here_2_help

When you look at your subcontract, do you see clause 52.216-7 (Allowable Cost and Payment). If so, you are already subject to 31.205-46, the requirements of which I don't believe you are interpreting correctly.

And ... today Boeing announced yet another KC-46a charge, reportedly $162 Million. No details. There are not very many defense contractors that could stand this kind of profit degradation. I daresay that, for all but the largest of the large, this kind of financial performance would spark talk of financial insolvency.

Yes. As to how, Google "Big Safari"

Hah!

DMS and tech obsolescence is a huge, industry-wide, problem and getting worse. One of the root causes (among others) is the preference for COTS and similar items. The commercial marketplace moves light-years faster than the DOD lifecycle. As a result, parts are discontinued and need to be replaced. This necessitates (1) end of life buys in order to secure an adequate part supply to support existing production needs (assuming you know what the "true" needs are), (2) identification of alternate sourcing, and (3) redesign to incorporate the new supplier's part into the product. If you're lucky, there is no change to form, fit, or function. But sometimes you don't get lucky and now you have a major redesign in the middle of production. Savvy customers fund DMS activities as a separate CLIN on the production contract. They have a contractual requirement for early notification (and the other side of the coin is prompt action by the customer). As noted above, some changes are minor and others are significant. Some customers have joint Change Control Boards (CCBs) that permit timely action and others wait for an Engineering Change Proposal (and associated cost proposal) to be submitted before taking action. If the customer doesn't take prompt action, the contractor may be due an REA for delay/disruption, especially if the lack of action impacts the production line. Thus it's a complicated topic and the cost of the end of life buy is but one aspect of the activity. You note "labor to procure and sell-off the procurement" but you missed the real cost, which is engineering labor for DMS monitoring, program labor for identification of second sources (if necessary) and for determining the right quantity of parts to procure, and the huge costs associated with redesign if necessary. You are, if you'll permit me, focusing on the tip of the iceberg but missing the rest it. I would assume that the government has the right to review the contractor's determination that the end of life pricing is fair and reasonable. However (as I hope I've illustrated with this long-winded post) what is fair and reasonable under the circumstances might not just be the price paid. First, the supplier might have the contractor over a barrel--it will charge whatever it wants because the part is going obsolete and it just doesn't care anymore or the quantity being procured is minimal when compared to the supplier's other product lines. Second, the cost of a production line stoppage is horrendous and I'm pretty sure most contractors would pay whatever was being asked in order to avoid that situation. I'm getting tired of typing now. Hope this helps.

Matthew -- To clarify: The Clinton reforms, championed by Kelman, were intended to increase individual discretion. That they did, but there was no commensurate increase in individual accountability. Most of the Obama "reforms" have consisted of rolling-back that discretion, substituting instead centralized command and control. (Hello Review Boards!) Accountability is still generally lacking. Again, my personal views.

Matthew, Not Vern but I want to respond anyway. In my view the Kelman reforms of the mid-1990's were half-right. We needed to give people more discretion. The problem was that we didn't increase their accountability. We increased discretion without commensurate accountability for that discretion. My two cents.

Vern, My post was about perception and feelings. I provided a link to one small business who perceived -- felt -- that it was wronged. You are discussing reality and the rules and what happens when you run afoul of the rules. You are not wrong ... but that misses my point. It's not about whether Quimba's perceptions were correct; it's about my assertion that those perceptions, to one extent or another, are widespread within the SB community. Disclosure: At one point I was hired by Quimba to advise on the validity of a government counter-claim. So I know more about the situation than I'm allowed to say. I simply cannot get into it other than to post the link to the blog.

Jamaal, We are dealing with "fairness" and it's about perception more than reality, in my view. Small businesses commonly perceive that the rules are rigged against them. Many DOD contractors commonly perceive that the role of DCAA is to reduced negotiated profit after completion of performance. Is that reality? Doesn't matter -- it's a common perception. Personally I believe the the transition from SBIR Phase I to Phase 2 (typically moving from FFP to CP contract type) is extremely difficult for small businesses. Is it "fair"? Maybe, in the sense that the rules apply to every business making that transition. But to the SB who suddenly has to deal with a huge change in management approach, it does not feel "fair". Shrug. My comment is basically that the vendors do not feel the rules are biased in their favor. How can we analyze a feeling?

Michael11, The payment clause in the contract should dictate the type of payment, shouldn't it?

I'm going to have to go ahead and disagree with you there. Ask any small business. In fact, I have a small business in mind -- and you don't need to ask; you can read that small business' opinion regarding acquisition fairness, in great detail. The business has many relevant blog posts on the topic. https://quimbasoftware.wordpress.com/author/quimbasoftware/

Without meaning any offense ... let me say that any CO who thinks that a performance-based acquisition mandates use of performance-based payments is not competent to administer the acquisition. Don Mansfield, how can a CO pass the requisite DAU courses and still be this demonstrably clueless? (Not that it's YOUR fault....) H2H

Michael11, Just to be crystal clear, you are telling us that the RFP requires that a PBP plan must be submitted along with the proposal, but the required FAR provision 52.232-28 was not included in the RFP. That fact, if indeed it is what you're posting, doesn't change my mind regarding anything I've posted, but it does lead me to wonder about the competence of the CO's team and its ability to evaluate what it will be receiving from offerors. H2H

Michael11, Your latest follow-up question leads me to wonder whether or not you understand that PBPs are a form of contract financing and are not payments for deliveries. That is an important distinction that impacts a contractor's revenue recognition (among other things). From an accounting perspective, receipt of contract financing payments are not treated the same as receipt of payments from submission of an invoice/public voucher. If you are unclear on the myriad implications of contract financing payments then you may be in for a rude surprise in the future.

The private sector firms (government contractors) that I've worked with have created their own vendor rating systems. The systems are used (primarily) (1) to identify approved (single source or SCD) vendors who need additional "help" to address quality or delivery concerns, and/or (2) to identify "preferred" vendors in the case of two or more vendors who can perform the work. It's an indicator, and it's used that way. The systems tend to be streamlined and as user-friendly as possible, because the companies want to make it easy for the buyers to update the ratings when appropriate to do so. Of course, my experience is limited so I can only report anecdotally.

Further to Vern's thoughts, a Google search on DOD + Innovation returns some interesting discussion points. Here's one, for example -- http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=1045:the-quest-for-innovation&catid=1:latest-news&Itemid=55

If you can't trust past performance reports, what does that say about the evaluations of past performance? A heck of a lot of time and effort and energy and taxpayer dollars have gone into CPARS and FAPISS and all the other process enablers. Are you telling me it was all wasted? If so, who should be held accountable?

Michael11 -- My comment was not directed at you. It was a public commitment on my part, to help me remember to do my own work. Apologies if it appeared otherwise. ETA: The PBP plan *does* require work and analysis, especially in this anti-PBP era in which we are all working. Not only do the trigger events need to correlate with program milestones, but the value of each trigger event must be defended against the assertion that it represents an advance payment. In addition, the DOD cash flow model/spreadsheet/tool must be used and will have a tendency to reduce the profit rate that the weighted guidelines would otherwise have suggested. Something that was at one time fairly straightforward has been turned into a bureaucratic process, although the fact that I'm disappointed and surprised by that "evolution" from simple to complex in these days of "should-cost" and BBP is itself surprising. That said, keep it as simple as you can, because that will make it easier for the CO to do their work.

Concur with Vern's comments about NFP entities. I have done some work with NISH entities (or AbilityOne or whatever they call themselves today). Let me tell you, they are very focused on revenues and costs and cash flow -- the same things that Boeing, LockMart, Raytheon, etc. are focused on. They have marketing departments and program managers and financial analysts and IT departments -- just the same as any for-profit company of comparable size. Compensation and benefits tend to be comparable as well, as least among the larger NFPs. The difference, as Vern noted, is that "profits" (the difference between price and costs) is not distributed to owner(s) but, instead, returned to the entity for use in furthering the mission. To be clear: on a project-by-project basis, there is definitely a profit or loss; the difference is that project profit is reinvested in the business and not distributed via dividends or other means.

Vern, Yep. I also remember some points of contention in previous USAF attempts to acquire/lease Boeing aircraft as commercial items....

Maybe what's being suggested here is that the USAF could have gotten a better product, faster and cheaper, if they would have acquired the tankers under Part 12 procedures?

Joel, Noted. Are you suggesting that we hold the SSA accountable for a poor award decision? If so, how?

Concur with Joel and want to add that we all need to move away from reliance on such "national treasures" and focus on doing our own literature searches. Quite a bit of Vern's information could be found by anybody with competent Google skills. I will commit here and now to doing my own research first before posting questions here. H2H

I think Todd Davis raises one interesting point -- i.e., "During my time in industry many of the systems I procured were driven by the cost of certain metals and foreign currency. We developed strategies around these risks to mitigate cost drivers." It is a well documented fact that the DOD lacks a coherent approach to acquiring certain strategic metals (e.g., titanium). Instead of centralizing purchases and using that volume to pressure the three domestic suppliers to lower prices, DOD too often pays its contractors to acquire titanium on a piecemeal basis, contract by contract. And then it protects those contractors by including economic price adjustment clauses, which (glossing over nuance) permit the contractors to pass on any price increases, thus reducing pressures to negotiate hard with one of the three domestic suppliers. Not my opinion. it is the opinion of the DOD OIG in a 2009 report released in February 2010, Among other things, the DOD OIG found that 'the BLS producer price index for titanium mill shapes, used in the economic price adjustment clause of the Navy F/A-18 E/F Super Hornet contract, was outdated and subject to extreme market volatility, as it was primarily based on spot market prices. The index was also too narrow to be used in DOD multiyear contracts…” So the DOD could do more and it should do more. It could buy titanium (and other strategic materials) directly, establish a stockpile, and then provide the metals directly to its contractors as government-furnished material. According to the DOD OIG, that change would save taxpayers from $100 to $300 million annually.

Not especially surprised. Many small businesses want to sell to the Feds but they simply do not know how to do so. They hear about GSA Schedules and think that will be their magic carpet ride to millions of dollars of revenue; but they have no clue about how to convert their contract vehicle to a closed sale and an award. They also have no clue about how to read their contract and how to comply with its terms. Last year we were contacted by a small business that wanted to sell fuel to the DLA. Long story short: The owner expected that the act of obtaining a CAGE code and registering on the required websites would be sufficient to win the DLA work. Turns out he was wholly unprepared to meet the DLA's expectations (including those involving quality control and interstate transport). We gen'd up a compliance roadmap but he was unwilling (or unable) to execute it. By "unable to execute it" I mean that he was unable to take the simplest of steps, such as changing his passwords from the ones we established for him to something only he knew. He called us a month after the project was done to ask how to access one of the primary websites--even though we had given him a deliverable with each website, user ID and initial password listed. Wasted money.