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SBA's New Rule
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These sweeping changes are aimed at streamlining procurement processes.
The SBA just issued a new, and highly anticipated, rule implementing sweeping changes largely aimed at streamlining its procurement processes – i.e., a win for government efficiency! While the rule is comprehensive and includes a variety of relatively minor amendments to the SBA’s pre-existing regulatory scheme, there are a few highlights that contractors should review immediately to understand their benefits.
Awardees on Unrestricted MACs Must Now Recertify for All Set-Aside Orders
An initial highlight of the SBA’s new rule surrounds changes to the recertification requirements of firms’ size and socioeconomic status when specific set-aside orders are issued under an unrestricted multiple award contract (“MAC”). Previously, the SBA’s regulations in this regard had led to a great deal of uncertainty as contracting officers had discretion on whether to require MAC awardees to recertify their status prior to award of a set-aside order – i.e., such awardees were left to roll the dice if they outgrew their size status during the life of their MAC. The SBA’s new rule alleviates this uncertainty by simply mandating that awardees of unrestricted MACs recertify their size and socioeconomic status as of the time they submit an offer on a set-aside order. Thus, this modification puts contractors on clear notice of the requirements they need to meet when pursuing set-aside orders before investing valuable time and resources in pursuing the same.
Merging the 8(a) Mentor-Protégé Program and the all Small Mentor-Protégé Program
Since the SBA initiated its All-Small Mentor-Protégé Program in 2016, many commentators and contractors alike have been left wondering why the SBA continued to maintain a separate 8(a) Mentor-Protégé Program considering their underlying purpose and rules were nearly identical. However, at last recognizing the lack of justification for maintaining these programs separately, the SBA’s new rule will be combining them to “to eliminate confusion and remove unnecessary duplication of functions within SBA”. Thus, 8(a) firms may now participate in the All-Small-Mentor-Protégé Program thereby putting all firms, seeking a mentor-protégé arrangement, into a single program and under a single set of rules.
Discarding the “3-in-2” Rule
Another topic of confusion among contractors, under the SBA’s pre-existing regulations, was the necessity of the SBA’s rule that joint ventures may only be awarded three contracts during their two-year lifespan. Such confusion surrounded, not only what exactly the significance of “three” contracts was but also, the ease with which many savvy joint ventures could simply circumvent this limitation. Specifically, many savvy contractors would simply form additional joint ventures to pursue up to six, nine, or more awards. Again, recognizing the lack of justification for such inefficiency, the SBA’s new rule streamlines the once aptly named “rule of 3-in-2” to discard with any limitation on the number of awards that joint venture can pursue during its two year lifespan – i.e., the SBA has created a much simpler “rule of 2”.
The SBA’s comprehensive new rule had the goal of streamlining the procurement process and it does just that. Small businesses can now look to a single comprehensive program to pursue mentor protégé arrangements, pursue an unlimited number of contracts through a joint venture, and pursue set-aside orders on a MAC with greater certainty on the requirements they will have to meet. In addition to these key highlights, in the coming weeks and months, the SBA is expected to begin rolling out a series of guidance materials that are expected further clarify many aspects of this new rule.
See the Latest GSA UpdatesOctober 5, 2020October 2, 2020August 29, 2019May 8, 2019
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In many industries, small business status under SBA’s government contracting rules depends on a company’s average annual receipts. But if a company is a member of a joint venture, it can be confusing figuring out which joint venture receipts count toward the company’s small business size.
Fortunately, in its recent new rule, SBA has provided two important clarifications. Let’s take a look.
“Proportionate Share” Means Workshare
Currently, the applicable regulation says, “[f]or size purposes, a concern must include in its receipts its proportionate share of joint venture receipts.” Unfortunately, given the way SBA’s joint venture regulations are written, the term “proportionate share” can be interpreted in two reasonable ways.
“Proportionate share” might mean proportionate to each member’s ownership interest in the joint venture. A joint venture operating under the SBA’s rules must be owned at least 51% by the qualifying small business or businesses. (It’s very common, though not required, for a qualifying small business to own 51% of the joint venture and its partner to own 49%.)
Alternatively, “proportionate share” might mean proportionate to each member’s work share. The SBA rules require that the qualifying small business or businesses perform at least 40% of the joint venture’s work. Further, profits are split according to workshare, not ownership. This means that if a small business owns 51% of a joint venture, but performs 40% of the joint venture’s work, the small business receives 40% of the profits, not 51%.
In the new rule, the SBA clarifies that members should calculate their proportionate share by workshare, not by ownership. The new rule states:
For the calculation of receipts, the appropriate proportionate share is the same percentage of receipts or employees as the joint venture partner’s percentage share of the work performed by the joint venture.
Many small businesses own 51% of their joint venture entities, but perform 40% of the joint venture’s work, or something very close to 40%. For them, the SBA’s clarification is especially welcome news because they will be “tagged” with fewer receipts for small business size purposes than would be the case if “proportionate share” referred to ownership.
Subcontractor Receipts are Allocated by Workshare, Too
Some joint venturers have also been confused over what happens when the joint venture has subcontractors. For instance, can subcontracted receipts be excluded completely? And, assuming a total exclusion isn’t allowed, if one of the joint venture members is responsible for overseeing a specific subcontract, are those receipts attributed only to that joint venture member?
In its commentary accompanying the new rule, SBA explains, “[a]s with all contracts, SBA does not exclude revenues generated by subcontractors from the revenues deemed to be received by the prime contractor.” Therefore, “100 percent of the revenues will be apportioned to the joint venture partners, regardless of how much work is performed by other subcontractors.”
SBA then says:
SBA does not believe that it matters which partner to the joint venture the subcontract flows through. Of the [appropriate] percent of the total contract that the joint venture partners must perform, SBA will look at how much is performed by each partner. That is the percentage of total revenues that will be attributed to each partner. This rule makes clear that revenues will be attributed to the joint venture in the same percentage as that of the work performed by each partner.
The bottom line is that subcontractor revenues cannot be excluded, and they’ll be apportioned to the joint venture members in accordance with work share, regardless of which joint venture member oversees a particular subcontract. (My personal preference, by the way, usually is to award subcontracts through the joint venture entity itself, not through one of the members–but that’s a discussion for another day.)
Anyone Want an Example?
Now’s the time when I ordinarily might try to invent an example, probably involving some ridiculously-named fake contractors and perhaps a random ’80s music reference or two. (Do you realize that U2’s New Years Day never made the Billboard Top 40? A travesty!) But the fine folks at SBA have beaten me to the punch: the new rule already has an example, and it’s a pretty good one.
Here it is:
Joint Venture AB is awarded a contract for $10M. The joint venture will perform 50% of the work, with A performing $2M (40% of the 50%, or 20% of the total value of the contract) and B performing $3M (60% of the 50% or 30% of the total value of the contract). Since A will perform 40% of the work done by the joint venture, its share of the revenues for the entire contract is 40%, which means that the receipts from the contract awarded to Joint Venture AB that must be included in A’s receipts for size purposes are $4M. A must add $4M to its receipts for size purposes, unless its receipts already account for the $4M in transactions between A and Joint Venture AB.
SBA’s not going to win any style points for naming its fictional companies, but the example effectively shows how “proportionate share” is calculated and how subcontractor receipts are treated.
Company A will perform 40% of the joint venture’s work, so it is responsible for 40% of the joint venture’s receipts. Presumably, Company A owns at least 51% of the joint venture, so Company A benefits from “proportionate share” not being determined by ownership.
However, although Company A only receives $2 million, it must account for $4 million in receipts. This is because subcontractor receipts cannot be excluded, so the $5 million in subcontracts must be allocated to the partners by work share. Because Company A is performing 40% of the joint venture’s work, 40% of the subcontracted receipts are allocated to Company A.
A Few Final Thoughts
I’ve got a few quibbles with SBA’s new final rule, but by and large I think SBA has done an outstanding job of listening to the broader small business community and responding to problems contractors have faced operating under SBA’s rules. The new rule on joint venture receipts provides some important clarifications, and that’s always a good thing for contractors.
SBA’s new rule takes effect November 16, 2020.
Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919.
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Will 2021 NDAA Procurement Reforms Lead to More Small Business Contracts for DOD?
The subject of acquisition reform has been a leading focus for the entire government in recent years, but has been an explicit priority for defense agencies of late. As the house armed services subcommittee begins their work on the 2021 defense authorization bill next week, may are wondering if the reform started in 2018, that paved the way for small business contracts within the DoD will continue. The National Defense Authorization Act (NDAA) for FY 2018 simplified acquisitions between the range of $10,000 and $250,000. This reform was significant because the broader dollar range greatly benefited the viability of small business contracts and incentivized defense agencies to further utilize small business contracts.
Although defense agencies have been meeting their small business thresholds and the small business delivered products and services have been thoroughly proven to contracting officers, this policy change further incentivized agencies to utilize these contracts. This was encouraging news because small business contracting has been falling among defense agencies since 2010. To illustrate, a recent GAO report analyzing DOD contract awards between Fiscal Years 2010-2016 found that “the Department of Defense… obligated over $230 billion to minority- and women-owned businesses. GAO’s analysis of federal procurement data found that DOD’s obligations to these businesses that is 12% less than in FY 2010, overall spending by DOD decreased 27% during the same period.” This shows that although overall contract spending has risen, spending on women- and minority-owned small businesses has actually fallen.
As stated by Angela Styles, former Office of Federal Procurement Policy administrator, the incentive for defense agencies to use small business contracts is not eliminated once contracting thresholds are met. Styles stated, “I think [contracting officers] understand the importance of small businesses to the economy. They want to make those purchases. They get good products and services out of them. And, maybe, often times they are more responsive than some of the large businesses as well.”
Although the DOD has many options for increasing small business procurements, one of the most underutilized vehicles is NITAAC’s Chief Information Officer – Solutions and Partners 3, Small Business (CIO-SP3 SB). This Governmentwide Acquisition Contract (GWAC) makes vetting and competing small business awards easy. Through CIO-SP3 SB, defense agencies can grow their small business goals. With a $20 billion contract ceiling spanning five socioeconomic categories, including Small Business (SB), Women-Owned Small Business (WOSB), 8(a), Service Disabled Veteran Owned Small Business (SDVOSB), and Historically Underutilized Business Zone (HUBZone), there are no better options for soliciting small business products and solutions.
With 10 task areas covering virtually every defense agency need, defense agencies should look to small businesses for innovative solutions that are capable of meeting upcoming modernization and acquisition reform priorities, such as software licensing and cloud computing. Even better, CIO-SP3 SB customers benefit from the full weight of NITAAC’s backing, which includes Fair Opportunity competition, no protests for awards under $25 million for the DOD, and unparalleled customer support.
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“How do you do simplified acquisition?” is a common question I hear from acquisition personnel that are more familiar with using FAR part 15 procedures to solicit offers and award contracts. The question presupposes that there is a regulated set of procedures that one must follow—similar to what is prescribed in FAR part 15, agency FAR supplements to FAR part 15, agency guidebooks on source selection, and the decisions of the Government Accountability Office (GAO) and Court of Federal Claims (COFC). Fortunately, that is not the case. Rather, FAR part 13 (Simplified Acquisition Procedures (SAP)) expressly states that certain procedures contained in FAR part 15 (Contracting by Negotiation) do not apply and requires contracting officers to “use innovative approaches, to the maximum extent practicable, in awarding contracts using simplified acquisition procedures.” FAR 13.003(h)(4). An underlying message in FAR part 13 is to not bring your FAR part 15 baggage with you. The following list presents thirteen reasons why SAP is simpler than the competitive negotiation procedures of FAR part 15.
Last week, I posted an article on the Wifcon Forum in which Dr. Mark J. Lewis, the Director of Defense Research and Engineering for Modernization provided some thoughts about defense projects. The article was entitled Risk Aversion Impedes Hypersonics Development. Within the article was a 44- minute video that includes, in part, his discussion of the race for hypersonic weapons systems. I listened to the video and found it interesting. The article itself started with this quote:Quote
Speeding ahead with the development of hypersonic weapons, both offensive and defensive, will require the Defense Department to look back to the 1960s — a time when it was far less risk-averse than it is now . . .
* * * * *
We need to be less risk-averse. And that doesn't mean we seek to maximize risk. But it also means we're not afraid to take risks, or we're not afraid to fail, as long as they're what I term noble failures . . .
I lived through the 1960s and I'm in no hurry to go back there. What did Dr. Lewis mean? In so many words he was saying, being the fallible humans that we are, expect failures as we push the current envelope of technology. It's hard moving forward into something new. He mentioned two types of failures, the first one he called a noble failure. Think about it. We do our homework, test, and something unexpected happens. From that failure, learn from it, and move forward with the program. The second type of failure is one that is caused by a stupid mistake and you don't learn much, if anything, from it. He also noted that since we must expect failures, we must have the resources to test, correct, and move the system forward.
As an example of having available resources for testing, he mentioned the X-15 research vehicle that had 199 test flights in the 1950s and 1960s. The X-15 was dropped from a B-52, its small rocket engine was ignited for a little over a minute so it could reach space. It would then glide to earth and land on its skis. He contrasted that to DoD's X-51 program that had 4 test flights planned from 2010 through 2013. In short, looking back to the 1960s means that you learn from testing if you plan for enough tests. I agree.
I took Dr. Lewis's advice and went back to the 1960s and looked on my own. In truth, I've been looking at the 1960s for some time. Here is an excerpt from Dr. Lewis's article that caught my attention. About hypersonic weapons, he said.Quote
The speed, maneuverability, and trajectories of hypersonic weapons will give whomever masters them first an advantage, Lewis said. A hypersonic weapon traveling at Mach 5, faster than around 3,800 miles per hour, he said, presents challenges to adversaries.
* * * * *
But developing and delivering a hypersonic cruise missile or a hypersonic boost/glide system will take some time, he said. He said he expects the department to be able to deliver whatever systems are determined to be most useful "at scale" sometime around the mid-2020s.
If DoD and Dr. Lewis believe hypersonic weapons are important to develop again and field again, then do it with adequate testing and resources. But what if we already tested such a system in a real operational airplane, in less than 5 years, over 60 years ago. Here is an excerpt from Clarence L "Kelly" Johnson's book, KELLEY, More than My Share of it All. He was writing about the Air Force's YF-12A, first flown in 1963, which is a derivative of the CIA's A-12, first flown in 1962. The YF-12A was being tested to drop missiles from its bomb-bay doors. Now compare the numbers in the quote below to those in Dr. Lewis's above quote.Quote
Launched from the airplane at well above Mach 3 [about 2,100 mph], and accelerating on its own at another Mach 4, the missile was speeding hypersonically at Mach 7 at the peak of its course. We fired at target drones at altitudes ranging from sea level to more than 100,000 feet, and hit targets more than 140 miles away. We proved we could hit targets over ocean or over land.
* * * * *
Our success rate was better than 90 percent hits.
Although the YF-12A was sending hypersonic missiles at targets successfully in 1963, we now are hoping to do it in 2025. That's over 60 years after we first did it. What happened? Well, the YF-12A program was killed by Robert Strange McNamara, then Secretary of Defense, who is infamous for his efforts in Southeast Asia. Accoding to Kelley Johnson, McNamara said:Quote
. . . no need existed for such a high-performance airplane, that our potential enemies did not have anything comparable, and that an airplane couldn't hit a target going that fast anyway.
McNamara was working in the moment and had no vision of the future. Although Congress appropriated money for the YF-12A program for three successive years, McNamara refused to use our technological advantage with hypersonic systems and move forward with it. Before the program was killed, there were 3 YF-12A's built but only one exists today at the National Museum of the United States Air Force in Dayton, Ohio. Here it is.
Now, let me take you and Dr. Lewis back to the 1960s and design, develop, and field real airplanes and beat his 5-year window. Let's start at the beginning of 1960 when the A-12 contract was signed by Kelly Johnson and the CIA. In April 1962, 2 1/2 years later, the A-12 was on its first flight. The YF-12A was an A-12 derivative that the Air Force and Kelly Johnson converted to an interceptor. It's first flight was in August 1963. The SR-71, another A-12 derivative, built by Kelly Johnson and the Air Force, had its first flight in November 1964--less than 5 years after the award of the A-12 contract. Let's slip back into the mid 1950s for a moment and the U-2. Kelly Johnson built the U-2 in 8 months. You've caught on--Kelly Johnson was an absolute aviation genius and his U-2, A-12, YF-12A, and SR-71 were incredible operational airplanes. The A-12, YF-12A, and SR-71 were all Mach 3.2 airplanes. They didn't reach Mach 3.2 with afterburners for a few minutes. They cruised at that speed for hours. By the way, the U-2 is still flying and Lockheed is still selling it--about 65 years after its first flight.
If Dr. Lewis wants to go back to the 1960s for ideas on how to field real airpalnes quickly, he's going to have to go back and resurrect Kelly Johnson.
Let's take one last brief trip back to the 1960s. How about July 20, 1969 as the United States was landing humans on the Moon. A few years later, that program was ended as a result of budget cuts. After the Moon landing, I went to my Summer job in the factory that I worked at during my college years. I expected to see happy faces and hear loud talk about our country's great achievement. As I approached my workspace on the factory floor, I heard grumbling from the workers. It was depressing, I was ready for Mars and theses guys were still dreaming about P-38s--which, of course, Kelly Johnson helped to build. All I heard from the workers was something like: we did it, let's quit.
I agree with much of what Dr. Lewis says but he stated the obvious. However, more is needed. We built technology to down enemy aircraft with hypersonic missiles in 1963 but that achievement was squandered by a politiical appointee who couldn't see past his green eyeshades when he terminated the YF-12A. Now, nearly 60 years later, we're competing with China and Russia in a race to build hypersonic weapons. Did we take a technology break so the rest of Earth could catch-up?
We landed humans on the moon in 1969, politicians terminated the program to save money, and we are now among several nations hoping to land on the moon--50 years after the United States did it before. Did we take a success break?
If we achieve something truly remarkable and important this year, how do we know our politicians and political appointees will recognize its importance and build on the achievement. Or, will they decide that we did it, let's quit.
The CARES Act and FFCRA provide multiple options of economic relief for government contractors. They also provide multiple opportunities for confusion and errors. The number one takeaway: NO DOUBLE DIPPING!…
The post PPP Loans for Government Contractors – No Double Dipping appeared first on Left Brain Professionals Inc.
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In the 2019 National Defense Authorization Act (NDAA), Congress placed serious limitations on the Government’s use of Lowest Price, Technically Acceptable (LPTA) procurements. As a result, we should be seeing the Government issue more RFPs in which technology and innovation outweigh price. In these instances, contractors can seek a higher price but are expected to show substantial technological advantages. Two recent protests cases out of GAO illustrate the principles of technical proposal evaluation when technical factors are more important than price, and demonstrate the potential cost/technical trade-offs under these circumstances.
Read the full article here.
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ASHBURN, Virginia (September 19, 2018) The National Contract Management Association (NCMA)
President Charlie Williams Announces the New NCMA Chief Executive Officer
On behalf of the National Contract Management Association (NCMA) Board of Directors, I am pleased to announce the appointment of Kraig Conrad, CAE, CTP, as the new NCMA Chief Executive Officer. Kraig will formally take his position on November 1, 2018. Kraig joins NCMA with 20 years of association leadership experience. He most recently served as Chief Executive Officer of the Professional Risk Managers’ International Association (PRMIA), where he guided the PRMIA Board of Directors and its global network of more than 50,000 risk professionals to craft an enhanced vision for the group that includes a long-range strategic plan; new advocacy, certification, and training efforts; promoting the PRMIA brand; and enhancing membership benefits.
Prior to PRMIA, he held many roles at the National Investor Relations Institute, including Acting Co-Chief Executive Office and Vice President for Programs and Development. Kraig has also served as Research Lead for Strategy Practice at Corporate Executive Board, Director of Corporate Finance and Risk Management and Director of Strategic Alliances at the Association for Financial Professionals. He started his career as a Financial Analyst at Credit Suisse.
Kraig earned a Bachelor of Arts in Economics from the University of Southern California and a Master of Business Administration from the University of Illinois at Chicago. He is a Certified Association Executive and member of the American Society of Association Executives, and a Certified Treasury Professional and member of the Association for Financial Professionals.
“We are excited to have Kraig join our team. Kraig has demonstrated time and time again exemplary leadership skills and thoughtful approaches to the business of association management,” says NCMA President Charlie Williams. “We are confident that Kraig is the right person at the right time for NCMA as we continue the NCMA journey that was begun over 59 years ago. As our new CEO, Kraig’s association leadership skills will be critical to the Board of Directors as it charts the association’s strategic path forward and seeks to further elevate the association’s relevance to the profession it serves.”
The selection of Kraig concludes a national search supported by Staffing Advisors, a Washington, DC-based executive search firm. Kraig shares the NCMA dedication to professional growth and the educational advancement of acquisition and contracting professionals worldwide. Please join us in congratulating Kraig as we welcome him to the organization.
Founded in 1959, the National Contract Management Association (NCMA) is the world's leading professional resource for those in the field of contract management. The organization, which has over 18,000 members, is dedicated to the professional growth and educational advancement of procurement and acquisition personnel worldwide. NCMA strives to serve and inform the profession it represents and to offer opportunities for the open exchange of ideas in neutral forums. For more information on the association, please visit www.ncmahq.org.
Contact: Amanda Gillespie, Marketing & Communications Director firstname.lastname@example.org (571) 382-1127
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In the 1973 futuristic mystery thriller Soylent Green there’s an exchange between Detective Thorn (Charlton Heston) and Hatcher (Brock Peters):
Det. Thorn: Ocean's dying, plankton's dying . . . it's people. Soylent Green is made out of people. They're making our food out of people. Next thing they'll be breeding us like cattle for food. You've gotta tell them. You've gotta tell them!
Hatcher: I promise, Tiger. I promise. I'll tell the Exchange.
Det. Thorn: You tell everybody. Listen to me, Hatcher. You've gotta tell them! Soylent Green is people! We've gotta stop them somehow!
Acquisition Reform is like Soylent Green, it’s people. I don’t mean the Congresscritters, like Representative Thornberry and Senator McCain, and their Committees. I don’t mean the Administrator of the Office of Federal Procurement Policy, whoever he or she may turn out to be. I don’t mean the acquisition and procurement policy wonks in the Pentagon and elsewhere.
This past week (i.e., 14 – 20 May 2017) was a big week for the professional acquisition reformers:
The Advisory Panel on Streamlining and Codifying Acquisition Regulations issued the “Section 809 Panel Interim Report” (May 2017). Read the 60 page report, and formulate your own opinion if it will fix the problems in Government acquisition. Frankly, I think it will take more than getting rid of the $1 coin requirement, but I could be wrong.
Representative William McClellan "Mac" Thornberry introduced H.R. 2511 “To amend Title 10, United States Code, to streamline the acquisition system, invest early in acquisition programs, improve the acquisition workforce, and improve transparency in the acquisition system.” The short title on that would be ‘‘Defense Acquisition Streamlining and Transparency Act’’. (sic) Read the 80 page resolution, and formulate your own opinion if it will fix the problems in Government acquisition. [If we have Representative Thornberry, can Senator McCain be far behind? (Or, is that FAR behind?)]
A (moderately) reliable source has told me that the Department of Defense will be leaving Better Buying Power behind, now that Mssrs. Carter and Kendall are gone. But, wait, acquisition reform has not been abandoned. Apparently, it will go on, but now as “Continued Acquisition Reform.” Presumably that will be abbreviated as “CAR.” Continued Acquisition Reform should not be confused with Continuous Acquisition Reform nor Continued Acquisition Reform, nor Continuous Process Improvement, for that matter, those would all be bygone days.
The professional acquisition reformers have time and again passed legislation and issued regulations to “fix” the acquisition process. This fiscal year (2017) Title VIII (i.e., Acquisition Policy, Acquisition Management, and Related Matters) of the National Defense Authorization Act (NDAA) had 88 sections. The year before, 77 items. And, yet, Representative Thornberry and Senator McCain believe there is a need for a lot more acquisition reform legislation this year. Title VIII has included over 500 sections over the last ten years, but we still need more. What we have at issue here is what is referred to as the Law of the Instrument. Although he was not the first to recognize the Law, Abraham Maslow is probably the one best remembered for articulating it, "I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail." For those of us on the receiving end of the Congressional output that would be, “I suppose it is tempting, if the only tool you have is a legislation, to treat everything as if it were a bill." I suspect, although I cannot be positive, that most, if not all, of the folks doing the legislating have never had to use the Federal Acquisition Regulation (FAR) to buy anything. If they had, they would not be nearly so cavalier in tossing around statements about how bad the acquisition process is, and how more legislation is the answer.
Will such legislation solve the acquisition problem? According to the Honorable Frank Kendall the answer is a resounding “NO.”Quote
Frank Kendall, then undersecretary of defense for acquisition, technology and logistics (USD(AT&L)), condemned, or “slammed,” or “blasted,” such legislation.
Frank Kendall, who has served as the Pentagon's top weapons buyer since October 2011, blasted Congress's acquisition reform efforts, which he said almost inevitably create more bureaucracy and regulation.
Kendall called legislative action “an imperfect tool to improve acquisition results.”
“It is not a good instrument to achieve the results that I think the Hill is after, but they keep trying,” he said. “To be honest, I believe that as often as not, what they do does not help. In some cases, it has the opposite effect.”
Bloomberg Federal Contracts Report, “Outgoing DOD Weapons Buyer Slams Congress’ Acquisition
But, in all fairness, it’s not just them. Since we last had a reissuance of the FAR in March 2005, the FAR Council has brought us 95 Federal Acquisition Circulars (FACs) to update and expand the FAR. Since we last has a reissuance of the Defense Federal Acquisition Regulation Supplement (DFARS) in January 2008, the Defense Acquisition Regulations Council has brought us 211 Defense FAR Supplement Publication Notices (DPNs). With all of that, there are still dozens of open FAR and DFARS cases yet to be heaped on our plate. Although legislation may have been a major root cause of much that change activity, we can probably offer some of our “thanks” to the President, OMB, OFPP, GAO, Boards of Contract Appeals and Courts. Admittedly, now and again, a good idea actually gets slipped into the regulations. [Note: The number of FACs and DPNs issued in 2017 was artificially suppressed as a result of Executive Order 13771 – Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs. The two councils (i.e., FAR Council, Defense Acquisition Regulations Council (DAR Council) and the Civilian Agency Acquisition Council (CAA Council)) withheld publication of a large number of cases while policies and procedures were “sorted out.”]
[Note: Refer to Augustine’s Laws, Law Number XLIX: Regulations grow at the same rate as weeds.]
And, if that were not enough, we have institutional acquisition reform (e.g., policy letters, memoranda, directives, instructions, guidebooks, handbooks, manuals). Everyone seems to want to get into the act in one way or another. It is interesting to note, however, that the “perpetrators” of this institutional acquisition reform do not see it in the same light as acquisition reform legislation.
But, I recognize the lesson that King Canute was trying to teach when, in the apocryphal anecdote, he had his throne taken to the sea and ordered the tides not to come in. They did anyway. Legislators will legislate, it’s what they do. Regulators will regulate, it’s what they do. Policy makers will policymake, it’s what they do. None of them will willingly give up their rice bowls.
Let’s get back to Soylent Green.Quote
“Acquisition improvement is going to have to come from within. It is not going to be engineered by Hill staffers writing laws for us,” Kendall said. “It's going to be done by people in the trenches every day, dealing with industry, trying to get incentives right, trying to get the performance right, trying to set up business deals and enforce them, set reasonable requirements in our contracts.”
Bloomberg Federal Contracts Report, “Outgoing DOD Weapons Buyer Slams Congress’ Acquisition Fixes,” Andrew Clevenger, January 17, 2017
Better Buying Power (BBP)? The Honorable Mssrs. Carter and Kendall were responsible for BBBP, in all its iterations. Did that rise up from the trenches? Or, was it handed (or pushed) down from above? Isn’t this a bit like the pot calling the kettle black? If you will permit the adding of a single letter to a line of Hamlet by William Shakespeare, "The laddy doth protest too much, methinks."
[Note: Refer to Augustine’s Laws, Law Number L: The average regulation has a life span one-fifth as long as a chimpanzee's and one-tenth as long as a human's, but four times as long as the official's who created it.]
Well, whichever way you look at it (i.e., upside, downside, sidewise) it is all more work for the acquisition professionals that must do the daily work of buying supplies and services for the Government. If you want to have an idea of how all of this acquisition reform weighs us down, then take a look at William Blake’s illustration “Christian Reading in His Book” for John Bunyan’s The Pilgrim's Progress. It will depend on how many pixels the image you find has, but it looks to me that he is reading the FAR.
Who are the Soylent Green? Not the policymakers, but the people in the trenches, doing the hard work of acquisition on a daily basis, day in and day out, week in and week out, month in and month out, year in and year out. The contract specialist, contract negotiator, contract administrator, cost or price analyst, purchasing agent or procurement analyst just trying to get the job done. These are, for the most, part the unsung heroes and heroines of acquisition reform. These are the ones who, through innovation and personal initiative reform that acquisition process, one acquisition at a time. And, if we are lucky, or clever, are able to pass successes along to others.
As acquisition professionals, we must pass on our successes, and failures, to others, so that they may join in the fruits of success, and avoid the pitfalls of failure. You cannot count on “Lessons Learned,” alone. How often do lessons learned go unread and unlearned? You cannot count on “Best Practices,” alone. How often do best practices, go unread and unpracticed? Share with others. Share quickly. Share often. Share wherever you can.
A final thought.Quote
So what is to be done? By and large the answer to that question is well understood—in fact, many friends of mine such as former Deputy Secretary of Defense David Packard; the head of the Skunk Works Kelly Johnson; Air Force General Bennie Schriever; Admiral Wayne Meyer and Army General Bob Baer, among others, were providing the answer decades ago. What is required is simply Management 101. That is, decide what is needed; create a plan to provide it, including assigning authority and responsibility; supply commensurate resources in the form of people, money, technology, time and infrastructure; provide qualified leadership; execute the plan; and monitor results and strenuously enforce accountability. Ironically, little of this requires legislation—but it does require massive amounts of will . . . from all levels of government. Unfortunately, many of the problems are cultural—and it is difficult to legislate culture. But there is much that could be done.
Views from the Honorable Norman R. Augustine
The Acquisition Conundrum
DEFENSE ACQUISITION REFORM: WHERE DO WE GO FROM HERE? A Compendium of Views by Leading Experts, STAFF REPORT PERMANENT SUBCOMMITTEE ON INVESTIGATIONS UNITED STATES SENATE (October 2, 2014)
The absolute final thought. I’m sorry, I can’t help myself. I don’t care about King Canute: Don’t legislate. Don’t regulate. Just leave us alone to do our work as best we can.
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The long-standing principle that the federal government had the same implied duty of good faith and fair dealing as any commercial buyer was put in jeopardy by a 2010 decision of the U.S. Court of Appeals for the Federal Circuit, Precision Pine & Timber, Inc. v. U.S., 596 F.3d 817 (Fed. Cir. 2010). There a panel of the court adopted a narrow rule seemingly limiting application of the principle to situations where a government action was “specifically targeted” at the contractor or had the effect of taking away one of the benefits that had been promised to the contractor. Although the decision concerned a timber sales contract not a procurement contract, when I wrote it up in the May 2010 Nash & Cibinic Report (24 N&CR ¶ 22), I expressed the fear that the reasoning would be subsequently applied to procurement contracts.
My fear was realized in a construction contract case, Metcalf Construction Co. v. U. S., 102 Fed. Cl. 334 (2011). In that decision, the judge described eggregious conduct on the part of the government officials that would have been held to be a breach of the implied duty of good faith and fair dealing under many earlier cases. However, the judge held that under the Precision Pine standard, the contractor had not proved that the actions were specifically targeted at the contractor. In the February 2012 Nash & Cibinic Report (26 N&CR ¶ 9), I criticized this decision but stated that I believed that even if the decision was affirmed on appeal, most contracting officers would not take this as a signal that the proper way to administer contracts was to abuse the contractor.
Fortunately, a panel of the Federal Circuit has reversed the decision, Metcalf Construction Co. v. U. S., 2014 WL 519596, 2014 U.S. App. LEXIS 2515 (Fed. Cir. Feb. 11, 2014). The court held that the lower court had read Precision Pine too narrowly and that “specific targeting” was only one example of the type of conduct that could constitute a breach of the implied duty of good faith and fair dealing. Importantly, the court also rejected the government’s argument that this “implied duty” only could be found when it was footed in some express provision of the contract. The court concluded that the correct rule was only that the express provisions of a contract had to be examined to ensure that they had not dealt with the conduct of the government; for if they had, they would override the implied duty.
This leaves us in a tenuous position with regard to the views of the Federal Circuit. We have one panel in Precision Pine stating a narrow rule, another panel in Metcalf Construction stating the traditional rule, and a third panel in Bell/Heery A Joint Venture v. U.S., 739 F.3d 1324 (Fed. Cir. 2014), ruling in favor of the government because the contractor had not alleged facts showing that the government had “engaged in conduct that reappropriated benefits promised under the contract” (which is part of the Precision Pine reasoning). Thus, it is difficult to state where the judges of the Federal Circuit stand. Hopefully, the court will agree to take either Metcalf Construction or Bell/Heery to the full court for an en banc review of the issue.
I’ve never been sure why the Department of Justice has so vigorously argued that the government should not be held to the same standards of conduct as a commercial buyer. Of course, persuading the courts and boards that a narrower standard should be applied to the government is a way to win litigated cases. But, in my view, encouraging abusive or non-cooperative conduct hurts the government as much as it hurts its contractors. I have taught for many years that in the long run the government benefits from actions that show industry that it is a fair contracting partner. A line of published judicial decisions that demonstrates that the government is not such a partner is one more of the many messages that tell companies they should sell to the government only when they can find no other customer. Surely, this is not the message that government agencies in need of products and services on the commercial marketplace want to convey to companies that can provide those products and services.
Many years ago when I came to Washington to work in the field of government contracting, I concluded that there was one major advantage to being on the government side of the negotiating table. That advantage was that I was under no pressure to extract money from the contractor by unfair bargaining or unfair contract administration. To me fairness was an integral part of the job of a government employee. I still believe it and teach it. Thus, no matter what the outcome of the good faith and fair dealing litigation, I will continue to urge government employees that fair treatment of contractors is the only way to go.
Ralph C. Nash
When I get older, losing my hair
Many years from now . . . .
When I'm Sixty-Four
John Lennon, Paul McCartney
Shortly after we celebrate our country's independence on July 4, 2013, Wifcon.com will end its 15th year on the internet. With much help from the Wifcon.com community, I've raised a growing teenager. When I started, I was 49 and my hair was so thick that I often shouted ouch or some obscenity when I combed it. Wifcon.com has existed in 3 decades and parts of 2 centuries. During that period, I've updated this site for every work day--except for the week or so when I called it quits. I remember the feeling of relief. I thought it was over. However, many of you convinced me to bring it back. Yes, just when I thought I was out, many of you pulled me back in.
As I mentioned in an earlier post, someone once told me that Wifcon.com was my legacy. I once had great hopes for a legacy. Perhaps, a great saxophone player belting out a solo in front of thousands of fans and seeing them enjoying themselves. Instead, here I sit in my solitude looking for news, decisions, etc., to post to the home page. For many years, my dog Ambrose kept me company. Now, my dogs Blue Jay and Lily stare at me and look for attention. With my sights now set realistically, I accept that Wifcon.com is my legacy. It's the best I could do.
Every now and then, I receive an e-mail from someone thanking me for Wifcon.com. They tell me how it helped their careers. These e-mails keep me and Wifcon.com going.
Send me a postcard, drop me a line,
Stating point of view
Indicate precisely what you mean to say
Yours sincerely, wasting away
Give me your answer, fill in a form
When I'm Sixty-Four
John Lennon, Paul McCartney
The thoughts in these e-mails won't let me quit. I still search each night for something to add to the site in hopes that it will increase your knowledge. If I find something new, I still get excited. Often, it feels like a self-imposed weight around my neck. What started as a release for my imagination has evolved into a continuing and daily addition to the contracting community. In the evenings, it is as if I'm Maillardet's automaton. I head over to my office, sit before the computer, and update. Then I send the updated pages to Virginia where it is accessed from around the world. Maybe I'm addicted to Wifcon.com; maybe I was born with the Wifcon.com gene.
If you haven't added the numbers, I'm 64 now. Wifcon.com and I are showing our age. I can comb the top of my head with my fingers. The ouches and other obscenities caused by my once thick hair are gone. A recent upgrade to the discussion forum requires that I turn the "compatibility mode" off on my browser. In that mode, I realized that Wifcon.com is ugly. I have current software for the needed future redo of this site.
I am Wifcon.com; Wifcon.com is me. It is my legacy and my albatross. As always, thank you for your support.
You'll be older too,
And if you say the word,
I could stay with you.
When I'm Sixty-Four
John Lennon, Paul McCartney