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Policy Memo on TINA Sweeps - Referenced Spector Memo

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Does anyone have a copy of the June 7, 1989 memo from Eleanor Spector entitled "Contractor Delays in Submitting Certificates of Cost or Pricing Data" that was referenced in Shay Assad's Policy memo (link posted on the WIFCON home page) ?

 

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Guest Vern Edwards

The Assad policy memo seems to have disappeared.

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I would not use the memo that the previous poster linked because it is dated June 5.  The memo I linked on June 5 for June 6 is now dated June 7.  I would use the June 7 memo on the Home Page of this site because there may have been an edit by the issuer.

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Thank you Bob.  I read both side by side and the difference in the final one dated Jun 7 is that on the second page, the last sentence in the paragraph that starts "Effective immediately..." is revised  as follows:

"Contracting Officers shall implement this policy for all future solicitations that require a Certificate of Current Cost or Pricing Data  [emphasis added] and, to the extent practicable, in currently open solicitations."

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Guest Vern Edwards

I think the memo, as revised, is nothing but a threat of blackmail.

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I like it.

Edit: Shay Assad knows what he is talking about.  He worked for Raytheon for almost 22 years, in all of their business lines, both government and commercial. He was a senior executive with Raytheon, including a stint as Chairman and CEO of Raytheon Engineers and Constructors, whom I had to tangle with over three seemingly endless years on a major Defense Program. They held two major systems contracts on our program at the time. 

He and I once sat face to face across a small meeting table in a hotel in Salt Lake City, surrounded by Senior government and Raytheon officials standing at the walls. Raytheon was trying to compel the government to pay them tens of million dollars in alleged but unsupported  impact costs on a contract that they were in the process of losing their shirts on. I told them that the government would work with them to resolve the issues but we weren’t going to simply pay them without them justifying their case. I offered them a team of several project controls experts who worked for me to work with their staff to perform a deep review of all the issues and background data in their system, including cost, schedule, manpower productivity, etc. Assad agreed to do that and to continue performance    

There are several articles on Shay Assad’s current role, such as: 

https://www.politico.com/story/2016/04/defense-pentagon-spending-assad-221776

 

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Guest Vern Edwards
7 hours ago, joel hoffman said:

I like it.

You shouldn't like it.

Large defense contractors instituted the use of TINA sweep processes back in the 1980s in order to mitigate the risk of unintentional defective pricing that arises in large organizations in which cost or pricing data relevant to a particular negotiation may be scattered about in multiple offices and divisions and among many subcontractors. Cost or pricing data that is relevant to one such negotiation might also be relevant to another, but persons within large companies may not be aware of other ongoing negotiations and of the need to share such information in order to ensure that it is furnished to multiple COs.

Keep in mind that FAR 15.406-2(b) states:

Quote

If the contractor had information reasonably available at the time of agreement showing that the negotiated price was not based on accurate, complete, and current data, the contractor’s responsibility is not limited by any lack of personal knowledge of the information on the part of its negotiators.

Emphasis added.

Keep in mind that the government might take the term "contractor" to mean the entire corporate enterprise and not just the office or division or affiliate engaged in a particular negotiation. Sweeps are a form of self-defense, and sweeps can take time, because some contractors are huge enterprises and relevant cost or pricing data may be scattered among offices located all over the country and even in foreign countries.

Now, DOD is being criticized for taking too long to award and modify contracts. To the extent that it takes a long time, it's in large measure because Congress, DOD, and DOD contracting activities have cluttered their processes and because many of their people are not competent. So the DOD pricing office wants COs to ask contractors to certify the accuracy, completeness, and currency of their cost or pricing data no later than five business days after price agreement, and hints at threats to contractors' estimating systems if they don't comply. And this sweeping memorandum does not advise COs to take specific circumstances into account when making their demands for certification within five business days.

Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long. How about waiving the requirement to submit certified cost or pricing data in urgent procurements? Then again, perhaps the risk of criticism for approving too many waivers is just too great a risk for DOD to take.

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Guest Vern Edwards
17 hours ago, govtacct02 said:

Here it is.

USA000646-18-DPAP.pdf

The above link is to the wrong version of the memo. The memo at that link is the June 5 version. The official version is dated June 7 and should be accessible here:

https://www.acq.osd.mil/dpap/policy/policyvault/USA000646-18-DPAP.pdf

The link on the Wifcon home page takes you to the official version. The differences seem to be very slight, but it's best to use the official version.

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31 minutes ago, Vern Edwards said:

You shouldn't like it.

Large defense contractors instituted the use of TINA sweep processes back in the 1980s in order to mitigate the risk of unintentional defective pricing that arises in large organizations in which cost or pricing data relevant to a particular negotiation may be scattered about in multiple offices and divisions and among many subcontractors. Cost or pricing data that is relevant to one such negotiation might also be relevant to another, but persons within large companies may not be aware of other ongoing negotiations and of the need to share such information in order to ensure that it is furnished to multiple COs.

Keep in mind that FAR 15.406-2(b) states:

Emphasis added.

Keep in mind that the government might take the term "contractor" to mean the entire corporate enterprise and not just the office or division or affiliate engaged in a particular negotiation. Sweeps are a form of self-defense, and sweeps can take time, because some contractors are huge enterprises and relevant cost or pricing data may be scattered among offices located all over the country and even in foreign countries.

Now, DOD is being criticized for taking too long to award and modify contracts. To the extent that it takes a long time, it's in large measure because Congress, DOD, and DOD contracting activities have cluttered their processes and because many of their people are not competent. So the DOD pricing office wants COs to ask contractors to certify the accuracy, completeness, and currency of their cost or pricing data no later than five business days after price agreement, and hints at threats to contractors' estimating systems if they don't comply. And this sweeping memorandum does not advise COs to take specific circumstances into account when making their demands for certification within five business days.

Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long. How about waiving the requirement to submit certified cost or pricing data in urgent procurements? Then again, perhaps the risk of criticism for approving too many waivers is just too great a risk for DOD to take.

Shay Assad knows the Defense Industry. He was an insider.  I edited my above post to add some perspective, including some personal experience dealing with him as a Raytheon exec on a major defense acquisition program. 

 

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Guest Vern Edwards
2 minutes ago, joel hoffman said:

Shay Assad knows the Defense Industry. He was an insider.  

Is that supposed to be an argument in support of the policy? 

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1 minute ago, Vern Edwards said:

Is that supposed to be an argument in support of the policy? 

https://www.politico.com/story/2016/04/defense-pentagon-spending-assad-221776 

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Guest Vern Edwards

Joel:

I know Mr. Assad. I sat on a panel with him a couple of years ago at which we discussed contract pricing. I respect him, but I do not share all of his opinions. Are you arguing that the policy is sound because Mr. Assad is promoting it? That's why you like it? You read an article in Politico?

Please tell me that's not the case. If it is, just say so. If it's not, then tell us your reasons for liking the policy. Your responses thus far have been insulting.

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Guest Vern Edwards

Joel:

Wait. I didn't see your edit.

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Guest Vern Edwards
10 hours ago, joel hoffman said:

Shay Assad knows what he is talking about.  He worked for Raytheon for almost 22 years, in all of their business lines, both government and commercial. He was a senior executive with Raytheon, including a stint as Chairman and CEO of Raytheon Engineers and Constructors, whom I had to tangle with for four seemingly endless years on a major Defense Program. They held two major systems contracts on our program at the time. 

He and I once sat face to face across a small meeting table in a hotel in Salt Lake City, surrounded by Senior government and Raytheon officials standing at the walls. Raytheon was trying to coerce the government to pay them tens of million dollars in alleged but unsupported  impact costs on a contract that they were in the process of losing their shirts on. I told them that the government would work with them to resolve the issues but we weren’t going to simply pay them without them justifying their case. I offered them a team of several project controls experts who worked for me to work with their staff to perform a deep review of all the issues and background data in their system, including cost, schedule, manpower productivity, etc. Assad agreed to do that and to continue performance on the contract. 

Shortly after that, Raytheon sold REC to another major US company in the engineering and construction business.

As far as I was concerned at the time, they were as close to being bullies and extortionists as I had ever experienced. Of all the contractors that I ever dealt with, which included several of the top ten US construction companies, Raytheon was the most difficult one. They were also the slowest in processing contract actions, including conducting sweeps after completion of negotiations, even on fairly routine mods.

Okay, I've read the above addition to your earlier post. None of that supports the wisdom of the memo. Knowledgeable people make bad decisions, and in my opinion that policy is a bad decision for the reasons that I gave above.

If you have nothing to say about the policy itself, I'll put down your approval of it to celebrity worship and nothing more. It's like saying the Vietnam War was a good idea because John Wayne supported it, he made a lot of war movies, and you met him while he was filming "The Green Berets" at Fort Benning in 1965.

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No celebrity worship here. 

I saw the article while refreshing my memory on what his official title was during the time. It provides some background on him,  the policy and industry perspective

You are a contractor and entitled to your opinion. I was a career government acquisition employee (technically still am as a re-employed annuitant when called upon for an assignment) and am entitled to my opinion concerning the policy. 

I don’t intend to debate you, as a contractor, about it. 

 

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Guest Vern Edwards
2 minutes ago, joel hoffman said:

I don’t intend to debate you, as a contractor, about it. 

What a crock, accompanied by more irrelevant biographical information. Who cares that you once detested Mr. Assad and then read an article about him that apparently changed your opinion? What's that got to do with the policy pros and cons?

The bottom line is that I think you must not know much about TINA sweeps, their origin and historical development, the rationale for conducting them, and the arguments against them, and you must not be familiar with the professional literature about them. You haven't considered the other options available to DOD policy people and to COs that would make sweeps unnecessary or at least less often so. What do you say to that? Are we going to get more biography?

And since when don't you debate contractors? In any case, you don't have to debate me as a contractor. You can debate me as a former major systems contracting officer, contracting director, and teacher and writer on contracting, and somebody with whom you often agree.

Many respectable persons have argued that sweeps are a good idea. Here's a link to an NCMA 2014 World Congress briefing on TINA given by two Naval Postgraduate School instructors and an attorney.

https://www.ncmahq.org/docs/default-source/default-document-library/pdfs/b10---enhance-your-understanding-of-the-truth-in-negotiation-act-(tina).pdf?sfvrsn=ed32202b_2

Look at chart 21, on which they say:

Quote

A “sweep” is not specifically required by regulations; it is a best practice internal control designed to improve TINA compliance.

And why didn't DOD consider alternatives to implied threats? Why not recommend the use of closing or cutoff dates for submission of data in order to reduce the need for sweeps? Why not consider waivers in urgent procurements?

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I'm with Vern--this 5-day policy is based on flawed assumptions. Cost or pricing data that might pop up in a sweep are not limited to what might be included in a specific proposal or negotiation, nor roll into a specific estimating system. Perhaps that logic would have worked within Raytheon? No clue, but I do know all business systems are not created equal. I can think of several large mostly commercial item companies who have done non-commercial work for the Government. Sweeps take weeks because a nationwide review of pricing for similar offerings is required in order to certify.

I'm not sure the Government quite understands the legwork that goes into a certificate of cost or pricing data.  

For the five-day window to have any merit, I think a better definition of what data requires disclosure is necessary. Otherwise you're still stuck with the contractor guessing what the Government might find useful in a negotiation. And now it all has to be completed in five days.

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To Vern's point about considering other alternatives, we do not know if there is data showing that sweeps play a significant role in any delays in awarding contracts.  Is this policy really about speeding up the process or a way of advancing a hidden agenda of which we are not aware?  In any event, I think it is inevitable that this will be challenged. 

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Guest Vern Edwards
13 minutes ago, Retreadfed said:

To Vern's point about considering other alternatives, we do not know if there is data showing that sweeps play a significant role in any delays in awarding contracts.  Is this policy really about speeding up the process or a way of advancing a hidden agenda of which we are not aware?  In any event, I think it is inevitable that this will be challenged. 

I have spoken with Mr. Assad and others in DOD who say that sweeps have delayed contract awards for weeks, even months. Such complaints are old, by the way. Government people have complained about sweeps ever since companies started doing them in the late 1980s. But I have not seen any hard data.

See for example, Impact of FASA on the Truth in Negotiations Act, by Simchak and Gildea, 95-08 Briefing Papers 1 (July 1995):

Quote

On major contracts, “sweeps” have taken weeks or even months to complete, with resultant delays in signing contracts because most CO's will not sign a contract until a Certificate has been included in the contract file. To minimize the delays associated with proposal updates, the proposed regulations encourage the CO and contractor to establish cutoff dates for the submission of cost or pricing data. Agreement on cutoff dates should end the current routine practice of time-consuming and expensive data “sweeps.”

Footnote omitted.

See Air Force Guidance Treats Cutoff Dates for Certified Cost or Pricing Data, 36 No. 32 Gov't Contractor ¶ 423 (August 1994):

Quote

Signed by AFMC Director of Contracting, Brigadier General Timothy Malismenko, the July 29 memorandum identifies cutoff dates as a “useful tool” that has the potential to shorten the acquisition cycle by minimizing delays associated with last-minute proposal updates and certification sweeps. Accordingly, it encourages contracting personnel to take advantage of cutoff dates, where appropriate. At the same time, the memorandum cautions that “criteria for cutoff dates should be designed to avoid limiting potential contractor liability,” as suggested by the Department of Defense Office of Inspector General in its Truth in Negotiations Act (TINA) Handbook (see 35 GC ¶ 295).

Emphasis added.

See Truth in Negotiations/Edition III by Morrison and Ebert, 89-11 Briefing Papers 1 (October 1989):

Quote

Only one “Certificate of Current Cost or Pricing Data” is required for a procurement. The FAR provides that you should submit the Certificate as soon as practicable after price agreement is reached. Citing this regulation, DOD and the Air Force have objected to the policy of some contractors to postpone submission of the Certificate until a postprice agreement review or “sweep” of data has been made.124 Although the purpose of these sweeps is to ensure that all cost or pricing data are accurate, complete, and current, DOD claims that delays in excess of 30 days in submitting the Certificate may indicate a deficiency in the contractor's estimating system.

Footnote 123 omitted. Footnote 124 says:

Quote

See Memorandum from Eleanor R. Spector, Deputy Asst. Secy. of Defense for Procurement, “Contracting Delays in Submitting Certificates of Current Cost or Pricing Data” (7 June 1989); Memorandum from Ira C. Kemp, Associate Dir., Contracting & Mfg. Policy, U.S. Air Force, “Contracting Delays in Submitting Certificate of Current Cost or Pricing Data” (27 Feb. 1987).

And see Subcontractor Cost or Pricing Data by Arnavas and Gildea, 93-08 Briefing Papers 1 (July 1993):

Quote

In deciding whether to perform “sweeps” or require them from subcontractors, a prime contractor must consider (1) the delay that consideration of such data will inevitably cause in the procurement process, (2) the real need to submit the data since the prime has no obligation to disclose data that were not reasonably available to it or are otherwise deemed insignificant, and (3) the likelihood that the additional data will cause the contract price to be unnecessarily reduced. These factors should be balanced against the specter of a possible defective pricing or false claims action by the Government if the data are not disclosed.

Emphasis added.

So as you can see, the issue of the effect of sweeps on the speed with which contracts can be awarded dates at least as far back to the late 1980s.

But keep in mind that the practice was started after the spare parts pricing scandals and the consequentially renewed interest in TINA and the False Claims Act. Companies felt that defective pricing was a high risk issue. It was and is.

TINA is one of the worst contracting laws ever enacted. It was originally proposed as a solution to unrealistically high targets in incentive contracts. I cannot prove it, but I believe that it has cost us more than it has saved. If there are significant delays associated with sweeps, the government has only itself to blame. And there are better solutions than this new policy. Among them: the use of cutoff dates and what I call "tailored" waivers.

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Guest Vern Edwards

BTW, contractors don't particularly like sweeps. See Price-Based Acquisition: Issues and Challenges for Defense Department Procurement of Weapon Systems, Lorell, Glaser, and Cook (Rand Corp., 2005):

Quote

One area of general agreement, especially among contractors, was that the requirement for certified cost or pricing data—that is, TINA data—adds additional time to the contracting process. The consensus was that the requirement for TINA data consumed about 30 extra days of effort, with little value added to the final price. Although other contracting actions can proceed while the TINA sweeps are made, the 30-day period just before contract award was seen as mostly “dead” time in the schedule

Despite the fact that contractors in some cases were more than willing to share their cost data with DoD, the addition of the TINA certification requirement was seen as a major complication to the cost data process. As pointed out previously, contractors already gather data to convince their management of the soundness of the business case for any given program, but the level of detail for internal decisionmaking is usually nowhere near the level of detail required by TINA certification. In addition, once the cost data are gathered to make the business case in a non-TINA situation, a sweep to update the data usually is not done, particularly in a period of generally stable prices. Even DoD COs confirmed that contractors typically expend considerable effort and time checking their final certified cost data to avoid defective-pricing accusations. Almost all interviewees agreed that the additional risks and criminal exposure raised by TINA are a significant and legitimate contractor concern. Sometimes program starts are delayed because contractors make extraordinary efforts to ensure that no errors, no matter how trivial, have crept into their estimates.

Thus, DoD did not see additional cost to itself because of TINA as a significant problem, but it did see delay in finalizing contracts as an issue. One CO noted that after a “handshake agreement” (agreement on costs, work scope, hours, etc.) involving an Alpha contracting process (more on this type of contract is provided below), the contractor still typically took six weeks or more to provide certified cost data. Such delays were often considered an unnecessary impediment to quick launch of a high-priority project.

Emphasis added. Footnotes omitted.

TINA is a bad law, and the new policy is a bad policy. There are other, better ways to fix the delay problem.

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On 6/8/2018 at 9:18 AM, joel hoffman said:

You are a contractor and entitled to your opinion. I was a career government acquisition employee (technically still am as a re-employed annuitant when called upon for an assignment) and am entitled to my opinion concerning the policy.

[deleted]

On 6/8/2018 at 9:18 AM, joel hoffman said:

I don’t intend to debate you, as a contractor, about it. 

*turns up nose, strikes a dramatic pose, struts off the dance floor*

On 6/8/2018 at 7:49 AM, Vern Edwards said:

Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long.

bingo

 

On 6/7/2018 at 11:06 PM, joel hoffman said:

He and I once sat face to face across a small meeting table in a hotel in Salt Lake City, surrounded by Senior government and Raytheon officials standing at the walls.

[deleted]

Seriously, @joel hoffman, do you have an actual reason for liking this policy, other than 

On 6/8/2018 at 8:21 AM, joel hoffman said:

Shay Assad knows the Defense Industry. He was an insider.

...because PepeTheFrog is one of those, also. So is Vern Edwards. Who cares?

What about the Doctor Reverend Martin Luther King, who told us to judge frogs not by the color of their building badge, but by the content of their character (and merits of their statements)? 

Edited by PepeTheFrog
edited jokes that went too far

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Pepe, I will ignore your condescending insults for the moment.  

Paragraphs 2-5 of the memo reflect the reasons that I like the idea.

Mr Assad was a Defense Industry Executive for many years and understands their business practices. 

I assume that he knows what he is talking about - and he signed the memo.

if you had read the article  that I cited, you would understand why Mr. Assad, as a former industry insider, should know what he is speaking of. 

 https://www.politico.com/story/2016/04/defense-pentagon-spending-assad-221776

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joel hoffman, PepeTheFrog apologizes because that was meant to be poking fun, not an insult. PepeTheFrog is deleting the stuff that went too far.

PepeTheFrog remembers that article when it came out. It says that Shay Assad thinks (or knows) that the government overpays regularly. But this memo is about shortening the length of time for TINA sweeps, which is about shortening acquisition timelines, not necessarily getting a lower price. 

PepeTheFrog thinks that the government is usually outmatched by large contractors. But PepeTheFrog does not think that shortening the opportunity to do compliance checks for high-risk areas of liability like TINA sweeps is helpful for that issue. For the other issue of shortening acquisition timelines, it's a drop in the ocean and laughable. "Physician, heal thyself." 

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