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LucyQ

IDIQ Decision

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here_2_help:

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I have a theory in search of evidence that more bad contracting decisions are made in September than in all the rest of the months of the year, combined.

Some theories become nightmares in implementation.  

jwomack:

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As an auditor, would it be wrong to only review acquisitions made in September?  It may be statistically skewed but the weaknesses would certainly be identified.

Before we start, we have to determine if September is different from any other month.  One easy preliminary effort is to compare contract actions and funds obligated for all months, for all agencies, and see if September is any different from another month.  If that effort shows that September is any different from the 11 other months, you're in trouble.  Here are some reasons:

  1. Everyone (with newspaper knowledge only) knows that government wastes billions of dollars in September and you have to prove it or look like an ass, 
  2. Your organization will want to staff your effort immmediately increasing your own project's costs, 
  3. The staff you receive won't know the difference between a collie and a contract action,
  4. If you are forced into a sampling strategy, you will lose control of the design of the work to some or all extent,
  5. If you have to put boots on the ground, the boots will be in the wrong part of the world and travel money is scarce,
  6. This looming disaster will consume 1 to 2 years of your career and you will be forgotten during that time,
  7. Etc, etc, etc, and it only gets worse after 1 through 6.

With that in mind, the information system you use is your only friend (of course, eventually, you will have to validate the information in that system but that is another problem).  If you don't kow the difference between a collie and contract action, resign and find something else to do.  If you continue, you're dead meat. 

OK, you know what you are doing, make that information system sing and tell you everything it has in it.  If something comes up unexpectedly, you can make it explain.  The more detail the system provides, the better.  That information system might be manipulated to answer many of your questions, it may help limit the effort to something that is doable, such as reviewing September contract actions, contract awards, etc. only, or it may help you to kill this project if it is hopeless.  Your goal is to redesign your project into something that is humanly possible.  Forget any comparison of one month's actions to another.  There are too many variables when you consider 1 through 7 above.  If you are lucky,  you may identify a handful of contracting activites that you can focus on.  If you do that, you will have to explain why you did.  In the end, your project will have to have integrity, be fair, and have a use.  If it doesn't, fight to kill it.  With the information system supporting you, you will have a fighting chance at survival.

[NOTE:  I added a few words to my #1 above so readers will know that I was being facetious with the "Everyone Knows."]

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There are three issues:

1. Does the government obligate a disproportionate amount of its annual appropriations during the last month of the fiscal year?

2. What constitutes a "wasteful" obligation?

3. Are end-of-year obligations any more "wasteful" than obligations made during the first 11 months of the fiscal year?

It's "common knowledge" that the answer to the first question is yes. There are differences of opinion about the answer to the second question and no generally accepted proposition. (What's "wasteful" is in the eye of the beholder.) And it's a common assumption that the answer to the third question is yes.

According to Curbing the Surge in Year-End Federal Government Spending: Reforming “Use It or Lose It” Rules, by Fichtner and Greene, a 2014 Mercatus Working Paper out of George Mason University, there is not a lot of empirical evidence in support of answers to questions 1 and 3. The authors of that study surveyed the literature and did their own analysis of some data. They looked at the U.S., at state governments, and at some foreign governments. They were especially interested in determining whether use-it-or-lose-it spending policies were contributing to unbalanced spending and waste and whether a carry-over or rollover policy would be better.

https://www.mercatus.org/system/files/Fichtner-Year-End-Spending.pdf

Some choice quotes, with footnotes omitted:

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The “use it or lose it” phenomenon refers to the propensity of US government agencies to spend unused financial resources toward the end of the fiscal year out of fear that leftover resources will be returned to the Department of the Treasury, and will prompt future congressional budget cuts for the agency. While anecdotes and media stories of year-end spending surges are widespread, empirical support for year-end spending surges or the motivation behind them is significantly less available.

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In 1998, the US General Accounting Office (GAO)7 reported that the number of yearend spending surges had declined since 1980, when Congress and the GAO first looked at the issue. Among more than 3,200 Inspectors General reports, the GAO found only one that linked poor contracting practices with a high rate of year-end spending. However, the GAO cautions that its analysis is limited because of “agencies’ widespread reporting noncompliance” and “the absence of complete and accurate reporting” of agencies’ spending.

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Panel member Robert D. Behn of Harvard University argues that year-end spending surges may in fact be “socially optimal” and doubts the assumption that they are inherently wasteful.

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A 2009 International Monetary Fund report found that year-end spending surges are a “commonly observed phenomenon in government administrations.” Such surges have occurred in Canada, Taiwan, and the United Kingdom, to name a few countries.

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Over the years and across departments, the trend of executive departments spending a disproportionately large amount of resources in the final month of the fiscal year is apparent, regardless of administration, party control of Congress, or delays in finalizing agency appropriations.

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Significantly more literature exists on how to curb year-end spending than empirical analyses on the extent to which such spending is wasteful.

Anecdotal accounts of year-end waste do not prove any general proposition and are very often nothing but a one-sided expression of opinion. My own experience as a contracting officer and chief of a contracting office was to have a rush of procurements at the end of the FY, but I don't know whether that rush produced disproportionate amounts of obligation. It never occurred to me to record data in that regard. I obligated what I was asked to obligate when I could do it. Most were projects that had been sitting around waiting for funding and that happened because other projects fell through and left money on the table. Although I think it is reasonable to assume that a hurry-up procurement is more likely to be wasteful than a well-planned one, I cannot prove any general proposition in that regard. I can think of some procurements that I thought were wasteful despite being well-planned.

As contracting practitioners, we need to think this through before jumping on the bandwagon of unproven assertion and accusation.

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On 9/21/2017 at 6:45 PM, LucyQ said:

We have an IDIQ with a set of NSNs. They wanted to add more NSNs and they had us submit a quote. After negotiation they said the price was too high and will not award. Is there anything we can do about it? I'm assuming they found the price to not be fair and reasonable but can we ask the exact decision why they won't award. If we don't agree with that decision, is there any way we can protest somewhere? This is under 10M and I guess it would have been a scope change because they would have added NSNs to the contract where they could then issue DO's under. 

Wow. This thread has wandered so far off the Reservation  that we can't even SEE the Reservation anymore.

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Anybody willing to jump on the bandwagon of prohibiting use of UCAS in the fourth quarter of the government fiscal year?

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About wandering "off the reservation." Here is the OP:

On 9/21/2017 at 3:45 PM, LucyQ said:

We have an IDIQ with a set of NSNs. They wanted to add more NSNs and they had us submit a quote. After negotiation they said the price was too high and will not award. Is there anything we can do about it? I'm assuming they found the price to not be fair and reasonable but can we ask the exact decision why they won't award. If we don't agree with that decision, is there any way we can protest somewhere? This is under 10M and I guess it would have been a scope change because they would have added NSNs to the contract where they could then issue DO's under. 

That was covered in the first response:

On 9/21/2017 at 3:56 PM, Don Mansfield said:

Yes, you can offer a lower price.

Really, what more was there to say?

Then someone offered a general proposition:

On 9/22/2017 at 9:39 AM, here_2_help said:

I have a theory in search of evidence that more bad contracting decisions are made in September than in all the rest of the months of the year, combined.

And the the thread was off and running, although the route was circuitous because someone decided to tell a personal story that had no bearing on the general proposition. All in all, the response to the general proposition has been more interesting than the opening post.

 

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3 hours ago, here_2_help said:

Anybody willing to jump on the bandwagon of prohibiting use of UCAS in the fourth quarter of the government fiscal year?

No. Burn all bandwagons. If you need a UCA, do a UCA.

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The GAO Redbook says the following, "GAO has conducted several studies of year-end spending and has consistently reported that year-end spending is not inherently more or less wasteful than spending at any other time of the year. In one report, GAO suggested that year-end spending surges are really symptomatic of a larger problem—inadequate management of budget execution—and that the apportionment process could be more effectively used to provide the desired management." (Vol. 1, Ch. 5, p. 5-17.)

Unfortunately, out of the five studies cited, four are from the 1980s and one dates from 1998.

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See Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement, a oft-cited 2010 study of year-end spending conducted by two researchers for the National Bureau of Economic Research (NBER). The study was based on IT acquisitions between 2004 and 2009. It reached the following conclusion:

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Many organizations have budgets that expire at the end of the fiscal year. Faced with uncertainty over future spending demands, these organizations have an incentive to build up a rainy day fund over the first part of the year. If demand does not materialize, they must rush to spend these resources on low quality projects at the end of the year. We test these predictions using data on procurement spending by the U.S. federal government. Using contract-level data on a near-universe of federal contracts, we document that spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average. Using a newly available dataset that tracks the quality of $130 billion in information technology (I.T.) projects, we show that quality scores for year-end projects are 2.2 to 5.6 times more likely to be below the central value. 

The reference to "quality" refers to the inherent value of the project for which the acquisition is being conducted, not to the conduct of the acquisition process.

The paper is interesting, but somewhat technical. Keep in mind that it is based entirely on IT acquisitions. Other studies of other types of acquisitions show that in some agencies the highest rate of obligation is during the first quarter of the fiscal year. That probably reflects annual obligations for kicking off large dollar severable support services.

Here is a link to a short nontechnical summary of the NBER study. In the summary you'll find a link to the complete study report, which is 67 pages long.

http://www.nber.org/digest/mar14/w19481.html

Heads up: There appear to be slightly different versions of this study report, some dated 2010 and some dated 2013. However, as best I can tell, they report the same conclusions.

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Here's a typical anecdotal, sensationalist report that was published in the Washington Times in 2015. This is the kind of thing that the public reads and judges you on.

Federal agencies end fiscal year with shopping spree: $8,788 in hand sanitizer, $33,000 in toilet paper among last-minute buys

http://www.washingtontimes.com/news/2015/oct/1/golden-hammer-federal-agencies-end-fiscal-year-wit/

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16 hours ago, Vern Edwards said:

No. Burn all bandwagons. If you need a UCA, do a UCA.

No problem.

As soon as you hold COs and PMs personally liable for failing to definitize in accordance with statute. Otherwise, I'm not going to burn that bandwagon.

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46 minutes ago, here_2_help said:

No problem.

As soon as you hold COs and PMs personally liable for failing to definitize in accordance with statute. Otherwise, I'm not going to burn that bandwagon.

Because the failure to definitize in accordance with statute is always solely the fault of the COs and PMs...

This is the type of reactionary behavior that, if it catches on and snowballs, would result in poor acquisition policy (though I'll gladly eat these words if you provide a sound argument for your "bandwagon").

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You can't hold COs personally liable (or responsible), because they must rely on others in their own and the contractor's organization during the definitization process in order to reach a settlement. COs lead the government definitization team, but they don't have dictatorial powers. And unilateral decisions will probably lead to litigation.

Definitization may involve more than just price and time settlements. There may be unresolved technical issues. It is not just a matter of processing paperwork.

COs should not be judged on the basis of outcomes that they cannot control through their personal performance.

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3 hours ago, Vern Edwards said:

You can't hold COs personally liable (or responsible), because they must rely on others in their own and the contractor's organization during the definitization process in order to reach a settlement. COs lead the government definitization team, but they don't have dictatorial powers. And unilateral decisions will probably lead to litigation.

Definitization may involve more than just price and time settlements. There may be unresolved technical issues. It is not just a matter of processing paperwork.

COs should not be judged on the basis of outcomes that they cannot control through their personal performance.

So since everybody is responsible, then nobody is responsible. I'm not buying it for a second. Who has the Certificate of Appointment?

The statute says what the statute says. If the CO and PM are not willing to comply then they shouldn't issue a UCA. If they do so then it's on them to comply with the statute.

And please do not give me that hoary line about how somehow the contractor didn't do something and now everybody gets to blame the contractor for not doing their jobs. If the contractor submits a definitization proposal then it's fulfilled its responsibility and everything else is on the government team.

***

Hey, look at that reservation way over there!

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20 hours ago, here_2_help said:

As soon as you hold COs and PMs personally liable for failing to definitize in accordance with statute.

 

16 hours ago, here_2_help said:

The statute says what the statute says. If the CO and PM are not willing to comply then they shouldn't issue a UCA. If they do so then it's on them to comply with the statute.

By "the statute" I presume you are referring to 10 U.S.C. § 2326, "Undefinitized contractual actions: restrictions." By "comply" I presume you are referring to the limitation on obligation of funds in paragraph (b) and the time limits in paragraphs (b)(1) and ( (f).

If so, please cite the specific language of the statute that says a CO or a PM is to be held "personally liable" for failing to comply with those requirements or that requires an agency head to hold them personally liable. Please cite anything anywhere in the statute that requires a CO or a PM to be "personally liable" for anything.

And what do you mean by "personally liable"? Liable in what way? What is the nature of the liability to which you would hold them?

Please be specific, H2H, since you obviously think it's important and since any such policy could be detrimental. You are making the argument, so you owe it to us to explain how you reached your conclusion about personal liability.

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16 hours ago, here_2_help said:

If the contractor submits a definitization proposal then it's fulfilled its responsibility and everything else is on the government team.

***

Hey, look at that reservation way over there!

I guess that means the contractor has no responsibility to negotiate in good faith, provide timely counter offers, etc.  This is the same garbage I heard once in negotiations:

  • Contractor: "We submitted a proposal with cost and pricing data, so the price is the price." 
  • Government: "Well, we analyzed your proposal/data and found these mistakes in your proposal.  We also disagree with the analysis in these BoEs.  Therefore, we think the fair and reasonable price is actually lower than what you proposed."
  • Contractor: "Well, we put a lot of time into that proposal and we submitted cost and pricing data, so the price is the price."
  • Government: "Well, we would like to discuss our findings, ask some questions, and work towards reaching agreement on what a fair and reasonable price is..."
  • Contractor:  "What more do you want from us?!  It's all in the proposal and the data.  The price is the price."

I suspect you know this, but just in case, when a UCA is in place, the two parties have yet to reach an agreement on the full terms and conditions of the contract (that's why it is called an "undefinitized contract action").  Now this is the part where you seem to be on an island with your bandwagon: when two parties have not reached an agreement, both parties have the responsibility to negotiate in good faith until they reach an agreement (or agree to go their separate ways).  A CO/PM cannot do that on their own and it is naïve to think otherwise...by it's very nature, an agreement requires a responsible/authorized individual from each party and the CO/PM only represent one of the two parties (think of it as a mathematical equation: Government Concurrence + Contractor Concurrence = Agreement).  The qualifying proposal will probably have errors and will certainly have areas that the Government takes exception to - when that happens, if we accept your proposition, the contractor would have no responsibility to engage the Government in discussions over their findings and disagreements.  How is that productive?  Agreement would be impossible, so...on this island with your bandwagon, it seems contractors would merely submit qualifying proposals and then Contracting Officers, "with the approval of the head of the contracting activity, [would] determine a reasonable price or fee...subject to Contractor appeal as provided in the Disputes clause" (DFARS 252.217-7027( c ))...I'm not sure that's preferable to the status quo, but you've yet to provide a sound argument as to why that would be better than negotiations (even when they experience a delay in reaching agreement) or why prohibiting UCAs in the fourth quarter or holding COs and PMs personally liable are good policies.

Just to see if your views are consistent, should members of the contractor's team be held personally liable for failure to submit a qualifying proposal IAW the definitization schedule?

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Moreover, on large and complex contracts, especially development contracts, technical, schedule, and budget issues might arise during the period between issuance of the UCA and submission of the definitization proposal. Such matters will have to be worked out and may delay the submission of a proposal. Such matters might arise between submission of the proposal and the date set for commencement of negotiations, or even during negotiations.

Persons who have negotiated complex UCA definitizations are familiar with those problems.

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Purely anecdotal, but it's been years since I saw a true UCA. Large contractors I've worked with tend to shy away from them and have established rather strict internal approval requirements. I imagine it's tough for a CO to put one in place for similar reasons. Both sides of the table seem to think that a UCA is a huge advantage for the other party--Gov't sees it as a license for the contractor to run costs up and contractors see it as a license for the Gov't to kill their profit on the backend.

Since these stricter internal requirements have been put in place, I don't see UCAs. I instead see lots of ATPs, NTPs, Letter Contracts, At-risk-orders, etc.  Basically come up with anything you want. Just don't call it a "UCA" because that has to get signed off up top.

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7 minutes ago, kevlar51 said:

I don't see UCAs. I instead see lots of ATPs, NTPs, Letter Contracts....

Emphasis added.

I'm pretty sure that letter contracts are UCAs. See DFARS 217.7401(d).

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1 hour ago, Vern Edwards said:

Emphasis added.

I'm pretty sure that letter contracts are UCAs. See DFARS 217.7401(d).

Please don't use facts and citations to prevent my decent into disgruntled oldmanhood.

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On 9/27/2017 at 7:34 PM, Vern Edwards said:

All in all, the response to the general proposition has been more interesting than the opening post.

:lol:  Touche'...

 

One other legitimate UCA circumstance where "no one was at fault" was what we had to deal with in the 1990's:  defense contractors constantly being bought/sold /merged, which caused havoc in the negotiation process.  You could hardly crack a proposal open before it was pulled back because guys like GE Aerospace became Martin Marietta became Lockheed Martin over a time frame measured in months (test gear for the F-14 IRST in my case, i.e., not even terribly complicated).  All of whose C&P data required some level of DCAA blessing before we could conclude negotiations.  Hence, a UCA until the CAS issues were resolved.

Adam Smith's fault I suppose?

(I, for one, don't believe there is any relationship between UCAs and FY-end spending.)  

Edited by REA'n Maker

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Admittedly I did not read all of the referenced documents in this thread word for word but in a scan one thing it appears not discussed is that  many agencies have instituted cut-off dates way before the end of the fiscal year.  I too remember the day of hurry up to beat midnight on either June 30 and then Sept 30 but now the hurry up is sooner.

One but not the perfect example I found this in my search.   Many agencies demand similar dates so that all end of FY obligations occur in early September or even August.  The example here suggests the same ideal while not coming out and saying it.  Noted, and I may be too cynical, but a SAP that is open market  has to be in to acquisition 6 months ahead of the end of a FY?    Oh the tangled web that the acquisition community has made for itself!

 

https://www.va.gov/officeofacquisitionoperations/customers/cutoffDates.asp 

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As my office assigns the 50 reqs that we just received this morning, I must chuckle.  We have accepted over 500 orders since our cut off of Sept 15th.  How can you stop the requests when the funds are not released until September.  We just got Congressional Notice on about a billion $ Thursday night. Of course they were ready for award already and awaiting the funds  but still there is a lot of work to finalize the award in the system.   We plan to be here till midnight like every year.  

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