Jump to content
The Wifcon Forums and Blogs

  • entries
  • comments
  • views

About this blog

Entries in this blog

Don Mansfield

I was recently perusing some of the recent final rules issued by the FAR Council when I came across a statement that I found interesting. In responding to a comment concerning the applicability of TINA to task and delivery orders, the FAR Councils stated that TINA applicability is to be determined when negotiating a basic IDIQ contract, as well as when negotiating subsequent orders under the contract. A description of the comment that they received read as follows:

The respondent also highlighted the example of an indefinite delivery-indefinite quantity (IDIQ) contract where orders are issued and inquired whether ``at the time of contract award'' related to issuance of the IDIQ contract or individual orders placed under this IDIQ contract.

The Councils' response was as follows:

In the case of IDIQ contracts, it is commonly understood that it is the estimated total value of orders for the specified period at the time of contract award, as well as the individual value of any subsequent discrete orders, to which the TINA thresholds apply.

(See FAR Case 2008-012, Clarification of Submission of Cost or Pricing Data on Non-Commercial Modifications of Commercial Items (75 FR 13414)).

My initial reaction was "Good, they got it right." However, I was not satisfied with the complete lack of explanation other than that this information was "commonly understood." "It is commonly understood?" is the equivalent to saying "Well, everybody knows?", which is not an answer that I would accept from a student nor is it one that the public should be accepting from the FAR Councils. Further, the FAR Councils' use of "commonly understood" raises the question: Commonly understood by whom? Based on my experience, "commonly debated" would be a more apt description.

Task and Delivery Orders are "Contracts"

By stating that TINA applicability determinations must be made at the task and delivery order level, the FAR Councils have, perhaps unwittingly, admitted that task and delivery orders are "contracts" as defined at FAR 2.101. Consider the requirements for obtaining cost or pricing data at FAR 15.403-4(a)(1):

?Unless an exception applies, cost or pricing data are required before accomplishing any of the following actions expected to exceed the current threshold or, for existing contracts, the threshold specified in the contract:

(i) The award of any negotiated contract (except for undefinitized actions such as letter contracts).

(ii) The award of a subcontract at any tier, if the contractor and each higher-tier subcontractor were required to submit cost or pricing data (but see waivers at 15.403-1( c )(4)).

(iii) The modification of any sealed bid or negotiated contract (whether or not cost or pricing data were initially required) or any subcontract covered by paragraph (a)(1)(ii) of this subsection.

If TINA applies to task and delivery orders, then task and delivery orders must fall into one of the three enumerated categories. A task or delivery order issued by the Government is certainly not a subcontract, so (ii) is out. A task or delivery order under a contract is not a "written change in the terms of a contract", so they do not meet the definition of "contract modification", thereby eliminating (iii). Thus, task and delivery orders must be "contracts."

However, one cannot reasonably describe this information as "commonly understood" either. Consider the following statements made in FEATURE COMMENT: Contesting Task And Delivery Order Awards At The COFC--Policy Implications Of A Choice Federal Courts May Soon Have To Make (51 NO. 20 Gov't Contractor ? 174). In discussing the automatic stay provisions of CICA, the author writes:

The first time period, from the date of contract award to 10 days after contract award, is irrelevant to protesting task orders, since such orders are not "contracts" in themselves. See definitions of "task order" and "delivery order" under FAR 2.101.

The author, seemingly indecisive, also writes:

As for the CICA stay--the stay of a contract award decision that automatically comes into play when that contract award decision is challenged before GAO-- this stay may simply be unavailable in the context of task orders because such orders may not be "contracts." The FAR councils could probably resolve the CICA stay issue by redefining the term "contract" under FAR 2.101 to include task orders, but given the serious nature of the controversy and its likely impact on other aspects of the multiple-award IDIQ contracting system, that sort of redefinition appears unlikely because treating task orders as "contracts" could trigger other procedural obligations.

This author is not alone. In FEATURE COMMENT: Acquisition Reform Revisited--Section 843 Protests Against Task And Delivery Order Awards At GAO (50 NO. 9 Gov't Contractor ? 75) the authors put forth the following argument:

However, CICA does not explicitly define the term "contract award." One could argue that protesters of task or delivery orders are not entitled to an automatic suspension of performance because of the definitions of "contract," "task order" and "delivery order" found in the FAR. FAR 2.101 defines "contract" as "a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the government to an expenditure of approved funds ...." On the other hand, the terms "delivery order" and "task order" are defined as orders "placed against an established contract" and, thus, arguably do not constitute "contracts" under the FAR.

Consistent with the FAR's distinction between contracts and task or delivery orders issued under contracts, GAO, in Advanced Tech. Sys., Inc., Comp. Gen. Dec. B-296493.6, 2006 CPD ? 151, concluded that it was unnecessary for an agency to conduct a responsibility determination before awarding an order under a General Services Administration Federal Supply Schedule contract because that determination was made when the underlying "contract" was awarded.

I agree with the first author's assessment of the potential controversy that would ensue if the FAR Councils were to redefine "contract" to include task and delivery orders. If the FAR Councils were to propose such a rule, I would estimate that they would receive no less than 100 public comments.

Where's the Cost or Pricing Data Clause for Task and Delivery Orders?

If it's "commonly understood" that TINA applies to task and delivery orders, why isn't there a standard FAR clause for use in task and delivery order contracts that compels the submission of cost or pricing with a task or delivery order proposal when applicable? There's a standard FAR provision at FAR 52.215-20, Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data (Oct 1997), that can be used to compel offerors to submit cost or pricing data when submitting offers for a basic IDIQ contract. There's also a standard FAR clause at FAR 52.215-21, Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data?Modifications (Oct 1997), that compels submission of cost or pricing data when pricing contract modifications (if applicable). Where is "Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data?Task and Delivery Orders"? Why not have offerors agree to submit cost or pricing data (if applicable) with subsequent task and delivery order proposals?


The Councils' response in the publication of this rule reminded me of an earlier response pertaining to the applicability of CAS to task and delivery orders accompanying a final rule on CAS (70 FR 11743-01). In that response, the Councils reached the opposite conclusion. The exchange was as follows:

Task Order Contracts

31. Comment: One respondent stated that one of the many situations that greatly affect the cost accumulation calculation that is not addressed in the proposal is the trend toward task order contracts that may have both fixed fee and incentive fee tasks, as well as CAS covered and non-CAS covered tasks.

Councils' response: Nonconcur. The Councils believe that this situation is adequately covered by the language at FAR 30.605(h)(5), and the definition of "Affected CAS-covered contracts" at FAR 30.001.


As for the issue of CAS-covered versus non-CAS-covered tasks, a contract cannot contain both CAS-covered and non-CAS-covered tasks. In order for CAS-coverage to differ between tasks, each task would have to be a separate contract. In such cases, the definition of affected CAS-covered contracts would exclude the non-CAS covered tasks from the computation of the cost-impact.

Thus, a determination of CAS applicability is made only when placing the basic IDIQ contract. If an IDIQ contract is subject to CAS, all orders under the contract are subject to CAS. If an IDIQ contract is not subject to CAS, none of the orders under the contract are subject to CAS.

So, according to the FAR Councils, a contracting officer must determine applicability of TINA when awarding a basic IDIQ contract and issuing any subsequent orders, but need only determine the applicability of CAS once?when awarding a basic IDIQ contract.

This raises another yet another question?how is a CO supposed to know this? Consider the rules for determining CAS applicability at 48 CFR 9903.201-1:

9903.201-1 CAS applicability.

(a) This subsection describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. (See 9904 or 9905, as applicable.) Negotiated contracts not exempt in accordance with 9903.201?1(B) shall be subject to CAS. A CAS-covered contract may be subject to full, modified or other types of CAS coverage. The rules for determining the applicable type of CAS coverage are in 9903.201?2.

(B) The following categories of contracts and subcontracts are exempt from all CAS requirements:

(1) Sealed bid contracts.

(2) Negotiated contracts and subcontracts not in excess of $650,000. For purposes of this paragraph (B)(2) an order issued by one segment to another segment shall be treated as a subcontract.

(3) Contracts and subcontracts with small businesses.

(4) Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than 9904.401 and 9904.402 are concerned, any contract or subcontract awarded to a foreign concern.

(5) Contracts and subcontracts in which the price is set by law or regulation.

(6) Firm fixed-priced, fixed-priced with economic price adjustment (provided that price adjustment is not based on actual costs incurred), time-and-materials, and labor-hour contracts and subcontracts for the acquisition of commercial items.

(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater.

(8)?(12) [Reserved]

(13) Subcontractors under the NATO PHM Ship program to be performed outside the United States by a foreign concern.

(14) Contracts and subcontracts to be executed and performed entirely outside the United States, its territories, and possessions.

(15) Firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data.

By asserting that CAS determinations are not made at the task or delivery order level, the FAR Councils must be using a definition of "contract" that is different than what appears at FAR 2.101. What definition are they using and why does that definition exclude task and delivery orders? I don't get it.


If the FAR Councils believe that task and delivery orders are "contracts" as defined at FAR 2.101, then they can clear up a considerable amount of confusion by including these types of orders in that definition. If they do that, why not add a standard FAR clause compelling submission of cost or pricing data (when applicable) with task or delivery order proposals? While they're at it, how about an explicit statement in the FAR stating that TINA applicability determinations are made at the task and delivery order level and another statement that CAS applicability determinations are not? Probably too much to ask.

Don Mansfield

There has been a considerable amount of controversy over the last year or so in the area of small business programs. In International Program Group, Inc., (B?400278, B?400308, 19 September 2008) the Government Accountability Office (GAO) held that HUBZone set-asides took priority over service-disabled veteran-owned small business (SDVOSB) set-asides and SDVOSB sole source acquisitions. This was unsurprising given the clear language in the FAR. In Mission Critical Solutions (B?401057, 4 May 2009) (also see reconsideration), the GAO held that the HUBZone set-asides took precedence over the 8(a) program. This was surprising given the clear language of the FAR. Of note in both cases was that the GAO solicited and rejected the Small Business Administration's (SBA's) interpretation of the applicable statutes, which was that there was parity among the 8(a), HUBZone, and SDVOSB programs. It was after the latter case that the Office of Management and Budget (OMB) stepped in with a memorandum advising agencies to disregard the two GAO decisions and providing the following guidance:

Pending the completion of the legal review of the GAO's decisions by the Executive Branch, the SBA's "parity" regulations should not be disregarded by contracting officers, and Federal agencies should not, as a result of the GAO's decisions, be compelled to prioritize HUBZone small businesses over 8(a) BD or SDVOSBs. Instead, until the legal review is completed, Federal agencies should continue to give active consideration to each small business program pursuant to their pre-existing contracting practices and "parity" policies.

Remarkably, this guidance 1) assumes that contracting officers had been following the parity policies implemented in SBA's regulations and 2) implies that, henceforth, contracting officers are free to treat HUBZone, SDVOSB, and 8(a) contractors as equals. There is no acknowledgement of the fact that there were no pre-existing "parity" policies in the FAR. Prior to the GAO decisions, the FAR Council issued a proposed rule that would have implemented parity among the three programs?something that clearly did not exist in the FAR. See 73 FR 12699. As of today, the FAR Case dealing with Socioeconomic Program Parity (2006-034) has been tabled. As such, any contracting officer subject to the FAR that thinks that they have been given the green light to disregard the FAR and treat all three programs the same should think again.

Consider the following scenarios:

Scenario 1: The conditions for both a HUBZone set-aside and a SDVOSB set-aside (or sole source) exist for a particular acquisition exceeding the simplified acquisition threshold. The requirement cannot be satisfied through the 8(a) program.

In this scenario, FAR 19.1305 requires a HUBZone set-aside:

(a) A participating agency contracting officer shall set aside acquisitions exceeding the simplified acquisition threshold for competition restricted to HUBZone small business concerns when the requirements of paragraph ( b ) of this section can be satisfied.


( b ) To set aside an acquisition for competition restricted to HUBZone small business concerns, the contracting officer must have a reasonable expectation that?

(1) Offers will be received from two or more HUBZone small business concerns; and

(2) Award will be made at a fair market price.

If a CO chose to pursue a SDVOSB set-aside (or sole source) in this scenario, he or she would be deviating from the express requirements of FAR 19.1305. However, a CO subject to the FAR does not have the authority to deviate from the FAR without approval from the agency head (see FAR 1.4). Further, we already know from International Program Group that the GAO would sustain a protest if an agency were to pursue a SDVOSB set-aside (or sole source) when the conditions for a HUBZone set-aside existed. While we don't know for sure how the Court of Federal Claims would decide such a protest, it would be surprising if they were to find that a HUBZone set-aside were not required, given the clear language of the FAR. On the other hand, proceeding with a HUBZone set-aside would be compliant with statute, the FAR, and the SBA regulations (which allow a choice of programs).

Scenario 2: The conditions for a HUBZone set-aside exist and the requirement can be satisfied through the 8(a) program.

FAR 19.800(e) provides for a "soft" priority for 8(a) as follows:

Before deciding to set an acquisition in accordance with Subpart 19.5 [small business set-asides], 19.13 [HUBZone set-asides], or 19.14 [service-disabled veteran-owned small business set-asides] the contracting officer should review the acquisition for offering under the 8(a) program.

While FAR 19.800(e) doesn't mandate that an acquisition be offered to the SBA under the 8(a) program if it can be, the implication is that there should be a good reason for not doing so. (FAR 2.101 defines should as "an expected course of action or policy that is to be followed unless inappropriate for a particular circumstance.") Thus, it would be unwise to simply ignore FAR 19.800(e) and proceed with a HUBZone set-aside?there should be something in the file that evidences the contracting officer's compliance with FAR 19.800(e). The same would be true if the conditions for a HUBZone sole source, SDVOSB set-aside, or SDVOSB sole source existed.

The Department of Justice Opinion

Responding to a request from the SBA, the Justice Department provided a legal opinion pertaining to the SBA's interpretation of the relevant statutes. The opinion found as follows:

Having carefully reviewed the relevant legal materials, including SBA's own views, we conclude that the Act does not compel SBA to prioritize the HUBZone Program in the manner GAO determined to be required. In our view, SBA's regulations permissibly authorize contracting officers to exercise their discretion to choose among the three programs in setting aside contracts to be awarded to qualified small business concerns. Further, in accord with this Office's longstanding precedent, GAO's decisions are not binding on the Executive Branch.

I can't wait to see how DOJ's reasoning holds up in the Court of Federal Claims (assuming we'll see a case). For argument's sake, let's assume that the opinion is correct. Does this mean that contracting officers can now ignore the FAR and treat all three programs equally? I don't think so. The opinion did not say that the FAR is wrong. It says that the SBA did not misinterpret the statute. Thus, the SBA has permissibly given agencies the discretion to choose among the three programs. The FAR Council has already made the choice for contracting officers?HUBZone takes priority over SDVOSB and 8(a) takes priority (albeit a "soft priority") over HUBZone and SDVOSB. The FAR Council may give this discretion to contracting officers, but the FAR would have to be changed to do so.

My Advice

In its memorandum, OMB stated that the results of its review of the legal basis underlying the GAO's decisions were expected this past summer?still no word from them as of Black Friday. Any further guidance issued by OMB should acknowledge the priorities that exist in the FAR and explain how contracting officers are to proceed. Merely stating that contracting officers are free to abide by SBA's "parity" policies without acknowledging the rules of the FAR will be most unhelpful.

In the meantime, contracting officers that find themselves in Scenario #1 above should proceed with a HUBZone set-aside. Contracting officers that find themselves in Scenario #2 above should document compliance with FAR 19.800(e) before proceeding to any other type of set-aside or sole source.

Don Mansfield

When taking a class on the Cost Accounting Standards (CAS) last year, I came across a DCAA rule that made perfect sense to the auditors, but left some of the contracting officers scratching their heads. The rule deals with how to calculate the cost impact of a CAS noncompliance or accounting change on a cost-plus-award-fee (CPAF) contract.

Chapter 8 of the DCAA Contract Audit Manual (CAM) contains guidance on how to evaluate cost impact proposals submitted to the Government as a result of a CAS noncompliance or cost accounting practice change (see CAM 8-503). The CAM outlines a five-step process, which is shown in an abbreviated form below:

Step 1 Compute the increased/decreased cost estimates and/or accumulations for CAS-covered contracts and subcontracts.

Step 2 Combine the increased/decreased cost estimates and/or accumulations within each contract group.

Step 3 Determine the increased/decreased cost paid by the Government for each contract group, using the net impact on cost estimates, accumulations and profits/fees.

Step 4 Determine the increased costs paid by the Government in the aggregate by combining across contract groups the increased/decreased costs paid by the Government for both contract groups, as determined in step 3.

Step 5 Negotiate a settlement with the contractor.

The guidance stated under step 3 for determining increased costs to the Government states the following:

( c ) Profit/fee. Increased costs paid by the Government also occur when more profit/fee was negotiated than would have been contemplated by the contracting parties if the cost estimate had been based on changed or compliant practices. Accounting practice changes and estimating noncompliances affect fixed, target, and incentive fees. Accumulation noncompliances also affect incentive fees. Profit/fee that is not based on estimated costs (e.g., award fees) is generally not subject to adjustment.

There is a similar guidance for determining decreased costs to the Government.

Thus, the assumption is that the Government would have negotiated a lesser fixed, target, or incentive fee but for the contractor's CAS noncompliance or accounting practice change that caused the cost estimate to be higher than it should have been. For example, let's say a contracting officer negotiates a cost-plus-fixed-fee (CPFF) contract for an estimated cost of $1,000,000 and a fixed-fee of $100,000. The contractor completes the contract and is paid the fixed-fee of $100,000. However, it's later discovered that the contractor used a noncompliant estimating practice that caused the cost estimate to be higher than it should have been. If the contractor had used a compliant estimating practice, their estimated cost would have been $900,000. It is assumed that had the contracting officer known this, he/she would have negotiated a fixed-fee of $90,000. This may not be true in some cases, but it is reasonable as a general assumption.

This guidance is based on an interpretation in the FAR Appendix at 9903.306( c ), which states:

"The statutory requirement underlying this interpretation is that the United States not pay increased costs, including a profit enlarged beyond that in the contemplation of the parties to the contract when the contract costs, price, or profit is negotiated, by reason of a contractor's failure to use applicable Cost Accounting Standards, or to follow consistently its cost accounting practices. In making price adjustments under the Cost Accounting Standards clause at 9903.201-4(a) in fixed price or cost reimbursement incentive contracts, or contracts providing for prospective or retroactive price redetermination, the Federal agency shall apply this requirement appropriately in the circumstances."

So far, so good.

What's puzzling is the guidance stated in the last sentence of the above-quoted paragraph from the CAM:

Profit/fee that is not based on estimated costs (e.g., award fees) is generally not subject to adjustment.

Thus, the assumption is that, in the case of CPAF contracts, a contractor's cost estimate has no effect on the amount of award fee that a contractor is eventually paid. To illustrate this, let's say a contracting officer negotiates a CPAF contract with an estimated cost of $1,000,000 and an award fee pool of $100,000 (assume no base fee). After performance, the Government determines that the contractor is entitled to 100% of the available award fee and pays the contractor $100,000 (the typical practice is to determine award fee entitlement by applying the earned percentage to the award fee pool?this is a required practice in DoD). It is later found that the contractor used a noncompliant estimating practice which caused the cost estimate to be higher than it should have been. If the contractor had used a compliant estimating practice, their estimated cost would have been $900,000. In this case, it is assumed that had the contracting officer known this, he/she still would have negotiated an award-fee pool of $100,000. This may be true in some cases, but it is curiously inconsistent with the assumption made when calculating the cost impact on a CPFF contract.

Is it reasonable to assume that a contractor's estimated cost has no affect on the size of the award fee pool that a contracting officer negotiates?

While it is true that a structured approach to developing prenegotiation fee objectives, which relies heavily on prenegotiation cost objectives, is generally not required when developing a prenegotiation award-fee pool objective, it's quite a stretch to assume that prenegotiation cost objectives have no effect on the prenegotiation award fee pool objective (or the size of the award fee pool negotiated). Official guidance on negotiating award fee pools acknowledges that estimated cost can be a consideration. The Air Force Material Command Award Fee Guide offers the following guidance for establishing the award fee pool:

There are different methods that can be used to establish the award-fee pool.

The methods listed below are possible approaches:

- Review past acquisition history/experience

- Research current award-fee pools for similar efforts

- Use Weighted Guidelines Method as a reference point

- Establish evaluation criteria and apply a percentage based on risk and importance

- Cash flow analysis

[bold added].

The Navy-Marine Corps Award Fee Guide offers almost identical guidance.

In my experience, as well as that of some of my colleagues, a contract's estimated cost was a significant factor (if not the most significant factor) in negotiating the size of award fee pools in CPAF contracts. I would be surprised if my experience were atypical.

I'd be interested in hearing to what extent my readers consider estimated costs when negotiating an award fee pool for a CPAF contract. Let me know your experience.

Don Mansfield

Did you ever wonder about the type of debate that goes on before an acquisition rule becomes final and is incorporated into the Federal Acquisition Regulation System? This information can be found in the Background section of the final rule when it appears in the Federal Register. I make a point of reading this section whenever a new rule comes out because it tells the story behind the rule?who the rule is going to affect, who is happy about the rule, who is upset about the rule, who thinks it should be scrapped, what the rule makers were thinking when they created and revised it, etc. This section is also a valuable reference when you are trying to interpret a rule in the FAR System that is unclear or ambiguous.

Typically, the comments received range from pointing out errors in the rule to blatantly self-serving statements from private parties either praising the wisdom of the rule or explaining how the rule will inevitably bankrupt small business concerns, cost the Government more money, and lead to a widespread malaise in the country. The rule makers' responses to the comments range from nonresponsive or evasive to well-written explanations of why the comment is or is not valid (I've generally had good responses to comments that I have submitted for consideration).

DoD recently issued a final rule revising the existing rules on the restriction on the acquisition of specialty metals (DFARS Case 2008-D003). The rule contained a straightforward definition of "high-performance magnet" in the new clause at DFARS 252.225-7009, Restriction on Acquisition of Certain Articles Containing Specialty Metals, as follows:

High performance magnet means a permanent magnet that obtains a majority of its magnetic properties from rare earth metals (such as samarium).

Apparently, the Background statement pertaining to this definition that accompanied the interim rule drew criticism from a number of interested parties. The comments received went so far as to suggest that the definition, as written, would pose a threat to national security:

The respondent disagreed with DoD's Background statement that magnets containing rare earth elements are technologically superior in magnetic performance to other types of magnets, because the technological superiority of one magnet over another is ultimately driven by the requirements of the application where it is used. The respondent also stated that, in addition to maximum energy product, parameters such as temperature stability, temperature range, resistance to demagnetization, corrosion resistance, mechanical toughness, and machinability contribute to the decision as to which type of magnet to use for a military application.

These respondents were also concerned that limiting the definition to rare earth (such as samarium-cobalt) magnets and excluding alnico magnets would increase dependency on Chinese magnets and threaten national security. For example, one respondent expressed concern that, if alnico magnets are not included in the definition, alnico magnets that are COTS items will be exempt from the specialty metals restriction.

DoD's response to these comments brought me back to high school physics class (God bless you, Mr. Michel). Here is an excerpt:

With regard to whether it is meaningful to define ``high performance magnet'' as a permanent magnet that obtains a majority of its magnetic properties from rare earth metals: Cobalt, iron, and nickel are the three primary ferromagnetic metals and, therefore, are present in most, if not all, permanent magnets. However, it is the very strong magneto-crystalline anisotropy (the property of being directionally dependent) of certain rare earth elements that produces the exceptional magnetic behavior in the materials to which they are added. The partially filled 4f electron subshells in rare earths lead to magnetic properties in a manner similar to the partially filled 3d electron subshells in transition elements such as cobalt, iron, and nickel. However, the magnetic moment of a rare earth material is typically an order of magnitude greater than that in a transition element; and rare earths exhibit a large anisotropy due to dipolar interactions. In summary, rare earths possess very unique electron structures that produce extreme anisotropy in their magnetic properties.

I don't know if that is right. However, I did learn a new word (anisotropy) and I now know something about the magnetic properties of rare earth metals and transition elements that I didn't know before.

You may ask: "what good is knowing this?" Other than trying to make someone think that you are smarter than you actually are, there may be no value. However, as evidenced by the discussion in the Background section of the rule, there was a great deal of deliberation about the final definition. A contracting officer may encounter situations where he or she needs to apply the new rule and knowing that the definition of "high-performance magnet" is very narrow will help.

Take a look at the Background section of an acquisition rule the next time one comes out (FAC 2005-036 was just issued last week). Not only will it add some life to the rule as it appears in the regulation, you may learn something.

Don Mansfield

The end of the fiscal year is always a good time to start brush up on fiscal law?particularly the bona fide needs rule. Contracting offices may soon face questions of fiscal law that have already been answered in Volume I, Chapter 5, of Principles of Federal Appropriations Law (GAO Red Book).

One interesting case of fiscal law, which you won't find in the Red Book, deals with funding undefinitized contract actions (UCAs) that cross fiscal years. Consider the following scenario:

A DoD activity issues a UCA in late fiscal year 2009 with a not-to-exceed price of $1,000,000. In accordance with DFARS 217.7404-4(a), the agency obligates $500,000 of the not-to-exceed price (the DFARS limit is currently 50% of the price ceiling, or 75% if the agency is in receipt of a "qualifying proposal"). The agency does not get around to definitizing the UCA until early FY 2010. When they do, the contracting officer and the contractor agree to a final contract price of $950,000. The unfunded balance is $450,000 (assuming actual costs prior to definitization were $500,000).

Assuming the contract is funded with annual appropriations, which fiscal year's appropriation must be charged to fund the additional $450,000?

Believe it or not, fiscal year 2010 funds must be used. A number of people that I have spoken to are befuddled by this, because they believe that the definitizing contract modification would be fulfilling a bona fide need of FY 2009, which would thus require the use of FY 2009 funds. However, this is incorrect.

The Comptroller General answered this question in Obligating Letter Contracts, B-197274, September 23, 1983. In that case, a procurement official from the Department of Justice requested guidance on how to fund letter contracts that crossed fiscal years. Agency practice had been to record an obligation for the amount of the price ceiling and include a clause that limited the liability of the Government to 50% of the price ceiling. In other words, they would overrecord their obligation. The procurement official described his dilemma as follows:


The Comptroller General responded as follows:




Following the initial example, the $450,000 to be added to the contract when the definitizing contract modification is executed covers a bona fide need of fiscal year 2010. This need was originally a bona fide need of FY 2009, but it went unsatisfied within the time period available for new obligations. As such, the bona fide need was carried forward to FY 2010.

UCAs have become a hot topic in contracting, particularly in DoD. In response to a GAO report that found a significant number of UCAs still undefinitized beyond the 180-day window imposed at DFARS 217.74, the DFARS was recently revised to include more rules pertaining to UCAs. However, I never saw any discussion about how to fund UCAs that cross fiscal years (maybe everybody already knows the rule :lol: ). Based on the GAO report, I'm willing to speculate that a good number of UCAs are left undefinitized until the fiscal year following their issuance. For UCAs funded by annual appropriations, I wonder what fiscal year's funds are being obligated when the UCAs are definitized. My guess is, in most cases, the same fiscal year's funds that were obligated for the UCA.

Don Mansfield

There seems to be a closely held belief by some in the Federal contracting community that the FAR requires the contracting officer to perform a price analysis before awarding any contract. CON 111 used to contain the following statements:

You must use price analysis to ensure that the overall price is fair and reasonable. Even when an offeror is required to provide the most in depth type of proposal data ? data known as "cost or pricing data" -- you will still need to use price analysis to ensure that the overall price is fair and reasonable. Point: You'll always, always, always use price analysis!

A number of my colleagues, both practitioners and instructors, would agree with those statements. Further, I have had a number of students pre-programmed by their contracting offices to believe that price analysis is always required.

What does the FAR say?

Subparagraphs a(2) and a(3) of FAR 15.404-1 discuss the requirements for the performance of price and cost analysis:

(2) Price analysis shall be used when cost or pricing data are not required (see paragraph (B) of this subsection and 15.404-3).

(3) Cost analysis shall be used to evaluate the reasonableness of individual cost elements when cost or pricing data are required. Price analysis should be used to verify that the overall price offered is fair and reasonable.

Note that a(2) qualifies the requirement for price analysis with the language "when cost or pricing data are not required." To interpret a(2) to mean that price analysis is always required would render meaningless the qualifying language in the statement ("when cost or pricing data are not required"). Such an interpretation would be inconsistent with the fundamental principle that statutes and regulations must be read and interpreted as a whole, thereby giving effect to all provisions. See Waste Mgmt. of North Am., B-225551, B-225553, Apr. 24, 1987, 87-1 CPD ? 435 at 5.

Subparagraph a(3) sets forth the requirement for performing cost analysis (i.e., when cost or pricing data are required) and contains the statement that "Price analysis should be used to verify that the overall price offered is fair and reasonable." Does this statement require price analysis when cost or pricing data are required? To answer this, we need to review the definitions of "should" and "shall" in FAR 2.101:

"Should" means an expected course of action or policy that is to be followed unless inappropriate for a particular circumstance.

"Shall" means the imperative.

Thus, when cost or pricing data are required, the contracting officer is 1) required to perform cost analysis and 2) expected to perform price analysis unless it's inappropriate for a particular circumstance. That's different than stating that the contracting officer must perform both price and cost analysis when cost or pricing data are required. The implicit acknowledgement that price analysis could be inappropriate in a particular circumstance (and thus, not required) contradicts the assertion that price analysis is always required.

Why the Confusion?

I'm not sure why some folks think that price analysis is always required. Perhaps they haven't read the FAR carefully. I recently had my students read subparagraphs a(2) and a(3) and asked them whether it was true or false that price analysis was always required. They were split about 50% true 50% false. When I had the students who answered "False" re-read a(2) and a(3), I was able to get the split to about 15% true 80% false and 5% I don't know. I can live with that.

A more likely reason behind the existence of this myth is that an uncomfortably large number of people in our field do not know what the FAR says because they do not read it. Instead, they are guided by, and they repeat, rumors.

Don Mansfield

WARNING: OMB issued a memorandum on July 10 directing executive agencies to temporarily disregard the two GAO decisions discussed below until a full review can be conducted. Until such a review is conducted, do not use the table.

Depending on your point of view, two recent GAO decisions have either clarified or muddied our understanding of the rules pertaining to the order of priority for small business programs. In International Program Group, Inc., B-400278; B-400308, September 19, 2008, the GAO held that HUBZone set-asides take precedence over service-disabled veteran-owned small business (SDVOSB) set-asides and SDVOSB sole sources (a highly criticized decision). In Mission Critical Solutions, B-401057, May 4, 2009, the GAO held that HUBZone set-asides take precedence over the 8(a) program. In both cases, the GAO sought, and disagreed with, the SBA's interpretation of the relevant statutes.

Based on these two decisions, and the current rules that in FAR Part 19, I have created a table to assist in determining the order of priority for small business programs. Instructions and relevant references are provided in the table. The table assumes that the acquisition exceeds the simplified acquisition threshold.

Take a look and let me know if you have any questions or comments.

Don Mansfield

In TYBRIN Corporation, B-298364.6; B-298364.7, March 13,2007, the GAO held that an offeror's cost estimate that indicated that it would not perform 51% of the contract work on a small business set-aside rendered the offer unacceptable, even though the offeror did not explicitly take exception to the solicitation's limitation on subcontracting clause (FAR 52.219-14) and the SBA granted the offeror a certificate of competency. The GAO reasoned as follows:

[T]he issue here does not concern whether a bidder or offeror can or will comply with the subcontracting limitation requirement during performance of the contract (where we recognize that the matter is one of responsibility (or in certain cases, contract administration, see, e.g., Raloid Corp., B‑297176, Nov. 10, 2005, 2005 CPD para. 205 at 4)), but rather, whether the bidder or offeror has specifically taken exception to the subcontracting limitation requirement on the face of its bid or proposal. Given that the determination in this latter, limited circumstance involves the evaluation of a bid or proposal for compliance with a material term of the solicitation, the determination is one of responsiveness or acceptability, rather than responsibility.

As a result, the Air Force reopened discussions with offerors and sought revised proposals. This action was unsuccessfully challenged in the Court of Federal Claims (see The Centech Group, Inc., v. U. S. and Tybrin, Inc., 07-513C, Filed December 7, 2007, Refiled December 13, 2007) and unsuccessfully appealed to Court of Appeals for the Federal Circuit (The Centech Group, Inc., v. U. S. and Tybrin Corporation, No. 08-5031, February 3, 2009).

Thus, it would seem that we have a general rule that if information in a cost estimate indicates that an offeror will not comply with a material term of a solicitation, then the offeror has implicitly taken exception to that term of the solicitation, which would make their offer unacceptable (or nonresponsive).

However, in Group GPS Multimedia, B-310716, January 22, 2008, the opposite conclusion was reached. In that case, the successful offeror submitted a cost estimate that contained a proposed labor rate that was below the labor rate stated in the Department of Labor Wage Determination (the contract would be subject to the Service Contract Act). The protester argued that this gave the awardee an unfair price advantage. The GAO held as follows:

On a fixed-price contract, as here, under which the awardee is required to pay the actual SCA wages and benefits out of whatever price it offers, and where the proposal contains no indication that the company will not meet its statutory obligations in this regard, labor rates or benefits that are less than the SCA-required rates or benefits may constitute a below-cost offer but one which is legally unobjectionable. Biospherics, Inc., B-285065, July 13, 2000, 2000 CPD para. 118 at 12. That is, regardless of what wage rates K-MAR used in calculating its proposed price, it will still be required to compensate its employees at the appropriate prescribed SCA wage rates. Free State Reporting Inc., B-259650, Apr. 4, 1995, 95-1 CPD para. 199 at 7. Further, the determination of prevailing wages and fringe benefits, and the issuance of appropriate wage determinations under the SCA, are matters for the Department of Labor (DOL). Concerns with regard to establishing proper wage rate determinations or the application of the statutory requirements should be raised with the Wage and Hour Division in DOL, the agency that is statutorily charged with the implementation of the Act. See 41 U.S.C. sections 353(a); 40 U.S.C. sect. 276a; SAGE Sys. Techs., LLC, B-310155, Nov. 29, 2007, 2007 CPD para. 219 at 3. Thus, to the extent the protester?s contention is that K-MAR may not properly categorize its employees under the SCA or compensate some of its employees at the required SCA wage rate, it is not a matter for our consideration, since the responsibility for the administration and enforcement of the SCA is vested in DOL, not our Office, and whether contract requirements are met is a matter of contract administration, which is the function of the contracting agency. SAGE Sys. Techs., LLC, supra; Free State Reporting Inc., supra, at 7 n.7.

This raises several questions. Why wouldn't a cost estimate that contains proposed labor rates below the SCA-minimum labor rates render an offer unacceptable, but a cost estimate that shows an offeror performing less than 51% of the contract work on a small business set-aside would? In neither circumstance does the cost estimate indicate compliance with a material term of the solicitation (the Limitation on Subcontracting clause and the Service Contract Act, respectively). Yet, we have different results. Is compliance with the Limitation on Subcontracting clause a special case? If so, why? Or is proposed compliance with the SCA (as evidenced in a cost proposal) a special exception to the rule? If so, why?

Any ideas?

Don Mansfield

In a remarkable statement issued today, the Government Accountability Office (GAO) apologized to the Department of Defense for what it called "decades of unwarranted and unsubstantiated criticism." The admission came in the wake of the release of a March 2009 GAO report titled Defense Acquisitions: Assessments of Selected Weapon Programs that claims that for 2008 programs, research and development costs are now 42 percent higher than originally estimated and the average delay in delivering initial capabilities has increased to 22 months.

"Who knows if any of that stuff is true" said the author of the study. "We write these reports years in advance when there are no data. Last month, I completed documenting my 'findings' for a 2010 report on DoD's mismanagement of 2009 stimulus funding." He added, "From what I do know of DoD, they are a stellar organization."

GAO also recanted recent Congressional testimony that stated:

Since 1990, GAO has consistently designated DOD's management of its major weapon acquisitions as a high-risk area. A broad consensus exists that weapon system problems are serious, but efforts at reform have had limited effect. For several years, GAO's work has highlighted a number of strategic- and program-level causes for cost, schedule, and performance problems in DOD's weapon system programs. At the strategic level, DOD's processes for identifying warfighter needs, allocating resources, and developing and procuring weapon systems, which together define the department's overall weapon system investment strategy, are fragmented.

"That was a gross mischaracterization and we regret those statements. Truth be told, DoD's weapon system programs, in particular the Future Combat Systems program, are models of responsible program management. They represent the Federal Government at its best" said the GAO.

When asked what motivated today's statement, a GAO spokesperson responded that "we can't keep up with the demand for this type of criticism. The DoD-bashing crowd is insatiable. It's getting to the point where we are ignoring some real problems in other agencies, like NASA", an obvious reference to the recent expose of former astronauts at the space agency.

GAO had painted DoD as a largely dysfunctional, overinflated, and wasteful bureaucracy in numerous reports dating back to the 1970s. One retired GAO auditor, who now runs a Web site dedicated to Federal contracting, added some insight: "DoD wasn't half as bad as what we wrote about them, but nobody wanted to hear it."

DoD has yet to formally respond to the GAO's apology.

Don Mansfield

The myth about communication being 93% nonverbal probably didn't start in the contracting field, but we are partly responsible for its spread. This is especially true when it comes to the subject of contract negotiation. The course manual for CON 100 used to state that communication was 90% nonverbal as a matter of fact. A speaker at a recent conference that I attended used a figure of 93% in a presentation on contract negotiation. The current Contract Pricing Reference Guides contain a variation of this claim in a chapter titled "Nonverbal Communication" (Volume V, Chapter 5):

Communication Is More Than Verbal. Good negotiators must first be good communicators. Unfortunately, many negotiators think of communication only as oral or written verbal exchanges. But verbal exchanges account for only a fraction of the messages people send and receive. Research has shown that between 70 and 90 percent of the entire communication spectrum is nonverbal. Consequently, you should be aware of the different forms of nonverbal communication that you are likely to encounter during negotiation conferences. [bold added]

Whenever this claim is made, it's almost always accompanied by a statement that it is supported by "research", but what "research"?

Well, there actually was a research study done in 1967 that found that 93% of communication was nonverbal...under very specific conditions. The following excerpt from The Virtual Handshake explains just what the study found:

Albert Mehrabian, a UCLA professor, completed research in 1967 showing the significance of non-verbal cues in communications. He concluded, in part, ?The combined effect of simultaneous verbal, vocal and facial attitude communications is a weighted sum of their independent effects ? with the coefficients of .07, .38, and .55, respectively.? (Albert Mehrabian and Susan R. Ferris, ?Inference of attitudes from nonverbal communication in two channels.? Journal of Consulting Psychology 31 (1967): 248-252. ) Out of context, this implies that in face-to-face conversation, 38% of communication is inflection and tone of voice, 55% is facial expression, and only 7% is based on what you actually say.

This statistic has grown into a very widely quoted and oft-misunderstood urban legend. Many communication skills teachers and image consultants misuse this data to indicate that your intonation, speaking style, body language, and other non-verbal methods of communication overpower your actual words. As a result, many people are concerned that online communication is much more difficult because body language, tone of voice, and facial expressions cannot today be effectively conveyed over the internet.

Not true. Mehrabian?s study only addressed the very narrow situation in which a listener is analyzing a speaker?s general attitude towards that listener (positive, negative, or neutral). Also, in his experiments the parties had no prior acquaintance; they had no context for their discussion. As Mehrabian himself has said explicitly, these statistics are not relevant except in the very narrow confines of a similar situation.

Mehrabian's exact words appear in a description of his book "Silent Messages" -- A Wealth of Information About Nonverbal Communication (Body Language):

Inconsistent communications -- the relative importance of verbal and nonverbal messages. My findings on this topic have received considerable attention in the literature and in the popular media. "Silent Messages" contains a detailed discussion of my findings on inconsistent messages of feelings and attitudes (and the relative importance of words vs. nonverbal cues) on pages 75 to 80.

Total Liking = 7% Verbal Liking + 38% Vocal Liking + 55% Facial Liking

Please note that this and other equations regarding relative importance of verbal and nonverbal messages were derived from experiments dealing with communications of feelings and attitudes (i.e., like-dislike). Unless a communicator is talking about their feelings or attitudes, these equations are not applicable. Also see references 286 and 305 in Silent Messages -- these are the original sources of my findings. [bold added].

For a thorough debunking of this myth, see Contributions of Different Modalities to "Content".

Nonverbal communication is important in a contract negotiation. Eye-rolling usually communicates disagreement. A long sigh usually communicates frustration. Busting out laughing at the other party's counteroffer can be an effective way of communicating your intent to consider it. However, unless the parties intend to discuss their emotions in lieu of contract terms, they shouldn't go in to the negotiation thinking that 93% of the message they are sending is nonverbal. If they do, they'll find themselves focusing too much on the form of the negotiation instead of the substance.

As contracting professionals, we all need to do our part to stop the spread of this common communication myth.

Don Mansfield


You have to rate proposals in a source selection.

When discussing the evaluation of competitive proposals with my students, I make a point of asking the following two questions (in order):

1. Are agencies required to evaluate proposals?

2. Are agencies required to rate proposals?

Usually, students respond affirmatively to question #1 and are able to support their answers by citing FAR 15.305(a), which states "An agency shall evaluate competitive proposals and then assess their relative qualities solely on the factors and subfactors specified in the solicitation." However, confusion sets in when I follow with question #2 and students read the very next sentence of FAR 15.305(a), which states "Evaluations may be conducted using any rating method or combination of methods, including color or adjectival ratings, numerical weights, and ordinal rankings." Clearly, the language regarding use of a rating method in conjunction with an evaluation is permissive, not mandatory.

"What's the difference?", "Why wouldn't you rate proposals?", "How do you decide who is the better value if you don't rate the proposals?" are typical student responses. These are all good questions.

Evaluation v. Rating

A good way to understand the difference between evaluation and rating is to look at a typical article in Consumer Reports (CR). Here?s an example of a summary evaluation of a new car?s ?Driving Experience? (model name omitted):

The ride is steady and composed. It absorbs bumps smoothly but is firm. Road noise is reduced, but the tires still rumble noticeably and slap over pavement joints. Routine handling is responsive and fairly agile. Body lean is suppressed, and the quick steering has good weight and feedback. It displayed good grip and balance in emergency maneuvers, and its standard electronic stability control is well calibrated. The [car] posted a commendable speed in our avoidance maneuver. The smooth 166-hp, 2.4-liter, four-cylinder engine provides adequate acceleration. The five-speed automatic transmission is very smooth and responsive. We measured 21 mpg overall on regular fuel. The all-wheel-drive system sends power to the rear wheels when needed more quickly than in the previous [model]. The brakes provided short, straight stops on wet and dry pavement. Low-beam headlights reached only a fair distance, and high beams reached a good distance.

?Driving Experience? was one evaluation factor under the heading ?Road Test.? CR also evaluated ?Reliability?, ?Safety?, and ?Owner Satisfaction?, to name a few. According to the Web site, there were over 50 different tests and evaluations performed on the car. Presumably, this produced a mountain of data. However, the typical car buyer does not have the time to peruse the data, nor do they fully understand it. As such, CR established a 100-point scale and a set of predetermined criteria to translate test and evaluation results into scores on the scale. In addition, they partitioned the scale into quintiles and assigned an adjective to each (Poor, Fair, Good, Very Good, and Excellent). Using this rating method, the car described above received a score of 74 and an adjectival rating of ?Very Good.? In this case, CR used a combination of rating methods (numerical scoring and adjectival rating) to translate complex evaluation results into an easily consumable format for its readers.

But Teach, Why Wouldn?t you Rate Proposals?

First, it's not required. Besides that, the results of the evaluation may not be particularly complex. For example, let?s say I used price and performance risk as my evaluation factors in a source selection. Performance risk had two subfactors?past performance and experience. In the solicitation, I instructed offerors to submit a one-page write-up and customer point of contact for each of their relevant contracts. The evaluation of performance risk consisted of an assessment of the write-ups as well as interviews with the customer points of contact to validate the offeror?s claimed experience as well as to ascertain how well the offeror performed. The evaluators then wrote an evaluation of each offeror?s performance risk, documenting the relative strengths and weaknesses of each. Why would it be necessary to translate this information into a rating? How would this aid my decision-making? I?m not going to be faced with volumes of information.

Another reason I would avoid the use of ratings is when I was dealing with evaluators that didn?t understand them. In my experience, when ratings are used, ratings are all you get. I can recall receiving technical evaluations that had nothing more than the word ?Excellent? (when I used adjectival ratings) or ?95? (when I used a numerical rating). I wanted an evaluation and I got a rating.

How do you decide who is the better value if you don't rate the proposals?

The answer is the same way that you would if you did rate proposals?by performing a comparative assessment of proposals against all source selection criteria in the solicitation. A source selection authority (SSA) relies on ratings to make their source selection decision at their peril. See, for example, Si-Nor, Inc., B-282064, 25 May 1999, where the source selection authority based her decision to award to a higher-priced offeror on the fact that the offeror had a higher past performance rating. One of the reasons the protest was sustained was because the SSA did not describe the benefits associated with the additional costs, as required by FAR 15.308. ?Because they had a higher rating? will typically fail to meet this requirement.

So we shouldn?t use ratings?

Not necessarily. The point is that you have discretion to use or not use ratings. Most people don?t know why they use ratings other than the fact that it?s traditional where they work. The decision to use (or not use) ratings should result from thoughtful deliberation, not a successful copy and paste from your office mate?s old source selection plan. A wise man once said ?Tradition is the hobgoblin of mediocre minds.?

Don Mansfield

Some of you were confused when I classified the following statement as myth-information in the Federal Contracting Myths thread:

Offerors with no record of past performance must be rated neutral.

Let me explain where I was coming from.

In April of 1994, OFPP used a variation of the word neutral with the term "past performance" in a Federal Register notice soliciting comments on their proposed pilot program to increase the use of past performance information in source selections. The notice stated:

"New" Firms. One of the most frequently asked questions about using past performance information in source selections is, "How are new firms to be treated?" In OFPP's view, new firms should be neither rewarded nor penalized as a result of their lack of performance history. If, for example, past performance is to be rated on a scale of one to ten, a new firm should be given the average score of the other competing offerors. Unless the RFP contains a specific requirement for prior performance based on safety, health, national security, or mission essential considerations, agencies should "neutralize" the past performance factor and evaluate the merits of proposals received from new firms in accordance with other stated evaluation criteria. [59 FR 18168-02]

In November of 1994, the Federal Acquisition Streamlining Act (FASA) (Public Law 103-355) amended 41 USC 405 to include a new subsection (j) implementing the Government's policy of considering past performance in source selections. (j)(2) contains the following language:

In the case of an offeror with respect to which there is no information on past contract performance or with respect to which information on past contract performance is not available, the offeror may not be evaluated favorably or unfavorably on the factor of past contract performance.

The FAR Council attempted to "plain language" the statute when it came time to implementing the new policy. In a proposed rule implementing the past performance information policy, FAR 15.608(a)(2)(iii) contained the following statement:

Firms shall be allowed to compete for contracts even though they lack a history of relevant past performance. [59 FR 8108]

When the final rule came out in March 1995 (FAC 90-26), the proposed rule was changed to read as follows:

Firms lacking relevant past performance history shall receive a neutral evaluation for past performance.

The background statement of the FAC stated that the final rule "clarifies that firms lacking relevant performance history shall receive a neutral evaluation for past performance." (60 FR 16718-01) However, since there is no discussion of the comments received in response to the proposed rule, it is unclear why the proposed rule needed clarification.

Apparently, the FAR Council thought that the rule needed even further clarification and proposed the following definition of a neutral evaluation in the first proposed FAR Part 15 Rewrite:

Firms lacking relevant past performance history shall receive a neutral evaluation for past performance. A neutral evaluation means

any assessment that neither rewards nor penalizes firms without relevant performance history. [61 FR 4830]

However, this only muddied the waters. The background of the second proposed rule provides the following explanation:

Several public comments requested that a definition of "neutral'' past performance rating be included in the final rule. This proposed

rule provides only general guidelines for establishing a neutral rating, since what constitutes "neutral'' seems to change with the

circumstances of each individual source selection. However, suggestions from the general public for a more rigorous definition are solicited

and will be considered by the FAR Council in drafting the final rule. [62 FR 26639]

The second proposed rule also contained a valiant attempt to define a neutral past performance evaluation as follows:

Firms lacking any relevant past performance history shall receive a neutral evaluation for past performance. The evaluation

approach shall reflect the circumstances of each acquisition. A neutral evaluation is one that neither rewards nor penalizes offerors without

relevant performance history (41 U.S.C. 405). While a neutral evaluation will not affect an offeror's rating, it may affect the

offeror's ranking if a significant number of the other offerors participating in the acquisition have past performance ratings either above or below satisfactory.[62 FR 26639]

This language failed to clarify anything, so in the final rule the FAR Council said the heck with it, let's just parrot the statute:

Definition of neutral past performance evaluations. The proposed rules provided a definition of neutral past performance evaluations. Public comments recommended that we revise the definition and provide detailed instructions on how to apply neutral past performance ratings in any source selection. 41 U.S.C. 405(j)(2) requires offerors without a previous performance history, to be given a rating that neither rewards nor penalizes the offeror. We did not adopt the public comment recommendations, opting instead to revise the final rule to reflect the statutory language, so that the facts of the instant acquisition would be used in determining what rating scheme is appropriate. This alternative provides for flexible compliance to satisfy requirements of the statute. [62 FR 51224-01, FAC 97-02]

This final rule gave us the rule as it is stated now at FAR 15.305(a)(2)(iv):

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.

So the FAR Council took the language of the statute, attempted to clarify it by introducing the term "neutral past performance evaluation", tried again to clarify it by defining "neutral past performance evaluation", confused a lot of people, then gave up. "Neutral past performance" was removed from the FAR over 11 years ago after a brief and infamous appearance. Despite this fact, it remains popular in the federal contracting vernacular.

Don Mansfield

If the preconceived notions that our students are bringing to the classroom is any indication, there's a good deal of myth-information being spread regarding indefinite-delivery indefinite-quantity (IDIQ) contracts. The one belief that I want to focus on today deals with obligating the contract minimum upon award of an IDIQ contract.

You don't have to obligate the minimum when you award an IDIQ contract. You can wait until you issue an order to make obligations.

This belief usually stems from a fundamental misunderstanding of the difference between creating and obligation and recording an obligation. The difference is explained in Chapter 7 of the GAO Redbook (p. 7-8):

It is important to emphasize the relationship between the existence of an obligation and the act of recording.

Recording evidences the obligation but does not create it. If a given transaction is not sufficient to constitute a valid

obligation, recording it will not make it one. E.g., B-197274, Feb. 16, 1982 (?reservation and notification? letter held not

to constitute an obligation, act of recording notwithstanding, where letter did not impose legal liability on government

and subsequent formation of contract was within agency?s control). Conversely, failing to record a valid obligation

in no way diminishes its validity or affects the fiscal year to which it is properly chargeable. E.g., B-226782, Oct. 20,

1987 (letter of intent, executed in fiscal year 1985 and found to constitute a contract, obligated fiscal year 1985 funds,

notwithstanding agency?s failure to treat it as an obligation). See also 63 Comp. Gen. 525 (1984); 38 Comp. Gen. 81,

82?83 (1958).

[bold added].

When a contracting officer awards an IDIQ contract, she has obligated the Government to purchase the contract minimum. She has created an obligation. When that same contracting officer cites a long line of accounting (containing the appropriation citation) and a dollar amount on the award document, she has recorded an obligation (when she distributes the award document to her accounting office, they will record the obligation in the agency's books).

Let's say that the contracting officer awards the IDIQ contract, but does not record the amount of the Government's obligation on the award document. What has happened? An obligation has been created, but has not been recorded. Is there a problem with that? (Yes, go back and read the bolded sentence in the citation that I provided above). The problem is that the contracting officer has caused her agency to violate the ?recording statute,? 31 USCA ? 1501, which sets forth the criteria for recording an obligation as follows:

(a) An amount shall be recorded as an obligation of the United States Government only when supported

by documentary evidence of?

(1) a binding agreement between an agency and another person (including an agency) that is?

(A) in writing, in a way and form, and for a purpose authorized by law; and

(B.) executed before the end of the period of availability for obligation of the appropriation or fund used

for specific goods to be delivered, real property to be bought or leased, or work or service to be provided?..

In the second example I provided, there exists a binding document that meets the criteria of (1)(A) and (B.) (the IDIQ contract), but no obligation would have been recorded. The agency would have underrecorded its obligations. That's bad. Chapter 7 of the GAO Redbook (p. 7-6) states the following regarding under- and overrecording of obligations:

The overrecording and the underrecording of obligations are equally improper. Both practices make it impossible

to determine the precise status of the appropriation and can lead to other adverse consequences. Overrecording

(recording as obligations items that are not) is usually done to inflate obligated balances and reduce unobligated balances

of appropriations expiring at the end of a fiscal year. Underrecording (failing to record legitimate obligations)

may result in violating the Antideficiency Act. 31 U.S.C. ? 1341.

I always urge my students to take a course in Federal Appropriations Law at some time in their career--the sooner the better. Unlike Federal Acquisition Law, where the acquisition team is permitted to "assume if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority", there is very little flexibility when it comes to applying the rules Federal Appropriations Law.

Don Mansfield

First, I'd like to thank everyone that contributed to my thread seeking myth-information in federal contracting. I culled another 20 pieces to add to the seven that I was able to come up with. If you come across any or are able to think of any more, please add to the thread or send me a message.

Second, I'd like to comment on something that Retreadfed wrote in the aforementioned thread:

I presume Don's point in starting this discussion was to demonstrate the many points of ignorance (not stupidity) that exist in the procurement world.

While I hadn't thought about it, I like the distinction that Retreadfed made. Myth-information exists due to ignorance of the rules. If you want to read about stupidity, there's an excellent compilation of it in DoD's Encyclopedia of Ethical Failures (don't miss the 2008 update).

Now, back to the point of this entry. Vern Edwards contributed the following nugget to the misinformation thread:

During a source selection, anything that you say to one offeror you must say to all other offerors.

No doubt this belief is the result of overlawyering and/or taking the "better safe than sorry" approach to source selection. Let's take a look at what the FAR says concerning this subject. FAR 15.201(f) states:

General information about agency mission needs and future requirements may be disclosed at any time. After release of the solicitation, the contracting officer must be the focal point of any exchange with potential offerors. When specific information about a proposed acquisition that would be necessary for the preparation of proposals is disclosed to one or more potential offerors, that information must be made available to the public as soon as practicable, but no later than the next general release of information, in order to avoid creating an unfair competitive advantage. Information provided to a potential offeror in response to its request must not be disclosed if doing so would reveal the potential offeror?s confidential business strategy, and is protected under 3.104 or Subpart 24.2. When conducting a presolicitation or preproposal conference, materials distributed at the conference should be made available to all potential offerors, upon request.

[bold added].

As you can see, the scope of the information that must be shared with all offerors when it is shared with one offeror prior to receipt of proposals is much narrower than "anything that you say." However, it is common practice at some contracting activities to record every question received and answer provided regarding an RFP (no matter how mundane) in an amendment and issue to all prospective offerors (the better safe than sorry approach). While such an approach is compliant, it is not required and makes for long amendments and the excessive provision of information.

Regarding what can be said during discussions, FAR 15.306(d)(1) states:

Discussions are tailored to each offeror's proposal, and shall be conducted by the contracting officer with each offeror in the competitive range.

[italics added].

Tailored. This necessarily means that you are not required to discuss the same areas with each offeror. In Trident Sys., Inc., Comp. Gen. Dec. B-243101, the rule was stated as follows:

nsofar as Trident alleges the Navy did not hold equal discussions because the offerors were not asked the same questions, the only additional question Trident was asked concerned its relationship with its subcontractor; SPA was not asked this question because SPA did not propose to use a subcontractor. In any case, in order for discussions to be meaningful, contracting agencies must furnish information to all offerors in the competitive range as to the areas in which their proposals are believed to be deficient so that the offerors have a chance to revise their proposals to fully satisfy the agency requirements...In other words, since the number and type of proposal deficiencies will vary among offerors the agency should tailor the discussions for each offeror, based on the offerors' evaluated deficiencies.

Exchanging information with offerors involves thoughtful judgement and discretion. Unlike some other areas of contracting, it is not a mechanical exercise governed by a simple mandatory rule. Those who shy away from using their judgment and discretion (probably to avoid criticism) are always in search of mandatory rules (even if none exist) such as "During a source selection, anything that you say to one offeror you must say to all other offerors." This contributes to the persistence of myth-information. Don't be one of those people.

Don Mansfield

I read something that I found remarkable in the recently published GAO decision Master Lock Company, LLC, B-309982.2, June 24, 2008. Bob posted the decision on the Wifcon home page. The protester argued that the agency's evaluation of the awardee's past performance should have taken into account the fact that they had declined a delivery order under a different IDIQ contract. In response, the agency argued that a delivery order was not binding and the GAO agreed. Here's an excerpt:

"During the course of this protest, Master Lock also argued that the agency?s evaluation of Evergreen?s past performance was unreasonable. As discussed above, Evergreen declined to accept order No. 2745, which was issued under a different contract. DLA acknowledges that it did not consider these events in its evaluation of Evergreen?s past performance. AR at 8. The agency contends, however, that it was not required to do so because the submission of a quote by a vendor under an ID/IQ contract does not result in a binding obligation. Thus, the agency argues, because Evergreen did not accept the order, there was no contract performance for the agency to evaluate.

The agency
is correct
that neither the submission of a quote by a vendor
nor the issuance of an order
by an agency results in a binding contractual obligation. Rather, the government?s order represents an offer that the vendor may accept either through performance or by a formal acceptance document. M. Braun, Inc., B-298935.2, May 21, 2007, 2007 CPD ? 96 at 3."

[italics added].

However, the case that the GAO cited as support for their position did not deal with a task or delivery order under an IDIQ contract--it was a purchase order using simplified acquisition procedures. There's a big difference. FAR 16.506 requires the inclusion of the clauses at FAR 52.216-18, Ordering, 52.216-19, Order Limitations, and 52.216-22, Indefinite Quantity, in an IDIQ contract. Here's what the Indefinite Quantity clause says regarding the contractor's obligation to perform:

"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.'"

[bold added].

Now, what in this required FAR clause would give the contractor the right to decline an order, provided that the order complies with the Ordering and Order Limitations clauses? I don?t see it.

The decision includes the following statements further on in an attempt to clarify:

"Although the work required under any task or delivery order will only become a binding obligation on the parties if the vendor accepts the order, the underlying ID/IQ contract may itself have obligations. For example, a contract may require a vendor to accept orders placed by the agency within certain parameters.?

This is conceptually incorrect. IDIQ contracts do require (not ?may?) the contractor to accept orders placed by the agency within certain parameters (stated in the Ordering and Order Limitations clauses). The only instance where a contractor?s acceptance of a task or delivery order would matter would be if the agency?s order was not within the stated parameters in the Ordering and Order Limitations clauses. Furthermore, an arrangement where the Government was required to order a minimum quantity and the contractor would not be required to perform would arguably lack consideration and, thus, not be an enforceable contract.

The main problem with this decision is that it characterizes the exception to the rule (i.e., situations where the contractor may decline a task or delivery order under an IDIQ contract) as the rule itself. It also fails to recognize the distinction between purchase orders made in the open market and task and delivery orders under IDIQ contracts.

Don Mansfield
"You can't be distracted by the noise of misinformation."
-James Daly

In my career as a contracting professional and now an educator, I have come to appreciate the growing body of misinformation in Federal contracting. Contracting misinformation is pervasive. You can see it in the popular press, periodicals dedicated to the contracting profession, in posts at the Wifcon forum, internal policy memoranda at a Government agency, etc. As I'm writing this, somewhere a senior contracting professional is imparting misinformation on a newbie, and the newbie is believing him.

A certain amount of misinformation is understandable in Federal contracting, given the volumes of regulations and case law that govern Federal acquisition. I can accept that (it keeps me employed). However, certain contracting misinformation seems to resist any efforts to eradicate it. This class of misinformation has its origins in the operational contracting offices of the Federal Government and is usually created in the form of rules that have no basis in law or regulation, but sound like they do (especially when spoken by senior contracting professionals, legal counsel, or contract policy office personnel). It is this class of misinformation that is most aptly described as contracting "myth-information."

As a service to my profession, I will attempt to bust some of the more popular contracting myth-information that I have heard. I've created my own list of myth-information and am collecting more from participants in the Wifcon discussion forum (thank you to those that have contributed). I'll try to debunk at least one myth per blog entry. If you think you have heard some contracting myth-information and would like to share with others, please contact me and I will include it in the blog. Think of the blog as a clearinghouse for busted contracting myth-information.