Vern Edwards

Thirty-six years old and overdue for the grave. Outdated and demented: 10 U.S.C. § 2304 and 41 U.S.C. § 3301.

Sit down and talk it out. Like business people have done for—how long, centuries?

Why do you think the program office wants to do administrative work that you think is your job?

I don't think something in 1962 can mimic something in 2021. I think it's the other way 'round. 😎

See FAR 1.108(b).

A utopia of rules.

That's not what I was talking about. DTC was a program in which the government would specify the requirement as something like: "Design a bomb that will blow the enemy to bits and cost no more than $50,000 per unit to produce." (Design to Unit Production Cost)

Go to https://www.govinfo.gov/app/collection/cfr then scroll down to 2012, then scroll down to Title 13, and then go to 125.6(e)(7).

You're welcome, Joel. I think that what you were talking about was a form of design-to-cost, which was an old DOD policy used mainly in weapon system development and is still used in design-build contracting and in commercial design projects. You don't read much about it in government contracting anymore. For those interested in design-to-cost (DTC), there is plenty of material about it available by Googling the term.

I want to emphasize that my remarks pertain to contracts for services, especially long-term and complex (multi-function/multi-task/situation-dependent) services, such as contracts for various types of support services. I won't write a lengthy treatise here, but long-term and complex service contracts are invariably incomplete. Such contracts require the contractor to respond to contingencies, but the SOW cannot describe every contingency that may emerge in the course of performance. Contract law has long been grounded in the presumption that contracts are complete, and government contract policy and contract clauses reflect that notion. But legal scholars and economists now recognize that contractual completeness is often an impossibility. There is now an extensive literature in the fields of law and economics about incomplete contracts, and I wrote about it at Wifcon in the past. One American economist, Oliver Hart, won the Nobel Prize in economics for his work on incomplete contracts. One result of the recognition of contractual incompleteness has been the emergence of the concept of relational contracts. Ralph Nash and I wrote a long article about relational contracting for the Defense Acquisition Review Journal in September 2007, entitled, "A Proposal For A New Approach To Performance-Based Services Acquisition," pp. 352-363. https://www.dau.edu/library/arj/ARJ/arj45/ARJ45_complete.pdf, in which we stated: And it is for those reasons that I urge readers here to be cautious about disclosing budgets or estimates in RFPs, because budgets and estimates may not, in and of themselves, communicate the realities of contract performance, and because those realities might not be known or knowable at the time of proposal preparation. Disclosure of budgets and estimates might mislead, rather than inform, unless accompanied by appropriate supplemental information, advisories, caveats, and disclaimers. Incumbent contractors and others familiar with an agency's objectives, operations, and behavior, and with the actual conditions or performance, will know more about the truth, because they have lived it or seen it. They will know about the kinds of contingencies that might arise during the course of performance and the kinds of adjustments that might have to be made during performance, and are thus wise to the limits of budgets and estimates. But it may be hard for uneducated contracting officers and "technical" personnel to acknowledge and explain the inability of their solicitation and contract documents to communicate the government's "true" requirements. Be cautious. That is the only point that I want to make. And conduct discussions during source selection. Google "incomplete contracts" and "contract incompleteness" if the idea interests you. See "Overcoming contractual incompleteness: The role of guiding principles," by Frydlinger and Hart, at https://voxeu.org/article/overcoming-contractual-incompleteness-role-guiding-principles. And read, "The Many Futures of Contracts," by Ian R. Macneil, 47 S. Cal. L. Rev. 691 (1973-1974). It's a great and influential legal essay, written by the father of relational contracting.

The process can't negate that. An incumbent's advantage is hard-earned.

True in theory. Naive in reality.

@here_2_helpI just sent the article to you.

Oh, from time to time.

Here is an interesting article from The Dickson Law Review of Penn State University: The Contracting Officer: his Authority to Act and His Duty to Act Independently, 70 Dick L. Rev. 333, 1965 - 66. (Note the date on the article. It was written before passage of The Contract Disputes Act of 1978.) https://ideas.dickinsonlaw.psu.edu/dlra/vol70/iss3/5/ A quote: "Only when the contracting officer, who is the central figure in the procurement process, acts independently, responsibly and fairly, can both the Government and the contractor achieve economy and efficiently." Is the contracting officer still "the central figure in the procurement process"?

Here's a headline from a 1962 issue of Aviation Week and Space Technology: "Defense to Speed Development, Cut Costs: Services ordered to revamp research, procurement procedures to reduce lead time and avoid overruns" And so it goes.

No. At least 30 media opinionators have offered differing views.

Some additional thoughts: If you are thinking about revealing an estimate, are you going to reveal the constituent details, such as the amounts included for materials (including the bill of materials) and subcontracts, labor, other direct costs, indirect costs, and profit? Are you going to reveal the age of the estimate? Would you show how you allocate the estimate by SOW task? Or are you going to reveal just the bottom line? If you are thinking about revealing a budget (funding), are you going to reveal the bases for its development and when it was developed? (Maybe two years or more before issuance of the solicitation.) Are you going to include a caveat in the RFP to the effect that the government does not represent the estimate to be reliable or that the budget represents the anticipated cost of performance. Will you say that the government does not indemnify the successful offeror from injuries caused by government estimating errors or budget insufficiency? Will you say that the government takes no responsibility for estimating errors and omissions and budget shorfalls? ji20874 said, "If the budget estimate is too low, offerors will say so and the agency can adapt." Maybe. Hopefully. But are you going to provide a way for them to tell you that without the risk of being eliminated from the competition? Are you going to give them time to tell you before submission of proposals, or must they do so only with submission? If you reveal the budget or estimate in the RFP, are you going to conduct discussions with offerors in the competitive range in order to go over the government's estimate or budget and their proposals and try to reconcile any differences and discuss uncertainties and risks and how they might be resolved during contract performance? I'm writing these things so the people who come here to learn won't think it's as simple as just putting some dollar amount in a solicitation. Don't get me wrong—I'm not opposed to the idea, but I think it must be done professionally.

BTW, see FAR 36.203, Government estimate of construction costs, paragraph (c).

What do you mean by "will the contractor [be] eligible to claim"? "Eligible"? Are you asking whether the contractor would be entitled to a price adjustment for something? What do you mean by "idle charges"? "Idle charges"? I don't know what that means. Do you mean the cost of idle facilities or the cost of idle capacity, or something else? The phrase "idle charges" does not appear anywhere in the FAR System, in any board of contract appeals or Court of Federal Claims decision, in any Federal Circuit decision, in Government Contract Costs & Pricing, in the Government Contract Costs Pricing & Accounting Report, or in The Nash & Cibinic Report.

The new independent contractor rule and its subsequent withdrawal were matters of politics. The Trump Administration wanted to make it easier for employers to label workers independent contractors. The Biden Administration wants those workers to enjoy employee status and the protections that come with it. The Trump Administration pushed the rule through just days before Biden's inauguration. The Biden Administration responded by withdrawing the rule as soon as it took power. This is all very clear from the explanation of the rule announcing the withdrawal and the discussion of the public comments received about the withdrawal. If you are a professional regulation writer, your job is to write rules as directed. You should not be personally invested. It's just another task, one way or the other.

Budget or estimate? They are not necessarily the same. A budget is how much money you have, which might be based on a cost estimate or on the amount you were given last year. An estimate is a prediction, perhaps a three or four year old one, of how much it will cost to achieve some end result. At least, that's what I take those words to mean. While there is nothing inherently improper (as far as I know) about disclosing the government's estimate or budget, you should be very careful about doing it, especially in acquisitions for services. What are you saying to offerors? What's the message? Why are you disclosing the budget or estimate? In order to "scope" the contract? If so, are you promising to stay within scope? Did the person or people who wrote the statement of work base it on the estimate or budget? Did they write it with the estimate, budget, and future costs in mind, or did they simply cut and paste from someone else's SOW for a similar project or from the last contract? If the contractor bids to the disclosed budget or estimate, but the requiring activity didn't keep that budget or estimate in mind when writing the SOW, and doesn't keep it in mind when demanding service, and insists upon "full performance" in return for payment, you could end up with a claim for out-of-scope change, and a court or board might consider the estimate or budget when interpreting the SOW. The contractor's lawyer will almost certainly argue that it should. Disclosing a budget or estimate in an RFP for a service is not the same as telling an auto dealer that you don't want to spend more than $45,000 for a pickup. There might be legal consequences after contract award. It's not a good idea for rookie acquisition teams or for agencies in which the requiring activity and the contracting office are not working very closely with one another and do not share a solid understanding of performance costs. And it's an especially stupid thing to do, in my opinion, if you are going to award without discussions.

@Sam101 Thank you Sam101. Your answers are clear (a rarity here at Wifcon Forum), and I appreciate them.

With respect to the rule that withdrew the rule, 86 Fed. Reg. 24303, May 6, 2021—the one that Bob posted on May 6—the topic is a very complex legal issue. Reading it is heavy going, but not because the rule is badly written. It struck me as one heck of a great piece of writing. To the extent that it is hard to follow, it is because the law (regulation and case law) is very complex. The explanation is masterful. That writer designed and executed terrific English sentences. Footnotes omitted. Very clear. Someone should mail a copy to the FAR councils. For students of regulation, the rule's discussion of the issues shows how terribly difficult it can be to define seemingly straightforward terms like employee and independent contractor in the context of government policy.

@Sam101 I have three questions for you: 1. What kinds of things do you buy? 2. What do you mean by "approach"? 3. Is the offeror's description of its "approach" supposed to be a promise or set of promises or is it just information?