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Army Contracting Command Guilty of Noncompliance with a Nonexistent Rule

Don Mansfield

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In a recent DoD IG report, the Army Contracting Command was cited for its failure to perform "component assessments" on 23 contracts subject to the Buy American Act (see DoD IG Report No. 2015-026). The report states as follows:

ACC contracting personnel did not complete component assessments for 23 contracts. DFARS 252.225-7001(a) (3) (ii) (A) requires contracting officers to determine whether the cost of the end product and its components that are mined, produced, or manufactured in the United States or qualifying country exceed 50 percent of the cost of all components. However, for 16 of the 36 contracts for commercial items reviewed, ACC contracting personnel did not distinguish between commercial items that require an assessment and commercial off-the-shelf items that do not require an assessment. In addition, for 7 of the 14 contracts for non-commercial items reviewed, ACC contracting personnel did not complete component assessments to determine compliance with the Buy American Act.

Not having ever heard of such a requirement, I checked the reference to this requirement, which was allegedly located in DFARS 252.225-7001( a )(3)(ii)(A). DFARS 252.225-7001 is a contract clause entitled "Buy American Act and Balance of Payments Program". The clause does not contain "( a )(3)(ii)(A)", but it does contain a paragraph "( a )". Paragraph ( a ) defines, for purposes of their use in the clause, the terms "Commercially available off-the-shelf (COTS) item", "component", "domestic end product", "end product", "foreign end product", "qualifying country", "qualifying country component", "qualifying country end product", and "United States". The paragraph does not require the contracting officer to do anything. In fact, it doesn't require that anybody do anything--it merely defines words and terms. The balance of the clause imposes an explicit requirement on the contractor in paragraph ( c ) and an implied requirement on the contractor in paragraph ( d ):

(b ) This clause implements 41 U.S.C chapter 83, Buy American. In accordance with 41 U.S.C. 1907, the component test of the Buy American statute is waived for an end product that is a COTS item (see section 12.505(a)(1) of the Federal Acquisition Regulation). Unless otherwise specified, this clause applies to all line items in the contract.

(c ) The Contractor shall deliver only domestic end products unless, in its offer, it specified delivery of other end products in the Buy American--Balance of Payments Program Certificate provision of the solicitation. If the Contractor certified in its offer that it will deliver a qualifying country end product, the Contractor shall deliver a qualifying country end product or, at the Contractors option, a domestic end product.

(d) The contract price does not include duty for end products or components for which the Contractor will claim duty-free entry.

Nothing in the entire clause requires the contracting officer to do anything. The terms "contracting officer" and "component assessment" do not appear in the clause. The term "component test" appears once--in paragraph ( b ) (see above). No duty of the contracting officer can reasonably be inferred.

When read together with the provision at DFARS 252.225-7000, it is clear that any assessment of end item components should be done by an offeror when determining how to complete the certification in DFARS 252.225-7000( c ):







      • Certifications and identification of country of origin.
      • (1) For all line items subject to the Buy American and Balance of Payments ProgramBasic clause of this solicitation, the offeror certifies that
        (2) The offeror certifies that the following end products are qualifying country end products:
      • (i) Each end product, except those listed in paragraphs ©(2) or (3) of this provision, is a domestic end product; and
        (ii) For end products other than COTS items, components of unknown origin are considered to have been mined, produced, or manufactured outside the United States or a qualifying country.




      • Line Item Number


        Country of Origin





      • (3) The following end products are other foreign end products, including end products manufactured in the United States that do not qualify as domestic end products, i.e., an end product that is not a COTS item and does not meet the component test in paragraph (ii) of the definition of domestic end product:




      • Line Item Number


        Country of Origin (If known)





      • (End of provision)






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I assume that the Army Contracting Command pointed out the flawed assumption that the IG had made when responding to the audit. Let me just check their response to this finding to be sure:

The Deputy to the Commanding General, U.S. Army Contracting Command, responding for the Commanding General, Army Contracting Command, agreed with the findings and the recommendations, stating Army Contracting Command personnel would receive training on the distinction between commercial and commercial off-the-shelf items, as well as how to perform component assessments and the requirements to include the Buy American Act implementing clauses. In addition, Army Contracting Command will require contracting personnel to take Buy American Act training offered by the Defense Acquisition University. The training will be mandatory for all contracting personnel in FY 2015.

Oh, well. Get ready ACC contracting personnel--you will soon be receiving a policy memo requiring you to take CLC 027 Buy American Act. And no, it does not contain guidance on how contracting officers are to perform "component assessments".




12 Comments


Don, I'm going to take your analysis at face value, without confirming your cites (the way I should). Assuming you are correct, then I don't know which is worse -- that the DoDOIG cannot interpret the regs properly, or that the ACC leadership didn't call the auditors out on their fundamental error.

How embarrassing for the professions involved.

H2H

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The "(a)(3)(ii)(A)" is pretty clearly a mistake. They meant (a)(ii)(A). See the citation in the third line from the top of page 15 and in the seventh line from the bottom.

The IG appears to infer an administrative obligation to perform a component assessment based on the terms of the clause, paragraph ( c). The IG apparently believes that the clause imposes a duty on the CO to ensure contractor compliance with the terms of the contract.

Lots of contract clauses impose obligations on contractors without expressly requiring the CO to ensure compliance. Take a look at FAR 52.246-2, Inspection of Supplies -- Fixed Price (AUG 1996). It requires the contractor to perform quality assurance, but expressly denies any obligation on the part of the government to inspect or to check the contractor's QA work, merely giving it the right to do so. But what CO would say that he or she has no duty to inspect deliveries to ensure conformity?

The IG didn't trash the ACC. It seems to be doing little more than putting the ACC on notice that someone might ask it how it knows that the contractors are complying and not lying and that it ought to have an explanation. A fairly gentle heads up. It's up to the command to decide what if anything to do. Of course, they'll never be able to do component assessments on a significant number of contracts, even with training.

Don't be angry with them, Grasshopper. They're just doing what IGs do.

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I'm out on limb here, but I have never understood this thought process from auditors/IGs. They don't audit all Buy America contracts, just 50 because that is a decent sample. They learn the agency does not monitor roughly half of them (23/50). Should they infer that the agency monitors a little more than half of all Buy America contracts? Isn't more than half a decent sample?

Why the 'minimum sample size for me but not for thee' thought process? I don't know why 100% monitoring is always the standard when the IG does not audit 100% of the contracts. Apologies- more of an auditing question than a Buy America question, but I think that issue may be behind the defferences between Don's posting and Vern's response.

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"It seems to be doing little more than putting the ACC on notice that someone might ask it how it knows that the contractors are complying and not lying and that it ought to have an explanation."

Vern, yours is the voice of experience. And yet I cannot help but wonder how this situation might play out ...

1. Hotline call to DoD OIG, alleging that Contractor A is violating BAA with respect to compliance with this DFARS clause. (Hotline call originates with disappointed bidder who thought it should have won the contract award.)

2. OIG investigation, assisted by DCAA and appropriate law enforcement officials, substantiates the allegation.

3. Contractor A argues that the cognizant CO and COR were obviously derelict in their duties and thus complicit in its noncompliance. Contractor A cites this OIG report for supporting its assertion that the government had an affirmative duty to assure contractor compliance. Contractor A argues that it relied on the CO and COR's duty to provide assurance to its detriment. It's a weak argument but the US Assistant Attorney doesn't want to have a jury hear it (because juries and complex government contracting issues), so the government settles quickly and for small dollars.

4. Cognizant CO and COR receive discipline for failing to assure Contractor A's compliance with clause requirements. Their argument that their Command didn't give them the appropriate training, tools or processes falls on deaf ears. Their supervisors point out that there was a training course and they could have (and should have) attended it. Had they attended the class, they would have known how to assure their contractors were complying with the clause requirements.

Is that how this plays out, given the IG's assertion(s)?

Just wondering ....

H2H

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"DFARS 252.225-7001(a)(ii)(A)"

The "(a)(3)(ii)(A)" is pretty clearly a mistake. They meant (a)(ii)(A). See the citation in the third line from the top of page 15 and in the seventh line from the bottom.

The IG appears to infer an administrative obligation to perform a component assessment based on the terms of the clause, paragraph ( c). The IG apparently believes that the clause imposes a duty on the CO to ensure contractor compliance with the terms of the contract.

Lots of contract clauses impose obligations on contractors without expressly requiring the CO to ensure compliance. Take a look at FAR 52.246-2, Inspection of Supplies -- Fixed Price (AUG 1996). It requires the contractor to perform quality assurance, but expressly denies any obligation on the part of the government to inspect or to check the contractor's QA work, merely giving it the right to do so. But what CO would say that he or she has no duty to inspect deliveries to ensure conformity?

The IG didn't trash the ACC. It seems to be doing little more than putting the ACC on notice that someone might ask it how it knows that the contractors are complying and not lying and that it ought to have an explanation. A fairly gentle heads up. It's up to the command to decide what if anything to do. Of course, they'll never be able to do component assessments on a significant number of contracts, even with training.

Don't be angry with them, Grasshopper. They're just doing what IGs do.

"DFARS 252.225-7001(a)(ii)(A)" is not a valid citation, either. Paragraph ( a ) isn't broken down into (i), (ii), (iii), etc. Some of the definitions use (i), (ii), (iii), however.

A CO's duty to inspect deliveries to ensure conformity of supplies or services is stated at FAR 46.103( d ) and FAR 46.104( b ).

I'm not angry with the IG. I'm disappointed with the ACC's reaction. Instead of making the IG substantiate their position, they are going to make all of their contracting personnel take a three-hour online course that doesn't address what the IG thinks it does.

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Don't put requirements in contracts that you don't intend to enforce or if you don't iintend to perform a quality assurance role, to some extent - whether that be spot checks for compliance or 100% verification or something else.

Simply looking the other way, relying on certifications or other promises or implied compliance is unwise - in my estimation.

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Hi, Joel!

You think that spot checks are OK and I agree with you.

The oversight regime thinks that spot checks are not OK. They could very well be correct- I just don't understand why because they do spot-checks themselves. I don't know their business well enough to criticize too strongly, I just never understood this discrepancy.

(However, I part ways with you a little on self-certification. Unwise or not, we rely on the information they provide in their reps and certs like size status.)

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Don,

"DFARS 252.225-7001(a)(ii)(A)"

"DFARS 252.225-7001(a)(ii)(A)" is not a valid citation, either. Paragraph ( a ) isn't broken down into (i), (ii), (iii), etc. Some of the definitions use (i), (ii), (iii), however.

A CO's duty to inspect deliveries to ensure conformity of supplies or services is stated at FAR 46.103( d ) and FAR 46.104( b ).

I'm not angry with the IG. I'm disappointed with the ACC's reaction. Instead of making the IG substantiate their position, they are going to make all of their contracting personnel take a three-hour online course that doesn't address what the IG thinks it does.

I don't think FAR 46.103 and 46.104 address Buy American compliance, but I won't argue with you.

ACC's response was probably based on more than just the text of the report. There was probably an out-briefing in which things were discussed. ACC probably didn't think it was worth arguing about. Anyway, it t won't hurt the Army's people to take a three hour course. It might be interesting. Besides, a DAU online course probably can be completed in 30 minutes.

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Vern,

I don't think that FAR 46.103 and FAR 46.104 address Buy American compliance, either. I was responding to your reference to FAR 52.246-2 and your question : "But what CO would say that he or she has no duty to inspect deliveries to ensure conformity?"

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Hi, Joel!

You think that spot checks are OK and I agree with you.

The oversight regime thinks that spot checks are not OK. They could very well be correct- I just don't understand why because they do spot-checks themselves. I don't know their business well enough to criticize too strongly, I just never understood this discrepancy.

(However, I part ways with you a little on self-certification. Unwise or not, we rely on the information they provide in their reps and certs like size status.)

Apso, i was referring to government quality assurance concerning BAA and related Legislation.

Before coming to work for the Federal government,I learned from my boss, who owned an engineering consulting firm, never to trust or simply rely on self-certifications from contractors or from suppliers. He wouldn't accept any certification from "sales engineers" or "sales departments". He required a certification to be signed by an an official who was responsible for engineering or the manufacturing of a product. To be frank, he said that he "distrusted" (he used stronger language) sales engineers and the like. That was 37 years ago. I found his "concerns" to be well founded.

A very good Chief Executive once said "Trust but verify."

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There is something else that has not been discussed yet. In B-291878.3; B-292448.2, Leisure-Lift, Inc., the GAO specifically said the contracting officer may accept an offeror's Buy American Act certification and has no duty ensure the component test is met unless there is a reason to suspect the validity of the certification. I am not aware of anything since which raises questions about the validity of the decision.

As a general rule, an agency should go beyond a firms self-certification for Buy American Act purposes and should not rely upon the validity of that certification where the agency has reason to believe, prior to award, that a foreign end product will be furnished. On the other hand, where a contracting officer has no information prior to award that would lead to the conclusion that the product to be furnished is a foreign end product, the contracting officer may properly rely upon an offerors self'certification without further investigation.

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