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InNeedofWisdom

"Debunking Acquisition Reform Myths" - A Speech from 1995

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I found an interesting speech about HR 1670 from 1995 (which I do not believe was signed into law) at http://www.defense.gov/Speeches/Speech.aspx?SpeechID=948. Here are some quotes.

...I am concerned about the attempt in HR 1670 to create a broader definition of a commercial item or service. I am all for buying commercial items and services. However, it appears to me that current acquisition reform proposals are attempting to define government and defense-unique items and services as commercial items in order to exempt them from coverage of the Truth In Negotiations Act and keep government from gaining auditor access to contractor records...

I wonder if the speaker meant to include FASA from 1994 when he said "current acquisition reform proposals". Does his statement about HR 1670 apply today?

I am opposed to the section of HR 1670 that proposes further changes to the TINA. As presently written, TINA allows an exception to the requirement for providing cost or pricing data when the agreed upon price is based on established catalog or market prices of commercial items that are sold in substantial quantities to the general public. The proposed legislation would eliminate that exception and apparently replace it with another exception that is a great deal broader.

Here was the speaker's perception about attitudes in 1995 when he (the deputy DoD inspector general) was delivering this speech.

The prevailing attitude this year seems to be to eliminate use of the TINA and the auditors. The companies and even some DoD officials state that if you eliminate TINA and auditor oversight, then the DoD can buy their DoD-unique items from contractors at lower prices. Well, if you believe that you will generally receive a better price by eliminating the right to ask for cost and pricing data or the opportunity for auditors to look at a contractor's records, then I have a bridge you will be interested in.

I wish the speaker had given more data to back up the following claim.

The truth is that requesting cost and pricing data is a common commercial practice. Large companies that have purchasing leverage will generally make their suppliers provide cost and pricing data. Contractors who do business with the government gripe about TINA, yet they will make their own suppliers show them exactly what a product costs to make before they buy it. If the large company detects they overpaid that supplier, the supplier will probably never get another contract. The government cannot exercise a similar option to simply exclude a supplier.

Is that so? Here is part of the conclusion of the speech. What do you think about the statement that CICA and TINA together "help add suppliers and reduce prices"?

This is probably a good time to add a few thoughts on some of the concerns I have with the acquisition reform process to date. I happen to believe that the process has been focused to a major extent on those cost drivers that the defense industry does not like.

These cost drivers can, in fact, be burdensome and inappropriately used, and even when properly applied, they can cost the contractor a lot of time and money while they help to assure the government gets a quality product at a fair price. I am referring to such things as Competition in Contracting Act and the Truth in Negotiations Act, which help add suppliers and reduce prices. These safeguards and other safeguards have been built into the procurement process in response to past abuse and snafus.

Acquisition reform, especially much of what is being proposed in this second round, is carrying out a longstanding industrial or supplier agenda to curtail or eliminate many of these key safeguards which have been built into the United States procurement process over the past 200 years. I broadly categorize these as disclosure requirements, certifications, price-reduction requirements and audit rights. Certain of these safeguards help ensure cost (fair price) and quality, both of which become greater risks as we rely more on commercial products and practices.

While industry strenuously argues that such safeguards are incompatible with commercial sales practices, it is our experience and that of the inspectors general at the General Services Administration and the Department of Veterans Affairs that large private-sector purchasers consistently require these same types of safeguards in their own dealing with suppliers, as does the federal government.

I do not know if there are many people outside a government oversight agency that see things the same way as the speaker. What do you think?

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The truth is that requesting cost and pricing data is a common commercial practice. Large companies that have purchasing leverage will generally make their suppliers provide cost and pricing data. Contractors who do business with the government gripe about TINA, yet they will make their own suppliers show them exactly what a product costs to make before they buy it. If the large company detects they overpaid that supplier, the supplier will probably never get another contract. The government cannot exercise a similar option to simply exclude a supplier.

That's not true. Not even close. It's as wrong as it can be. If Derek J. Vander Schaaf really said that, he either did not know what "cost or pricing data" are, did not know commercial practice, or both. Probably both.

As for TINA and CICA, TINA has probably cost the government more than it has saved, and price or cost competition for the design and development of big ticket items is just plain stupid. Look at how successful CICA and TINA have been at controlling the costs of systems like the F-22 and the F-35.

Prior to becoming deputy DODIG (and acting, at various times), Vander Schaaf was a congressional staffer. He retired in 1996. After he retired he went to work for a contractor in violation of conflict of interest laws and had to pay a civil forfeiture to the Justice Department in the amount of $12,125:

http://www.justice.gov/opa/pr/1999/June/236crm.htm

There is not much current information about him. I have been unable to find any information about his current activities, and he appears not to have written a memoir.

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The history of TINA-related legislation and its implementing regulations is a wonderful case study of how government procurement policies are frequently misinformed, misdirected, and mishandled. As a result the system is now burdened with a complex, confusing, costly, inefficient, resource bloated, Government-unique activity that churns out reams of data that most practitioners really don't know how to manage, analyze, or apply. TINA's merits are a myth of acquisition reform that is worth debunking.

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...TINA's merits are a myth of acquisition reform that is worth debunking.

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.

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