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InNeedofWisdom

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  1. Vern is right about adequate price competition under FAR 15.403-1( c )(1)(i). If the agency only evaluated one offer, they should not conclude that the unevaluated offers meet the Government's expressed requirement for purposes adequate price competition. If the agency is part of DoD and decides to go down the path of FAR 15.403-1( c )(1)(ii) for adequate price competition with only one offer, it makes sense that they should follow DFARS 215.371 Only One Offer. However, I am not convinced that FAR 15.404-1( b )(2)(i) requires adequate price competition. The requirement in the first sentence appears to only be that there are two or more proposed prices received in response to that particular solicitation. Furthermore, the second sentence qualifies itself with the word "Normally" in regards to establishing price reasonableness by adequate price competition. Thus, I do not think the requirements for FAR 15.403-1( c )(1)(i) are incorporated into the requirements for FAR 15.404-1( b )(2)(i). Here is the actual text of FAR 15.404-1( b )(2)(i): When the requirements for adequate price competition under FAR 15.403-1( c )(1)(i) are not met and there are no other qualifying exceptions, FAR 15.404-1( b )(2)(i) provides for price analysis to supplement the cost analysis that must be performed with certified cost or pricing data. Taking it a step further, some defense contractors may subcontract requirements for commercial items (e.g. 25 units) with two or more "sole/single source" subcontractors (e.g. Sub A gets 10 and Sub B gets 15), but then use FAR 15.404-1( b )(2)(i) for price analysis of the commercial items.
  2. In regards to the report, I thought it could have been much shorter. It seemed to re-iterate the same alleged facts under different headings in a redundant and confusing way. Also, the public airing of private "laundry" seemed completely unnecessary. If this was to go to trial, I don't see how the jury would not be prejudiced ahead of time by this report with all its various alleged facts.
  3. The rhetoric by FedBid reminds me of the film Mr. Smith Goes to Washington. (There was a "Susan" and a "Taylor" in that film.) Here is a quote from page 38 (39):
  4. Do you think the SSA can use independent judgment based on the facts presented in the evaluation report?
  5. H2H, Thank you for the link about the quality issues. It makes sense that the lowest price may not provide the best value (or deal, depending on how you define it). I also like how you emphasize the ongoing relationship (partnership) of the prime contractor and subcontractor to deliver the product or service to the government. Vern, without getting into a circular argument with you about opinions or standards, the second question is intended to lead you to a logical answer based on 1) Your answer to the first question (e.g. if you had said, "Yes" to the first question) and 2) How you define "absolutely best deal possible". I like how you put the contractor's obligation into your own words at the bottom of your posting. H2H and Vern, your answers to the first question agree with what I meant in the first part of the third question. I agree with you that there wasn't a need to repeat the first question again as a qualifier (regarding the government) to the second half of the third question (regarding the defense contractor). What I meant by the second half of the third question might be best explained by Frank Kendall's article, "Our Relationship with Industry" (http://www.dau.mil/publications/DefenseATL/DATLFiles/Nov-Dec2013/Kendall.pdf). Industry's concern (obligation) is to earn a profit (i.e. help the government spend money) in good faith and truthfully. Thank you for your responses.
  6. As a related topic to paragraph (1)... Do you think there is one test or two tests for stand-alone commercial services under paragraph (6)? Based on the way the definition currently reads (after the change made back in early 2007 by FAC 2005-15), I think the definition says the commercial service only must be "of a type" with another service sold using either 1) An established catalog or 2) Market prices. In other words, I think the current version of paragraph (6) allows in the case of services exactly what I think paragraph (1) does not allow in the case of supplies! The verb tense in paragraph (6) makes it clear that "established catalog" and "market prices" are describing another "of a type" service instead of the service actually being procured. However, have you read what the DoD IG had to say about this subject for F-16 mission training simulator services back in March of 2006? Based on the version of the FAR prior to early 2007, the DoD IG might say that my current position is wrong. The DoD IG concluded that these simulator services should have been acquired under FAR Part 15 as non-commercial. Even though there were arguably "of a type" commercial services sold using an established catalogs or market prices, the DoD IG concluded that was not enough based on the previous version of FAR 2.101. Here is a quote from pdf pages 23-24 of the report found at http://www.dodig.mil/audit/reports/fy06/06-065.pdf: In case you are still interested in what may seem like a very boring subject, compare the FAR 2.101 definition to the public law definition found at http://www.law.cornell.edu/uscode/text/41/103. The phrase "of a type" was simply inserted in the FAR 2.101 definition without changing the public law definition. That may explain why the current definition of FAR 2.101 appears to require only one test: "Has another "of a type" commercial service been sold using an established catalog or market prices?"
  7. Your question is whether the item is commercial or non-commercial. I would say the item is commercial under paragraph (3)(ii). But some people may think that because there is an "of a type" item used by the public, they can just check box 1 for paragraph (1) and keep going. I really think part of the reason the DoD wanted to get rid of the "of a type" language in the commercial item definition was because of abuse of paragraph (1). It is one thing to believe something is commercial, but it is another thing to certify commerciality under the correct paragraph. I had to google "MRAP" to learn it is a "Mine-Resistant Ambush Protected" vehicle (http://en.wikipedia.org/wiki/MRAP). If the company that sells the MRAP oil filter to the army also offers the same MRAP oil filter to the public, there should be no problem with claiming commerciality under paragraph (1). Even if the company does not offer the same MRAP oil filter to the public, there should be no problem making the judgment call that the "modification" is minor to meet army (MRAP) requirements and claiming commerciality under paragraph (3)(ii). But there would be a problem if neither the company nor anyone else offered (nor sold) the MRAP oil filter to the public, and yet the company certified the item as commercial under paragraph (1). That would be a false claim. If the government suffered loss and wanted to destroy its working contractor relationship while placing its own program at risk, the government could take that defense contractor to court and win. But my guess is that this kind of issue has never gone to court because most things can be argued to qualify for (3)(ii). What do you think?
  8. In a speech yesterday at the 2014 Air Force Association's Air & Space Conference and Technology Exposition, Gen. Hawk Carlisle made the following statement (which can be found at the bottom of http://www.af.mil/News/ArticleDisplay/tabid/223/Article/497497/innovation-is-key-to-stabilizing-the-pacific.aspx.) Here are some questions: 1. When you analyze a subcontract (price or cost analysis), do you believe you have any kind of moral obligation to negotiate the absolutely best deal possible? 2. Do you feel that other constraints (e.g. schedule expectations) justify using "resources" in a way that results in less than the absolutely best deal possible? 3. Or, do you believe that any moral obligation to produce the very best "product" (e.g. Air Force) is simply a concern of the government, and that your concern is to help the government spend money (in good faith and truthfully)? If no question lines up with what you think about a contractor's obligation to analyze subcontracts, how would you describe that obligation? Do you think this lines up with the expectations of the government?
  9. Right, that is a good point. I like to think about the illustration of a basket with a red apple, green apple, orange, and grenade. All items are "of a type" in size. Only the red and green apple are "of a type" in flavor. But both the apples and the orange are "of a type" in use (eaten for nourishment). I think "in use" is the key to understanding "of a type" in paragraph (1). However, some people may think that if the item is "of a type" in use, it automatically meets definition (1) even without the item itself being sold to the public or offerred for sale. I say they should take the route of (3)(ii). Thank you for providing the link to the DoD IG report on the C-130J. I am relieved that the AF took the route of (3)(ii) [instead of just (1)]. I think the DoD IG would not have been able to take issue with the procurement if the PCO had 1) Used FAR 15 instead of FAR 12 and 2) Obtained certified cost or pricing data (CCOPD) only on the minor modification IAW FAR 15.403-1( c )(3)(iii)( B ). But did all this happen before the change was made to require CCOPD on the minor modification if the modification was larger than the greater of either the TINA threshold or 5% of the contract?
  10. Yes, that is the basic question. I enjoyed reading your posting and the example about the tank. It makes sense. I think the writers of the first paragraph were trying to quote the 41 USC Section 103 definition (http://www.law.cornell.edu/uscode/text/41/103) while making a confusing change in structure. I want the definition to mean whatever will keep me away from defective pricing and a false claims lawsuit. The DoD TINA statute (http://www.law.cornell.edu/uscode/text/10/2306a) in (h)(3) references (for the definition of commercial item) the 41 USC Section 103 definition. Thank you for quoting from Reading Law: The Interpretation of Legal Texts (2012). Any ideas on where I could look for any case law on this would be much appreciated. I think this kind of issue could come up in 1) A defective pricing/false claims case or 2) A defense contractor appealing to the ASBCA for either a DACO's decision to disapprove the business system or disallow a portion of incurred cost (e.g. profit on an IOT at price when commerciality was not clearly proven). Case law on this kind thing would be a dream come true (for a beggar).
  11. Yes, there should be no compounding of profit on an IOT at cost. However, if the affiliated organization proposed/made its transfer in accordance with FAR 31.205-26(e), the affiliated organization should not include any fee within its IOT at cost. It is possible that the prime contractor and its affiliate could decide to split the profit from the prime level. If so, the transfer of split profit should be handled separately as an unallowable cost in order to prevent application of any burdens at the prime level on the affiliate's share of the prime's profit.
  12. I agree with you that the government CO's and support staff should take full responsibility for cost analysis and only request field pricing assistance to the extent required. I found the discussion at the following link to be helpful: http://farsite.hill.af.mil/reghtml/changes/dac/DPN20130328.htm. The thing that really stood out to me was the discussion in comment #38 about final checklist item #17. It appears that the DAR Council expects defense contractors to provide a price/cost analysis with the proposal for every "subcontractor" regardless of dollar value. That seems incredible. I understand that Table 15-2 requires a price/cost analysis to be done and price/cost analysis over $700k to be submitted with the proposal. But to me this is a new requirement to actually require the submission of ALL price/cost analyses with the proposal. Do you think this is what DCAA was getting at in its reply to the DoD IG?
  13. The DoD IG recently published its review of various DCAA audits from 2011-2013: http://www.dodig.mil/pubs/report_summary.cfm?id=5967. I found pages 61-71 about DCAA audit 2701-2012C210... to be very insightful. The issues surrounding this report highlight an apparent difference between the cost analyst and the DCAA auditor. Hypothesis: The primary value of the cost analyst at a prime contractor (or upper-tier subcontractor) is to mitigate time constraints imposed by DCAA requirements (or, stated positively, to provide flexibility in maximizing the value for the customer.) Timeline of Events: Sep'10 - The Joint Strike Fighter (JSF) program office (PMO) asked DCAA Ft. Worth for assistance in anticipation of a proposal for 42 aircraft. Jan'11 - The JSF PMO changed its requirement to only 32 aircraft and asked DCAA to not review subcontractor proposals (see Key Points 1 & 2). Mar'11 - The JSF PMO asked DCAA Ft. Worth to provide "full scope audit assistance" once the proposal was received by DCAA Ft. Worth. Apr-May'11 - DCAA Ft. Worth received the proposal and determined it adequate while waiting for cost/price analysis on $1.7B in subcontracts. Aug'11 - DCAA Ft. Worth asked DCAA Bay States Branch Office (BSBO) to perform and complete an assist audit by the very end of Nov'11. Sep'11 - DCAA BSBO said the subcontract proposal had many inadequacies, but agreed to proceed and give an adverse (bad proposal) opinion. Sep'11 - The JSF PMO asserted in its pre-negotiation memo (not yet approved) that it would rely upon its own cost analyst for the subcontract. Nov'11 - DCAA BSBO gave DCAA Ft. Worth a memo with limited cost information saying its assist audit report should be done by mid-Jan'12. Nov'11 - The JSF PMO pre-negotiation memo (see Sep'11) was approved on the very date the assist audit was originally supposed to be done. Jan'11 - The results of a DCMA technical evaluation were received by DCAA BSBO, but not incorporated into the audit report (issued 7 weeks later). Mar'12 - DCAA BSBO provided its adverse opinion that the proposal was not acceptable for negotiation (just under 4 months after the due date). DoD IG Findings: 1. DCAA should not have started the assist audit if DCAA didn't think it was adequate. And, (apparently...) in the future if the customer still wanted DCAA to continue, then DCAA should report that customer to the DoD IG?! (Different people could reach different conclusions from the DoD IG report.) 2. DCAA should have not have made the judgment call to request the assist audit. The JSF PMO had made it clear that it would take care of all the subcontract proposals on its own and did not need DCAA to help. (This is where the cost analysts at the prime and at the JSF PMO were used.) 3. Once DCAA decided to actually proceed with the assist audit of the subcontract proposal, DCAA should have incorporated the results of the technical evaluation from DCMA. According to the DoD IG, DCAA had "ample time" to incorporate the results (e.g. 7 weeks before audit report issuance.) Key Points: 1. In Jan'11 the JSF PMO stated that it was "willing and open to discuss realistic, creative solutions to the generation and transmission of audit data to seek the greatest benefit to the Government." (That sounds like getting the facts without the report.) 2. In Jan'11 the JSF PMO also communicated there was 'enormous pressure to get...wrapped up by late summer/early fall' and that the JSF PMO would use the price/cost analysis of the prime contractor on the subcontract proposal. 3. In Sep'11 the JSF PMO communicated that its prenegotiation plan relied upon the JSF PMO cost analyst input for this subcontractor and took into account the prime contractor's price/cost and technical analysis of the subcontract proposal. 4. The DoD IG agreed with the JSF PMO that its prenegotiation memo demonstrated "a combination of analytical techniques and procedures used by the contracting officer to establish a fair and reasonable pre-negotiation position" for the subcontract. Outcome: DCAA disagreed with the DoD IG on all three findings and asserted that the new DFARS adequacy checklist would take care of things in the future. The DoD IG agreed that the new DFARS checklist would help and also stated, "Although DCAA did not agree, the management comments are responsive and we do not require additional comments." (This appears to mean the DoD IG decided to just drop the issue.) Conclusion: Whereas DCAA may conclude a proposal is inadequate for audit and should not be used as a basis for negotiations, the program office will find "realistic, creative solutions" to formulate prenegotiation positions and meet schedule expectations.
  14. Absolutely! Let's use a "space pen" as the example. This pen writes in outer space and for this example only NASA may buy it. Here is my train of thought: 1. Is the space pen "of a type" normally used by the public? (Yes) 2. Has the space pen been sold or offered to the public? (No, in this example only NASA may buy it.) 3. Will the space pen be available to the public by time of delivery to NASA? (No) 4. Is the modification "of a type" normally available to the public? (For this example I would say, "No", but others might say, "Yes".) 5. Is the modification minor to meet federal requirements? (If we assume the space pen costs $1,000 and the original pen only $10, then I would say, "No.") Some people might say that the space pen is commercial because the "of a type" item used by the public has been sold to the public. Instead of going to definition (3) and making judgment calls about modifications "of a type" or minor v. major, these people might say it qualifies for definition (1) based on the "of a type" item being sold to the public.
  15. "Buy the truth and do not sell it..." (Proverbs 23:23)

  16. Epiphany: Have you ever been told something, read something, and thought something for months, but then later concluded that what you were told and how you understood what you read was different from a plain reading of the text? The Commercial Item Itself: When you read paragraph (1) of the commercial item definition found in FAR 2.101, do you think paragraph (1) is saying that the proposed item itself must be either sold or offered for sale to the public [to qualify as commercial under paragraph (1)]? When you read paragraph (1) of the commercial item definition found in 41 USC Sec. 103 (http://www.law.cornell.edu/uscode/text/41/103), do you think paragraph (1) is saying that the proposed item itself must be either sold or offered for sale to the public? How many people do you know who say or think that only the "of a type" item must be sold or offered for sale for the proposed item to qualify as commercial under paragraph (1)? Are you familiar with any case law to support this? Points against "Of a Type": It may be in the best interest of the defense industry (and perhaps the government) to act as if paragraph (1) allows for an item that has never been sold or offered to the public to qualify as commercial under paragraph (1). But is that what it actually says? What would be the point of paragraph (2) if a proposed item could qualify as commercial under paragraph (1) based on another "of a type" item having been sold or offered for sale to the public? Would not paragraph (2) be largely redundant if this was true? Also, a proposed item could qualify for paragraph (1) or paragraph (3) because both address "of a type". When I held to my previous understanding of paragraph (1), I found it difficult to establish when a "modified item" should go under either paragraph (1) or (3). Conclusion: What do you think? Is it correct by definition for an item that has not itself been sold or offered for sale to the general public to be claimed as commercial under paragraph (1) of the FAR 2.101 commercial item definition? If not, do you think it is still pragmatically appropriate?
  17. It sounds like you are "here to help" the government spend money. There is nothing wrong with that done truthfully in good faith. Help the CO!
  18. I have a follow-up question about subcontracts for DoD prime contracts based on the below statement. Do you know of any statutory prohibition against a prime contractor awarding a subcontract similar to the above scenario? The prime contractor would propose a similar CLIN structure (FFP/CR) at the prime level, but not claim anything as commercial after product integration at the prime. If the DoD customer asked for cost or pricing data on the subcontract, the prime contractor would simply provide the price negotiation memorandum documenting its price analysis. I think that CPSR reviewers might take issue based on DFARS 252.244-7001( c )(13), but would there be any public law violation?
  19. Here is a multiple choice question. Do you believe the fault is with: 1) The law itself (i.e. TINA aka TCOPD) 2) The actions of people leading up to creation of the law, 3) The actions of people after enactment of the law, 4) Some combination of the above (please specify), or 5) Some other cause (please specify)? My belief is that the fault is with the government not having its own profit incentive mechanism and people's reaction to apparent dishonest (or unethical) behavior.
  20. I am assuming you have told the government how much fee you are proposing at the prime level on your subcontract cost. It sounds like the government is just negotiating with you about fee. Have you told them how much fee is wrapped into the subcontractor's proposal to the prime? I am also assuming that the subcontract is FFP and for a commercial item. Are my assumptions correct?
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