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A response to a call for comments

Vern Edwards

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I just read a very strange blog entry by Steven Kelman, former OFPP administrator, writing at Federal Computer Week online on November 20. The title of the entry is: “Improving statements of work to improve contract management.” You can access it at:

https://fcw.com/blogs/lectern/2015/11/kelman-contracting-better-sows.aspx.

I don't ordinarily read Kelman's FCW blog, "The Lectern," but someone sent it to me and I was intrigued by the title of the entry. i thought I might learn something.

Kelman begins by saying he’s been looking for ideas about how to improve contract management and had a conversation with the CEO of a small company whose ideas focused on writing and managing statements of work. She said that in her experience statements of work were often “poor.” Regrettably, she wasn't more specific about what makes them “poor,” because Kelman doesn’t provide any details.

The CEO complained to Kelman that it is often the case that statements of work are written by talented but busy program staff who do not end up working on the contract. Instead, the statement of work is handed over to an unenthusiastic contracting officer’s representative who is not a subject matter expert. Meanwhile, the contracting people are too busy to get involved unless there is a crisis.

The CEO’s specific suggestion? Have contracting officers use the “advisory downselect procedure” (advisory multi-step process) described in FAR 15.202 to reduce the pool of competitors to a “small number of finalists” with which the contracting folk could then work to develop a good statement of work. “[H]aving several contractors work on the joint SOW would guard against rigging the specs in favor of any one contractor’s solution.” The agency would then go on with a source selection.

That’s it. Anyone who has ever written a statement of work for a complex contract and been involved in committee work will understand why I think that would be a project to avoid like a mine field.

Kelman concludes his blog post by asking readers to “join the dialogue” by posting comments or contacting him at his office email address.

Here is my comment:

What is a statement of work? What kind of document is it in a contract for complex services? Is it like a hardware specification? Should it specify the work that the contractor must do, or should it describe the work in general terms and explain how the parties will work together to specify the work on an ad hoc basis over the term of the contract? What makes a statement of work "good"? What is the role of a contract in a complex and dynamic business relationship?

Kelman, who is known for his insistent calls for innovation, doesn’t seem to realize that in order to innovate one has to understand the problem. Kelman and the CEO don't understand statements of work and their role in service quality management.

As OFPP administrator in the 1990s, Kelman did a lot of damage by pushing the half-baked "performance-based contracting" policy, which called for writing "performance work statements" (see the current definition in FAR 2.101) that specify measurable "outcomes" or “results” instead of how-to. The policy was the product of professional ignorance and a failure of professional thought and imagination. Pushing it the way he did wasted precious energy, time, and money without achieving much of anything. I have written a few thousand words in The Nash & Cibinic Report explaining why that policy was dumb.

The problem with service contract management is that the policy people in government and academia who are supposed to be critical thinkers haven’t thought about it long enough and deeply enough. I don't think they read. You cannot specify services like you specify supplies. People like T. P. Hill and Avedis Donabedian wrote enlightening works that provide food for thought about the unique problem of specifying services. Ian R. Mcneil and others have written about the limitations of contract law in complex business relationships. I have cited them in the past.

Ralph Nash and I wrote a comprehensive piece about how to contract for complex services, which was published in the Defense Acquisition Review Journal (Defense ARJ), a publication of the Defense Acquisition University, in September 2007. The piece is entitled, “A Proposal for a New Approach to Performance-Based Services Acquisition.” You can access it here:

http://www.dau.mil/pubscats/pubscats/arj45/ARJ45_complete.pdf.

In that piece we discuss the reasons for the failure of performance-based contracting in pages 355 – 358. We make specific and detailed recommendations for change in pages 358 - 361.

Apparently, Kelman never read our piece, or read it and forgot about it, or read it and didn’t understand it, or read it and didn’t like it. In any case, it goes into much more detail than he and his CEO friend about the challenges and problems of specifying and managing complex services, and it proposes a much more imaginative scheme of innovation. It calls for a complete rethinking of the rules for the acquisition of complex services.

Why call for suggestions for improving contract management if you won't look at the ones that have been made and critically examine them? If you don't agree with what you read, state your reasons. That's the way to have a dialogue.

Until policy makers and former policy makers get a clue and convince Congress that the current service contracting statutory, regulatory, and policy-memo regime makes no sense at all, service contract management will continue to disappoint. There is a small window of opportunity now with the study panel that Congress has foisted upon DOD. See the FY 2016 NDAA, Sec. 809. I have no hopes or expectations for such panels anymore, but maybe something good could come out of it if somebody who knows something -- and who has done some serious thinking and who still has some patience left for putting up with acquisition reform hoo-rah and nonsense -- would take the matter in hand.




14 Comments


Vern,

Thanks for the link to the article! It's a brilliant suggestion that would address many of the challenges you and Ralph discussed. If implemented, it would actually facilitiate agile contracting and innovation, since the contract is structured to permit changes to requirements and service approach.

It's too bad it was published in that journal. At best, you were preaching to the choir. More likely, you were suggesting outside-of-the-box thinking to many who were firmly ensconsed within the box and were going to actively resist change.

After 30 years, I'm convinced that change, if it comes, will come from the outside and be imposed on those within the box.

H2H

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Most calls for solutions to the services contracting problem, yours included, ignore the fact that there's simply too much contracting going on. We're using contracting as a poor substitute for HR.

For actual complex services contracting, yours might be a good solution. But most services contracting isn't that complex. Despite the lack of complexity, contracting offices are being crushed under the weight of having to put contractor butts into government seats. We pretend we're implementing contractor solutions to government problems, but we aren't. We're simply hiring temps. Recognize that and the solutions practically suggest themselves--even if implementing them is probably a pipe dream.

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David,

I'm not interested in the assertion that there is too much contracting going on. That's why I didn't say anything about it. I don't know your argument in support of that assertion, and I'm not interested in it. I'm interested only in doing whatever contracting we're doing better than we're doing it now.

I certainly don't fault you for doubting the likelihood of implementing any effective solution. I doubt it, as well. But I don't like your thought that the solutions I proposed suggested themselves. I thought long and hard about the things that I proposed. I thought them up and I suggested them. They didn't suggest themselves.

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Like I said before, Vern's suggestions might prove useful for complex services and are well worth trying. But, I'm more focused on the daily, run-of-the-mill support services. In my possibly skewed view, these comprise the majority of the labor-wasting efforts in our contracting offices.

For those support services, rather than giving contracts to companies to carry out their ostensible solutions, I'd simply like to hire individuals on a temp basis--just as is done elsewhere in our modern economy. The myth I'm trying to expose is that companies' tools and methods are what's important. And they are if they're actually managing something. But where we're simply filling in holes in our org charts, it's the companies' employees that determine success or failure. Let's not pretend otherwise.

This would require losing the general prohibition on procuring personal services, but I see little loss there. We've only been honoring that in the breach, anyway.

Hiring temps on a onesey-twosey basis means that we no longer have to worry about losing 50% of an organization's workers in one day. We can hire or fire each one on an individual basis (which is what our customers do behind our backs, anyway). And what better way to hire permanent workers than to view the work they do as temps?

I replied to Steve Kelman with my suggestion and this document, which goes into more detail. https://drive.google.com/file/d/0B82K7PSt41hVa2duMUZFdi1vUTg/view?usp=sharing

He gave at least a politely positive response.

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In short, yes. Then we can devote our brain cells to the few, more sophisticated procurements where what we do really matters.

However, there is no one answer because there is no one problem. There are lots of problems that would require lots of solutions. I've addressed what I think is one big problem.

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Hi, David,

I'm sympathetic to what you write in some ways. HR is our evil twin, or we are theirs (It depends on which one has the dark goatee).

Are you suggesting hiring temps for simple work whcih is easy to specify, but contracting our complex work which is difficult to specify? Or am I reading this cross-eyed?

I ask that question as I usually lean toward the reverse.

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While I approved David's and apsofacto's comments, I don't want this redirected into a debate about contracting out. The issue is service contract management and how to improve it, not whether or not to contract out. If contracting out is your issue, please take it to the Forum, because I will not approve more comments on that issue.

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Good reading. I appreciate the distinction between complex and simple services. Every PBA training I’ve taken refers has some outrageously oversimplified requirement (usually grass cutting) that it continually refers back to. But, 99% of the services acquisitions I’ve been a part of fit more into the complex arena of requirements that are variable during performance which the trainings don’t touch.

We recently competitively contracted for the sustainment of a weapons system that was a long-term complex services contract. Price competition was essentially meaningless because it was almost impossible to define scope because the sustainment needs were variable during performance. Also requirements for sustainment have always exceeded available budget (and presumably would only grow more so as the system aged) so the program understandably wanted to spend what money it had. We wanted to define the budget and evaluate the contractors approach to meeting our requirements within the budget, but the idea was found unpalatable by leadership and the more traditional approach we had to adopt was ham-handed at best. And now that it’s awarded we are plagued by many of the same old problems, and everyone wonders why.

Sadly I don’t see the acquisition community adopting the suggestions you are putting forth. In fact I see them moving in the opposite direction. Particularly aspects of the Better Buying Power Initiative (e.g. “Create and maintain competitive environments”) have more than once been used in forcing us away from incorporating some principles set forth here. I agree these ideas have merit for complex services, particularly the long-term mutually beneficial relationships with contractors vice the constant re-competitions. Companies like Toyota have shown the benefit of long-term investment with key suppliers. Unfortunately some unrelated bungling/corruption during the Druyun’s lightning bolt years seem to have made certain powers-that-be hesitant to delve into this area again.

So in short I agree, but as a working level contracting cog it’s an uphill battle trying to implement or influence the magnitude of change that would have to accompany this sort of acquisition reform.

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I was once asked how we were going to solve the numerous problems we encountered on our $250M, 10 year Base Operating Support (BOS) facility service contract. Although I provided my input at the time, perhaps a better answer would have been “an ounce of prevention is worth a pound of cure” as Benjamin Franklin famously said. In other words, it’s better to avoid problems in the first place rather than deal with them after they arise. After the contract has been awarded and performance begins, things tend to get complicated. You can avoid many problems by writing the performance work statement (PWS) in clear, concise, consistent, and legally enforceable terms, and in agreement with the contract overall. I've read the “Proposal for a New Approach to Performance-Based Services Acquisition” article, and this is truly a great concept that merits consideration and could well be applied to BOS service contracts. But I also agree with the idea of “Improving statements of work to improve contract management.” The folks who write the PWS often lack a basic understanding of contracting principles and other rules and concepts that need to be considered when writing the PWS. The result is that much of the Government’s and contractor’s resources post award that could otherwise be directed towards the actual services under contract, are instead spent interpreting, clarifying, correcting, debating, and modifying the terms and conditions of the contract itself. I call this the “opportunity cost” of a poorly written contract. Time and effort is wasted, and quality of service, timeliness, and customer satisfaction often take a back seat. Not to mention the detrimental effect this has on the partnering relationship between the parties, as well as the equitable adjustments and claims that are sure to follow. A new approach to Performance-Based Services Acquisition might be good, but if we can’t get it right now with the current approach I really don’t see us mastering concept of "Relational Contracting” with much success. I do like the idea of Statements of Objectives (SOO), and believe that getting industry, stakeholders, and subject matter experts involved early in the template writing process, and then following the template approach as key to writing better SOO/PWS and resulting contracts.

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The folks who write the PWS often lack a basic understanding of contracting principles and other rules and concepts that need to be considered when writing the PWS. The result is that much of the Government’s and contractor’s resources post award that could otherwise be directed towards the actual services under contract, are instead spent interpreting, clarifying, correcting, debating, and modifying the terms and conditions of the contract itself. I call this the “opportunity cost” of a poorly written contract. Time and effort is wasted, and quality of service, timeliness, and customer satisfaction often take a back seat. Not to mention the detrimental effect this has on the partnering relationship between the parties, as well as the equitable adjustments and claims that are sure to follow.

Please provide a real example of such an instance.

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Here are just a few:

Government Property clauses included in the contract conflict with the PWS and with each other.

No Davis-Bacon Act wage determination included in the contract. Only reference to requirements for Davis-Bacon Act wage rates in the PWS is for certain IDIQ work. However, FFP does include some mention of "construction" work, and allows for service calls exceeding the 32 hours (which could be construction) to be completed under the IDIQ portion of the contract for the hours over 32. Per DFARS if a Davis-Bacon Act trade is involved in a repair exceeding 32 hours it is all considered construction.

PWS language regarding termination conflicts with the contract termination clauses.

There are many, many more examples.

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Those strike me as run-of-the-mill SOW and solicitation development errors that COs should catch before issuing a solicitation. COs should perform QA on SOWs and solicitations.

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