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SDVOSB joint venture agreements will be required to look quite different after August 24, 2016. That’s when a new SBA regulation takes effect–and the new regulation overhauls (and expands upon) the required provisions for SDVOSB joint venture agreements.
The changes made by this proposed rule will affect joint ventures’ eligibility for SDVOSB contracts. It will be imperative that SDVOSBs understand that their old “template” JV agreements will be non-compliant after August 24, and that SDVOSBs and their joint venture partners carefully ensure that their subsequent joint venture agreements comply with all of the new requirements.
If you’ve been following SmallGovCon lately (and I hope that you have), you know that we’ve been posting a number of updates related to the SBA’s recent major final rule, which is best known for establishing a universal small business mentor-protege program. But the final rule also includes many other important changes, including major updates to the requirements for SDVOSB joint ventures. For those familiar with the requirements for 8(a) joint ventures, most of the new requirements will look familiar; the SBA states that its changes were intended to ensure more uniformity between joint venture agreements under the various socioeconomic set-aside programs.
The SBA’s final rule moves the SDVOSB joint venture requirements from 13 C.F.R. 125.15 to 13 C.F.R. 125.18 (a change of note primarily to those of us in the legal profession). But the new regulation is substantively very different than the old. Below are the highlights of the major requirements under the new rule. Of course (and this should go without saying), this post is educational only; those interested in forming a SDVOSB joint venture should consult the new regulations themselves, or consult with experienced legal counsel, rather than using this post as a guide.
In order to form an SDVOSB joint venture, at least one of the participants must be an SDVOSB, and must also be a small business under the NAICS code assigned to the procurement in question. The other joint venturer can be another small business, or the partner can be the SDVOSB’s mentor under the new small business mentor-protege program or the 8(a) mentor-protege program:
A joint venture between a protege firm that qualifies as an SDVO SBC and its SBA-approved mentor (see [Sections] 125.9 and 124.520 of this chapter) will be deemed small provided the protege qualifies as small for the size standard corresponding to the NAICS code assigned to the SDVO procurement or sale.
This piece of the new regulation appears to overturn a recent SBA Office of Hearings and Appeals decision, in which OHA held that a mentor-protege joint venture was ineligible for an SDVOSB set-aside contract because the mentor firm was not a large business.
Required Joint Venture Agreement Provisions
Under the new regulations, an SDVOSB joint venture agreement must include the following provisions:
- Purpose. The joint venture agreement must set forth the purpose of the joint venture. This is not a change from the old rules.
- Managing Member. An SDVOSB must be named the managing member of the joint venture. This is not a change from the old rules.
- Project Manager. An SDVOSB’s employee must be named the project manager responsible for performance of the contract. This, too, is not a change from the old rules. Curiously, unlike in the rules governing small business mentor-protege joint ventures, the SBA doesn’t specify whether the project manager can be a contingent hire, or instead must be a current employee of the SDVOSB. The new regulation also doesn’t address OHA case law holding that a specific individual must be named in the agreement (i.e., it’s insufficient to simply state that “an employee of the SDVOSB will be the project manager.”) It’s unfortunate that the SBA didn’t address that issue; if the SBA agrees with OHA’s rulings, it would have been nice to have the regulations reflect this requirement so that SDVOSBs understand that a specific name is required.
- Ownership. If the joint venture is a separate legal entity (e.g., LLC), the SDVOSB must own at least 51%. This is a change from the old rules, which don’t address ownership.
- Profits. The SDVOSB member must receive profits from the joint venture commensurate with the work performed by the SDVOSB, or in the case of a separate legal entity joint venture, commensurate with its ownership share. This is a change from the old rule, which applies the 51% threshold to all SDVOSBs. To me, there is no good reason to distinguish between “informal” and “separate legal entity” joint ventures, especially since the SBA (elsewhere in its final rule) concedes that “state law would recognize an ‘informal’ joint venture with a written document setting forth the responsibilities of the joint venture partners as some sort of partnership.” In other words, an informal joint venture is a legal entity too, just not one that has been formally organized with a state government. In any event, the long and short of this change is that we can expect to see many more informal SDVOSB joint ventures. That’s because, using the informal form, the non-SDVOSB will be able to perform up to 60% of the work and receive 60% of the profits (see the discussion of work split below); whereas in a separate legal entity joint venture, the non-SDVOSB will be limited to 49% of profits, no matter how much work the non-SDVOSB performs.
- Bank Account. The parties must establish a special bank account” in the name of the joint venture. This is a change from the old rule, which is silent regarding bank accounts. The account “must require the signature of all parties to the joint venture or designees for withdrawal purposes.” All payments to the joint venture for performance on an SDVOSB will be deposited in the special bank account; all expenses incurred under the contract will be paid from the account.
- Equipment, Facilities, and Other Resources. Itemize all major equipment, facilities, and other resources to be furnished by each venturer, along with a detailed schedule of the cost or value of such items. This is a change from the old rule, which doesn’t require this information to be set forth in an SDVOSB joint venture agreement. In a recent court decision, an 8(a) joint venture was penalized for providing insufficient details about these items—even though the contract in question was an IDIQ contract, making it difficult to provide a “detailed schedule” at the time the joint venture agreement was executed. Perhaps in response to that decision, the new regulations provide that “if a contract is indefinite in nature,” such as an IDIQ, the joint venture “must provide a general description of the anticipated major equipment, facilities, and other resources to be furnished by each party to the joint venture, without a detailed schedule of cost or value of each, or in the alternative, specify how the parties to the joint venture will furnish such resources to the joint venture once a definite scope of work is made publicly available.”
- Parties’ Responsibilities. Specify the responsibilities of the venturers with regard to contract negotiation, source of labor, and contract performance, including ways that the parties will ensure that the joint venture will meet the performance of work requirements set forth in the new rule. Again, if the contract is indefinite, a lesser amount of information will be permitted. This is an update from the old rule, which requires information on contract negotiation, source of labor, and contract performance, but does not require a discussion of how the SDVOSB joint venture will meet the performance of work requirements.
- Ensured Performance. Obligate all parties to the joint venture to ensure complete performance despite the withdrawal of any venturer. This is not a change from the current rule.
- Records. State that accounting and other administrative records of the joint venture must be kept in the office of the small business managing venturer, unless the SBA gives permission to keep them elsewhere. Additionally, the joint venture’s final original records must be retained by the small business managing venturer upon completion of the contract. These provisions, which are not included in the old rule, seem dated in the assumption that records will be kept in paper form; it instead would have been nice for the SBA to allow for more modern record-keeping, like a cloud-based records system that enables documents to be available in real-time to both parties.
- Statements. Provide that quarterly financial statements showing cumulative contract receipts and expenditures (including salaries of the joint venture’s principals) must be submitted to the SBA not later than 45 days after each operating quarter of the joint venture. This language, which was basically copied from the 8(a) program regulations, doesn’t specify who might be a “joint venture principal” in a world in which populated joint ventures have been eliminated. The joint venture agreement must also state that the parties will submit a project-end profit-and-loss statement, including a statement of final profit distribution, to the SBA no later than 90 days after completion of the contract. I find these requirements a bit odd because, unlike for 8(a) joint ventures, the SBA doesn’t pre-approve SDVOSB joint ventures, nor does it seem that the SBA will review a particular SDVOSB joint venture agreement except in the case of a protest. So why the ongoing requirement for submitting financial records?
While I wish that every SDVOSB would call qualified legal counsel before setting up an SDVOSB joint venture, the reality is that many SDVOSBs attempt to cut costs by relying on joint venture agreement “templates” obtained from a teammate or even from questionable internet sources. Using SDVOSB joint venture agreement templates is risky enough under the old rules, but will be an even bigger problem after August 24, when all those old templates become severely outdated. I hope that all SDVOSBs become aware of the need to have updated joint venture agreements meeting the new regulatory requirements, but I won’t be surprised to see some SDVOSB joint ventures using outdated templates in the months to come–and losing out on SDVOSB set-asides as a result.
Performance of Work Requirements
In addition to setting forth many new and changed requirements for SDVOSB joint venture agreements, the new regulation also specifies that, for any SDVOSB contract, “the SDVO SBC partner(s) to the joint venture must perform at least 40% of the work performed by the joint venture.” That work “must be more than administrative or ministerial functions so that [the SDVOSBs] gain substantive experience.” The joint venture must also comply with the limitations on subcontracting set forth in 13 C.F.R. 125.6.
And that’s not all: the SDVOSB partner to the joint venture “must annually submit a report to the relevant contracting officer and to the SBA, signed by an authorized official of each partner to the joint venture, explaining how and certifying that the performance of work requirements are being met.” Additionally, at the completion of the SDVOSB contract, a final report must be submitted to the contracting office and the SBA, “explaining how and certifying that the performance of work requirements were met for the contract, and further certifying that the contract was performed in accordance with the provisions of the joint venture agreement that are required” under the new regulation.
Past Performance and Experience
Many SDVOSBs will groan at the new paperwork and reporting requirements established under the new regulation. But the SBA has inserted at least one provision that is a definite “win” for SDVOSBs and their joint venture partners: the new regulation requires contracting officers to consider the past performance and experience of both members of an SDVOSB joint venture. The regulation states:
When evaluating the past performance and experience of an entity submitting an offer for an SDVO contract as a joint venture established pursuant to this section, a procuring activity must consider work done by each partner to the joint venture as well as any work done by the joint venture itself previously.
Small businesses sometimes assume that agencies are required to consider the past performance and experience of the individual members of a joint venture–but until now, that wasn’t the case. True, many contracting officers considered such experience anyway, but there have been high-profile examples of agencies refusing to consider the past performance of a joint venture’s members. Of course, a joint venture is defined as a limited purpose arrangement, so it makes no sense to require the joint venture itself to demonstrate relevant past performance. This change to the SBA’s regulations is important and helpful.
The Road Ahead
After August 24, 2016, those old template SDVOSB joint venture agreements won’t be anywhere close to compliant, so SDVOSBs should act quickly to educate themselves about the new regulations and adjust any planned joint venture relationships accordingly. For SDVOSBs and their joint venture partners, the landscape is about to shift.
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If you have been working on GSA Schedules for the past few years, you may remember that in May 2012, GSA’s initiative was the end of the Schedule Input Program (SIP) and the mandatory use of the new Formatted Price List (FPL) for the Financial and Business Solutions (FABS) Schedule. There was much excitement generated by this news as we were all ready for the end of SIP. In January 2014, GSA announced that FABS would no longer utilize the FPL and all vendors were to return to SIP. As we look into the years ahead, I am optimistic that eventually the Formatted Product Tool (FPT) will truly be the end of SIP.
What is the FPT?
FPT is a systems upgrade that will be activated within the existing eOffer and eMod platforms and NOT in a separate application. There will be an automatic upload of products and prices to GSA Advantage!
The General Services Administration (GSA) Federal Acquisition Service (FAS) is planning to implement the FPT across the Multiple Award Schedules (MAS) program beginning with select pilot Schedules in late July 2016.
The order of the FPT rollout, with approximately two week intervals, is as follows:
- Schedule 58 I – Professional Audio/Video
- Schedule 72 – Furnishings & Floor Coverings (to be released with Schedule 58 I)
- Schedule 75 – Office Products/Supplies
- Schedule 73 – Food Service, Hospitality & Cleaning Equipment
- Schedule 51 V – Hardware Superstore
- Schedule 70 – Information Technology Products, Software & Services
What Do I Have to Do?
If you accept the FPT, you will be required to complete the one-time “rebaselining” of price list data as well as other data fields for proper display of these items. GSA can then ensure all of your currently awarded products are uploaded to GSA Advantage! For baselining, the contractor will utilize a provided template in eMod to submit all awarded products and associated product data, to include Manufacturer Part Number (MPN) and Universal Product Code Type A data, when applicable. All descriptive information required by SIP will be captured in one submission via eMod and uploaded to GSA Advantage!. This will become your FSS Price List upon execution of the modification.
If you accept the FPT bilateral modification, you will have 60 days to complete the rebaseline process. Please note that with the FPT, Contracting Officers will now have additional data analytics and transparency in helping them determine that pricing is fair and reasonable. Phase I of FPT is focused on collecting standard part numbers for items on Schedule.
Is Participation Mandatory?
No. At this time, acceptance of the upcoming Schedule Refresh/Mass Modification is optional if you are on one of the pilot Schedules. However, FPT will soon be mandatory for all new offers on product Schedules.
Does FPT Include Products and Services?
No. Phase 1 of this pilot program only includes products. If you have both products and services on the pilot schedule (such as IT 70), you are to enter the product information in the FPT pricing template and enter the services information in a text file. Both documents are to be uploaded via FPT, but in different file formats.
My recommendation is to completely understand the FPT process prior to accepting the upcoming Refresh Solicitation/Mass Modification for one of the pilot schedules. Continue to follow GSA Interact for updates on the Formatted Product Tool and for notice of the Refresh Solicitation/Mass Mod release.
I highly recommend attending the next GSA FPT training by registering for the next webinar on July 27, 2016 from 1:00pm – 3:00pm ET.
About the Author:
Executive Director of Contracts and Consulting
Maureen Jamieson has more than twenty-five years of experience managing federal contracts. She is highly experienced in solving client pricing problems and implementing effective pricing strategies for placing products and services on GSA Schedule contracts.
The post The Exit of SIP and Entrance of the Formatted Product Tool appeared first on Centre Law & Consulting.
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In January 1944, the Office of Strategic Services, a wartime intelligence agency and predecessor to the modern Central Intelligence Agency (CIA), issued Strategic Services Field Manual No.3 (Simple Sabotage Field Manual) to its agents to aid the Allied war effort in Europe. The purpose of the classified document was to explain the technique of simple sabotage, outline its possible effects, and present suggestions for inciting and executing it. It introduced the concept of simple sabotage as follows:Quote
Sabotage varies from highly technical coup de main acts that require detailed planning and the use of specially trained operatives, to innumerable simple acts which the ordinary individual citizen-saboteur can perform. This paper is primarily concerned with the latter type. Simple sabotage does not require specially prepared tools or equipment; it is executed by an ordinary citizen who may or may not act individually and without the necessity for active connection with an organized group; and it is carried out in such a way as to involve minimum danger of injury, detection, and reprisal.
The manual goes on to describe two types of simple sabotage: destructive and nondestructive. Regarding the latter type, the manual explains that—Quote
“It is based on universal opportunities to make faulty decisions, to adopt a non-cooperative attitude, and to induce others to follow suit. Making a faulty decision may be simply a matter of placing tools in one spot instead of another. A non-cooperative attitude may involve nothing more than creating an unpleasant situation among one’s fellow workers, engaging in bickerings, or displaying surliness and stupidity.
This type of activity, sometimes referred to as the ‘human element,’ is frequently responsible for accidents, delays, and general obstruction even under normal conditions. The potential saboteur should discover what types of faulty decisions and non-cooperation are normally found in his kind of work and should then devise his sabotage so as to enlarge that ‘margin for error.’”
The manual has a section titled “Specific Suggestions for Simple Sabotage” that provides suggestions for how to execute simple sabotage for different targets. There are suggestions on how to innocently start fires in buildings, set off automatic sprinklers to ruin warehouse stock, change sign posts at intersections and forks, dilute gasoline with water, wine, or urine so it won’t combust, and other Dennis the Menace type hijinks. What seemed most familiar were the suggestions under “General Interference with Organizations and Production.” Here are a few:Quote
(a) Organizations and Conferences
(1) Insist on doing everything through “channels.” Never permit short-cuts to be taken in order to expedite decisions.
(2) Make “speeches.” Talk as frequently as possible and at great length. Illustrate your “points” by long anecdotes and accounts of personal experiences. Never hesitate to make a few appropriate “patriotic” comments.
(3) When possible, refer all matters to committees, for “further study and consideration.” Attempt to make committees as large as possible—never less than five.
(4) Bring up irrelevant issues as frequently as possible.
(5) Haggle over precise wordings of communications, minutes, resolutions.
(6) Refer back to matters decided upon at the last meeting and attempt to re-open the question of the advisability of that decision.
(7) Advocate “caution.” Be “reasonable” and urge your fellow conferees to be “reasonable” and avoid haste which might result in embarrassments or difficulties later on.
(8) Be worried about the propriety of any decision—raise the question of whether such action as is contemplated lies within the jurisdiction of the group or whether it might conflict with the policy of some higher echelon.
(b) Managers and Supervisors
(9) When training new workers, give incomplete or misleading instructions.
(10) To lower morale and with it, production, be pleasant to inefficient workers; give them undeserved promotions. Discriminate against efficient workers; complain unjustly about their work.
(11) Hold conferences when there is more critical work to be done.
(12) Multiply paper work in plausible ways. Start duplicate files.
(13) Multiply the procedures and clearances involved in issuing instructions, pay checks, and so on. See that three people have to approve everything where one would do.
(14) Apply regulations to the last letter.
(c) Office Workers
(7) Spread disturbing rumors that sound like inside dope
(4) Pretend that instructions are hard to understand, and ask to have them repeated more than once. Or pretend that you are particularly anxious about your work, and pester the foreman with unnecessary questions.”
The manual was declassified in 2008, but I suspect it fell in to enemy hands long before that. The question is, though, why is the enemy targeting Federal contracting offices?
"A question. Since before your sun burned hot in space and before your race was born, I have awaited a question."
Star Trek, the Guardian in “The City on the Edge of Forever.”
Early on in college I realized that questions were the gateway to learning. I didn’t put questions to my professors very often. I asked them mainly of myself, then learned by looking for answers. It took time, which was murder under the quarter system of the University of California. (I swear, I don’t think they were trying to teach us anything, just move us through the process.)
I learned that I had to ask good questions. Dumb questions (and there is such a thing as a dumb question) were the gateway to nowhere.
But what’s a good question?
I have long believed that the ability to ask good questions is one of the most important skills that a contract specialist must master. The ability to ask good questions is essential to learning the various facets of the work and to doing the work well.
Suppose you are planning to negotiate a sole source contract price and you have received a price proposal and certified cost or pricing data. You’ve conducted a preliminary cost analysis and developed a list of questions. The time has come for face-to-face fact-finding.
Your philosophy is that cost analysis is just reverse cost estimating. In order to develop a pre-negotiation objective you intend to disassemble the contractor’s cost estimate and profit objective, understand them, assess their reasonableness, put them back together and see what you get, then develop your negotiation plan.
You’re sitting in the contractor’s facility, across from their lead negotiator and the other members of its team. They are waiting for you. The intend to be honest. They will answer you truthfully, but they are not going to help you ask and they are not going to be forthcoming. If you want information, you are going to have to ask for precisely what you want.
So, what’s your first question?
* * *
Wifcon Forum long ago transitioned from a true discussion forum into a Q&A website, and much like someone passing through Elizabeth Kubler Ross’s stages of grief at the prospect of death, I have transitioned from shock, through anger and annoyance, to disappointment and depression, and finally to acceptance of what seem to me to be a lot of poor quality questions. I'm not the only one who thinks so. Some of us discuss the problem often, but behind the scenes.
What do I mean by “poor quality”? The best way to answer that is to show you some examples, all asked by persons who posted anonymously, without any user name, more than a decade ago. Here’s one from early 2003:Quote
We had a FP purchase order for support services that ended 9/30/02. We did not use all of the funds on the PO. We sent a final invoice to the gov't for the remaining money not spent.
I don't have experience with a FP Purchase Order so I hope you can clarify this for me.
The invoice references FAR Part 16.202-1 which states:
A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.
Is there another FAR part that allows for us to bill for the remaining funds? Thanks. I appreciate your help[.]
Here is another, from December, 2000:Quote
What is the standard to apply when calculating an equitable adjustment for a deductive change?
We have a situation where a change was made to a construction contract that reduced the quantity of an estimated quantity CLIN by approximately 50%. The contractor submitted a REA for the change. The REA was for a share of the cost savings that resulted from the deleted work. Essentially, the contractor is saying that he is entitled to share in the cost savings because he found a way to do the work more efficiently than originally planned.
I've never seen an approach to a deductive change like this. Is it proper?
Here is another, also from 2000:Quote
What paragraphs of FAR 52.212-4 can be used for modification authority in block C of the SF 30 when modifying a delivery order written against a commercial contract? If the Government does not accept nonconforming services, why would it not be appropriate for the CO to use 52.212-4(a), Inspection/Acceptance, to deobligate what now are excess funds. Second part to this question. When can the modification authority for a delivery order ride on the modification authority used for the basic contract when the revisions to a contract have to be carried over to the delivery order.
All punctuation as in originals.
I wish I could say that those are rare examples, but they are all too common. I could have used a few from last week, but I didn’t want to hurt anyone’s feelings.
I’m sure that those questions made perfectly good sense to those who asked them. They might make good sense to some of you who are reading this blog post. But not to me.
Okay, so what makes a question “good”? As it turns out, that is not as easy a question to answer as you might think.
I wanted to write a well-reasoned answer to my own question, which itself might be a dumb question, so over the course of the past several months I have read extensively and sometimes deeply in the theory of questions. (The theory has a name: erotetics) and the practice of questioning. It is an important part of logic, science, rhetoric, law, and semantics, and works range from the highly technical, such as Belnap, The Logic of Questions and Answers (Yale, 1976) and Harrah, “A Logic of Questions and Answers,” Philosophy of Science, Vol. 28 (1961) pp. 267-273, to those that are more readily accessible to nonspecialists, such as the entry, “Questions,” at the Stanford Encyclopedia of Philosophy, http://plato.stanford.edu., the entry “Questions,” in The Encyclopedia of Philosophy, Vol. 7 – 8, and in The Theory of Questions: Erotetics through the Prism of its Philosophical Background and Practical Applications, by Anna Brożek (Rodopi, 2011).
A search of the internet led me to a lot of advice about how to ask a good question. You can find an example of such advice (a pretty decent one) at this site:
You can find another example here:
The advice strikes me as sound, though not entirely satisfying.
Recently, however, I came across something that stopped me in my tracks -- a short article by Wendell Johnson (1906 – 65), “How to Ask a Question,” published in Journal of General Education in April, 1947, republished in ETC: A Review of General Semantics (Winter 1948), and published again in a retrospective in ETC: A Review of General Semantics (Fall 1983). You can find it here: http://www.jstor.org/stable/42576616?seq=1#page_scan_tab_contents, but you need a subscription or access through a university or public library.
It’s very short, only five pages, but dense. The author packed a lot of thinking into those pages. You have to read deeply. I have added it to my list of essential reading for contracting practitioners.
Because it may not be readily accessible by all, here are a few quotes to give you the flavor of the thing:Quote
Even among college upper classmen and graduate students one finds in varying degrees a naive belief that there are knowers -- that the way to get the answer to a question is simply to ask the man who knows it.
* * *
[T]he techniques of fruitful inquiry necessarily involve certain ways of using language, particularly in the framing of questions. Just any old string of words, arranged grammatically and with an interrogation mark at the end, won't do.
* * *
[A]n answerable question is one that implies the observations, or reliably reported observations, needed to answer it. Any question that does not meet this test -- any question, that is, for which no specifications are supplied as to the particular observational procedures to be used in answering it -- is to be classified as meaningless for purposes of fruitful inquiry, as nonsense from an investigative point of view. From a psychiatric point of view it may be richly meaningful, of course. This is to say that anyone who can analyze and interpret such a question in a way that clarifies the confusion of the one who asks it qualifies, to this extent, as a psychiatrist . Anyone who unhesitatingly answers the question, without recognizing its meaningless character, qualifies as surely as a fool . One may, with benefit, regard this as one of the more important items in that vast category known as useful but seldom used information.
* * *
The fundamental skill to be taught is that of specifying the procedures to be used in making the observations needed to answer any questions one asks -- and in specifying the terms in which the observations are to be reported . Except as the questioner provides these specifications, he can hardly expect anyone else to divine what he is asking, nor can he be depended upon to recognize the answer himself if by some odd chance it should appear.
But my favorite quote in the piece, and one of my all-time favorite quotes, is this:Quote
It is known almost as widely as it is disregarded that a fool is one who knows the answers to the questions that only a fool would ask. It follows that effective insurance against becoming a fool oneself lies in knowing what sorts of questions and answers these might be. It would appear reasonable to assume, on this basis, that a major responsibility of our schools and colleges is that of providing adequate instruction in the techniques of fruitful inquiry.
Yep, my question, "What is a good question?", was a fool’s question. So I’m going to refine it. That might take me a while. In the meantime, give Wendell Johnson's article a read. It will be well worth your time and thought.
Had you ever speculated on why April Fools’ Day seems to be such an important day for federal acquisition? After all, consider some of the regulatory and policy issuances on that day:
The Federal Acquisition Regulation (FAR) became effective on April Fools’ Day (1984).
The Federal Aviation Administration became exempt from the FAR on April Fools’ Day (1996).
The Office of Federal Procurement Policy (OFPP) memorandum on “Protests, Claims, and Alternative Dispute Resolution (ADR) as Factors in Past Performance and Source Selection Decisions” was issued on April Fools’ Day (2002).
Army Federal Acquisition Regulation Supplement (AFARS) Revision #25 was issued on April Fools’ Day (2010).
FAR Case 2010-015 on the Women-Owned Small Business (WOSB) Program was published in the Federal Register on April Fools’ Day (2011).
No doubt a little research would provide a number of additional examples.
Frankly, if it were me, April Fools’ Day would probably be the last day that I would pick for issuing important regulations or policy statements. That is one day that I would avoid like the plague. [Note: The last statement is not technically correct, I would go to greater extremes to avoid the plague than to publish an acquisition policy or procedure on April Fools’ Day.] Why not just wait a day, and avoid all the innuendo and snickering? After all, consider, April has 29 other days that are perfectly suitable for issuing regulations, policies, procedures, guidance and information.
Comparison of Major Contract Types
For example, on Monday, April 25, 2016, the Defense Acquisition University/Defense Systems Management College updated the Acquisition Community Connection with a revised version of its Comparison of Major Contract Types (i.e., Comparison of Major Contract Types - April 2016). [For those who would like a direct link: https://acc.dau.mil/CommunityBrowser.aspx?id=214513.] The new version better aligns with the terminology in the Contract Pricing Reference Guides, updates the charts on the reverse, and adds a chart on “Achieving a Reasonably Challenging but Achievable (RCA) Target Cost,” one of topics discussed extensively in the new Guidance on Using Incentive and Other Contract Types.
Over the years, various versions of the “Comparison” have been fairly popular (i.e., 94,863 Page Views and 80,840 Attachments Downloaded. Although, given the number of personnel in the Defense Statutory Acquisition Workforce Contracting Career Field, 29,690 as of the 2nd quarter of 2015, those Lifetime Activity numbers may not be all that high, relatively speaking.
The April Fools’ Day Announcements for 2016
So, it can be done. However, this April Fools’ Day (2016) Defense Procurement and Acquisition Policy (DPAP) elected to issue two important pieces of procedures/guidance to the Defense Statutory Acquisition Workforce:
Guidance on Using Incentive and Other Contract Types (April 1, 1016).
Department of Defense Source Selection Procedures (SSP) (April 1, 1016).
Both documents have their warts. For instance, the Guidance incorrectly identifies one of the two statutory references for limitations on negotiation of price or fee. The good news is that thee one applicable to the DoD was identified correctly. Running the Spelling and Grammar checker one last time would not have been amiss.
Warts aside, the results of this Better Buying Power (BBP) are somewhat disappointing. The Specific Action in the USD(AT&L) memorandum “Implementation Directive for Better Buying Power 2.0 - Achieving Greater Efficiency and Productivity in Defense Spending” was, “Director, DP will provide a draft policy guidance document on the use of incentives in contracting to the BSIG for review by July 1, 2013. The starting point for this document will be the DoD and NASA Guide, “Incentive Training (sic) Guide,” originally published in 1969.”
For those of you unfamiliar with the Incentive Contracting Guide, it was the last of a number of such guides published in the 1960s. That particular version of the Guide was 252 pages. By comparison, the new Guidance is 41 pages. About 40 % of the Guidance is devoted to negotiation of fixed-price incentive (firm target) (FPIF) contracts in a sole-source environment a discussion of Reasonably Challenging but Achievable Target Cost (RCA), which go hand-in-hand. The coverage for Time and Materials/Labor Hour (T&M/LH) Contracts amounts to a paltry nine (9) lines. Ask yourself these two questions, “How many sole-source FPIF contracts does the Department award? If ‘T&M is the least preferable contract type,’ where should the emphasis have been placed?”
For those of you who need guidance on structuring multiple incentive contracts the DOD and NASA Guide: Incentive Contracting Guide 1969 may be a better bet than the new Guidance. The good news is that it is still available on the Defense Acquisition University’s Acquisition Community Connection. [For those who would like a direct link: https://acc.dau.mil/CommunityBrowser.aspx?id=189615.]
The updated Source Selection Procedures are more than 505 longer than the previous version. The Procedures would have benefited from fact checking, copy editing and proof reading. Another warts issue.
Warts aside, for those of you who will be involved in DoD source selections that meet the thresholds in the Procedures, you will want to give it a thorough read. Among other things, you will see some new descriptions of adjectival ratings and a new source selection procedure in APPENDIX B, “TRADEOFF SOURCE SELECTION PROCESS: SUBJECTIVE TRADEOFF AND VALUE ADJUSTED TOTAL EVALUATED PRICE (VATEP) TRADEOFF.” The latter came about as the result of USD(AT&L) memorandum “Implementation Directive for Better Buying Power 2.0 - Achieving Greater Efficiency and Productivity in Defense Spending.” Under the heading of Better define value in “best value” competitions there was a Specific Action, “Director, DP will review the ‘Process Manual’ developed by the joint Service team led by the Air Force and present a recommendation for adoption with any recommended changes to the BSIG by July 1, 2013.” You need to read the entire section to understand the direction. No doubt you will see a good deal of discussion about VATEP percolating up.
Understand that although the Guidance and Procedures were issued on April Fools’ Day, they are no joke. Read them carefully, and implement them wisely.
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All of us can probably agree that each year seems to go by faster than the year before. The older we become, the rate at which we age seems to increase. So now, with 2016 upon us, (and without providing a comprehensive listing of new contracting laws, statutes, regulations, personnel changes, or best practices during 2015), perhaps it’s best to simply summarize and reflect on what 2015 might signify regarding acquisition success. Let’s also not use the “R” word even though talking about acquisition reform keeps us blog writers and consultants busy.
Some initiatives that began with great fanfare are no longer around. The government almost “closed” again, although the list of program exceptions to shutdowns is now so large that many don’t notice. Those programs with greater lobbying power are essential, while many very worthy programs are used as pawns. Probably the greatest damage to government contracting, dwarfing any new legislative improvement, is the indecisive nature and short-term environment under which government programs must operate.
GSA launched initiatives in category management, including its acquisition gateway, eBuy Open and other initiatives intended to improve contracting officer market knowledge and vehicles available to meet specific needs and better leverage government buying power.
The Department of Defense says it’s at a 35-year best in controlling costs for major acquisition programs and bestowed a variety of 15 individual and five organization awards for the past year. Heidi Shyu stepped down as the Army’s acquisition executive and off of the acquisition “bus,” where she coined the analogy that all acquisition program “passengers” have a brake and steering wheel, but no gas pedal.
Legislation intended to improve the current process within information technology is underway and new legislation within DoD was passed. It will be sometime before it is clear how well these latest changes have performed.
Discussion with today’s acquisition leaders reveals a determination to do the right thing as best as possible despite the peripheral (beyond acquisition) system challenges at each step. This past year may best be remembered for cyber security breaches; new and enhanced multiple-crises emanating from the Middle East; successful space probes and retrieval; cyclones, earthquakes, and changing climates; gun violence from Tunis to California; and a never-ending political campaign.
For contracting managers, the faster nature of societal change and news cycles may mask the great strides being made to respond more effectively to ever-changing government requirements and outsourcing needs. Ineffective conference, education, and industry communication restrictions appear to be abating. However, lengthy debate over government salary, bonuses, or predetermined solutions to unresearched acquisition problems continues.
From a contracting standpoint, 2015 may not be momentous in terms of single legislation or headlines. However, the complexities and challenges of successfully navigating today’s acquisition environment—from reduced spending to cyber security to Federal Reserve policy to the sheer complicated nature of the business enterprise itself—continues to grow. The requirements are harder, and the solutions harder still. Contractors supporting the government (and indeed the government itself) have a more difficult time understanding how to prepare, respond, and execute to these ever-evolving challenges. From workforce to technology, uncertainty is increasing and proven solutions decreasing. A new workforce is growing up in an environment of more employment uncertainty, from challenges to the education they’ve received to the manner of training and on-the-job experience they need.
However, we should all be impressed by the professionals working within this environment and what they accomplish. They don’t have time to publicly write or promote their efforts, but they are there and are noble. The year 2016 promises to be no easier than 2015. Our contracting leaders and managers are up to the challenge, but let’s understand for ourselves the causes and concerns, offer our advice and support, and be part of the solution.
Michael P. Fischetti
National Contract Management Association
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The Competition in Contracting Act of 1984 requires the Government Accountability Office (GA0) to report to the U. S. Congress annually when government agencies fail to fully implement its bid protest recommendations. GAO has posted these reports on its website since fiscal year (FY) 1995. Initially, these reports provided little information but by FY 2004, GAO published its "Bid Protest Statistics" covering FY 2004 through 2001. I have added every one of these reports to the fiscal year numbers at the top of the bid protest statistics.
Beginning in its report for FY 2013, GAO began listing its "most prevalent reasons for sustaining protests" during the FY. This has continued for FY 2014 and FY 2015. Although the information provided does not include cases where an agency took corrective action before a formal sustained decision was reached, it does provided information on 227 sustained decisions. In that sense, it may provide some help whether you are trying to prevent a protest or whether you may protest a procurement.
Below is my ranking of the most prevalent reasons for sustained protests listed by GAO for FY 2015 through FY 2013:
- failure to follow the evaluation criteria (listed 3rd in FY 2015 and 1st in FYs 2014 and 2013).
- unreasonable cost or price evaluation (listed 1st in FY 2015 and 4th in FY 2013) and
- inadequate documentation of the record (listed 4th in FY 2015 and 2nd in FY 2013)
- unequal treatment of offerors (listed 4th in FY 2014 and 3rd in FY 2013)
- unreasonable technical evaluation (listed 5th in FY 2015 and 3rd in FY 2014)
This ranking also requires a caveat because the number of sustained protests varied significantly for FY 2015 (68), FY 2014 (72), and FY 2013 (87).
Other reasons for sustained protests GAO listed include
- unreasonable past performance evaluation (listed 2nd in FY 2015)
- flawed selection decision (listed 2nd in FY 2014)
In addition to listing the most prevalent reasons, GAO also gives 1 example decision for each of the most prevalent reasons it lists in a FY. For example, under unreasonable cost or price evaluation which GAO placed first in FY 2015, GAO lists Computer Sciences Corp.; HP Enterprise Servs., LLC; Harris IT Servs. Corp.; Booz Allen Hamilton, Inc., B-408694.7 et al., Nov. 3, 2014, 2014 CPD ¶ 331.
My listing of each decision that GAO provided as a most prevalent reason with a link to the decision is here.
To me, the most striking reason for GAO sustaining a protest is inadequate documentation. That can be prevented by a thorough review of what documents are provided in the evaluation and selection decision. If there is something missing, identify it and correct it. You can get more information on the documentation issue by looking at the Wifcon.com protest page FAR 15.305 (a)(3): Technical Evaluation - Documentation.
Another striking reason for sustained protests is the first that I list--failure to follow the evaluation criteria. One time a friend of mine was sitting on an evaluation panel for a GAO procurement that I had no involvement in at all. He had something extra he wanted to include in his evaluation of proposals and he asked me about it. Although I was stunned at the question, I simply told him that he must follow the evaluation criteria in the solicitation and if he had any questions he should ask the contracting officer--not me.
Before ending this entry, I will once again remind you that the information provided by GAO only includes sustained protests. These are decisions in which the agency digs in its heels and fights the protest to a final decision. As GAO explains, "agencies need not, and do not, report any of the myriad reasons they decide to take voluntary corrective action." What you see here may be the tip of the iceberg.
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The long-standing principle that the federal government had the same implied duty of good faith and fair dealing as any commercial buyer was put in jeopardy by a 2010 decision of the U.S. Court of Appeals for the Federal Circuit, Precision Pine & Timber, Inc. v. U.S., 596 F.3d 817 (Fed. Cir. 2010). There a panel of the court adopted a narrow rule seemingly limiting application of the principle to situations where a government action was “specifically targeted” at the contractor or had the effect of taking away one of the benefits that had been promised to the contractor. Although the decision concerned a timber sales contract not a procurement contract, when I wrote it up in the May 2010 Nash & Cibinic Report (24 N&CR ¶ 22), I expressed the fear that the reasoning would be subsequently applied to procurement contracts.
My fear was realized in a construction contract case, Metcalf Construction Co. v. U. S., 102 Fed. Cl. 334 (2011). In that decision, the judge described eggregious conduct on the part of the government officials that would have been held to be a breach of the implied duty of good faith and fair dealing under many earlier cases. However, the judge held that under the Precision Pine standard, the contractor had not proved that the actions were specifically targeted at the contractor. In the February 2012 Nash & Cibinic Report (26 N&CR ¶ 9), I criticized this decision but stated that I believed that even if the decision was affirmed on appeal, most contracting officers would not take this as a signal that the proper way to administer contracts was to abuse the contractor.
Fortunately, a panel of the Federal Circuit has reversed the decision, Metcalf Construction Co. v. U. S., 2014 WL 519596, 2014 U.S. App. LEXIS 2515 (Fed. Cir. Feb. 11, 2014). The court held that the lower court had read Precision Pine too narrowly and that “specific targeting” was only one example of the type of conduct that could constitute a breach of the implied duty of good faith and fair dealing. Importantly, the court also rejected the government’s argument that this “implied duty” only could be found when it was footed in some express provision of the contract. The court concluded that the correct rule was only that the express provisions of a contract had to be examined to ensure that they had not dealt with the conduct of the government; for if they had, they would override the implied duty.
This leaves us in a tenuous position with regard to the views of the Federal Circuit. We have one panel in Precision Pine stating a narrow rule, another panel in Metcalf Construction stating the traditional rule, and a third panel in Bell/Heery A Joint Venture v. U.S., 739 F.3d 1324 (Fed. Cir. 2014), ruling in favor of the government because the contractor had not alleged facts showing that the government had “engaged in conduct that reappropriated benefits promised under the contract” (which is part of the Precision Pine reasoning). Thus, it is difficult to state where the judges of the Federal Circuit stand. Hopefully, the court will agree to take either Metcalf Construction or Bell/Heery to the full court for an en banc review of the issue.
I’ve never been sure why the Department of Justice has so vigorously argued that the government should not be held to the same standards of conduct as a commercial buyer. Of course, persuading the courts and boards that a narrower standard should be applied to the government is a way to win litigated cases. But, in my view, encouraging abusive or non-cooperative conduct hurts the government as much as it hurts its contractors. I have taught for many years that in the long run the government benefits from actions that show industry that it is a fair contracting partner. A line of published judicial decisions that demonstrates that the government is not such a partner is one more of the many messages that tell companies they should sell to the government only when they can find no other customer. Surely, this is not the message that government agencies in need of products and services on the commercial marketplace want to convey to companies that can provide those products and services.
Many years ago when I came to Washington to work in the field of government contracting, I concluded that there was one major advantage to being on the government side of the negotiating table. That advantage was that I was under no pressure to extract money from the contractor by unfair bargaining or unfair contract administration. To me fairness was an integral part of the job of a government employee. I still believe it and teach it. Thus, no matter what the outcome of the good faith and fair dealing litigation, I will continue to urge government employees that fair treatment of contractors is the only way to go.
Ralph C. Nash
When I get older, losing my hair
Many years from now . . . .
When I'm Sixty-Four
John Lennon, Paul McCartney
Shortly after we celebrate our country's independence on July 4, 2013, Wifcon.com will end its 15th year on the internet. With much help from the Wifcon.com community, I've raised a growing teenager. When I started, I was 49 and my hair was so thick that I often shouted ouch or some obscenity when I combed it. Wifcon.com has existed in 3 decades and parts of 2 centuries. During that period, I've updated this site for every work day--except for the week or so when I called it quits. I remember the feeling of relief. I thought it was over. However, many of you convinced me to bring it back. Yes, just when I thought I was out, many of you pulled me back in.
As I mentioned in an earlier post, someone once told me that Wifcon.com was my legacy. I once had great hopes for a legacy. Perhaps, a great saxophone player belting out a solo in front of thousands of fans and seeing them enjoying themselves. Instead, here I sit in my solitude looking for news, decisions, etc., to post to the home page. For many years, my dog Ambrose kept me company. Now, my dogs Blue Jay and Lily stare at me and look for attention. With my sights now set realistically, I accept that Wifcon.com is my legacy. It's the best I could do.
Every now and then, I receive an e-mail from someone thanking me for Wifcon.com. They tell me how it helped their careers. These e-mails keep me and Wifcon.com going.
Send me a postcard, drop me a line,
Stating point of view
Indicate precisely what you mean to say
Yours sincerely, wasting away
Give me your answer, fill in a form
When I'm Sixty-Four
John Lennon, Paul McCartney
The thoughts in these e-mails won't let me quit. I still search each night for something to add to the site in hopes that it will increase your knowledge. If I find something new, I still get excited. Often, it feels like a self-imposed weight around my neck. What started as a release for my imagination has evolved into a continuing and daily addition to the contracting community. In the evenings, it is as if I'm Maillardet's automaton. I head over to my office, sit before the computer, and update. Then I send the updated pages to Virginia where it is accessed from around the world. Maybe I'm addicted to Wifcon.com; maybe I was born with the Wifcon.com gene.
If you haven't added the numbers, I'm 64 now. Wifcon.com and I are showing our age. I can comb the top of my head with my fingers. The ouches and other obscenities caused by my once thick hair are gone. A recent upgrade to the discussion forum requires that I turn the "compatibility mode" off on my browser. In that mode, I realized that Wifcon.com is ugly. I have current software for the needed future redo of this site.
I am Wifcon.com; Wifcon.com is me. It is my legacy and my albatross. As always, thank you for your support.
You'll be older too,
And if you say the word,
I could stay with you.
When I'm Sixty-Four
John Lennon, Paul McCartney