student is tired and stressed and cannot fully devote herself to the class work. If the class is demanding, the student's classroom performance is suboptimal and the educational experience fails.

I have seen that scenario a thousand times. I saw it last week.

Training costs money in more ways than one. A disrupted training experience is a lost training opportunity and a waste of taxpayer money. The excuse? We have to get the solicitation or the mod out, that's all there is to it. That's no excuse. I have no sympathy for the supervisor. If you can't leave the trainee alone during the training, then don't let them attend the class. Give the opportunity to someone else or forego the training entirely. Send the busy trainee some other time or have someone else pick up the work. Plan for training, dammit!

We're hiring contracting interns like mad, but we're putting them into the hands of people who take only the short-term view. They see trainees as workforce augmentation, instead of workforce investment to be nurtured and developed. They throw requisitions at people and then give them documents from which to cut and paste, and call that OJT. These are the same people who have failed to develop efficient contracting processes and who clutter their procedures with needless activities. They don't know much and they can't teach anything. They drive the best of the new generation away and ruin the ones who stay.

In July 21 testimony before the House Armed Services Committee, the Director of Defense Procurement told the congressmen that a "major element" of DOD's acquisition reform effort is to revitalize the defense acquisition workforce. He said:

Significant emphasis by leadership to include the President, the Congress, and the Secretary of Defense have laid the foundation for the first significant growth in the acquisition workforce since the military build-up in the 1980's and the downsizing that occurred during the 1990's. The Defense acquisition workforce is critical for improving acquisition outcomes for the nation's $1.6 trillion investment in major systems. This workforce is also critical for supporting our expeditionary and emergency acquisition missions.

If the workforce is so critical, then he should put out the word that supervisors are responsible for creating an environment in which training money is not just spent, but is spent well.

Vern Edwards

In many places, the Federal Acquisition Regulation tells contracting officers to document their conclusions about this or that. The classic example is the requirement in 15.406-3(a)(11) to document the fairness and reasonableness of the contract price. See also FAR 16.103((d):

Each contract file shall include documentation to show why the particular contract type was selected.

By "documentation," FAR means explanation.

Can you explain yourself? Suppose that you propose to use a firm-fixed-price contract for a research and development project. The other party, skeptical, asks why. What would you say? You would probably say something about risk and government pricing policy. But what if the other party were to ask you: What is risk? Risk of what, exactly? How much risk is there? Why do you think there is only that much risk? Why do you think a firm-fixed-price contract is the right arrangement for that much risk?

How would you answer those questions? How would you explain yourself?

By explanation, I don't mean description. When someone asks what is a BPA under a GSA schedule contract, they are asking for an explanation in the form of a description. You explain such BPAs by describing them and how they work. I'm talking about explanations of conclusions, decisions, and actions, in which you try to make someone understand why you think, decided, or acted in a certain way. Such explanations are not only intended to inform, but also to persuade the reader or listener that your ideas, decisions, and actions comply with the law and are reasonable.

I am fascinated by the topic of explanation, because I have watched my students struggle to explain to others in a class why they have reached this or that conclusion about a problem.

What is an explanation? Of what does an explanation consist? What makes an explanation good or bad? What makes an explanation convincing? Can an explanation be good that is complete and sound, but not convincing?

What if you explain in terms that the questioner doesn't understand, because they are ignorant of things they need to know? For instance, suppose that you answer the question, "How much risk?" by talking about probability distributions, decision trees, and expected values, and the questioner does not understand those things. Is that your fault? Should you "dumb-down" your explanation in order explain in terms that the ignorant questioner understands? Does documentation have to explain to the ignorant, or only to the informed?

And what if someone who does understand listens to your simplistic explanation and says to you, "Well, that explanation is not really complete, because you haven't addressed the probabilistic asymmetry of the problem." Is an incomplete explanation good if it satisfies an ignorant questioner, but does not satisfy an informed observer? What do you write if you must document a file, but don't know who will ask questions?

Suppose that you don't understand everything yourself, and can't answer the "How much risk?" question with specificity, but only in general terms, like, "A lot." How often do we think things, reach conclusions, and make decisions without being sure about our reasons? How often do we act in a certain way, but can't completely explain why? Is it possible that we don't ask ourselves enough questions? Do we get away with weak explanations only because we aren't seriously challenged very often?

The problem of explanation has been around a long time and there is a massive literature about it. The first systematic treatment that I know of was written by Aristotle and is titled, The Art of Rhetoric, or Treatise on Rhetoric, or just, Rhetoric.

Aristotle begins:

For all men attempt in some measure to conduct investigations and to furnish explanations, both to defend and to prosecute. Amongst the general public, then, some perform these tasks haphazardly, others by custom and out of habit, and since they admit of being carried out in both ways, it is apparent that it would also be possible to do them by method. For it is possible to study the reason for success both of those who succeed by habituation and of those who do so by chance, and anything that is just of this kind everyone would agree to be the province of an art.

Further on, after a brief discussion of various kinds of rhetorical proofs, he says, "Since proofs are presented by these means it is clear that the grasp of them belongs to whoever has mastered the syllogism? ."

The syllogism. What is a syllogism? Merriam-Webster's Third New International Dictionary, Unabridged, defines syllogism as follows:

a deductive logical scheme or analysis of a formal argument that consists of a major premise, a minor premise, and a conclusion and that may be used either to prove a conclusion by showing that it follows from known premises or to test the truth of premises by showing what follows from them (as in "every virtue is laudable; kindness is a virtue; therefore kindness is laudable")

In logic, a deductive argument is considered valid if, if the premises are true, then the conclusion must be true. An argument is true if, if the premises are true, then the conclusion must be true, and, in fact, the premises are true. Aristotle (again!) wrote an entire treatise about deduction and syllogisms titled, Prior Analytics.

The syllogism is an important idea, and there is an enormous literature about it, but I find that most of my students are not familiar with the word, or have heard it but don't know what it means. There is a handy introductory discussion of argument and syllogisms at Changingminds.org At the home page, under the heading, Disciplines, click on Argument, then click on Syllogisms. See also Syllogistic Reasoning.

Syllogisms are useful for the kinds of explanations we in acquisition must provide, in which we must reach a conclusion based on law, regulation, or business principle.

In Making Your Case: The Art of Persuading Judges (Thomson-West, 2008), by Associate Justice Antonin Scalia of the U.S. Supreme Court and Bryan A. Garner, editor of Black's Law Dictionary and author of works on legal writing, the authors included a section about syllogistic reasoning. It begins on page 41 and is entitled, "Think syllogistically." The authors begin as follows:

Leaving aside emotional appeals, persuasion is possible only because all human beings are born with a capacity for logical thought. It is something we all have in common. The most rigorous form of logic, and hence the most persuasive, is the syllogism. If you have never studied logic, you may be surprised to learn⎯like the man who was astounded to discover that he had been speaking prose all his life⎯that you have been using syllogistic reasoning all along. Argument naturally falls into this mode, whether or not you set out to make it do so. But the clearer the syllogistic progression, the better.

Emphasis added.

A syllogism has three parts: a major premise, a minor premise, and a conclusion. The classic example is:

  • Major premise: All men are mortal.
  • Minor premise: Socrates is a man.
  • Conclusion: Therefore, Socrates is mortal.

In acquisition, the major premise is a law, regulation, policy, or business principle. The minor premise states the pertinent facts of the acquisition at hand. The conclusion is drawn from the conjunction of the two premises. Here is a simple example:

  • Major premise: According to FAR 16.601(d)(1)(i), before using a time-and-materials contract the contracting officer must prepare and sign a determination and findings that no other contract type is suitable.
  • Minor premise: The contracting officer plans to use a time-and-materials contract for this acquisition.
  • Conclusion: Therefore, in this case, the contracting officer must prepare and sign a determination and findings that no other contract type is suitable.

That was easy. But it might not be so easy to explain why no other contract type is suitable. In that case, the major premise might be stated as follows:

  • Major premise: According to FAR 16.601?, a time-and-materials contract is suitable for use when it is not possible to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence.

The challenge now is to develop a convincingly true minor premise to the effect that it is not possible to estimate costs "accurately" in the acquisition at hand. In order to do that, you may have to develop another syllogism. In fact, in order to make your case you might have to develop a chain of syllogisms. Legal arguments have been called chains of syllogisms. See Huhn, The Use and Limits of Syllogistic Reasoning in Briefing Cases, 42 Santa Clara Law Review 813 (2002).

I think that the syllogism and syllogistic reasoning are the keys to clear thinking and good explanation. They go hand-in-hand with an understanding of the audience and the sources of its skepticism. The more consciously you structure your explanations in syllogistic form, the better they will be, because in order to construct a good syllogism you have to think and write clearly. You could develop a syllogism or chain of syllogisms to explain why a particular proposal is the best value in a source selection. The major premise would be a statement that best value is a function of the combination of evaluation factors in one proposal that give it an advantage over others. The minor premise would be a statement of key facts about the chosen proposal in relation to the others in terms of the evaluation factors. The more consciously you structure your major and minor premises and demonstrate that your best value conclusion "follows" from them, the better and more persuasive your explanation will be.

In my classes, students are now required to develop syllogisms to explain their arguments and are given a form to use for that purpose, which has spaces for the major premise, the minor premise, and the conclusion and a set of instructions. A good syllogism is concise and to the point. It takes time and practice to become skillful at developing a good syllogism, and like all things worthwhile, you have to work at it. But if you do, you will find that the effort to do it will help you think more clearly. You will find it easier to spot the holes and the weaknesses in your arguments, so you will be better able to see when you must bolster the argument in support of your conclusion, and when your conclusion is insupportable. People who disagree with you will be forced to show you where you have gone wrong. Is there an error in your major premise? Your minor premise? Your conclusion? If they accept your premises, and if your conclusion follows, then why do they still disagree? Such focus can make it easier to resolve disagreements. Of course, in order to write a good syllogism you must be able to write good sentences. That's not easy, and I notice that most of my students are not good at it.

The government is hiring a lot of trainees and they are going to ask a lot of questions. Someone has to give them answers in the form of explanations, and someone has to explain why the answers are true. If the trainees are to be developed properly, they must be given good explanations and trained how to make them.

There is more to being good at this work than knowing regulations and procedures, which is why I like it. I find this sort of thing a lot more interesting than questions about using BPAs under GSA schedule contracts.

For more about syllogisms, see Kelley, The Art of Reasoning, 3d ed. (1998).

Vern Edwards

"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 (B) 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.

Vern Edwards

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.

Vern Edwards

I just received a catalog from a prominent publisher of books about contracting. I know that such books are expensive, but these prices are stunning: $559.59 for a treatise on contract costs; $214.00 for a ?guidebook?; $92.00 for a book about default termination; $543.00 for a treatise about negotiation and sealed bidding.

Other publishers are much the same: $105.00 for a paperback copy of the Cibinic and Nash book on contract administration. $140.00 for an excellent introduction to cost estimating. My own book about source selection costs $95.00. There are a few good commercially available textbooks, but they are priced out of reach of the average practitioner. The ?course manuals? for most classes are mediocre, at best. The one commercial organization that produces reliably good course manuals wants $235.00 each for them.

Who buys books at those prices? Institutions and law firms; not many individuals. At those prices, books are out of reach of the people who need them most. I know the reasons for such prices, but they infuriate me all the same.

The government is busy hiring persons to do its contracting. DOD is going to hire 20,000 of them. Those persons must be trained. They get lousy classroom training for the most part, and truly awful OJT, but some of that could be offset by the availability of good textbooks and high quality programmed home study courses. With good textbooks, people could study at home (which is the best way to learn).

Most publishers will give quantity discounts, which raises a question: Why doesn?t someone in the government approach the commercial publishers and negotiate a deal. Sales of such books are generally low. What if the government offered to buy, say, 20,000 of them? That?s a lot more than most of those books sell in a year. Maybe more than all of them. What kind of a discount could the government receive? What if the books were also made available for direct purchase by government and contractor employees at the government discount?

There is plenty of training money floating around now⎯why can?t some of it be used to buy good textbooks for trainees? What if the Administrator of OFPP or the Administrator of GSA or the Director of Defense Procurement approached the head of marketing for West, Wolters Kluwer, Management Concepts, and other publishers and said: We want to make a deal. I wonder if they could get the price of the Cibinic and Nash books down to $25.00 or $30.00, the price of a hardcover Stephen King novel. Answer: You can't know until you try. Heck, I'd make it a matter of patriotism.

The government is hiring like crazy. The new hires have to be trained. Who is going to train them? DAU? FAI? Please. But with good books, someone competent could set up high quality home study programs for the new people.

Sometimes, the lack of imagination on the part of our ?leaders? simply astonishes me.

Vern Edwards

Don Mansfield and I discussed my recent blog entry about IDIQ contracts last night, and Don offered an interpretation of the Indefinite-Quantity clause that I want to share. Don suggested a different interpretation of the first paragraph of the Indefinite Quantity clause, FAR 52.216-22. which reads as follows:

(a) This is an indefinite-quantity contract for the supplies or services specified, and effective for the period stated, in the Schedule. The quantities of supplies and services specified in the Schedule are estimates only and are not purchased by this contract.

I had read that the first sentence to say that the effective period is specified in the Schedule, but Don thinks that it should be read as follows:

This is an indefinite quantity contract, effective for the period stated, for the supplies or services specified in the Schedule.

I think that Don is right, and that my interpretation was wrong. I had missed the second comma in the sentence, the one following "stated." (Poor eyesight is my only excuse, and not much of one.)

Based on my original interpretation, I had concluded that the effective period is to be stated in the Schedule, somewhere among Uniform Contract Format sections A through H. I had further concluded that since the ordering period is to be stated in Section I, in the Ordering clause, and since Section I is not part of the Schedule, the effective period and the ordering period are not one and the same. Now it appears to me that they might be one and the same, in which case the contract need stipulate only three dates instead of five:

  • the first date of the ordering period,
  • the last date of the ordering period, and
  • the last date of required performance.

What are the implications?

The last paragraph of the Indefinite Quantity clause reads as follows:

(d) Any order issued during the effective period of this contract and not completed within that period shall be completed by the Contractor within the time specified in the order. The contract shall govern the Contractor's and Government's rights and obligations with respect to that order to the same extent as if the order were completed during the contract's effective period; provided, that the Contractor shall not be required to make any deliveries under this contract after _______________ [insert date].

Assuming that the contract does not stipulate a separate effective period, and that the effective period mentioned in the Indefinite Quantity clause is the ordering period to be stipulated in the Ordering clause, then I think the contract terms are "effective" only during the effective/ordering period, except for orders that are not completed within that period, in which case the terms are extended for that order until it is completed. Another exception would be any term that expressly survives the effective/ordering period, such as a warranty. I still think that the operative effect is unclear and the parties to an IDIQ contract must be wary and alert to the possibilities.

Whatever the facts and the interpretation, Don and I agree that the parties to an IDIQ contract must carefully coordinate the dates in the contract and the dates in orders. We also agree that the parties would be wise to stipulate when an order will be considered "completed." One possibility is to stipulate that an order is "completed" only when the government has made final payment on the order. I think that contracting officers would be wise to obtain a contractor's release of claims on each order prior to making final payment on the order.

Vern Edwards

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:

[T]he requiring activity wants to put a task order in place that has a base year and 2, one-year options. The ID/IQ contract expires half way through the first one-year option. What authority allows you to exercise the second option year?

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:

Specify the period of the contract, including the number of options and the period for which the Government may extend the contract under each option? .

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:

Indefinite Quantity (Oct 1995)

(a) This is an indefinite-quantity contract for the supplies or services specified, and effective for the period stated, in the Schedule. The quantities of supplies and services specified in the Schedule are estimates only and are not purchased by this contract.

(B) Delivery or performance shall be made only as authorized by orders issued in accordance with the Ordering clause. The Contractor shall furnish to the Government, when and if ordered, the supplies or services specified in the Schedule up to and including the quantity designated in the Schedule as the ?maximum.? The Government shall order at least the quantity of supplies or services designated in the Schedule as the ?minimum.?

? Except for any limitations on quantities in the Order Limitations clause or in the Schedule, there is no limit on the number of orders that may be issued. The Government may issue orders requiring delivery to multiple destinations or performance at multiple locations.

(d) Any order issued during the effective period of this contract and not completed within that period shall be completed by the Contractor within the time specified in the order. The contract shall govern the Contractor?s and Government?s rights and obligations with respect to that order to the same extent as if the order were completed during the contract?s effective period; provided, that the Contractor shall not be required to make any deliveries under this contract after _______________ [insert date].

(End of clause)

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:

Ordering (Oct 1995)

(a) Any supplies and services to be furnished under this contract shall be ordered by issuance of delivery orders or task orders by the individuals or activities designated in the Schedule. Such orders may be issued from __________ through ____________ [insert dates].

(B) All delivery orders or task orders are subject to the terms and conditions of this contract. In the event of conflict between a delivery order or task order and this contract, the contract shall control.

? If mailed, a delivery order or task order is considered ?issued? when the Government deposits the order in the mail. Orders may be issued orally, by facsimile, or by electronic commerce methods only if authorized in the Schedule.

(End of clause)

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:

In Dynamics Corp. of America v. United States, 389 F.2d 424, 430-33 (Ct. Cl. 1968), the Court of Claims established that the government?s issuance of orders under an indefinite quantity contract is like its exercise of options and must be accomplished in strict accordance with the contract?s terms. The court found that the orders in question were not issued within the time period specified in the contract and granted summary judgment to the contractor for the reasonable value of goods it had delivered under protest when the government required it to perform. Indeed, it is settled that, ?[f]or an option order to be effective, the Government must exercise the option in exact accord with the terms of the contract.? Freightliner Corp. v. Caldera, 225 F.3d 1361, 1366 (Fed. Cir. 2000).

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:

Any order issued during the effective period of this contract and not completed within that period shall be completed by the Contractor within the time specified in the order. The contract shall govern the Contractor?s and Government?s rights and obligations with respect to that order to the same extent as if the order were completed during the contract?s effective period? .

Emphasis added. However, the paragraph goes on to say:

provided, that the Contractor shall not be required to make any deliveries under this contract after _______________ [insert date].

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:

(a) Except as provided in paragraph (B) of this section, a contract is considered to be physically completed when?

(1)(i) The contractor has completed the required deliveries and the Government has inspected and accepted the supplies;

(ii) The contractor has performed all services and the Government has accepted these services; and

(iii) All option provisions, if any, have expired; or

(2) The Government has given the contractor a notice of complete contract termination.

(B) Rental, use, and storage agreements are considered to be physically completed when?

(1) The Government has given the contractor a notice of complete contract termination; or

(2) The contract period has expired.

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)(B), 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:

Options may be included on orders placed against GSA Multiple Award Schedule (MAS) contracts, provided that the options are clearly stated in the requirement and are evaluated as part of the ordering activity's best value determination. Such options may be exercised on GSA Schedule contract orders, provided that:

? Funds are available;

? The requirement covered by the option fulfills an existing government need;

? Prior to exercising an option, the ordering activity ensures that it is still in the government's best interest; i.e., that the option is the most advantageous method of fulfilling the government's need, price and other factors considered; and

? The options do not extend beyond the period of the Schedule contract, including option year periods.

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
before
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
after
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.

Vern Edwards

In his June 17 column in Government Executive, Brian Friel asked managers to think about what kind of communicator they are:

As a manager, what kind of communicator are you? Are you a face-to-face type of person, preferring to have employees stop by your office to touch base? Or are you more of a phone and voicemail boss, managing via your cell phone as you dart around to various meetings? Maybe you're an Internet age communicator -- an e-mailer and texter. You like reading employees' questions and responding with the click-clack of your keyboard, rather than having them knock on your door or ring your line at potentially inconvenient times.

This is interesting. I have noticed that many chiefs of contracting offices seem to spend most of their time running from meeting to meeting. I don?t see how that leaves them much time for communicating with their people.

I think that one of the most valuable things you heads of contracting activities and chiefs of contracting offices can do is get away from the desk top computer, the office, and the conference room, and walk around. Drop in unannounced at the cubicles of contracting officers and contract specialists and ask them what they?re working on. This should not come across as checking up on the employee, but as showing a genuine interest in their work. Ask them what problems they are having and what they need to do a better job.

An open door policy is not enough. Most people won?t take advantage of it. Instead, show up at their door for a little unscheduled one-on-one. Do it intermittently and unpredictably, not as a side-trip from a meeting with their boss. Drop in on a specific person and then leave; don?t go from cubicle to cubicle. After you leave, others will ask the person what it was about, and he?ll say: She just wanted to know what I?m working on and how I?m doing.

Do it for no reason other than to show interest and concern and to take the pulse of the organization. I call this the ?Little Touch of Harry in the Night? approach. The phrase comes from Shakespeare?s tale of the English hero-king Henry V. In the prologue to Act IV of his play, Shakespeare relates how Henry visited his troops during the night before the battle of Agincourt, at which the French surrounded and would greatly outnumber the English during the battle:

The poor condemned English,

Like sacrifices, by their watchful fires

Sit patiently and inly ruminate

The morning's danger, and their gesture sad

Investing lank-lean; cheeks and war-worn coats

Presenteth them unto the gazing moon

So many horrid ghosts. O now, who will behold

The royal captain of this ruin'd band

Walking from watch to watch, from tent to tent,

Let him cry 'Praise and glory on his head!'

For forth he goes and visits all his host.

Bids them good morrow with a modest smile

And calls them brothers, friends and countrymen.

Upon his royal face there is no note

How dread an army hath enrounded him;

Nor doth he dedicate one jot of colour

Unto the weary and all-watched night,

But freshly looks and over-bears attaint

With cheerful semblance and sweet majesty;

That every wretch, pining and pale before,

Beholding him, plucks comfort from his looks:

A largess universal like the sun

His liberal eye doth give to every one,

Thawing cold fear, that mean and gentle all,

Behold, as may unworthiness define,

A little touch of Harry in the night.

Walking from cubicle to cubicle can be good for morale, if you handle it right. Handling it right means being casual and sincere and not making promises you know you can?t keep. Don?t promise even to look into making a promise you know you can?t keep. Sincerity and credibility go hand in hand. Tell the truth about what you can and can?t do and what you will and won?t do. And don?t make silly suggestions to people about how to do their jobs. You don?t have to know all the answers to working level questions, and if you?ve been a manager for very long you probably don?t know many answers to working level questions.

Do more listening than talking. There is nothing worse than a general who shows up at the foxholes freshly shaven and resplendent in clean uniform and tries to inspire by pontification before going to back to a comfortable headquarters ten miles behind the line. Look at those stacks of files in the cubicles, at the paper scattered on the desks, at the images on the computer screens, and at the persons sitting in front of you. Try to imagine what it ?s like to sit there, especially if you haven?t worked in such a cubicle recently. Look at the office and listen its sounds. Listen to what the people have to say.

Looking and listening is good, even if it?s not enough.

Vern Edwards

Correction

In my recent "management fiasco" entry, i reported that the intern retention rate at the organization I visited was only 20 percent. I have been corrected. The rate was 25 percent.

I feel so much better. Don't you?

Vern Edwards

During a recent visit to a federal agency contracting shop, I was told that the retention rate among contracting interns has thus far been twenty percent. Twenty percent! Although the rate is lower than I expected, I am not entirely surprised.

I talk to a lot of contracting interns. What strikes me about them is that they are they are well-educated by today?s standards⎯masters degrees are common among them⎯and they are smart and eager. But they are disappointed by the work they are doing. It is not the work they had expected to do. An intern at a prestigious office recently said to me in despair: ?They have people with MBAs and JDs doing clerical work.? I later asked a group of that agency?s interns how many of them were challenged by the work they were doing. Not one person raised their hand. I then asked how many thought they would still be working there in four years. Not one person raised their hand. Some were angry and said that they had been lied to about the work. They told me that they were not being given good training, that many of the contracting officers they had been assigned to paid little attention to them, that they didn?t have mentors, and that the work is boring. Classroom ("formal") training from government and commercial sources is notoriously poor.

I think we are seeing a human resources management fiasco in the making. Agencies are recruiting contracting interns and trainees like crazy, and they are hiring good people, but they don?t know how to train and develop the new hires. They don?t seem to have formal OJT training plans and they don?t have enough good veterans to provide high quality OJT and be mentors. The typical training scheme is to assign the newbies to contracting officers as worker bees. But agencies don't prepare the contracting officers to conduct first-rate OJT. The quality of OJT is entirely dependent on the quality of the contracting officer to whom a trainee is assigned and on that person?s contracting knowledge and skill, and on his or her ability and willingness to inform, instruct, guide, and inspire. There simply are not enough good contracting officers to go around.

If something does not change, the government is going to attract good people, spend money to train them, train them poorly, and then lose the best of them before it can recoup its investment. Those who remain will be ill-prepared to do good work. I can say from personal experience that most government middle and senior managers have no idea about how to prevent this from happening. The managers that do have good ideas do not have the resources.

It is too bad. Contracting (as opposed to purchasing, i.e., making simplified acquisitions and placing orders against GSA schedule contracts) can be fascinating work. When played at the highest levels, contracting is an exciting and challenging game. We ought to be able to recruit, train, and retain very good people to play the game. But while we have shown that we can recruit potentially great players, we do not know what to do with them after they sign on.

Given our country?s dependency on contractors to do its important work, this is much worse than ?too bad,? it is disastrous.

I don?t think the Obama administration has a clue, much less a plan. I want to be wrong about that, but I don't think I am.

Vern Edwards

The Files

Bureaucracy has been a pejorative term for a long time.

The terms bureaucrat, bureaucratic, and bureaucracy are clearly invectives. Nobody calls himself a bureaucrat or his own methods of management bureaucratic. These words are always applied with an opprobrious connotation. They always imply a disparaging criticism of persons, institutions, or procedures. Nobody doubts that bureaucracy is thoroughly bad and that it should not exist in a perfect world.

Von Mises, L. Bureaucracy (Yale, 1946), p. 1. (The word is French in origin and literally means rule by bureau, i.e., by office. The Oxford English Dictionary reports the first use in English as occurring in 1818, when the novelist Syndey Owenson, Lady Morgan, wrote of the Bureaucratie, or ?office tyranny,? by which Ireland was governed.)

Early theories of bureaucracy described it favorably, as a form of social organization preferable to ?personal subjugation, nepotism, cruelty, emotional vicissitudes, and capricious judgment which passed for managerial practices in the early days of the industrial revolution.? See Bennis, W., ?Beyond Bureaucracy,? in Society, July/August 2007, p. 31. Bureaucracy has been called ?a social invention which relies exclusively on the power to influence through rules, reason, and law.?

Nowadays people associate bureaucracy with ?red tape,? and they grumble about it, sometimes bitterly. But, as Herbert Kaufman put it in his wonderful little book, Red Tape: Its Origins, Uses, and Abuses, ?One person?s ?red tape? may be another?s treasured safeguard.? Think of the Transportation Security Administration and its annoying and ever-changing rules about how to get through airport security. Annoying, that is, until you think of what might happen if there were no rules.

Bureaucracy is a fact of modern life. Whatever you think of it, bureaucracy happeneth to us all.

I think the first scholar to develop a systematic theory of bureaucracy was the German sociologist Max Weber (1864-1920), who applied the term to both public and private sector organization and considered bureaucracy an organizational advancement.

The decisive reason for the advance of bureaucratic organization has always been its purely technical superiority over any other form of organization? Precision, speed, unambiguity, knowledge of the files, continuity, discretion, unity, strict subordination, reduction of friction and of material and personal costs⎯these are raised to the optimum point in the strictly bureaucratic administration, and especially in its monocratic form. As compared with collegiate, honorific, and avocational forms of administration, trained bureaucracy is superior on all these points.

He wasn?t being ironic. These are what he described as the key characteristics of bureaucracy:

Modern officialdom functions in the following specific manner:

I. There is the principle of fixed and official jurisdictional areas, which are generally ordered by rules, that is, by laws or administrative regulations.

1. The regular activities required for the purposes of the bureaucratically governed structure are distributed in a fixed way as official duties.

2. The authority to give the commands required for the discharge of these duties is distributed in a stable way and is strictly delimited by rules concerning the coercive means, physical, sacerdotal, or otherwise, which may be placed at the disposal of officials.

3. Methodical provision is made for the regular and continuous fulfilment of these duties and for the execution of the corresponding rights; only persons who have the generally regulated qualifications to serve are employed.

In public and lawful government these three elements constitute 'bureaucratic authority.' In private economic domination, they constitute bureaucratic 'management.' Bureaucracy, thus understood, is fully developed in political and ecclesiastical communities only in the modern state, and, in the private economy, only in the most advanced institutions of capitalism?

II. The principles of office hierarchy and of levels of graded authority mean a firmly ordered system of super- and subordination in which there is a supervision of the lower offices by the higher ones. Such a system offers the governed the possibility of appealing the decision of a lower office to its higher authority, in a definitely regulated manner?

III. The management of the modern office is based upon written documents ('the files'), which are preserved in their original or draught form?

IV. Office management, at least all specialized office management-- and such management is distinctly modern--usually presupposes thorough and expert training. This increasingly holds for the modern executive and employee of private enterprises, in the same manner as it holds for the state official.

V. When the office is fully developed, official activity demands the full working capacity of the official? .

VI. The management of the office follows general rules, which are more or less stable, more or less exhaustive, and which can be learned. Knowledge of these rules represents a special technical learning which the officials possess. It involves jurisprudence, or administrative or business management.

Quoted in Gerth and Mills, eds., From Max Weber: Essays on Sociology (Routledge, 2009), p. 196.

Consider Item III, ?the files.? Many contracting practitioners hate ?the files,? even the very idea of ?the files,? and they hate documenting ?the files,? even if they understand the reasons for and the necessity of doing so.

The phantasmal belief that files can and are meant to record all governmental proceedings and happenings in their entirety has fueled the categorical imperative of Western administrations to make records and keep files. This belief has been fundamental to the administrative practice of recording and filing for at least the last two centuries. Max Weber, the German bureaucracy-expert of the 19th Century, transformed this practice into a principle? at the very moment when another medium of communication was emerging: the telephone. This new non-script based means of communication threatened the existence of files insofar as it had the potential to usurp extra- and intra-administrative communications from the documentary universe of the written word. To prevent this from happening, record keeping was implemented as a bureaucratic principle. From then on files began to pile up all over⎯files which historians, far from complaining about the masses of paper, would eventually take as their preferred source. The administrative workers, however, have since been drowning in files. For them records are the monsters they have to do battle with every day.

Vismann, C., ?Out of File, Out of Mind,? in Chun and Keenan, eds., New Media, Old Media: A History and Theory Reader (Routledge, 2005), p. 97.

But I am fascinated by ?the files.? The Federal Acquisition Regulation mentions ?contract file? in over 100 places, usually to require that the contracting officer document something or other. FAR Subpart 4.8 prescribes requirements for contract files and says in part:

4.801 General.

(a) The head of each office performing contracting, contract administration, or paying functions shall establish files containing the records of all contractual actions.

(B) The documentation in the files (see 4.803) shall be sufficient to constitute a complete history of the transaction for the purpose of?

(1) Providing a complete background as a basis for informed decisions at each step in the acquisition process;

(2) Supporting actions taken;

(3) Providing information for reviews and investigations; and

(4) Furnishing essential facts in the event of litigation or congressional inquiries.

Here is a typical documentation requirement, from FAR 17.207(f):

Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and Part 6.

?The files? are the artifacts of the contracting practitioner?s work. They are all that practitioners leave behind as evidence of their knowledge and skill. The newly developed aircraft, or ship, or computer system is not the product of the contracting practitioner?s work. The practitioner is an enabler, not a developer or producer. The practitioner?s work is to make the development or production possible in a way that complies with the law and that is fair to all parties. The practitioner brings the contract into existence and furthers its execution, and the files are the evidence of that work.

I can learn almost everything I want to know about the quality of a contracting practitioner by looking at his or her files. Files are nothing less than professional autobiography. When a practitioner fills out a form, writes and/or signs a memo, a determination and findings, or a final decision; signs off on a justification for other than full and open competition; and writes a contract or a contract modification, he or she is leaving a record of their work for contemporaries and posterity. Some of us remember Captain Charles S. Wallace, U.S. Army Signal Corps, today, only because he signed the contract with the Wright brothers for the first military aircraft.

The appearance of a contract file says a lot about the practitioner?s pride and attention to detail. Is it well-organized⎯with a table of contents and tabs? Are the tabs labeled? Does it contain an introductory narrative memo? Are the documents inserted in a consistent order (oldest first? newest first?). Does it contain unsigned or undated memos? Is it bespattered with indecipherable post-it notes?

The contents of a contract file tell me about the breadth and depth of the practitioner?s knowledge and skill. They tell me about the quality of his or her thinking and judgment⎯about his or her ability to assess facts, identify the important ones, and to reason, argue, bargain, and persuade. Some file documents are especially revealing⎯price negotiation memoranda (see FAR 15.406-3), source selection decision documents (see FAR 15.308), contracting officer statements of facts relevant to protests (see FAR 33.104(a)(3)(iv)(B) and 4 CFR 21.3(d)), and contracting officer final decisions on claims (see FAR 33.211). The preparation of those documents gives contracting practitioners an opportunity to show brilliance, to show workmanlike competence (which is enough), or to professionally embarrass themselves.

Arguably, the solicitation and the contract itself are the most important file documents. Although much of them is boilerplate, statements of work, specifications, and special contract clauses tell me a lot. Even if the contracting officer did not write the statement of work or specification, the quality of those documents tells me what the contracting officer was willing to put into his or her contract, which is very revealing. Contract line item structure and boilerplate solicitation provision and contract clause selection are also revealing, as is the quality of proposal preparation instructions and descriptions of evaluation factors.

What matters most, of course, are not the documents themselves, but the facts that they represent and reflect: events, thoughts, conclusions, arguments, decisions, actions, resolutions, and agreements. The file tells the practitioner?s own story about his or her work. To the extent that practitioners will be judged on their work, it will largely be on the basis of their files.

Nothing is more pathetic than the practitioner who, when confronted with something in one of their old files, says: Well, that doesn?t tell the whole story, or Well, that?s not how it actually went down, or, Yes, I signed it, but I don?t agree with it, or I?m not sure what that means. A recent decision of the Armed Services Board of Contract Appeals, General Dynamics C4 Systems, Inc., ASBCA No. 54988, 2009 WL 1464387, May 8, 2009, sustained a claim of nearly $40 million because the contracting officer had not complied with the terms of the ordering clause in an indefinite-delivery indefinite-quantity contract. The contractor had contested the manner in which delivery orders had been issued⎯by email instead of by U.S. mail. One of the saddest passages in the 26 page decision is this one:

On 20 January 1999, CO [deleted] issued DO No. 0002 for data requirements and repair parts, On 7 April 1999, he issued DO No. 0003 for a technical manual. He did not recall the method by which he issued any of his DOs.

Emphasis added. Apparently, the method of issuance was not important enough to note in the file, but it was important enough to cost the government $40 million. And what can we say about protests sustained because of the inadequacy of source selection documentation? See, e.g., The Boeing Company, Comp. Gen. Dec. B-311314, 2008 CPD ? 114:

Although the Air Force argues that it considered whether there was any schedule or cost risk associated with the proposed changes to Northrop Grumman's aircraft to satisfy the airspeed requirements, see Air Force's Post?Hearing Comments, at 18, we have not been directed to documentation in the record establishing that such an analysis was performed.

Of course, some practitioners think that the less filed the better, since files can reveal who did what and result in someone being held responsible for something.

Not too long ago I had the chance to look at the source selection files of a famous defense acquisition of the mid-1980s. I was very excited to see the files, because the acquisition is famous and had been a source of pride to the agency that had conducted it. But when I saw the files I was flabbergasted, then horrified. I did not see the quality of work that I had expected to see. The contracting officers (there were two) of that organization were not the professional giants that I had expected, but run-of-the-mill bureaucrats of clerical quality. As it later turned out, certain statements that they had made in important memos were not true, but had been inserted in the memos, not with the intent of telling lies, but pro forma. They were merely things that one said in such memos without giving it a thought, never really expecting to be asked about it. They were merely things that one said in those kinds of file documents because one was expected to say them. I will never again look up to that contracting office as I once had.

In ancient times, architects and sculptors would mark their work to make sure that everyone knew who had done it. Engraved on the entablature of the Pantheon in Rome?s Piazza della Rotonda, one of the world?s oldest buildings, is the name of the man who had it built:

M ? AGRIPPA ? L ? F ? OS ? TERTIVM? FECIT

which stands for: ?Marcus Agrippa, son of Lucius, Consul for the third time, built this.? On the Piet?, which sits in a chapel within St. Peter?s Basilica in Rome, Michelangelo carved, ?Michel Angelus Bonarotus Florent. Faciebat,? Michelangelo of Florence Made This. They were proud of their work and wanted everyone to know who did it. Of course, those are great works of art. But ordinary Roman kitchenware potters also signed their work. (See Walters, History of Ancient Pottery (1905), pp. 458-459 and 509.) I wonder how many contracting practitioners would be willing to place a label on their file saying that they had made it. THIS FILE WAS CREATED AND MAINTAINED BY JANE DOE, CONTRACT SPECIALIST, JUNE 5, 2008 - MAY 31, 2009.

None of us is a Marcus Agrippa or a Michelangelo, that?s true, and files are not works of art. But our work is our work. It?s what we have. It is part of what defines us. It says something about us. And even if ordinary citizens will never know or care who signed the contract and created the file for the next big thing, some in our community of practitioners will know. Some lawyers, judges, or historians might come to know. We will know.

Vern Edwards

When and why should a contracting officer go to a lawyer? The way that a contracting person answers that question will tell you what they think about the role and the responsibility of the contracting officer.

I often ask contracting personnel in my classes how they would determine what the rule is about this or that. Very often, too often, the answer is: Ask a lawyer. That answer sends old-timers like me up the wall. Most of us think it is disgraceful to go to a lawyer with such a basic question. In our view the proper answer is: You should know the rule if you?re doing something to which the rule applies. If you don't know, then you should look it up. The answer, "Ask a lawyer," is entirely unacceptable. So, when and why should a CO go to a lawyer?

I teach a class in which the students are given the following scenario:

During a source selection, the evaluators tell the CO that one offeror?s technical proposal is ambiguous on a certain point. The statement of work requires that the contractor provide a device having a capacity of X. The proposal is unclear whether the device has X capacity or one-half that amount. The evaluators need to know what the offeror is actually proposing so that they can determine whether the proposal is acceptable or not. They want the CO to call the offeror and get an answer. The call should take no more than a few moments, and the answer would permit the evaluators to wrap up their work.

The RFP had notified offerors that the government intended to award the contract without discussions. Thus, the issue: If the CO makes the inquiry, would it constitute clarification or discussion? If clarification, then the agency can ask and still award without discussions, but if discussion, then the agency must conduct discussions with all offerors within a competitive range and permit those offerors to revise their proposals before it can make an award. The extra steps would take at least another month and expose the agency to the risk of a protest about its competitive range determination. It would also expose the agency to the risk of a protest about its conduct of discussions. Since the agency put offerors on notice that it intended to award without discussions it is not obligated to inquire, but if it doesn?t inquire the offeror?s proposal must be considered unacceptable, which would make the offeror ineligible for award. That would be too bad, since the offeror is considered to be an exceptionally good contractor, its technical proposal is considered to be otherwise excellent, and it has offered a very good price. Yet, good contractors with very good proposals would remain in the competition. What should the contracting officer do?

The rules about clarification and discussion are in FAR 15.306. Any CO who conducts source selections for a living should know those rules word for word. Unfortunately, you can memorize those words and you still won?t have any idea about the distinction between clarification or discussion. You might think that you do. After all, the language in FAR 15.306(a) and 15.306(d) make the distinction seem quite clear. But the distinction between clarification and discussion has been developed mainly in GAO case law. The FAR simply does not reflect that case law.

So how do you learn about the case law? There are several sources that discuss the clarification/discussion issue in depth, e.g., Feldman, Government Contract Awards: Negotiation and Sealed Bids, and Nash, et al., Source Selection: The Competitive Negotiation Process, 2d ed. I wrote an in-depth analysis of the distinction for the September 2007 issue of The Nash & Cibinic Report, entitled, ?Postscript V: Clarifications vs. Discussions,? cited by Westlaw as: 21 N&CR ? 45. A CO who conducts source selections should be familiar with those publications, or others like them, and should read GAO and Court of Federal Claims protest decisions.

A CO who is familiar with the FAR and the GAO case law should be able to decide the issue in the scenario. The GAO would consider the inquiry to be discussion, not clarification, because resolution of the ambiguity is necessary in order to determine whether or not the proposal is acceptable. See, e.g., Nu-Way, Inc., Comp. Gen. Dec. B-296435.5, 2005 CPD ? 195:

When an offeror is given the opportunity to remove an ambiguity from its proposal, especially where the information to be provided is essential for determining the proposal's acceptability, such an exchange constitutes discussions.

In light of the GAO case law, the contracting officer?s legitimate choices are: (1) refuse to make the inquiry, reject the offer as unacceptable, and award without discussions, or (2) establish a competitive range, conduct discussions, and solicit and evaluate final proposal revisions. Should the CO consult the agency lawyer? If so, for what? What can the lawyer say that the CO does not already know?

The lawyer in the agency legal office functions as in-house counsel. He or she is not the CO's lawyer, but the agency's lawyer, and represents the agency, looking out for its organizational interests. In working with a CO, the lawyer is not seeking to support the CO in any personal sense, is not seeking to fulfill the CO's wishes or to get the CO what he wants. The lawyer is seeking to ensure that decisions and courses of action are good for the agency as a whole.

A CO should not assume that a lawyer will know the answer offhand. Government contract law is a specialized field. Government lawyers work in a lot of specialized fields and a particular lawyer might not have much experience practicing government contract law. Even a lawyer who practices government contract law might not have done much source selection work and might not be familiar with the case law or literature about clarification and discussion. But a lawyer is formally trained to think, especially about legal issues. Law school is a school about how to think about problems in a certain way and in an orderly manner. Lawyers understand legal principles, rules, and procedures. They know how to frame and research an issue, how to determine the current status of the case law, how to spot distinguishing facts in a particular case, and how to argue a case--skills that contracting officers are not expected to possess and ordinarily do not have. A good in-house lawyer is a counselor in the best sense of that word: a person trained to give professional guidance to a client, a source of knowledgeable, dispassionate, considered advice.

Contracting decisions are the CO?s to make, not the lawyer?s, at least in theory. Yet many COs complain that their lawyers ?won?t let me? do this or that. What has probably happened is a clash of views. The CO wants to do X. The lawyer thinks that X is unwise or illegal and not in the best interests of the agency. The CO can't proceed without the lawyer's "legally sufficient" stamp of approval. Someone at a higher level than both must ultimately decide, and the CO and the lawyer must make their cases. The CO is at an understandable disadvantage. The boss probably doesn't fully understand the issue, but her lawyer is telling her that it would be unwise to go along with the CO. Weighing the arguments of both sides and not fully understanding the issue, the boss is likely to think that deciding in favor of the lawyer is the safest course of action. This can lead some lawyers to run roughshod over COs, especially if they do not think the COs are competent. Yet the CO is responsible for any decision or contract bearing his or her signature, and when a regulation calls for a CO decision the CO cannot be directed to decide in a specified way.

Many COs are mainly administrative technicians. They process paperwork and do data entry, but are not competent to make sound decisions. Too many do not know the regulations as they should and do not read cases, books, and articles. They do not have the professional knowledge or skills they need, or the personality and personal skills, to enable them to take charge, innovate, and decide. Their leaders don?t trust them and thus tie their hands with policies and reviews and rely on the lawyers to make contracting decisions. Indeed, many government lawyers that I know are exasperated by the lack of knowledge and capability among the COs they support.

Many if not most agencies require COs to submit their files for legal review in order to establish "legal sufficiency." Such reviews have become a kind of contracting quality assurance, and some lawyers use them, perhaps unconsciously, to manage the contracting process based on their personal views about the best way to do things. (Don't use that evaluation factor. Don't use that scoring method. Don't use that procedure. Use this language in the proposal preparation instruction instead of the language you wrote.) In an ideal world, this wouldn?t happen. In that world the practice of sending every contract valued in excess of a certain dollar amount to the legal office for review would be considered unnecessary and wasteful, and COs would send files to the legal office only for input about issues such as the propriety and adequacy of a special contract clause, or a dispute settlement with far-reaching implications. But in an ideal world COs would be genuine experts and far more knowledgeable about contracting than agency lawyers.

So when and why should a CO go to a lawyer? When it's a matter of choice, a CO should never go to a lawyer for basic information or to ensure that a file reflects compliance with well-established rules. A CO should not need a lawyer for that. But when an issue is complex and the legal implications are significant, something a competent CO should be able to recognize, then a CO should go to a lawyer for professional insight and advice. A CO should make a tentative decision about what to do based on the issue, her understanding of the applicable rule, and the pertinent facts, and then visit the lawyer to discuss it and the pros and cons of one course of action versus another. The conversation might go something like this: "Hi, Jack. I?ve got a situation. This is the scenario, this is my assessment, and this is what I?m thinking of doing. I?d like your professional opinion and advice. What do you think?" And a CO shouldn't get frustrated if the lawyer says, "Well, you could do this or you could do that, and it might turn out this way or it might turn out that way." After all, the CO was seeking advice, not direction. Right?

Vern Edwards

What if you held a competition and everybody won? Did you have a competition?

As reported at Federaltimes.com, GSA finally awarded its "Alliant" small business governmentwide acquisition contract on March 27. (Bob reported this in his blog yesterday.) The procurement had held up by a protest to the U.S. Court of Federal Claims, which GSA lost. See Serco, Inc., 81 Fed.Cl. 463 (2008). (Oh, those pesky small businesses.) In the original competition there had been 62 competitors, and GSA had awarded 29 contracts. The pool of competitors shrank to 59 after the protest, and GSA awarded 59 contracts. http://www.federaltimes.com/federal-times-...to-all-bidders/

Nice protest avoidance strategy, don't you think? But Federaltimes.com quotes a GSA representative as follows:

The important thing to note is that there was never any intent or objective for us to award to all offerors. We conducted a diligent reevaluation from Apr[il] [20]08 to Mar[ch] [20]09 of past performance, basic contract plan, cost/price analysis and tradeoff analysis. Subsequent to that we had discussions with the offerors deemed to be in the competitive range who were able to update their proposals based on individual weaknesses identified by the contracting officer. That made a substantial difference in the quality and completeness of their proposals thereby resulting in 59 companies who demonstrated a high capability to meet the government's requirements at a fair and reasonable price.

If you believe that, I know where you can buy shares in a Ponzi scheme.

Why is GSA so adamant that it had not intended to give everybody a contract? Because if it had, then price could not have been a significant evaluation factor, and the GAO insists that the Competition in Contracting Act (CICA) requires that price be a significant evaluation factor. See Electronic Design, Inc., Comp. Gen. Dec. B-279662.2, 98-2 BCA ? 513. Also, if GSA had intended to award to all offerors, and if the offerors suspected that, then there might not have been adequate price competition under the Truth in Negotiations Act (TINA). The fact that the prices might not have been the result of adequate price competition might be significant later on. (Although, if the Alliant procurement was for commercial items it was already exempt from requirements for the submission of cost or pricing data.)

Assuming that GSA had planned to avoid another protest by giving everybody a contract, did it do anything wrong? Well, if you go by the book and agree with GAO, it probably did, since it had to conduct the procurement in accordance with CICA. But I think the answer is no, as a practical matter, since the real competition will presumably take place when agencies select the contractor to be awarded a task or delivery order. Presumably.

In any case, why not give everybody a contract? After all, look at what we've done for the banks and the auto manufacturers. Competition kills, and we certainly don't want anybody to die. Especially if they've got a good lawyer.

Vern Edwards

Malpractice?

On January 28, 2009, the U. S. Court of Federal Claims awarded Alabama Aircraft Industries, Inc., (formerly Pemco Aeroplex, Inc.) $1,003,288.38 in bid and proposal costs, because of errors committed by the Air Force in the conduct of a source selection for scheduled depot maintenance of KC-135 tanker aircraft. See Alabama Aircraft Industries, Inc.-Birmingham v. United States, 85 Fed. Cl. 558. The company had sought $2,146,361.91.

A little more than a year earlier, on December 27, 2007, the Government Accountability Office sustained a protest of an earlier phase of the same procurement and recommended that the Air Force reimburse the company the costs of filing and pursuing the protest, including attorney's fees. See Pemco Aeroplex, Inc., Comp. Gen. Dec. B-310372, 2008 CPD ? 2. In that protest the firm was represented by six attorneys from the firm of Latham & Watkins, LLP.

Here is the chronology of the procurement, as gleaned from the GAO and court decisions:

May 2005 ⎯ Air Force issues a draft RFP

Aug 2005 ⎯ Air Force issues the actual RFP

Oct 2005 ⎯ Air Force receives proposals and begins evaluation

May 2006 ⎯ Air Force issues a major RFP amendment

Jul 2006 ⎯ Air Force issues another major amendment

Sep 2006 ⎯ Air Force receives new proposals and begins new evaluation

Feb 2007 ⎯ Air Force receives final proposal revisions (FPRs)

May 2007 ⎯ Air Force reopens discussions

Jun 2007 ⎯ Air Force receives second round of FPRs

Sep 2007 ⎯ Air Force awards contract to Boeing; Pemco protests

Dec 2007 ⎯ GAO sustains the protest on grounds of faulty price realism analysis

Feb 2008 ⎯ GAO denies Air Force request for reconsideration

Mar 2008 ⎯ Air Force takes corrective action and again awards to Boeing; Pemco files second protest

Jun 2008 ⎯ GAO denies second protest; Pemco files complaint with Court of Federal Claims

Sep 2008 ⎯ Court of Federal Claims finds for Pemco (now Alabama Aircraft Industries) on grounds of faulty price realism analysis, sets aside award, orders new solicitation, and awards bid and proposal costs

Jan 2009 ⎯ Court of Federal Claims finds Alabama Aircraft Industries (formerly Pemco) entitled to $1,003,288.23 in bid and proposal costs, $714,590.72 of which the company paid to a proposal consultant, Shipley Associates, http://www.shipleywins.com/index.php.

This procurement was a recompete of an existing contract. It was for one year of services plus four one-year options and was worth about $1.2 billion. So far, beginning with the issuance of the draft RFP in May 2005, the Air Force has taken almost four years to fail in the conduct of the procurement and has cost the taxpayers more than $1,000,000 in protest cost and bid and proposal cost payments to the protester and who knows how much in government administrative and legal costs. A contract for the work has not yet been awarded.

What happened? Is a recompete supposed to take more than four years to go from start to failure? People got paid to do this work. Who was responsible for this fiasco? Was this a case of professional incompetence? Was it malpractice? Or was it merely bad luck that could have happened to anyone and thus was no one's fault?

Is it counterproductive to want to find the culprit or culprits and exact retribution? Or should we just let it go and move on? Chalk it up to experience?

If the outfit that conducted this procurement had been a contractor working under an award fee contract, would they be entitled to any fee? If the contract had been performance based, would they be entitled to any payment at all? Can those people be expected to get best value for the taxpayers?

Is our procurement system so screwed up that it's unreasonable and unrealistic to expect anyone to know what they're doing and to do it well?

Vern Edwards

GWU Professor Steve Schooner and his colleague Chris Yukins have written an article that Bob has posted on the Wifcon homepage: Public Procurement: Focus on People, Value for Money and Systematic Integrity, Not Protectionism. In it they say:

Governments should invest stimulus resources in rebuilding their professional acquisition workforces ⎯ aggressively recruiting the best talent, bolstering skills-based training, improving retention and incentives, and identifying best practices for efficient procurement. These stimulus outlays in acquisition professionalism will generate significant return on investment, both in the short- and long-term.

I agree. Unfortunately, most Federal managers think that rebuilding the professional acquisition workforce means hiring as many people as they can, as fast as they can, while they can, and developing better PowerPoint training, which are exactly the wrong things to do.

Here are some ideas:

1. Hire the right workforce to do the work at hand, which means more purchasing agents (GS-1105s) and procurement clerks and technicians (GS-1106s) and fewer contract specialists (GS-1102s).

Overwhelmingly most contracting work consists of simplified acquisitions, placing orders against existing contracts, making routine contract modifications, and performing routine administrative and clerical tasks. That work does not require much knowledge of the FAR, does not entail cost analysis or complex price analysis, does not entail providing "business advice" to program personnel, and does not require a bachelor's degree with 24 hours of business credits. The people doing most of that work will never "advise" a program manager, write a complex acquisition plan, design an incentive contract, grant consent to subcontract, determine CAS compliance or defective pricing, issue a change order or negotiate a complex equitable adjustment, resolve data rights issues, or write a contracting officer's final decision. Be realistic: most people in contracting will spend their careers cranking out simple purchase after simple purchase, and most of them will be satisfied with that work most of the time. Stop overselling the work to college graduates who are looking for something more than that.

2. Take the rules about ordering and purchasing--mainly Subpart 8.4, Part 13, and Subpart 16.5--out of the FAR and put them in a separate chapter of Title 48, Chapter 100, to be called the "Federal Purchasing Regulation." Provide clear instructions for expeditious and administratively economical contractor selection and order placement. Make chiefs of contracting offices ensure that simple work is done simply and quickly, and not by using labor intensive and time-consuming FAR Part 15 contractor selection procedures, and hold them responsible for using wasteful procedures.

3. Provide the right training. For instance, most contracting folk are buying commercial items, so teach them how prices are set in the commercial sector instead of teaching them about learning curves and cost analysis, which few of them will ever use. Stop wasting time and money teaching everybody to do things that only some of them will ever do.

4. Develop better and specialized training for people who will be doing truly complex work. Make the training demanding and fail students who do not perform well in class. Let's face it, some people will not be able to cut it when it comes to the complex work. Let's identify them early on and make purchasing agents out of them, instead of complaining later about their incompetence.

5. Free the people doing complex work from administrative and clerical drudgery, so they can focus on the important contracting tasks and problems. Give them clerical and administrative support. By "complex," I mean awarding and administering contracts for noncommercial supplies that require higher-level contract quality requirements, and contracts for facility operations and maintenance services, program support services, large-scale research, and major systems development (IT, space, and weapons). Those people should be advising program officials, preparing acquisition and source selection plans, writing proposal preparation instructions and special contract terms, designing incentives, determining cost allowability and CAS compliance, performing cost and profit analyses, negotiating data rights, enforcing contract terms, negotiating nonroutine contract modifications, and resolving potential disputes. They should not be writing synopses and inputting data to FPDS.

6. Distinguish contracting officers from purchasing agents and establish government-wide standards for contracting officer appointment. Give purchasing agents appropriate contracting authority to handle simplified acquisitions and to place orders against existing contracts.

7. Establish an elite Contracting Officer Academy in Washington, DC, to provide advanced training to persons nominated for high level contracting officer appointments (very large dollar value and unlimited authority).

8. Establish a small, elite corps of SES-level "super" contracting officers, appointed by OFPP and permanently assigned to OMB, and available for temporary assignment to agencies in order to conduct acquisitions of national importance and unusual complexity.

9. Develop a job series for specification and statement of work specialists, and hire and train people to interview users about their needs and to write contract specifications and statements of work. The time is long since past to stop expecting people to gain those developmental and writing skills on a part time basis by giving them half-baked manuals and websites and sending them to two-day seminars.

10. Develop a job series entitled, Contracting Officer's Representative/Contracting Officer's Technical Representative and train specialists to monitor contractor performance and perform quality assurance and related functions. Being a COR/COTR is not a part time, secondary job for specialists in other fields. It is a full time job.

I believe that these steps can significantly improve contracting operations and results in the long term, but none of this can happen unless OMB takes charge. The individual agencies lack vision and won't do it. They take the short term view, and will rush out and hire as many 1102s as possible, send them to the same half-baked training that contract specialists have received for years, and then use more people than necessary to do things inefficiently and ineffectively. In short, they would ruin a whole new generation.

The president's chief of staff, Rahm Emanuel, has supposedly said: "Never allow a crisis to go to waste, they are opportunities to do big things." That's a motto for our time. We have a chance to fix much that is wrong with acquisition generally and contracting specifically. Let's do it, so that later we won't echo Lord Jim's lament: Ah! what a chance missed!

Vern Edwards

On March 4, the White House Office of the Press Secretary released a memo from the president to the Heads of Executive Departments and Agencies⎯Subject: Government Contracting. Here are some highlights and my reactions.

Since 2001, spending on Government contracts has more than doubled, reaching over $500 billion in 2008. During this same period, there has been a significant increase in the dollars awarded without full and open competition and an increase in the dollars obligated through cost-reimbursement contracts. Between fiscal years 2000 and 2008, for example, dollars obligated under cost-reimbursement contracts nearly doubled, from $71 billion in 2000 to $135 billion in 2008. Reversing these trends away from full and open competition and toward cost-reimbursement contracts could result in savings of billions of dollars each year for the American taxpayer.

BFOTO. (Brilliant for Observing the Obvious, pronounced: buh-foe′-toe.) Uh, Mr. President, you might want to consider that we were seriously attacked in 2001, then we began fighting a couple of wars in nasty far away places, and then we had a really big hurricane, which was followed by a host of unusually intense natural disasters⎯fires, floods, and tornadoes?⎯all of which tend to call for urgent contracting, which makes planning hard, which tends to mean more noncompetitive and cost-reimbursement, time-and-materials, and labor-hour awards. I mean, these haven't exactly been "normal" times of late.

It is the policy of the Federal Government that executive agencies shall not engage in noncompetitive contracts except in those circumstances where their use can be fully justified and where appropriate safeguards have been put in place to protect the taxpayer.

In addition, there shall be a preference for fixed-price type contracts. Cost-reimbursement contracts shall be used only when circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract.

Moreover, the Federal Government shall ensure that taxpayer dollars are not spent on contracts that are wasteful, inefficient, subject to misuse, or otherwise not well designed to serve the Federal Government's needs and to manage the risk associated with the goods and services being procured.

The Federal Government must have sufficient capacity to manage and oversee the contracting process from start to finish, so as to ensure that taxpayer funds are spent wisely and are not subject to excessive risk.

Finally, the Federal Government must ensure that those functions that are inherently governmental in nature are performed by executive agencies and are not outsourced.

Yeah? So? What's new?

When awarding Government contracts, the Federal Government must strive for an open and competitive process. However, executive agencies must have the flexibility to tailor contracts to carry out their missions and achieve the policy goals of the Government. In certain exigent circumstances, agencies may need to consider whether a competitive process will not accomplish the agency's mission. In such cases, the agency must ensure that the risks associated with noncompetitive contracts are minimized.

Just as we thought! Noncompetitive awards are not okay. Unless they are.

I hereby direct the Director of the Office of Management and Budget (OMB), in collaboration with the Secretary of Defense, the Administrator of the National Aeronautics and Space Administration, the Administrator of General Services, the Director of the Office of Personnel Management, and the heads of such other agencies as the Director of OMB determines to be appropriate, and with the participation of appropriate management councils and program management officials, to develop and issue by July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency's needs, and to formulate appropriate corrective action in a timely manner. Such corrective action may include modifying or canceling such contracts in a manner and to the extent consistent with applicable laws, regulations, and policy.

I further direct the Director of OMB, in collaboration with the aforementioned officials and councils, and with input from the public, to develop and issue by September 30, 2009, Government-wide guidance to:

(1) govern the appropriate use and oversight of sole-source and other types of noncompetitive contracts and to maximize the use of full and open competition and other competitive procurement processes;

(2) govern the appropriate use and oversight of all contract types, in full consideration of the agency's needs, and to minimize risk and maximize the value of Government contracts generally, consistent with the regulations to be promulgated pursuant to section 864 of Public Law 110-417;

(3) assist agencies in assessing the capacity and ability of the Federal acquisition workforce to develop, manage, and oversee acquisitions appropriately; and

(4) clarify when governmental outsourcing for services is and is not appropriate, consistent with section 321 of Public Law 110-417 (31 U.S.C. 501 note)."

Oboy. More "guidance" from the top, when what we really need is leadership and smart, bold action.

Okay, so they're rounding up the usual suspects. Look, I think our new president is a very smart guy who has a lot of very smart folks working for him, and I wish them all well, but from a professional's point of view, the memo is silly. I'm going to be generous and assume that it's merely for public consumption and is not reflective of the quality of thinking about contracting operations that we can expect in the future. I still have hope. Heck, it's only a memo. Let's not give up too soon.

(With appreciation to DJ Bleckley for "BFOTO.")

Vern Edwards

On February 18, the Office of Management and Budget issued a memorandum to agencies providing guidance about implementation of the American Recovery and Reinvestment Act of 2009, Public Law 111-5. The guidance included the following broad objectives:

? Funds are awarded and distributed in a prompt, fair, and reasonable manner;

? The recipients and uses of all funds are transparent to the public, and the public benefits of these funds are reported clearly, accurately, and in a timely manner;

? Funds are used for authorized purposes and instances of fraud, waste, error, and abuse are mitigated;

? Projects funded under this Act avoid unnecessary delays and cost overruns; and

? Program goals are achieved, including specific program outcomes and improved results on broader economic indicators.

Much of the stimulus will be accomplished through the award of contracts, and Section 6 of the memo, pages 38 through 48, provides guidance about contracting. As one might expect, most of the recommendations take the form of such namby-pamby stuff as:

Agencies should emphasize the importance of selecting a contract type that supports requirements for meaningful and measurable outcomes consistent with agency plans for, and the goals of, the Recovery Act.

Competition is the cornerstone of our acquisition system.

Agencies should structure acquisitions to result in meaningful and measurable outcomes that are consistent with agency plans and that promote the goals of the Recovery Act.

Small businesses play a critical role in stimulating economic growth and creating jobs. They are the engine of our economy, and provide creativity, innovation and technical expertise to support our agencies. Agencies must provide maximum practicable opportunities for small businesses to compete for agency contracts and to participate as subcontractors in contracts awarded by agencies.

Agencies should place special emphasis on responsibility determinations and pre-award surveys. The award of a contract based solely on lowest evaluated price can produce a false economy, increasing performance, cost, and schedule risk.

Brilliant. What the memo boils down to is: Obligate the funds as fast as you can, but avoid scandals. If that's the best that OMB can do it will take five years to obligate all the funds. So much for a prompt stimulus.

Here, in the spirit of brainstorming, are some specific ideas. All of them are based on 35 years of hands-on operational experience at every level of acquisition. As with all brainstorming, the ideas are designed to be creative and outside the box. Some are decidedly controversial and risky. So what? Audentis fortuna juvet. No guts no glory, et cetera, et cetera, et cetera. If the stimulus doesn't work, IG criticism will be the least of President Obama's problems.

RECOMMENDATIONS

1. It should go without saying: Use existing contracts⎯GSA schedule contracts, GWACs, MACs⎯when appropriate. Streamline competitive ordering procedures. No FAR Part 15-type competitions.

2. Another thing that should go without saying: Keep simplified acquisitions simple.

Now, on to the radical stuff.

3. Bring back sealed bidding to buy supplies, construction, and simple services expected to exceed the simplified acquisition threshold and the commercial items test program $5.5 million threshold. See FAR 6.401. Sealed bidding is fast, economical, and as transparent as it gets, and its use will shield the administration from charges that it is wasting money by paying too much. There is little if any evidence that the Part 15 tradeoff process ("best value") approach to source selection (see FAR 15.101-1) produces better value than sealed bidding. Virtually all arguments to the contrary are based on inference, not evidence. Sealed bidding served this country well for more than a century. Yes, agencies will have to cope with the certificate of competency process. So be it. OMB should monitor SBA's effectiveness in executing the COC program, keep track of companies that get a COC and then perform poorly, and report its findings to the public. Agencies can work the COC problem by establishing special responsibility criteria as per FAR 9.104-2. (GAO calls them "definitive" responsibility criteria.)

4. When sealed bidding cannot be used, use the lowest-price technically-acceptable approach to source selection and base technical acceptability on experience, past performance, and, in the case of supplies, on product descriptions. Do not ask for proposals that describe the offerors' "approaches" to doing the work or various kinds of plans (quality, safety, personnel management, etc.). If offerors have experience and an acceptable reputation, then they know how to do the work. See item 3, above, with respect to the certificate of competency program.

5. Require a written justification subject to higher-level approval in order to use the tradeoff process approach to source selectiona resource consuming time absorber. When the tradeoff process absolutely cannot be avoided, do not solicit technical proposals describing "approaches" and various kinds of plans. Use price, experience, past performance, and, in the case of supplies, product attributes as evaluation factors. Reserve the right to waive comparative evaluation of past performance and experience if the leading competitors based on price are known to be acceptable in those regards. Use the smallest evaluation boards possible⎯ one or two persons. Do not use numerical or adjectival scoring of any kind. No draft RFPs or other faddish time-consuming techniques.

6. Specify requirements as quickly and as well as possible and then go with what you've got rather than trying to write perfect specs and SOWs. Yes, you might have to modify some contracts and make equitable adjustments later, but so what? If you have to you have to, that's all. Settle fast and move on. As it is, specifications and statements of work are rarely complete and perfect at the time of award. Exhorting agencies to do a better job of specifying requirements has gotten us nowhere during the 35 years that I have been in this business. It is what it is. Get on with the job.

7. Economize on competitions by consolidating requirements within and among agencies, soliciting offers on a line item basis, and then splitting awards. Why issue ten RFPs when one will do? Establish an office within OMB to assist agencies in coordinating and consolidating like requirements. Create a website.

8. Establish regional lists of all HUBZone, service-disabled veteran, and 8(a) firms to whom sole-source awards for various kinds of procurements may be made quickly. Another website.

9. Beef up the OFPP staff with "special forces" teams of true acquisition experts⎯technical, contracting, quality, finance, and legal⎯to settle questions from contracting officers about issues that arise during the conduct of an acquisition. (No general curiosity questions, please.) The decisions of the special forces teams will be binding on agencies and posted at a website for general availability. Instruct the teams to resolve all issues within 48 hours from receipt of the inquiry.

10. Override CICA stays. (See FAR 33.104( B) and ?.) The president should issue an executive order declaring that the need to stimulate the economy is urgent and compelling. Thus, when awarding contracts under the Recovery Act, agencies shall override CICA stays whenever protests are based on mere procedural errors in the conduct of procurements (meaningful discussions, evaluation inconsistent with relative importance, late bids or proposals, and minor evaluation errors). Yes, procedural errors can render competition less effective, but when the need for action is urgent, procedural perfection is a luxury. Agencies must not override a stay when a protest questions the honesty or integrity of offerors or agency personnel.

11. Reject GAO protest recommendations. The president should designate OFPP as central authority to decide whether to reject GAO recommendations arising from sustained protests. He should instruct OFPP to reject recommendations that will delay awards and that are based on mere procedural errors in the conduct of competitions. OFPP should also direct the agency in question to take and report corrective action that will ensure that such errors will be avoided in the future. Make the OFPP decision and the directive to take corrective action available to the public.

12. Ask Congress to suspend the Court of Federal Claims' jurisdiction over protests of Recovery Act funded procurements. Make GAO the sole venue for such protests. No forum shopping. Remind the Democratic majorities in Congress that their butts are on the line, too, and that delays in making awards aren't butt-friendly if they delay the stimulus.

13. Give the PCOs some clerical support and transfer as many acquisition personnel as possible from contract formation to contract administration.

14. Beef up contract audit staffs and require at least one routine incurred cost audit per year of every cost-reimbursement, time and material, and labor hour contract in excess of $5,000,000. Conduct audits of such contracts valued at $5 million or less on a random sample basis. Make the audit reports available to the public, with proprietary information removed.

More to come. Feel free to join in the brainstorming by posting your own ideas in the comments to this blog.

Improvise. Adapt. Overcome.

Vern Edwards

In his February 10 blog entry, Don Acquisition reviewed the history of the so-called "neutral" rule for evaluation of past performance during source selection. I want to continue the examination of that "rule" in terms of the relationship between experience and past performance as evaluation factors.

First, the true expression of the "neutral" rule, as stated at FAR 15.305(a)(2)(iv) is as follows:

In the case of an offeror without a record of relevant past performance or for whom information on past performance is not available, the offeror may not be evaluated favorably or unfavorably on past performance.

The rule simply says that you cannot say anything good or bad about something that does not exist.

The evaluation of past performance rests on the belief that the historical quality of a firm's performance has predictive value when it comes to assessing the risk of doing business with the firm. The belief is that a firm that has performed poorly in the past might do so again and is, therefore, a higher risk than a firm that has performed well. The "neutral" rule rests on the common sense logic that you cannot predict the quality of a firm's future performance based on its past performance if there was no past performance.

This rule has confused people who conflate past performance and experience. Assessments of experience and past performance are based on much the same data, but they are fundamentally different. Evaluation of experience is based on the belief that experience gives firms a chance to learn important lessons, knowledge that they can use in the future. We believe that a firm that has done certain work in the past is more likely to be able to avoid or respond effectively to problems in the future, because it may have already learned what can go wrong and how to prevent or fix it. On the other hand, a firm that has not done the work before will have to learn on the job, which may have a negative effect on performance. The logic that you cannot say anything good or bad about something that has not happened does not apply when the whole point is whether that something has happened. To say that you cannot consider the lack of experience to be either good or bad is to effectively prohibit the evaluation of experience.

As usual, however, most people do not have a clear idea about what they are talking about and do not think things through. During the 1990s, and still today to some extent, many people conflate past performance and experience, and often use evaluation factors such as "past performance/experience" and "experience and past performance," instead of (1) experience and (2) past performance. See, e.g., Jack Young Assocs., Inc., Comp. Gen. Dec. B-243633, 91-1 CPD ? 585, in which the GAO quoted from the RFP as follows:

Under the amended RFP, offerors were to submit "technical (past performance) and pricing proposals." Technical proposals, under the evaluation factor "Past Performance," were required to include:

"[a] description of the offeror's experience and quality history that demonstrates the ability to manufacture the item under this solicitation in accordance with the Government specification and delivery requirements. This description should include the offeror's record of adherence to contract schedules, contract quality requirements, and overall commitment to customer satisfaction and will be evaluated in accordance with the provisions set forth in Section M of this amendment."

Section M, "Evaluation Criteria and Basis for Award," stated that for this solicitation, "past performance is more important than cost or price." It further provided that "[a]s proposals become more equal in their past performance ratings, the evaluated cost or price becomes more important."

The RFP in that case made no clear distinction between experience and past performance, seemingly indicating that the two were to be evaluated as one. See too, Eagle Systems, Comp. Gen. Dec. B-243395, 91-2 CPD ? 96:

The RFP stated that cost would be considered and analyzed to assess realism and probable cost to the government and that past performance would be reviewed "to assure that offerors have relevant and successful experience." Finally, the solicitation provided that "Of the three factors: (1) technical, (2) cost, and (3) past performance, technical and cost are considered the most important and are considered of equal importance. Past performance is of less importance than technical or cost."

Perhaps most revealing of the confusion in some minds is this, from Chemical Demilitarization Assocs., Comp. Gen. Dec. B-277700, 98-1 CPD ? 171:

Past performance had no stated subordinate elements or factors (although the RFP stated in narrative what would be considered under this area). A performance risk assessment group (PRAG) was to evaluate the quality of an offeror's past performance and assign a risk rating of low, moderate, high, or unknown (i.e., no relevant experience).

Emphasis added. Note that the "neutral" assessment ("unknown") was to be for "no relevant experience," instead of for no record of past performance.

Compare those cases with Oceaneering International, Inc., Comp. Gen. Dec. B-287325, 2001 CPD ? 95:

The RFP stated:

Past performance is a measure of the degree to which an offeror satisfied its customers in the past and complied with Federal, state, and local laws and regulations? In the case of an offeror without a record of relevant past performance or for whom information on past performance is not available, the offeror will not be evaluated favorably or unfavorably on past performance.

RFP ? M.2.5. With regard to the experience factor, the RFP stated:

Experience is the opportunity to learn by doing. The Government will evaluate each offeror's organizational experience on the basis of its breadth, its depth, and its relevance to the work that will be required under the prospective contract, based on the information provided in the past performance/reference information sheets submitted in [the proposal]. The Government will also consider the organizational experience of the offeror's proposed subcontractors.

RFP ? M.2.4, amend. 5 at 2. The agency has the discretion to structure the evaluation scheme in this manner, and we will not object to an agency's reasonable evaluation of past performance and experience under such a scheme. Sigmatech, Inc., B-271821, B-271821.2, Aug. 22, 1996, 96-2 CPD ? 101 at 9 n.14; see Contrack Int'l, Inc., B-270102, B-270102.2, Feb. 8, 1996, 96-1 CPD ? 53 at 3-5.

It should come as no surprise that the GAO will not object to such a scheme, especially to those who have read the paper by Michael Golden, ESQ., Assistant General Counsel, GAO, entitled, Past Performance/Experience, in which he says:

The FAR identifies prior experience and past performance as separate concepts, and these concepts should not be confused in an evaluation. Although sometimes the agency's [sic] evaluate past performance and experience together, GAO decisions recognize there is a distinction between the two evaluation factors.

Mr. Golden's paper may be downloaded in pdf format at:

www.tricare.mil/contracting/acquisitionpolicy/ppa/paDocs/03-11_Attach_Past-Performance.pdf

So an offeror without a record of past performance may not be evaluated unfavorably on that basis, but may be evaluated unfavorably due to a lack of experience. However, that is true if and only if the distinction between experience and past performance is clearly stated in the language of the RFP and reflected in the evaluation documentation. If the distinction is not clear, or if the agency conflates experience with past performance, then the GAO might sustain a protest because the agency evaluated a firm unfavorably due to lack of experience.

A word of warning: You must read GAO decisions very carefully in order to sort out the experience/past performance distinction and its relationship to the "neutral" rule. Agencies and the GAO often use the terms experience and past performance interchangeably. So you will find protest decisions in which GAO said that an agency cannot evaluate an offeror unfavorably due to a lack of "experience." Those decisions are context specific and often turn on the way the agency used the terms in its solicitation or evaluation documentation. In order to fully understand the case law one must read the decisions with a discerning eye. The rule is clear, as you can see from Mr. Golden's article, but it is clear only to those who have studied the decisions carefully.

Finally, if the idea behind the neutral rule was to avoid "penalizing" new firms, why prohibit agencies from evaluating firms unfavorably due to the lack of a record of past performance, but permit them to evaluate firms unfavorably due to the lack of experience? Good question. Suffice it to say that one should not expect too much in the way of clear thinking from politicians and policy makers.

Vern Edwards

A little intellectual curiosity can take you a long way.

My first weeks on the job as a contracting intern were very frustrating. I wasn't frustrated by the contracting rules, which in those days were in the Armed Services Procurement Regulation (ASPR). No, what bothered me was that I didn't understand the products and services I was buying.

I was hired out of college by the Air Force Space and Missile Systems Organization, SAMSO, which carried out military space programs, such as developing and launching navigation, communications, and weather satellites ("spacecraft"), developing military launch vehicles (rockets used to carry satellites and other things into space), and developing advanced ballistic reentry vehicles⎯devices that carry nuclear warheads through the atmosphere to their targets. I was a history major in college, but my clients (not "customers"!) were project engineers and physicists, and when I read their statements of work I simply didn't understand them. Most of our acquisitions were noncompetitive, which meant that I had to learn how to perform cost and profit analyses in order to negotiate contracts. But how could I do that if I couldn't understand the statements of work?

In those days, ASPR Section 3.802, "Preparation for Negotiation," Subsection 3.802-1, "Product or Service," began with this sentence:

Knowledge of the product or service, and its use, is essential to sound pricing.

Good enough, but talk about a foreign language⎯my situation was worse than if the S.O.W.s had been written in Greek. I'd studied Greek in college. The S.O.W.s seemed to me to have been written in Linear A. I had no idea what they were about. I was a perfect PWAC⎯a Person Without A Clue. How do you analyze engineering labor hours when you don't understand what the engineers will be doing and what they will be producing? What, exactly, is "design"? What, exactly, do engineers do when they "design" something? What, exactly, does a "design" look like when you're holding it in your hands?

I think that one of the worst feelings in the world is the realization that you don't understand something that you must work with. It drove me crazy. Still does. So I started visiting my project officer clients and asking them to walk me through their projects and their S.O.W.s and explain everything in plain English. They enjoyed talking about their work, and I learned a lot. But I still didn't understand certain fundamental concepts. For instance, what is "ablation," an important topic in the development of reentry vehicles? When you're buying sensor design, what's a "sensor"? What's "breadboard"? What the heck is a "synchronous spacecraft"?

One day in my first few weeks on the job, a kind project officer, amused by my cluelessness (and undoubtedly seeking some relief from my relentless questioning), gave me a copy of NASA SP-7, Dictionary of Technical Terms for Aerospace Use, First Edition, dated 1965. I poured over it. Ah! So "ablation" is:

The removal of surface material from a body by vaporization, melting, chipping, or other erosive process; specifically, the intentional removal of material from a nose cone or spacecraft during high-speed movement through a planetary atmosphere to provide thermal protection for the underlying structure.

And a "sensor" is:

The component of an instrument that converts an input signal into a quantity which is measured by another part of the instrument. Also called sensing element.

And "breadboard" is:

An assembly of preliminary circuits or parts used to prove the feasibility of a device, circuit, system, or principle without regard to the final configuration or packaging of the parts.

And a "synchronous spacecraft" is:

An equatorial west to east satellite orbiting the earth at an altitude of approximately 35,900 kilometers at which altitude it makes one revolution in 24 hours, synchronous with the earth's rotation.

I still have that dictionary. I treasure it, because it enabled me to begin to understand the work that I was buying.

I started spending time in the library of our Federally-Funded Research and Development Center, the Aerospace Corporation, where I read about system engineering, engineering design, spacecraft systems, and the nature of the weapons acquisition process. I attended technical meetings and reviews whenever I could, even if I didn't understand all the drawings and reports. I wasn't trying to become an engineer, I was trying to learn their language (it's not as hard as you might think) and to understand their world and their problems and concerns, so I could talk to them and to their industry counterparts and understand what they were saying to each other and to me. I even read a book about engineering culture. I was learning about my clients and the products and services that I was buying.

In short, I made it my business to know my business as well as possible for a layman⎯to be an "educated layman." I read all the books and official handbooks and manuals that I could get my hands on. And all that reading stood me in good stead. I could speak the language of the people who performed technical analyses of contractor's cost proposals. I knew what questions to ask. I could sit across the negotiation table from a contractor's representatives without looking and sounding like an idiot. It made me valuable as a professional. It earned me a seat at the main conference table. But more importantly, it made my work more interesting and fun.

Whatever you buy, strive to learn as much about it as you can. (The internet makes it so much easier than it was when I got started.) Buying software development? Then read up on software development processes and the software industry. Buying body armor? Then learn everything you can about the technology of body armor. Buying medical research? Then read a couple of books about medical research. Buying fasteners? Then learn about fasteners and the fastener industry. Not only will such study help you to do your job better, but it will make the job more enjoyable and make you feel like a part of the team. You won't be a PWAC. Your clients (not "customers"!), who come to you for professional advice and service, will appreciate your effort to understand their world and their work and respect you for it.

You'd be surprised at how interesting fasteners and the fastener industry can be.

Vern Edwards

I teach a lot of interns and there is one thing that I notice about them that bothers me: Most of the ones that I have met do not know how to make effective presentations. When asked to present their position on some matter, they do not make their case in an orderly way. When asked to speak, they speak haltingly and in an inaudible voice and look at the paper in their hand instead of making eye contact with their audience. When using a flip chart pad they write in teeny-weeny and often illegible letters. Some have that deer-in-the-headlights look. And this is when they're speaking to their peers. It's hard to imagine them making a presentation to an assistant secretary, to a general or an admiral, or to a crusty old salt representing a contractor. It's hard to imagine them taking charge in negotiations, at a debriefing, or in a meeting to resolve a bitter dispute without litigation. They drive me crazy.

But they're just interns. Most seasoned people are as bad if not worse. (Yes, I said "most.") I wish I had a dollar for every debriefing I've attended at which the contracting officer came across as an ill-prepared incompetent and sparked a protest instead of quelling one. Don't expect the interns to get much help from OJT.

Intelligence and knowledge are essential to first-rate contracting performance, but they are not enough if you want to stand out and rise to the top of the heap in the field. Unless you are entirely self-absorbed, knowledge is worthless if you can't make your point to other people. A year ago I had an intern in my FAR Bootcamp, a young woman fresh out of college, who was chosen by her team to present their solution to a problem to the rest of the class. Her team had the wrong answer, but that young woman got up and made a confident presentation so dazzling that she convinced the people who had the right answer to adopt her position. I was mesmerized, and that doesn't happen to me a lot. She was an anomaly. Sad to say, but when it comes to making presentations, there are more deer in the headlights than tigers.

Want to see a first-rate presenter? Watch Stanford University's short film of Carly Fiorina's presentation: The Dynamics of Change and Fear.

Here is Steve Jobs, introducing the MacBook Air at Macworld 2008. Steve Jobs (He sold one to me.)

And here's a film of a 2006 Seth Godin presentation. Seth Godin (Brilliant. Hilarious.)

The key is to have clear ideas and to be able to present them clearly and with confidence to others, whether in an auditorium, a classroom, or a conference room. Some people seem naturally better at public speaking than others, but everyone can learn to be effective, if not dazzling. When I worked for the Air Force I enrolled in a correspondence course in which I learned the principles of preparing and delivering briefings and memoranda of various types. We used a textbook called The Tongue and Quill, which is still in print, albeit in a newer edition and designated Air Force Handbook 33-337. The Tongue and Quill Chapter 10 is entitled, "Air Force Speaking." I just read the new version and it strikes me as a useful document and very much worth a read. But you cannot learn to speak well merely by reading a book or attending a PowerPoint presentation. It takes practice. If you want to learn, think about joining a Toastmasters club. Toastmasters International I never joined such a club, but I'm told it's a great experience.

If you want to make a career in contracting, if you want to someday be in charge of one of those "large and complex" acquisitions that people like to talk about, instead of just processing the paperwork, then sign up for some training in public speaking and presenting. Better yet, talk your boss into bringing such a course onsite. And buy one that forces you to speak in front of others and to endure their criticisms.

Of course, in order to make a good presentation, whether before a large audience or to only four or five people from a company that just lost a source selection, you must be able to think clearly. Do you know how to do that? Are you sure?

You can learn how to do that, too.

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