Proper Contract Type for New Requirement?

[ashleyh]

I guess the quote below sums up my concerns. I want to have a contract vehicle in place that will allow for changing technologies and unknown types of vehicles/brands.

I realize that I am inexperienced and have "dribbled" in information. But I thought this was the purpose of these boards- to increase one's knowledge to become better contracting professionals.

I wish I could give you more definitive information, but my end users dont even ahve a good grasp of what they need/want. In addition, I havent worked on this at all for the past two weeks (at a DAU course- thanks Don from San Diego for mentioning that these forums exsist) and was just given the requirement only a week or two prior. I was trying to get a jump on the gun and start researching so when I got back to work I could have a place to start. Clearly I should have waited until I had more information available.

Yes, but -

We do know that there is a recurring requirement.

The cost of both labor and parts will vary by vehicle type, which is unknown until there is a delivery from GSA.

It will apparently vary each time there is an order and vehicle brands and models will change year by year.

The equipment and materials will vary over time. Emergency vehicle lighting systems are being updated as lighting and electronics technology changes. Solid state electonic lighting is in an extreme mode of change right now. For instance, pricing of LED chips has rapidly changed in only the last two months and the technology and availability of LED chips and applications is in hyper change per a briefing by a Phillips Lighting representative that I attended yesterday. We all know that computers are constantly being updated.

We don't know the size or magnitude of a typical order or the magnitude of the program.

We don't even know how many dealers there are who can perform the work.

Based on that number of unknowns, I would wonder why we would lock in any price or firm for 5 years...

[joel hoffman]

I guess the quote below sums up my concerns. I want to have a contract vehicle in place that will allow for changing technologies and unknown types of vehicles/brands.

I realize that I am inexperienced and have "dribbled" in information. But I thought this was the purpose of these boards- to increase one's knowledge to become better contracting professionals.

I wish I could give you more definitive information, but my end users dont even ahve a good grasp of what they need/want. In addition, I havent worked on this at all for the past two weeks (at a DAU course- thanks Don from San Diego for mentioning that these forums exsist) and was just given the requirement only a week or two prior. I was trying to get a jump on the gun and start researching so when I got back to work I could have a place to start. Clearly I should have waited until I had more information available.

Ashley, please don't apologize. I'm not criticizing you. I was reacting a comment that this should be condisered to be "Procurement 101" for those responding to your initial post and that an answer should have been provided based upon the level of information in your first post or two.

Instead, it was apparent to me that we didn't have enough understanding of the market or the nature and variability of the requirement to provide definite answers.

Just because a method was once used doesn't necessarily mean that it is the best or only way to get the work done.

If scope and price will vary considerably both in the short and long term, I'd consider getting pricing as current to the actual requirement rather than lock into long term pricing based upon "averages" of different vehicle types, which may or may not represent what vehicles you get over the next 5 years or for equipment that is rapidly changing both in price and in technology.

[Guest Vern Edwards]

Yes, but -

We do know that there is a recurring requirement.

The cost of both labor and parts will vary by vehicle type, which is unknown until there is a delivery from GSA.

It will apparently vary each time there is an order and vehicle brands and models will change year by year.

The equipment and materials will vary over time. Emergency vehicle lighting systems are being updated as lighting and electronics technology changes. Solid state electonic lighting is in an extreme mode of change right now. For instance, pricing of LED chips has rapidly changed in only the last two months and the technology and availability of LED chips and applications is in hyper change per a briefing by a Phillips Lighting representative that I attended yesterday. We all know that computers are constantly being updated.

We don't know the size or magnitude of a typical order or the magnitude of the program.

We don't even know how many dealers there are who can perform the work.

Based on that number of unknowns, I would wonder why we would lock in any price or firm for 5 years...

It appears that, at present, the government knows how it wants each vehicle type to be refitted, including the types of equipment to be installed. If, at any time, the government wants to change the equipment it can issue a change order or negotiate a supplemental agreement. Part of the equitable adjustment would be for consequential changes in labor costs. Big deal. Such contracts are very common.

If the government anticipates frequent and numerous such changes, it can choose between a strategy of making contract changes or conducting frequent new competitions. Again, big deal.

You are making a mountain out of a molehill. Instead of helping the newbie with simple answers and letting her ask follow-ups, we may have made her confusion worse.

[Don Mansfield]

I guess the quote below sums up my concerns. I want to have a contract vehicle in place that will allow for changing technologies and unknown types of vehicles/brands.

I realize that I am inexperienced and have "dribbled" in information. But I thought this was the purpose of these boards- to increase one's knowledge to become better contracting professionals.

I wish I could give you more definitive information, but my end users dont even ahve a good grasp of what they need/want. In addition, I havent worked on this at all for the past two weeks (at a DAU course- thanks Don from San Diego for mentioning that these forums exsist) and was just given the requirement only a week or two prior. I was trying to get a jump on the gun and start researching so when I got back to work I could have a place to start. Clearly I should have waited until I had more information available.

ashleyh,

I forgot to mention that things could get rough in this forum. However, folks typically end up getting good advice. Don't get discouraged. Welcome.

[joel hoffman]

It would seem to me that you'd want a contract vehicle that allows you to 1) have competition for orders, if there are sufficient sources 2) a pricing arrangement that doesn't require you to renegotiate unit labor and parts prices due to variations in vehicles over the course of one year or due to totally different vehicle types in future years 3) a pricing arrangement that you can automatically take advantage of latest technology and related market pricing 4) without having to settle for "average prices" for some hypothetical mix of vehicles or equipment that doesn't reflect actual usage.

[Guest Vern Edwards]

It would seem to me that you'd want a contract vehicle that allows you to 1) have competition for orders, if there are sufficient sources 2) a pricing arrangement that doesn't require you to renegotiate unit labor and parts prices due to variations in vehicles over the course of one year or due to totally different vehicle types in future years 3) a pricing arrangement that you can automatically take advantage of latest technology and related market pricing 4) without having to settle for "average prices" for some hypothetical mix of vehicles or equipment that doesn't reflect actual usage.

You might want those things. I don't know that I would. 1) I don't particularly like multiple-award IDIQ contracts and I don't know that they would be particularly helpful in Ashleyh's scenario. 2) If you can find somebody to give you a pricing arrangement like that, get them into a lunatic asylum before they hurt somebody. 3) Ditto. 4) Who suggested settling for average prices? Not me.

[joel hoffman]

With the limited ability to obtain the 4 objectives I outlined above, using procurement techniques that would be typically available to a good commercial company purchasing agent, its no wonder that the government buys $250 screws, $600 toilet seats (for toilets on C-5's that don't work anyway), and pays premium prices for electronics that are months to years behind market pricing trends.

If a contracting office doesn't have the experience or time to smartly price services and materials, they won't have the time or knowledge to mod fixed price contract line items to take advantage of market conditions or to adjust for actual fleet composition.

A simple method to obtain up to date, competitively priced equipment and installation, based upon the actual fleet, should be the goal here in my opinion.

[Don Mansfield]

With the limited ability to obtain the 4 objectives I outlined above, using procurement techniques that would be typically available to a good commercial company purchasing agent, its no wonder that the government buys $250 screws, $600 toilet seats (for toilets on C-5's that don't work anyway), and pays premium prices for electronics that are months to years behind market pricing trends.

joel,

Do you really believe that the government buys $250 screws and $600 toilet seats? When you pull the string on those stories, they typically turn out to be apocryphal. Remember the $600 hammer?

http://www.accessmylibrary.com/article-1G1...600-hammer.html

[formerfed]

A simple method to obtain up to date, competitively priced equipment and installation, based upon the actual fleet, should be the goal here in my opinion.

That is why I suggested conducting market research early on in this thread.

Way too often solicitations get issued that doesn't make sense to anyone, especially those companies that try and respond. That's because the government doesn't understand the marketplace.

If I were the CO and didn't know about this segment of the industry, I would call or visit some companies to become better educated. Some of my questions would be:

How do you normally price these products and services?

Here's what we (the government) are trying to do. If you were in our shoes, how would you approach it?

What do other customers like us do? (this would include state and local organizations plus commercial security companies)

What would you recommend we do to stay current with technology?

How should we deal with repairs/spares?

This could be as simple as a 30 minute phone call, depending upon the size of the overall requirement.

[joel hoffman]

Formerfed, I agree with you.

joel,

Do you really believe that the government buys $250 screws and $600 toilet seats? When you pull the string on those stories, they typically turn out to be apocryphal. Remember the $600 hammer?

http://www.accessmylibrary.com/article-1G1...600-hammer.html

Oh - please, Don. You obviously missed the point. As for wasteful contracting, you should be able to cite numerous examples.

American Airlines managed to destroy my almost new government computer last June in a freight elevator accident at the Pensacola Airport. It took 4 months and about 4 offices for my organization to figure out how we could get reimbursed and how much the replacement would cost.AA would only reimburse me, not the government. Finally, I drafted a letter for my boss to sign, saying that I owed the government the cost of a new computer, so I could get AA to write me a check for a replacement. The new computer was $1530 through the government.

I had also checked the local dealer, who would have charged me about $520 for the same exact computer. AA wrote the check for $1530 to me. I wrote a check to the government for $1530. The last I heard, they were still trying to figure out how to get the money into the correct account to purchase the new computer.I ended up with an old loaner.

[Guest Vern Edwards]

The work in this case seems to be simple and fairly standard. The government sends a car to a shop that refits it with specified, specialized equipment. I see no need for extensive market research. This is a labor and materials buy. The government has been awarding contracts like it for decades. Fire and police departments, ambulance companies, etc., have this kind of thing done all the time. There is nothing mysterious or complicated or difficult about it. Joel's molehill is the size of the Eiger.

[Don Mansfield]

Oh - please, Don. You obviously missed the point. As for wasteful contracting, you should be able to cite numerous examples.

American Airlines managed to destroy my almost new government computer last June in a freight elevator accident at the Pensacola Airport. It took 4 months and about 4 offices for my organization to figure out how we could get reimbursed and how much the replacement would cost.AA would only reimburse me, not the government. Finally, I drafted a letter for my boss to sign, saying that I owed the government the cost of a new computer, so I could get AA to write me a check for a replacement. The new computer was $1530 through the government.

I had also checked the local dealer, who would have charged me about $520 for the same exact computer. AA wrote the check for $1530 to me. I wrote a check to the government for $1530. The last I heard, they were still trying to figure out how to get the money into the correct account to purchase the new computer.I ended up with an old loaner.

joel,

That story better illustrates your point because it's probably true.

I'm not trying to get on your case, but when Joel Hoffman makes reference to the Government buying $250 screws and $600 toilet seats, some people are going to believe that it's true because Joel Hoffman said it. As such, I think you should be more careful, that's all.

[Guest Vern Edwards]

I don't see what Joel's story about his computer has to do with Ashleyh's questions.

[joel hoffman]

joel,

That story better illustrates your point because it's probably true.

I'm not trying to get on your case, but when Joel Hoffman makes reference to the Government buying $250 screws and $600 toilet seats, some people are going to believe that it's true because Joel Hoffman said it. As such, I think you should be more careful, that's all.

"NAVY's $600 Toilet Seat

The P-3C Orion antisubmarine aircraft went into service in 1962. Twenty-five years later it was determined that the toilet shroud, the cover that fits over the toilet needed replacement. Since the airplane was out of production this would require new tooling to produce. These on-board toilets required a uniquely shaped, molded fiberglass shroud that had to satisfy specifications for the vibration resistance, weight, and durability. The molds had to be specially made as it had been decades since their original production. The price reflected the design work and the cost of the equipment to manufacture them. Lockheed Corp. charged $34,560 for 54 toilet covers or $640 each.[1]

President Reagan held a televised news conference in 1987, where he held up one of these shrouds and stated: "We didn't buy any $600 toilet seat. We bought a $600 molded plastic cover for the entire toilet system." A Pentagon spokesman, Glenn Flood stated, "The original price we were charged was $640, not just for a toilet seat, but for the large molded plastic assembly covering the entire seat, tank and full toilet assembly. The seat itself cost $9 and some cents.… The supplier charged too much, and we had the amount corrected."[2] The president of Lockheed at the time, Lawrence Kitchen, adjusted to the price to $100 each and returned $29,165. "This action is intended to put to rest an artificial issue," Kitchen stated.[1]

References

1. ^ a b http://www.time.com/time/magazine/article/...iid=chix-sphere

2. ^ "But It Would Be Wrong" By: William Safire The San Francisco Chronicle Sunday, April 20th, 1986"

Obtaining a multitude of unit prices for pricing up to five years out from one provider, when neither the products (evolving technology and prices) nor the vehicles that they will be installed on are static in nature , doesn't seem to be smart acquisition to me. The computer is just another example of the government paying 2-3 times more than just buying it at a computer store, since Don didn't like the $600 toliet seat example, which was well publicized back in the 1980's. The above is from Wikipedia.

[joel hoffman]

Sorry, Don - the government only paid $76 for $.57 screws, not $250.

(see http://www.pogo.org/pogo-files/testimony/c...0315.html#23-24

Footnote 23. Department of Defense Authorization Ace for Fiscal Year 1999 Report on Authorizing Appropriations, Senate Armed Services Committee, Rpt. 105-189, and "U.S. Senate Panel Tells Pentagon to Stop Parts 'Pricing Abuses,' " Tony Capaccio, Bloomberg Business News, May 29, 1999.)

[Don Mansfield]

joel,

Your first post proves my point--once you pull the string on these stories, they typically turn out to be apocrophyl. The public is told that the Government bought $600 toilet seats implying that we must be overspending because toilet seats only cost $25 in Home Depot. The public is not told that 1) the Government actually bought uniquely shaped, molded fiberglass toilet shrouds that had to satisfy specifications for the vibration resistance, weight, and durability, 2) the molds had to be specially made as it had been decades since their original production, 3) they would require new tooling to produce, and 4) the price reflected the design work and the cost of the equipment to manufacture them. Considering all that, it doesn't sound like the Government got that bad a deal.

As for your second post, POGO is still taking credit for exposing the $436 hammer. As such, they shouldn't be trusted to tell the whole story.

[Guest Vern Edwards]

Bob,

It's time to restore the Newbies page.

Vern

[Don Mansfield]

Bob,

It's time to restore the Newbies page.

Vern

I second that.

[joel hoffman]

I second that.

Don - according to the articles, the toilet seats did cost the Navy over $600 until Lockheed was publicly challenged, whereupon they refunded most of the cost. Apparently, the Navy only needed tolet seats, not the entire toilet top assembly, although it wasn't entirely clear.

I keep trying to challenge the suggested contract method of a five year fixed price single award IDIQ (no competition for orders for 5 years) with numerous CLINS to cover the outyears and the various current vehicle models. I don't think it is the most appropriate method where the much of the scope of the work and the pricing will likely fluctuate in the near term as well as in the long term. Major portions of the installed equipment (emergency lights and computers) are advancing and changing. Pricing for solid state lighting and computers are trending downward. The types of vehicles that GSA will be providing over the next five years aren't really known per the questioner and based on industry updates, competitive buying at GSA, changing models, etc. Prices for parts and equipment for installation of lights, sirens and computers appear to vary with make and model as well as model years, per the questioner.

Vern's response is that I'm making a mountain out of a molehill along with other criticisms from Don and Vern. At one point Vern indicated the government should keep up with pricing trends, equipment advances and vehicles and just write mods. As much as this is a new, inexperienced office, I have doubts about the government's ability to keep abreast of market changes.

Please explain why the recommended contract vehicle (single award ID/IQ and maybe a requirements contract with fixed price CLINs) is the only appropriate one under such circumstances. Or is it the only type available? Thanks.

[Guest Vern Edwards]

Please explain why the recommended contract vehicle (single award ID/IQ and maybe a requirements contract with fixed price CLINs) is the only appropriate one under such circumstances. Or is it the only type available? Thanks.

An IDIQ because the requirement is indefinite in terms of both timing and quantity. (Go with requirements, if you can get better pricing.)

Single award because multiple-award is a pain in the ass. The administrative cost and delay of multiple award would exceed the benefit.

Fixed-price because that's the preferred type by policy and is better than either T&M or cost-reimbursement. There is no significant cost uncertainty about the requirement. You are foolish if you think that T&M or C-R necessarily result in better pricing. And nobody recommended a five year contract. I certainly didn't. I searched the thread and you are the only person who has mentioned a five-year contract.

By the way--I was in DC with the Air Force at HQ AFSC as a GS-14 when the spare parts pricing scandal hit in the early 1980s, and I worked on the issue for USAF. I still have my copy of the Air Force's "AFMAG" report on the matter. You don't know what you are talking about. All you seem to think you know is from websites and press reports, which, as we all know, are really, really reliable. Right? Smart people know their limits and shut up about things they don't know about. In any case, your yapping about $600 toilets has nothing to do with Ashleyh's problem.

[joel hoffman]

Fixed-price because that's the preferred type by policy and is better than either T&M or cost-reimbursement. There is no significant cost uncertainty about the requirement. You are foolish if you think that T&M or C-R necessarily result in better pricing. And nobody recommended a five year contract. I certainly didn't. I searched the thread and you are the only person who has mentioned a five-year contract.

Vern, Where did I ever mention a T&M or cost reimbursement vehicle or that it would result in a better pricing arrangement? Please refrain from accusing me of being foolish for something I didn't bring up or refer to. I may be foolish but not for that reason.

On 2 February, Ashley stated that she forgot to mention that there will be 4 option years. I read that to mean that she is to contract for one year with four option years, which would mean a contract for five years. Therefore, I have assumed that your preferred solution would include selecting a single vendor with five years of pre-priced CLIN's for unknown future vehicle types and ever changing computer models and other solid-state electronics in an ever changing electronics market. You also said that its no big deal to keep modifying the contract to keep up with actual market changes and actual fleet composition. None of that seems to make sense to this fool as the only way to meet Ashley's needs.

Normally, in acquisition planning, there is give and take and different viewpoints are discussed and debated. You have a propensity to belittle anyone here who doesn't instantly agree with you. I'm sorry that I questioned your recommendation.

[joel hoffman]

Vern, I also apologize for not agreeing with you that there is little or no uncertainty in trying pre-price computers and lighting systems five years in advance. I just don't happen to agree. I don't think that computer stores or emergency lighting manufacturers even know what the market will be like over the next several years, let alone in four or five years. Again, I'm sorry for exressing an opinion about the future requirement different than yours.

[Guest Vern Edwards]

Apology accepted.

As for an exchange of views, why don't you tell us how you would structure the contract? Can you do that without hitting Ashleyh up with 100 questions? You seem to know enough about the requirement to say what you wouldn't do. So say what you would do.

For the record: I would use a fixed-price, single-award IDIQ contract with a CLIN for each of the various vehicle refit jobs--each price to include labor and equipment kits. I would include an informational subclin for labor and one for equipment under each CLIN. Each equipment kit informational subclin would identify the items in the kit and the item prices. When an item in a refit kit needs to be changed during the period of performance, I would modify the contract and negotiate a price adjustment. I would think that the kit items are commercial.

As for belittling: I'm belittling your notion that putting equipment on vehicles is like buying the development of a Mars lander. I'm also belittling the way you brought in spare parts pricing, of which you know nothing except what you've read in the papers.

Okay, Joel. Bite the bullet. How would you do it? I've got an open mind.

[joel hoffman]

Apology accepted.

As for an exchange of views, why don't you tell us how you would structure the contract? Can you do that without hitting Ashleyh up with 100 questions? You seem to know enough about the requirement to say what you wouldn't do. So say what you would do.

For the record: I would use a fixed-price, single-award IDIQ contract with a CLIN for each of the various vehicle refit jobs--each price to include labor and equipment kits. I would include an informational subclin for labor and one for equipment under each CLIN. Each equipment kit informational subclin would identify the items in the kit and the item prices. When an item in a refit kit needs to be changed during the period of performance, I would modify the contract and negotiate a price adjustment. I would think that the kit items are commercial.

As for belittling: I'm belittling your notion that putting equipment on vehicles is like buying the development of a Mars lander. I'm also belittling the way you brought in spare parts pricing, of which you know nothing except what you've read in the papers.

Okay, Joel. Bite the bullet. How would you do it? I've got an open mind.

Vern, we don't know the size of each order or the overall quantities per year. I asked about that last week. I'm going to assume, based upon the information provided that there are 3-5 vehicles per order and there are at least 2-3 firms who could be licensed to install emergency vehicle lights, sirens and computer packages and repair/replace the same. Ashleyh indicated that the requirement is to be for 5 years. She indicated that vehicle types will vary, with significant cost and equipment differences between large and small vehicles.

From some limited research, it appears that the material cost for lights, sirens and computers plus estimated labor to install ought to be within 5k per vehicle, so orders for 5 vehicles should fall within $25k.

If so, then setting up a BPA may be feasible, using competitive orders.

If orders are expected to be larger, then a five year multiple award ID/IQ vehicle with the 2-3 firms may work. I'd compete the orders among the firms, rather than try to obtain fixed prices over five years from one firm.

My point is that I would avoid fixing CLIN prices for 5 years when the equipment and vehicle types will vary between orders and over time. As one example of price and technical volatility, the wholesale price of LED chips in January was about 1/5 of what it was last October and the applications and technology are expanding tremendously, per a person from Phillips Lighting who provided us briefing last week.

I noticed that there was at least one supplier on the Internet that indicated it had GSA contract and identified licensed dealers. Using the GSA contracts might be worth investigating. I'm not expert in the FSS systems.

[Guest Vern Edwards]

I think your approach--BPA, multiple-award contract--is administratively too costly.

Competition takes time and costs money all around. I would not use a BPA, since you have to get competition before placing each call unless the call is less than $3,500. Moreover, you can't lock in prices with a BPA. I would not use a multiple-award task order contract for the same reason. See FAR 15.504?(1)(ii)((3).

As for long-term fixed-pricing, you appear to assume that component costs, e.g., LED prices, translate quickly into reductions in the prices of commercial equipment that contains them. If you do assume that, the assumption is not valid. Reductions in component prices usually do not translate into immediate or even near-term reductions in commercial equipment prices. Moreover, I don't believe that the type of equipment we're talking about is updated with new technology as frequently as you assume. It would be too costly for manufacturers.

Depending on the estimated (speculated) size of the requirement, I would go with a single-award IDIQ contract and try to keep the maximum quantity under the $5.5 million commercial item test program threshold so I could use simplified acquisition procedures to award the contract. I would award on the basis of low price with special standards of responsibility in accordance with FAR 9.104-2. (No best value B.S., with "technical proposals" and all that crap.) Major advantage to that approach--the Competition in Contracting Act would not apply and I would not have to follow FAR Part 15 source selection rules.

I see no reason to award a contract with five options for this requirement, especially if you can use simplified acquisition procedures to make the award. Keeping the contract to one year (or even two) might make it less likely that you would have to modify the contract. (I'd be surprised if requirement changes would be frequent.)

All of this might have to be changed, depending on the exact nature of the requirement. There is a lot that Ashleyh hasn't told us: Will all of the vehicles come from one government location? Will the government pick up the completed vehicles or will the contractor have to deliver them? Etc.