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Vern Edwards

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Everything posted by Vern Edwards

  1. I don't know how you reached your conclusion, that the 8(a) Program is "explicitly" based on race. In order to be eligible for 8(a) status a firm must be a small disadvantaged business (SDB). The eligibility rules are in 13 CFR 124. In order to an SDB a small firm must be at least 51 percent unconditionally owned by a socially and economically disadvantaged person. According to the rules, a socially disadvantaged person is: Race is only one source of social disadvantage. Other sources are ethnic identity and culture. The census bureau considers race and ethnicity to be "two separate and distinct concepts." According to the American Heritage Dictionary, ethnic means: According to SBA regulations: Note that groups like Asian Pacific Amercans are not racially defined. They are "persons with origins" in places like Vietnam and Nepal are not racial in nature. The regulation then goes on to say: An economically disadvantaged person is: Anyone interested in this topic should read 13 CFR 124 in its entirety. In short, Pepe and FrankJon, you guys aren't reading the rules very carefully, if at all. 8(a) Program eligibility is not "based on" race. 8(a) eligibility can be established on any of a number of bases, not just race. I don't mind discussing things like this, but if we are going to discuss it let's do it like pros, not like amateurs.
  2. @Tony Bones Tony, going over my long response to you, it seems to me that I did not answer your question: "Why does [a cut-off date] make sense?" So, as punishment for your more snarkey remarks, I'm going to explain some more. The best way to understand the argument for cut-off dates is to read Defective Pricing Handbook by David Bodenheimer. I'm looking at the 2012-2013 edition, Chapter 5, "Reasonable Availability of Cost or Pricing Data." There is a newer, 2017-2018 edition. Here is as simple and short an explanation as I can write: Contractor's must disclose cost or pricing data that are reasonably available to it for disclosure. You have to connect availability and disclosure. Data may exist within a company, but it takes time to identify and process it for disclosure. The process of going from identification to disclosure is not instantaneous. Bodenheimer refers to this time as "lag time." Here is an illustration and explanation from a famous 1967 defective pricing case: American Bosch Arma Corp., ASBCA 10305, 65-2 BCA ¶ 5280. Of course, today's computer systems reduce the time lag. Bodenheimer identifies two kinds of lag time, "availability lag time," which it the time required to compile and disclose data, and "organizational lag time," which is the time required to locate, identify, and process data existing in other parts of a large corporation. Cut-off or closing dates are supposed to take such lag times into account. How long a lag time should be allowed? That is a matter for negotiation. Keep in mind that the definition of cost or pricing data is very broad. It includes more than accounting data: Emphasis added. Not all of those data are going to be readily identifiable as cost or pricing data and processable as such through accounting IT systems. Look particularly at items (3), (4), (7), and (8). So cut-off and closing dates are an accommodation. You can agree to a reasonable cut-off or closing date in recognition of a reasonable lag time or you can wait for the results of a sweep. It's up to you. Choose. The government has no authority, legal or moral, to force a contractor to sign a certificate before it feels reasonably certain that it will be telling the truth. It's not a matter of giving up the government's "right" to data and getting something in return. For the government it is a matter of deciding how much uncertainty to accept when negotiating a price. For the contractor it is a matter of how much risk to take of defective pricing litigation and even fraud prosecution.
  3. It is true that defective pricing risk ends on the date of price agreement or on an earlier date agreed to by the parties. But the problem is latent data in the possession of someone on the contractor's side that was not recognized as such before price agreement. Remember, the liability for defective pricing is not limited by the personal knowledge of the contractor's negotiators. If anyone anywhere in the company had cost or pricing data prior to price agreement that was not submitted to the government, the contractor will have committed defective pricing. Moreover, some matter might arise at some point during price negotiations that make something cost or pricing data that was not cost or pricing data before the matter arose---perhaps a change to the statement of work. If others are not notified of the change, they might possess cost or pricing data before price agreement that they do not recognize as such before the contract is signed. In short, I don't agree that post agreement sweeps are "essentially worthless." Moreover, a lot of very smart people have thought for more than 30 years that post agreement sweeps are a best practice. I'm not about to say that they're fools. Contractors conduct sweeps because they are risk averse. As I pointed out earlier, they don't seem to like them any better than the government. If they did not think sweeps were in their own best interests I do not think they would do them. A sweep is a precaution. In any case, there would be fewer government complaints about sweeps if the government's internal processes weren't so constipated and slow. Physician, heal thyself. (Did Pepe already say that?)
  4. Some of the apparent confusion might be due to terminology. When the parties agree to insert a date on the certificate other than the date of price agreement, that date is called the "closing" or "cutoff" date. Nowhere in FAR Part 15 is it referred to as the "effective date." Here is the language of the certificate, from FAR 15.406-2(a): The date to be inserted in the space before the two asterisks is either the date of price agreement or an earlier date agreed upon by the parties. See this note to the certificate text: And see FAR 15.406-2(c): In FAR 15.407-1 and FAR 52.215-10, the date on the certificate is referred to as the "as of date."
  5. Holy cats! I go off to the eye doctor for a couple of hours and look what happens. Okay, well, I'll respond to some of the comments. @Tony Bones Tony, the biggest defective pricing case in history was the Air Force's charge of defective pricing against United Technologies that resulted from the Great Aircraft Engine War procurement of the mid-1980s. DCAA wanted that case pursued. The Air Force refused. DCAA brought political pressure to bear and the Air Force caved and pursued the case. Here is what happened. In 1998, the Air Force sought a price reduction of $299 million due to defective pricing. Then, in 1999, the Justice Department charged United Technologies with false claims based on the alleged defective pricing and sought treble damages, about $900 million. The defective pricing case was pursued before the ASBCA and the Federal Circuit. The ASBCA initially found that United Technologies had committed defective pricing, but owed the Air Force nothing due to offsets. On reconsideration, the ASBCA found that United Technologies had not committed defective pricing after all. The Air Force appealed the ASBCA decision before the Federal Circuit. In 2006 the Federal Circuit affirmed the ASBCA's reconsideration decision. Eight years of litigation and legal fees. See: United Technologies Corp., ASBCA 51410, 04-1 BCA ¶ 32556 United Technologies Corp., ASBCA 53349, 05-1 ¶ 32860 Wynne v. United Technologies Corp., 463 F.3d 1261(Fed. Cir. 2006) The false claims charges were pursued independently in U.S. district court and before the 6th Circuit. In 2008, the district court found United Technologies liable for false claims damages in the amount of $657 million. United Technologies appealed to the 6th Circuit, which, in 2015, overturned the district court's judgement on the ground that the government had not proven damages and remanded the case to the district court to determine whether the government should have another chance to make its case. In 2016, the district court ultimately found that the government was entitled to $1,176,619. The parties let the matter drop. Eighteen years of litigation and legal fees. See: U.S. v. United Technologies Corp., 626 F.3s 312 (Sixth Cir., 2011) So, Tony, who cares that your shop, whatever shop that is, has only one or two people. What makes you think that what your shop does or does not think or would or would not do has anything to do with the government's decision to pursue of a defective pricing case? Powers other than yours have an interest and a say. You don't have to take my word for it. Everything that I wrote above is a matter of public record if you know how to read and research board and court decisions. DCAA was the hellhound on United Technologies' trail, not the Air Force. BTW, the United Technologies case shows why contractors take precautions like sweeps. Next: Well, Tony, my response is that judging from the memo, the government seems to be the party that's in a hurry. Why should a contractor give up its right to take its time and make sure that it can certify truthfully? If you won't agree to a cutoff date that precedes price agreement, you can just sit on your hands and wait until the contractor completes a sweep. Now here's the thing, paisano: The government enacted TINA in 1962 and has, from time to time, been very aggressive in pursuing contractors under it, especially since the spare parts pricing scandals of the mid-1980s. This aggressiveness, as illustrated by the United Technologies case, among others, has made them veeeeery nervous, and so they decided to protect themselves by conducting post agreement/precertification, precontract award sweeps. Just to make sure. As for cutoff dates---smarter people than me have advocated them as an alternative to sweeps, and I think I cited some of them in one of my earlier post to Joel. Now, the sum of my argument is as follows. The government wants contractors to obey the law. The law requires a contractor to submit accurate. complete, and current cost or pricing data to the contracting officer up until the time of price agreement. It is entirely possible that during the period of negotiations leading to price agreement the contractor, an affiliate, or a subcontractor may have been in possession of cost or pricing data that the contractor's negotiators did not know about and that the data holder did not recognize for what it was. For more than 30 years some contractor executives, who are at least as smart as Here_2_Help, have believed that after agreement, but before certifying and signing a contract, they should make one final check to try to sweep up any cost or pricing data that may have been laying around during negotiations but that were not submitted for one reason or another. Just to be safe. In most cases the contract won't be signed until the CO gets the certificate, and no liability attaches until a contract is signed in any event, so if the contractor finds some latent cost or pricing data they can hand it over to the government to consider before a contract is signed. That can avoid a whole lot of trouble. Yet now DOD wants to intimidate contractors into signing a certificate of current cost or pricing data before they feel certain that they will be signing truthfully. Why? Because the government wants to speed up it's self-constipated processes. Any contractor thinking of going along when they're not comfortable about it should read some of the literature on defective pricing and some of the case histories. Now here is some assigned reading. The literature on defective pricing is huuuuge. I'm taking the time to type out a few titles and quotes for you (and others) because I want my critics to have a clue. The following two articles were written in the late 1980s, about the time that contractors started to adopt the "sweep" procedure: Overly, "Government Contractors Beware: Civil and Criminal Penalties Abound for Defective Pricing," Loyola of Los Angeles Law Review, April 1987: Shirk et al., "Truth or Consequences: Expanding Civil and Criminal Liability for The Defective Pricing of Government Contracts," Catholic University Law Review, Summer 1988: Yikes! This is from the early 1990s: Godinich, Jr., "Expanding Criminal Liability for Fraud Arising from Defective Pricing of Government Contracts," Houston Lawyer, May/June 1993: See also Bodenheimer, Litigation and Proof in Defective Pricing Cases, 15-3 Briefing Papers 1 (April 2015). (David Bodenheimer was one of the contractor attorneys in the ASBCA litigation of the United Technologies case. He is also the author of Defective Pricing Handbook, 2017-2018 ed.) And see Sanders, Apogee Consulting, TINA Sweeps and Defective Pricing (2017), in two parts: http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=1265:tina-sweeps-and-defective-pricing-part-1-of-2&catid=1:latest-news&Itemid=55 http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=1266:tina-sweeps-and-defective-pricing-part-2-of-2&catid=1:latest-news&Itemid=55 Finally: To quote an Army buddy of mine from Oklahoma, in words uttered in 1966 in Vietnam somewhere to the southeast of Pleiku: "You'd rather sandpaper a wildcat's ass in a telephone booth." By the way, Tony Bones, rejecting or trying to diminish my argument on the basis of my current status as a small time contractor who never has to submit cost or pricing data and has nothing personal at stake is a case of the ad hominem fallacy. Argue against the argument, not the person making the argument. Bada bing... bada boom.
  6. By the way, anyone interested in the origin of small business contracting policy see Small Business and Strategic Sourcing: Lessons from Past Research and Current Data (RAND 2014), Chapter Two. https://www.rand.org/pubs/research_reports/RR410.html
  7. That is possible, but impossible to prove without Part 19. Maybe Part 19 and its predecessors are the problem. Perhaps the policy has infused the minds of acquisition personnel with the notion that "small businesses" are a distinct class of business entities that need special consideration and help in order to compete. Perhaps that has suggested to many that "small businesses" are less competent than "large businesses," otherwise, why would work have to be set aside for them. Once you create such an impression, it's very difficult to convince people that the little guys who need the special help are just as good as the big guys. By creating the special program you are creating, or reinforcing, a prejudice. So it may be true that Part 19 ensures that small businesses get something that they would not have gotten without Part 19. But maybe Part 19 ensures that they won't get more than they are "entitled" to. We meet the quota and then we're done. Right? Anyway, don't worry. Small business programs aren't going away. Ever.
  8. Vern Edwards


    Given our imperfect system of statutory and administrative law, I doubt that any court would declare such a contract improper and void ab initio. But who knows what a court might do? I think that a CO should initiate action in accordance with the law. I tend to be a stickler about complying with the rules, but when the rules conflict due to bureaucratic inaction I think a CO should act to award contracts in accordance with current statute or governing regulation. I realize of course that COs are themselves merely bureaucrats and must work within the bureaucratic scheme of their respective agencies, and that most will not be free to act on their own. If I were a CO, I might modify the FAR clause to bring it into line with statute without an approved deviation and see who says what about it. If they ordered me to comply with the FAR despite the statute I would document the file and move on. But then again, being sick of the socio-economic programs I might just laugh.
  9. @joel hoffman To me the issue is not whether sweeps extend lead time. They often do. To me the issue is whether the policy of demanding certification within five days of price agreement, regardless of the circumstances and the risks of defective pricing, is sound. It's not. It's unsound, and its contrary to law to the extent that it effectively demands that contractors certify to the truth of something that they do not know to be true. The assertion that a contractor's estimating system should enable it to certify with confidence within five days of price agreement, regardless of circumstances, is baseless. I reject your opinion that the policy is a good one because you believe that the person who signed the memo knows what he's talking about, which belief is based on your limited personal experience with that person from many years ago and something you read in a magazine article.
  10. Vern Edwards


    See FAR 1.602-1(b): Emphasis added. Nothing in FAR says that it prevails if it conflicts with another agency's regulation. See also FAR 1.602-2: Emphasis added. Sometimes regulations conflict, and the conflict must be resolved in favor of one or the other. See e.g., C&G Excavating, Inc. v. U.S., 32 Fed.Cl. 231 (1994):
  11. Some COs think that you should get a certificate with the original proposal in case you want to accept it without negotiation.
  12. Joel: I'm not going to ask you anything more, because all I get in return is a lot of nonresponsive chatter. You like the memo and I don't. It's clear that we're not going to get to the heart of the matter. Vern
  13. Joel: I'm not sure what you're trying to communicate. It is not clear to me what you mean by "proposal," "reflect," "best," or "information." By "proposal," did you mean the proposed price or something more? By "reflect," did you mean made on the basis of, set on the basis of, derived from, or something else? By "best," did you mean accurate, complete, and current or something else or something more? By "information," did you mean cost or pricing data as defined by FAR, or something more? In short, did you mean: A proposed price should be set on the basis of accurate, complete, and current cost or pricing data? In your attempt to clarify your statement you have referred to or quoted the FAR. However, those references and quotes do not clarify what you meant by what you said.
  14. That statement is as clear as mud.
  15. BTW, contractors don't particularly like sweeps. See Price-Based Acquisition: Issues and Challenges for Defense Department Procurement of Weapon Systems, Lorell, Glaser, and Cook (Rand Corp., 2005): Emphasis added. Footnotes omitted. TINA is a bad law, and the new policy is a bad policy. There are other, better ways to fix the delay problem.
  16. I have spoken with Mr. Assad and others in DOD who say that sweeps have delayed contract awards for weeks, even months. Such complaints are old, by the way. Government people have complained about sweeps ever since companies started doing them in the late 1980s. But I have not seen any hard data. See for example, Impact of FASA on the Truth in Negotiations Act, by Simchak and Gildea, 95-08 Briefing Papers 1 (July 1995): Footnote omitted. See Air Force Guidance Treats Cutoff Dates for Certified Cost or Pricing Data, 36 No. 32 Gov't Contractor ¶ 423 (August 1994): Emphasis added. See Truth in Negotiations/Edition III by Morrison and Ebert, 89-11 Briefing Papers 1 (October 1989): Footnote 123 omitted. Footnote 124 says: And see Subcontractor Cost or Pricing Data by Arnavas and Gildea, 93-08 Briefing Papers 1 (July 1993): Emphasis added. So as you can see, the issue of the effect of sweeps on the speed with which contracts can be awarded dates at least as far back to the late 1980s. But keep in mind that the practice was started after the spare parts pricing scandals and the consequentially renewed interest in TINA and the False Claims Act. Companies felt that defective pricing was a high risk issue. It was and is. TINA is one of the worst contracting laws ever enacted. It was originally proposed as a solution to unrealistically high targets in incentive contracts. I cannot prove it, but I believe that it has cost us more than it has saved. If there are significant delays associated with sweeps, the government has only itself to blame. And there are better solutions than this new policy. Among them: the use of cutoff dates and what I call "tailored" waivers.
  17. What a crock, accompanied by more irrelevant biographical information. Who cares that you once detested Mr. Assad and then read an article about him that apparently changed your opinion? What's that got to do with the policy pros and cons? The bottom line is that I think you must not know much about TINA sweeps, their origin and historical development, the rationale for conducting them, and the arguments against them, and you must not be familiar with the professional literature about them. You haven't considered the other options available to DOD policy people and to COs that would make sweeps unnecessary or at least less often so. What do you say to that? Are we going to get more biography? And since when don't you debate contractors? In any case, you don't have to debate me as a contractor. You can debate me as a former major systems contracting officer, contracting director, and teacher and writer on contracting, and somebody with whom you often agree. Many respectable persons have argued that sweeps are a good idea. Here's a link to an NCMA 2014 World Congress briefing on TINA given by two Naval Postgraduate School instructors and an attorney. https://www.ncmahq.org/docs/default-source/default-document-library/pdfs/b10---enhance-your-understanding-of-the-truth-in-negotiation-act-(tina).pdf?sfvrsn=ed32202b_2 Look at chart 21, on which they say: And why didn't DOD consider alternatives to implied threats? Why not recommend the use of closing or cutoff dates for submission of data in order to reduce the need for sweeps? Why not consider waivers in urgent procurements?
  18. Okay, I've read the above addition to your earlier post. None of that supports the wisdom of the memo. Knowledgeable people make bad decisions, and in my opinion that policy is a bad decision for the reasons that I gave above. If you have nothing to say about the policy itself, I'll put down your approval of it to celebrity worship and nothing more. It's like saying the Vietnam War was a good idea because John Wayne supported it, he made a lot of war movies, and you met him while he was filming "The Green Berets" at Fort Benning in 1965.
  19. Joel: Wait. I didn't see your edit.
  20. Joel: I know Mr. Assad. I sat on a panel with him a couple of years ago at which we discussed contract pricing. I respect him, but I do not share all of his opinions. Are you arguing that the policy is sound because Mr. Assad is promoting it? That's why you like it? You read an article in Politico? Please tell me that's not the case. If it is, just say so. If it's not, then tell us your reasons for liking the policy. Your responses thus far have been insulting.
  21. Is that supposed to be an argument in support of the policy?
  22. The above link is to the wrong version of the memo. The memo at that link is the June 5 version. The official version is dated June 7 and should be accessible here: https://www.acq.osd.mil/dpap/policy/policyvault/USA000646-18-DPAP.pdf The link on the Wifcon home page takes you to the official version. The differences seem to be very slight, but it's best to use the official version.
  23. You shouldn't like it. Large defense contractors instituted the use of TINA sweep processes back in the 1980s in order to mitigate the risk of unintentional defective pricing that arises in large organizations in which cost or pricing data relevant to a particular negotiation may be scattered about in multiple offices and divisions and among many subcontractors. Cost or pricing data that is relevant to one such negotiation might also be relevant to another, but persons within large companies may not be aware of other ongoing negotiations and of the need to share such information in order to ensure that it is furnished to multiple COs. Keep in mind that FAR 15.406-2(b) states: Emphasis added. Keep in mind that the government might take the term "contractor" to mean the entire corporate enterprise and not just the office or division or affiliate engaged in a particular negotiation. Sweeps are a form of self-defense, and sweeps can take time, because some contractors are huge enterprises and relevant cost or pricing data may be scattered among offices located all over the country and even in foreign countries. Now, DOD is being criticized for taking too long to award and modify contracts. To the extent that it takes a long time, it's in large measure because Congress, DOD, and DOD contracting activities have cluttered their processes and because many of their people are not competent. So the DOD pricing office wants COs to ask contractors to certify the accuracy, completeness, and currency of their cost or pricing data no later than five business days after price agreement, and hints at threats to contractors' estimating systems if they don't comply. And this sweeping memorandum does not advise COs to take specific circumstances into account when making their demands for certification within five business days. Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long. How about waiving the requirement to submit certified cost or pricing data in urgent procurements? Then again, perhaps the risk of criticism for approving too many waivers is just too great a risk for DOD to take.
  24. I think the memo, as revised, is nothing but a threat of blackmail.