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Caradoc

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  1. Background: DoD routinely makes proposals toward the upcoming National Defense Authorization Act (NDAA). Examples are here. Most recently, on 28 March, DoD proposed a change in the 41 USC definition of a commercial item by making three changes: delete phrase "of a type" to arrive at "...an item, other than real property, that— is of a type customarily used by the general public.... eliminate items offered for sale but not yet sold change "substantial" quantities to read "like" quantities Complete text of the DoD proposal concluding with suggested edits of the definition is available here or by clicking on the "commercial item" link on the left at this site: Current Situation: Most articles in trade publications seem to focus on and accept the idea that any abuse from overly broad use of commerciality would be reduced and better pricing would be obtained by deleting "of a type' from the definition: * Page 4 of INSIDE THE PENTAGON, 5 April * Defense News, 30 April * Defense Systems, May 2 Based on these same articles and as specifically addressed in the Defense News article, there is some concern within industry that any tightening of the definition will reduce use of commerciality to establish price reasonableness Perhaps because of the emphasis on eliminating "of a type" buys, there is little recognition that -- at least at face value -- changing "substantial" quantities to "like" quantities would seemingly broaden the potential for use of commerciality. Analysis: Despite the DoD proposal's assertion that its changes to the 41 USC definition "would prompt commensurate adjustments of the Federal Acquisition Regulation." a quick look at FAR 201-1 Definitions and FAR 15.403-1 Obtaining Certified Cost or Pricing Data reveals some minor quibbles and one major disconnect: * Any tightening accomplished by deleting "of a type" from the first paragraph of FAR's definition to arrive at "Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities..." means little.compared to the latitude provided by the third paragraph allowing for commercial items to include "Minor modifications... made to meet Federal Government requirements" with the assessment of "minor" left as a judgment call based on the extent of modifications. * As for "substantial quantities," FAR's definition of commercial item (paragraphs 1 through 4 applying to both supplies and services) doesn't use the term." It shows up only in para 6 (services involving established catalog or market prices) and para 8 (nondevelopmental items developed at private expense) where in both cases context precludes a simple change from 'substantial" to "like." As a sidenote, 'substantial quantities" also shows up in the subsequent definition of Commercially available off-the-shelf (COTS), where "substantial" is actually needed to define COTS. * More importantly, FAR 15's coverage of the commercial exception to cost and pricing data was already revised in 2009 to satisfy the language of Section 868 of PL 110-417 regarding both "substantial quantities" and "items of a type." The Interim Rule calling for implementation of this change is here and what follows with emphasis added in blue is current text of FAR 15.403-1©(3)(ii)(A) : When purchasing services that are not offered and sold competitively in substantial quantities in the commercial marketplace, but are of a type offered and sold competitively in substantial quantities in the commercial marketplace, they may be considered commercial items (thus meeting the purpose of 41 U.S.C. 254b and 10 U.S.C. 2306a for truth in negotiations) only if the contracting officer determines in writing that the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price of such services. ***end of text*** Summary: DoD's March 28 legislative proposal toward the 2013 National Defense Authorization Act attempts to close a door which -- at least for services -- has already been pretty well nailed shut. Perhaps similar wording should be considered for supplies. Finally, the wording of proposed changes would be awkward to implement in FAR and would risk failing to satisfy Section 868 of PL 110-417. Personal Opinion: Yes, there have been abuses of commerciality, perhaps even including the recent presidential helicopter program. I once personally fought and lost a battle to avoid an absurd series of small-purchase security upgrades to the private residence that President Nixon referred to as his "Western White House." These things happen. When the consequences of a PCO determination involve bullets and blood, the exigency of the situation may enter into the decision as to whether modification of a commercial item is extensive enough to require preparation and submission of cost and pricing data. It's always possible to second guess such decisions and there will always be part of the bureaucracy in favor of cost and pricing data. Finally, it looks like the budget folks in the Pentagon have put forward a position without coordinating with their contracting and legal counterparts. ************************************** Comments on any or all of the above would be welcome.
  2. Bravo! This would be a better world if we had "serious people reason[ing] from facts to reach valid conclusions before writing policy...." Instead, we have even the most serious people (often high-ranking and with the best of intentions!) simply putting their desired end results into policy documents without checking to see whether a bridge is needed to get from here to there. Best example in my experience was the F-16 offset program. As a matter of cooperation among NATO partners with benefits ranging from economies of scale to enhanced logistics posture, it was a great idea to arrange for coproduction by European sources (starting with various engine items). The MOUs which SecDef Schlesinger signed with the four European participating governments made the commitment that -- by the end of the initial aircraft production run -- the US would have offset (read "spent") 58 cents for comparable technology in those countries for every dollar worth of aircraft going to the four countries. The MOUs stated that prices fior these offset items would have to be "reasonably competitive." Aparrently missing was any analysis and resulting policy as to what 'reasonably competitive" would have to mean in order to cope with European labor rates 80-90% higher than US rates. Equally missing was any indication that anybody had asked the contracting community how much latitude the words "reasonably competitive" would provide in making an award decision. So, when the initial production run was about 2/3 completed and we hadn't accomplished any meaningful offset, it was finally time to make it happen. A sharp major at Wright Patterson recognized two issues working in different directions: (1) defining reasonably competitive as an acceptable percentage difference wouldn't contribute to European infrastructure since a European 'source" could simply propose a marked-up price for an item dropshipped from its US competitor and (2) for many items, extent of European technology available at next-lower-assembly level required at least some subcontracting back to US sources. His solution -- to be implemented at USAF MAJCOM level rather than DoD level -- was the 65-40 rule: we would accept a 40% premium above domestic price as being reasonably competitive but only if at least 65% of total dollars remained in Europe. Less than a month after policy letters went out to the AFSC Product Centers and the AFLC Air Logistics Centers, a firm in the Netherlands responded to a synopsis for divergent turbine nozzles for the F100 engine and we were on our way toward meeting DoD's offset commitment. Could have happened a lot sooner if the right people had been involved. The above was late 70s. Today, a similar tale of presumably good intentions versus actually making something happen is playing out in DoD's recent suggestion to revise the 41 USC definition of a commercial item. I'll post specifics under the appropriate heading.
  3. Despite apparent problem with the "responsible" half of determining "responsive and responsible," a memo for file about urgency of the requirement should ring true if the urgency can somehow be related to things like bullets and blood. Such a memo could go on to address unchanged requirement and minimal to no value obtainable from time spent on new solicitation. Don't like idea of a second round of final proposal revisions. Better to ask the so-far unsuccessful offerors to extend their final revisions for another 15 or 20 days even if acceptance period has lapsed. After all, a proposal remains the property of the Offeror and in hopes of award some or more likely all of them will be willing to extend. (Plus, a little voice in the back of my head cynically asks who among them will be filing a protest on day 9 or 10.) At the risk of sounding sporty, I'll go further and assert that if only one Offeror extends, reporting the resulting award as competitive would require only another memo explaining the timing of the competitive environment and why no one, including the Offeror, could have expected there'd be only one offer standing at the end of the day.
  4. I'm hoping one or two here know an example or two of true multiyear being used for fairly large dollar acquisitions. Two hours of Google indicate that a lot of people who ought to know better use the term multiyear loosely (no spreading of non-recurring startup cost with recoupment in the event subsequent years don't get exercised) when all they really mean is "multiple year" or options for follow-on years. As nearly as I can tell -- since there's mention of cost savings -- Navy's Aegis program used multiyear at one point. Other Google results include HMMWV (Humvee) and Javelin but digging in a bit does nothing to confirm use of multiyear as defined. Please, no major research asked for, just "top of your head" data call. Thanks in advance.
  5. Good point about FAR 2.101 and 6.303. Further, even if a would-be drafter of a J&A for a particular subcontract managed to get past those two cites, FAR 6.304 addresses dollar level for approval of a J&A in terms of the Government contract to be awarded, not some subset of that amount. This is one case where there's nothing subtle about what FAR means versus what it says. Upshot is that the only place where you'll find a J&A about why you need gizmo X from company Z is in a contract file leading to an award to that company.
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