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    When a source selection takes longer than World War II

    By Vern Edwards

    This blog post is adapted from an article I wrote for the June 2017 issue of The Nash & Cibinic Report. Copyright 2017 is by Thomson Reuters.          After the attack on Pearl Harbor on December 7, 1941, it took the United States 1,366 days to defeat Japan and receive its formal surrender on the U.S.S. Missouri on September 2, 1945. Thus far, it has taken the United States Army 1,416 days and counting to award a contract for support services at its Yuma Proving Ground. In the course of that procurement the Army has so far made three source selection decisions and suffered four protests to the Government Accountability Office and four protests to the U.S. Court of Federal Claims. The Army has taken corrective action twice and has proposed to do so a third time. It has had two different source selection authorities, two different chairs of the source selection evaluation board, and three contracting officers. The source selection was still underway as of the end of March 2017. The Yuma Proving Ground service procurement is evidence of two problems that plague Government contracting: first, a failure of professional competence and second, the continuation in the 21st Century of a 19th Century procurement system under the Competition in Contracting Act of 1984 (CICA) as amended.          As described in the latest protest decision in this saga, Jacobs Technology, Inc. and TRAX International Corp., --- Fed. Cl. ---, 2017 WL 1291795, March 31, 2017, the request for proposals, issued on May 16, 2013 and amended six times, called for a cost-plus-award-fee contract with a one-year performance period and three one-year extension options. The contractor’s job would be to support military testing. Historically, the incumbent contractor’s staff had consisted of approximately 1,234 full-time equivalents.         The source selection evaluation factors were mission capability, past performance, small business participation, and cost. The three non-cost factors were approximately equal in importance to each other and, in the aggregate, approximately equal to cost. The RFP required offerors to submit “limited” written proposals and make oral presentations. The Army received four proposals, including one from the incumbent contractor, TRAX International Corp. It took the Army until September 10, 2014—483 days after issuance of the RFP—to make its first award, to Jacobs Technology, Inc., which it determined to have “the lowest priced offer of the most highly rated proposals.” Jacob’s evaluated probable cost was $411,678,388. The contracting officer found the incumbent’s higher evaluated cost to be unreasonable. A Nineteenth Century Procurement Process          It is in the CICA requirement to evaluate cost that we find a 19th Century procurement system at work to the Government’s detriment. In order to ensure that offerors had a common basis for estimating cost, the RFP required offerors to base their estimates on an historical labor “baseline” established by the Army and included with the RFP. Unfortunately, the baseline did not include crucial information, the result being that the offerors did not, in fact, estimate costs on the same basis. The Army discovered the problem during the proposal evaluation. That’s when the contracting officer should have called a halt, amended the RFP to provide the missing information to offerors, instructed offerors to modify their proposals if they wished to do so, and then allowed the evaluation to proceed. Instead, the Army pressed on.          When TRAX, the incumbent, discovered the baseline problem after contract award, it protested to the GAO on that and other grounds. The Army announced that it would take corrective action and the GAO dismissed the protest. And then, astoundingly, the Army did not fix the problem. TRAX again protested the Army’s failure to evaluate provide a common cost baseline. The Army again announced that it would take corrective action and issued Amendments 7 and 8 to the RFP. The GAO again dismissed the protest. TRAX and Jacobs then protested the amendments and the Army issued Amendment 9, cancelling them. TRAX and Jacobs submitted revised cost proposals, and guess what? TRAX protested yet again. This time it complained not only about the failure to establish a common baseline, but also that the Army had allowed Jacobs to change its oral presentation slides without requiring it to make another oral presentation, as required by the RFP. The Army implemented a CICA stay in accordance with FAR 33.104(c). Jacobs filed suit at the Court of Federal Claims complaining that the Army should have overridden the stay. The Army announced that it would take a third corrective action. The GAO again dismissed TRAX’s protest, but Jacobs filed suit to block the Army from taking its proposed corrective action. TRAX then sued complaining about the Army’s continuing failure to solve the common baseline problem and alleging bias on the part of Army officials. The court denied the protests, freeing the Army to proceed with a third corrective action. That is where things stood as of last March 31.          The Army got into trouble because it tried to find a way to provide offerors with a basis to estimate what could not be estimated—the annual cost of a complex, long term, frequently changing service requirement, a problem that the court described beautifully at the end of its decision. There was no way for any of the offerors to estimate what it would cost to provide support services at Yuma Proving Ground for a year. As the Army had explained to the court: The only way that the Army could comply with CICA and evaluate cost was develop a common cost baseline, tell the contractors to plug in some numbers, and compare results as if they were meaningful indicators of what the offerors’ performance costs would be. But the resulting cost estimates probably bore little if any meaningful relationship to what would happen after contract award. They probably had little if any meaningful predictive value. The apparent cost difference between Jacobs and TRAX may have been illusory. The Army used the numbers so it could “include cost or price to the Federal Government as an evaluation factor that must be considered in the evaluation of proposals,” as required by10 U.S.C.A. § 2305(a)(3)(A)(ii) and 41 U.S.C.A. § 3306(c)(1)(B).       Orders are orders. Onward the Light Brigade. A lot of wasted effort, time, money, and litigation, the waste being attributable to a 19th Century obsession with cost competition, abetted by incompetent people. In today’s world of procurements of long-term, complex support services, CICA must be amended to permit source selection without evaluation of price or cost in appropriate circumstances, followed by one-on-one negotiations with the selectee before contract award. A Better Approach To Support Services Contracting          A better way to have contracted for the Yuma Proving Grounds support services would have been to award a contract with two line items. One line item would be for a firm-fixed-price contract with award-fee for day-to-day general management and supervision services and for administrative services such as safety, quality control and assurance, purchasing and materials management, property management, human resources management, and accounting. The other line item would be for a cost contract (no fee) for materials, labor, and other direct costs to be incurred for performance of support services. Under such a contract, with a day-to-day contractor management team in place and an advance agreement on any indirect cost rates applicable to the cost (no fee) line item, the parties would jointly plan and manage performance. The contractor would make its best effort to execute the plan by performing the support services under the cost (no fee) line item.          Instead of pretending that the contractor would independently plan, manage, and execute performance in accordance with an unavoidably incomplete "performance work statement," the parties would jointly plan the work to be done and its scheduling, budget, required materials, labor staffing, and labor compensation. The Government would have the final say on planning decisions. The Government would obligate funds for the firm-fixed-price with award-fee line item upon contract award, but it would fund the cost (no fee) line item in the amount required on a quarterly basis. The contractor would then execute through day-to-day performance.Such an approach to contracting would be relational, rather than transactional. See Edwards and Nash, “A Proposal for a New Approach to Performance-Based Services Acquisition,” Defense Acquisition Review Journal (September 2007), and Vitasek and Frydlinger, “Are You Suffering From the Contracting Paradox? Introducing the Relational Contract,” Contract Management (May 2017).           An agency would choose the contractor for such a contract on the basis of the best-qualified offeror with a fair and reasonable price, as described in “Postscript: Highest Technically Rated Offerors With Fair and Reasonable Pricing—The GAO’s Sevatec Decision,” The Nash & Cibinic Report (March 2017). The agency would evaluate only the offerors’ qualifications--based primarily on experience, past performance, and a brief oral presentation about their company and proposed contract management organization--and the fairness and reasonableness of their proposed firm-fixed-price and award fee for the day-to-day management services. Price evaluation would not involve nonprice/price tradeoffs or direct comparisons of offerors' prices. Since offerors would not propose estimated costs for performance of the support services under the cost (no fee) line item there would be no need to establish a common cost estimating baseline, and no need to evaluate the realism and reasonableness of offeror estimated costs. The agency would get a contract that is better adapted to the realities of long-term complex service contracting, and they would get it through a simpler source selection process.           A little innovation can go a long way.  
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  1. Just in time for the consummate workaholic acquisition professional to read while lying on the beach this summer, and for those who never want to get too far away from the Federal Acquisition Regulation (FAR), the General Services Administration (GSA) Office of Government-wide Policy, in conjunction with the FAR Council announced June 20, 2017, the release of the FAR in the Kindle Bookstore.

    The FAR is now available in eBook format for free in the Amazon Kindle bookstore.  Users can highlight text, bookmark sections, even send quotes via e-mail.  According to Acquisition.Gov, the eBook format is proving very popular with procurement professionals with thousands of downloads in the Apple iBooks Store.

    Information on how to download the FAR on Amazon Kindle and Apple iBooks is available at:  https://www.acquisition.gov/mobileaccess.

    The post The FAR Now Available in the Kindle Bookstore appeared first on Centre Law & Consulting.


    View the full article

  2. You’ve submitted a great proposal, but then you get the bad news – you lost. As most seasoned contractors know, an unsuccessful offeror often can ask for a debriefing from the agency and in doing so, hopefully get some valuable insight into its decision-making process. Many also understand that the benefits of asking for a debriefing may include extending the timeline for filing a GAO bid protest.

    But not all solicitations are subject to the same debriefing regulations, and depending on how the procurement was conducted, an offeror might not be entitled to that extended deadline–as one company recently learned the hard way in the context of a GSA Schedule procurement.

    For GAO protests, 4 C.F.R. §21.2(a) governs timeliness. The regulation provides that protests not based on alleged improprieties in a solicitation shall be filed no later than 10 days after the basis of the protest is known, or should have been known (whichever is earlier). The only exception mentioned in the regulation is for protests arising out of conduct from “a procurement conducted on the basis of competitive proposals under which a debriefing is requested, and when requested, is required.” When this exception applies, the protest cannot be filed before the debriefing date, but must be filed no later than 10 days after the debriefing is held.

    The important distinction – for our discussion today – in all that statutory legalese above, is “competitive proposals”.  As one recent offeror learned, if an RFP is not considered to be conducted on the basis of “competitive proposals”, the debriefing may not extend the timeline to file a protest.

    IR Technologies, B-414430 (June 6, 2017), involved a U.S. Marine Corps RFP for IT support of the agency’s ELS2 system, a web-based system that provides data and information on ground equipment and weapon systems. The RFP was a small business set-aside and limited offerors to those who had existing contracts under GSA Schedule 70. The RFP provided that award would be made on a lowest-price, technically-acceptable basis.

    IR Technologies submitted a proposal. On February 16, 2017, the agency informed IRT that award had been made to a competitor. The award notice stated that the competitor’s price was $6,996,549–far lower than IRT’s proposed price of $12,194,525.

    After it received the notice on February 16, IRT requested a debriefing. The agency provided a written debriefing the same day. IRT then submitted follow-up debriefing questions on February 22, to which the agency replied on March 1st.

    On March 6th, IRT filed a protest with the GAO. IRT raised several grounds of protest, including an argument that the awardee’s price was unrealistically low.

    The agency and awardee moved to dismiss this ground of protest, arguing that it was untimely because it was not filed within 10 days of when IRT knew or should have known its basis of protest–that is, within 10 days of when IRT received the February 16 notice.

    The GAO confirmed that, under its Bid Protest Regulations, a debriefing can extend the time frame to file a GAO bid protest, but only when a procurement is “conducted on the basis of competitive proposals” and where a debriefing is “requested, and when requested, is required.” These nuances can trip up prospective protesters, and that’s exactly what happened here.

    The GAO found that the RFP arose out of an FSS procurement conducted pursuant to FAR 8.4. Citing its own prior decisions for support, the GAO wrote that “FSS procurements conducted pursuant to FAR subpart 8.4 are not procurements conducted on the basis of competitive proposals,” and therefore, “the debriefing exception to our timeliness rules does not apply to such procurements.” The GAO continued: “ecause the FSS buy here was not a procurement conducted on the basis of competitive proposals, the exception to our timeliness rules allowing protests to be filed within 10 days of a debriefing does not apply.”

    GAO wrote that “IRT’s protest [of price realism] is based on a comparative assessment of [the awardee’s] price to its own–information which IRT knew from the award notice” issued on February 16. GAO held that IRT’s price realism challenge was untimely.

    IR Technologies shows that would-be protesters would be wise to pay careful attention to how the solicitation is written. If the RFP contemplates an FSS procurement, the debriefing exception to the timeliness rules under 4 C.F.R. §21.2(a)(2) won’t apply. And although there are other benefits to asking for a debriefing, an extended protest timelines isn’t one of them.


    View the full article

  3. This blog post is adapted from an article I wrote for the June 2017 issue of The Nash & Cibinic Report.

    Copyright 2017 is by Thomson Reuters.

             After the attack on Pearl Harbor on December 7, 1941, it took the United States 1,366 days to defeat Japan and receive its formal surrender on the U.S.S. Missouri on September 2, 1945. Thus far, it has taken the United States Army 1,416 days and counting to award a contract for support services at its Yuma Proving Ground. In the course of that procurement the Army has so far made three source selection decisions and suffered four protests to the Government Accountability Office and four protests to the U.S. Court of Federal Claims. The Army has taken corrective action twice and has proposed to do so a third time. It has had two different source selection authorities, two different chairs of the source selection evaluation board, and three contracting officers. The source selection was still underway as of the end of March 2017. The Yuma Proving Ground service procurement is evidence of two problems that plague Government contracting: first, a failure of professional competence and second, the continuation in the 21st Century of a 19th Century procurement system under the Competition in Contracting Act of 1984 (CICA) as amended.

             As described in the latest protest decision in this saga, Jacobs Technology, Inc. and TRAX International Corp., --- Fed. Cl. ---, 2017 WL 1291795, March 31, 2017, the request for proposals, issued on May 16, 2013 and amended six times, called for a cost-plus-award-fee contract with a one-year performance period and three one-year extension options. The contractor’s job would be to support military testing. Historically, the incumbent contractor’s staff had consisted of approximately 1,234 full-time equivalents.

            The source selection evaluation factors were mission capability, past performance, small business participation, and cost. The three non-cost factors were approximately equal in importance to each other and, in the aggregate, approximately equal to cost. The RFP required offerors to submit “limited” written proposals and make oral presentations. The Army received four proposals, including one from the incumbent contractor, TRAX International Corp. It took the Army until September 10, 2014—483 days after issuance of the RFP—to make its first award, to Jacobs Technology, Inc., which it determined to have “the lowest priced offer of the most highly rated proposals.” Jacob’s evaluated probable cost was $411,678,388. The contracting officer found the incumbent’s higher evaluated cost to be unreasonable.

    A Nineteenth Century Procurement Process

             It is in the CICA requirement to evaluate cost that we find a 19th Century procurement system at work to the Government’s detriment. In order to ensure that offerors had a common basis for estimating cost, the RFP required offerors to base their estimates on an historical labor “baseline” established by the Army and included with the RFP. Unfortunately, the baseline did not include crucial information, the result being that the offerors did not, in fact, estimate costs on the same basis. The Army discovered the problem during the proposal evaluation.

    Quote

    In June 2014, before the first contract award, two procurement officials on the “Cost Team” issued a clarification to the Source Selection Advisory Council to explain the “significant variance in cost” between the two highest-rated offerors, Jacobs and TRAX. The Army attributed the variance to a “[p]roblem” it found with the historical baseline staffing data provided in Technical Exhibit 10, item 6, specifically noting that the data did not include productive hours, average wage rates, or full-time equivalents. Thus, when Jacobs and TRAX submitted baseline staffing proposals, they took different approaches. Jacobs and TRAX each provided a baseline number of total labor hours that would be expended in the base period of the contract. Both Jacobs and TRAX also calculated the baseline total labor hours for the first year by multiplying (1) average productive labor hours per employee and (2) 1,234 employees, the figure provided in Technical Exhibit 10, item 6. See id. However, for the first prong of the equation, Jacobs’ productive labor hours per employee was [***], whereas TRAX’s productive labor hours per employee was [***]. See id. As a result, before either offeror applied any labor efficiencies that could reduce the offeror’s proposed hours, Jacobs proposed [***] total baseline hours and TRAX proposed [***] total baseline hours for the base period. This baseline number affected the cost of the proposals.

    That’s when the contracting officer should have called a halt, amended the RFP to provide the missing information to offerors, instructed offerors to modify their proposals if they wished to do so, and then allowed the evaluation to proceed. Instead, the Army pressed on.

    Quote

    Despite the different approaches, the Army determined that even if TRAX and Jacobs had proposed the same number of hours, whether through Jacobs’ or TRAX’s method, Jacobs would still have proposed a lower cost. The Contracting Officer thus found that Jacobs presented “the lowest priced offer of the most highly rated proposals,” and the Source Selection Authority (“SSA”) determined that Jacobs’ proposal “provide[d] the best overall value,” TRAX’s proposed cost was deemed “unreasonable.” Accordingly, on September 10, 2014, the Army awarded the contract to Jacobs. [References to the administrative record omitted.]

             When TRAX, the incumbent, discovered the baseline problem after contract award, it protested to the GAO on that and other grounds. The Army announced that it would take corrective action and the GAO dismissed the protest. And then, astoundingly, the Army did not fix the problem.

    Quote

    As with the first award evaluation, a procurement official on the Cost Team issued a clarification to the Source Selection Advisory Council to explain the variance in Jacobs’ and TRAX’s costs. That clarification identified the same baseline staffing issue related to Technical Exhibit 10, item 6, and indicated that Jacobs and TRAX had again applied different methodologies to determine baseline staffing for the base year, resulting in a lower baseline of labor hours for Jacobs. Nonetheless, the SSA found that Jacobs’ proposal “provide[d] the best overall value” based upon an evaluation of the four factors described in the RFP, and the Army awarded the contract to Jacobs for a second time on December 10, 2015. [References to the administrative record omitted.]

    TRAX again protested the Army’s failure to evaluate provide a common cost baseline. The Army again announced that it would take corrective action and issued Amendments 7 and 8 to the RFP. The GAO again dismissed the protest. TRAX and Jacobs then protested the amendments and the Army issued Amendment 9, cancelling them. TRAX and Jacobs submitted revised cost proposals, and guess what?

    Quote

    Significantly, Jacobs again submitted a lower cost than TRAX for total evaluated probable cost/price. As before, Jacobs proposed a lower number of baseline productive hours for the first year of the contract… The [Source Selection Authority] acknowledged Jacobs’ and TRAX’s different approaches regarding overtime, but found that both Jacobs and TRAX had complied with the RFP by beginning with 1,234 full-time equivalents and then applying management approaches and efficiencies to determine baseline staffing. The SSA further determined that Jacobs offered [***], and ultimately found that Jacobs’ proposal presented the best overall value. On October 28, 2016, the Army awarded the contract to Jacobs for a third time.  [References to the administrative record omitted.]

    TRAX protested yet again. This time it complained not only about the failure to establish a common baseline, but also that the Army had allowed Jacobs to change its oral presentation slides without requiring it to make another oral presentation, as required by the RFP. The Army implemented a CICA stay in accordance with FAR 33.104(c). Jacobs filed suit at the Court of Federal Claims complaining that the Army should have overridden the stay. The Army announced that it would take a third corrective action. The GAO again dismissed TRAX’s protest, but Jacobs filed suit to block the Army from taking its proposed corrective action. TRAX then sued complaining about the Army’s continuing failure to solve the common baseline problem and alleging bias on the part of Army officials. The court denied the protests, freeing the Army to proceed with a third corrective action. That is where things stood as of last March 31.

             The Army got into trouble because it tried to find a way to provide offerors with a basis to estimate what could not be estimated—the annual cost of a complex, long term, frequently changing service requirement, a problem that the court described beautifully at the end of its decision.

    Quote

    TRAX argues that it has made a threshold showing of conduct that is hard to explain absent bad faith, stating that the Army has “knowingly and deliberately ignored” problems related to baseline staffing during the three awards in this procurement, “each time to the benefit of Jacobs”… TRAX, however, has failed to make a threshold showing of conduct by the Army that is hard to explain absent bad faith… Rather, the errors appear to simply reflect the difficulties the Army has experienced in attempting to set a template for baseline staffing. Such difficulties stem, at least in part, from the nature of the Yuma testing facility, which has an uneven workflow and staffing needs that are hard to predict. See, e.g., AR 3-97 (stating that the Yuma facility requires an “ever-changing work effort” where the demands “change[] constantly” and contractors must be “flexible and adaptable”); AR 5b-457 (explaining that the Army could not provide “forecasted” information regarding full-time equivalents needed beyond the base period of the contract).

    There was no way for any of the offerors to estimate what it would cost to provide support services at Yuma Proving Ground for a year. As the Army had explained to the court:

    Quote

    Yuma’s primary mission is to provide “the most flexible, responsive, innovative and diverse set of capabilities and services across the spectrum of natural environments.” It tests military equipment of varying types, with the materials tested and the “associated infrastructure necessary to conduct each test chang[ing] constantly.” The Army describes Yuma as a “premier Army asset” with capabilities that are continually expanding, resulting in an increased need for personnel to support the testing conducted at the facility.

    The only way that the Army could comply with CICA and evaluate cost was develop a common cost baseline, tell the contractors to plug in some numbers, and compare results as if they were meaningful indicators of what the offerors’ performance costs would be. But the resulting cost estimates probably bore little if any meaningful relationship to what would happen after contract award. They probably had little if any meaningful predictive value. The apparent cost difference between Jacobs and TRAX may have been illusory. The Army used the numbers so it could “include cost or price to the Federal Government as an evaluation factor that must be considered in the evaluation of proposals,” as required by10 U.S.C.A. § 2305(a)(3)(A)(ii) and 41 U.S.C.A. § 3306(c)(1)(B).

          Orders are orders. Onward the Light Brigade. A lot of wasted effort, time, money, and litigation, the waste being attributable to a 19th Century obsession with cost competition, abetted by incompetent people. In today’s world of procurements of long-term, complex support services, CICA must be amended to permit source selection without evaluation of price or cost in appropriate circumstances, followed by one-on-one negotiations with the selectee before contract award.

    A Better Approach To Support Services Contracting

             A better way to have contracted for the Yuma Proving Grounds support services would have been to award a contract with two line items. One line item would be for a firm-fixed-price contract with award-fee for day-to-day general management and supervision services and for administrative services such as safety, quality control and assurance, purchasing and materials management, property management, human resources management, and accounting. The other line item would be for a cost contract (no fee) for materials, labor, and other direct costs to be incurred for performance of support services. Under such a contract, with a day-to-day contractor management team in place and an advance agreement on any indirect cost rates applicable to the cost (no fee) line item, the parties would jointly plan and manage performance. The contractor would make its best effort to execute the plan by performing the support services under the cost (no fee) line item.

             Instead of pretending that the contractor would independently plan, manage, and execute performance in accordance with an unavoidably incomplete "performance work statement," the parties would jointly plan the work to be done and its scheduling, budget, required materials, labor staffing, and labor compensation. The Government would have the final say on planning decisions. The Government would obligate funds for the firm-fixed-price with award-fee line item upon contract award, but it would fund the cost (no fee) line item in the amount required on a quarterly basis. The contractor would then execute through day-to-day performance.Such an approach to contracting would be relational, rather than transactional. See Edwards and Nash, “A Proposal for a New Approach to Performance-Based Services Acquisition,” Defense Acquisition Review Journal (September 2007), and Vitasek and Frydlinger, “Are You Suffering From the Contracting Paradox? Introducing the Relational Contract,” Contract Management (May 2017).

              An agency would choose the contractor for such a contract on the basis of the best-qualified offeror with a fair and reasonable price, as described in “Postscript: Highest Technically Rated Offerors With Fair and Reasonable Pricing—The GAO’s Sevatec Decision,” The Nash & Cibinic Report (March 2017). The agency would evaluate only the offerors’ qualifications--based primarily on experience, past performance, and a brief oral presentation about their company and proposed contract management organization--and the fairness and reasonableness of their proposed firm-fixed-price and award fee for the day-to-day management services. Price evaluation would not involve nonprice/price tradeoffs or direct comparisons of offerors' prices. Since offerors would not propose estimated costs for performance of the support services under the cost (no fee) line item there would be no need to establish a common cost estimating baseline, and no need to evaluate the realism and reasonableness of offeror estimated costs. The agency would get a contract that is better adapted to the realities of long-term complex service contracting, and they would get it through a simpler source selection process.

              A little innovation can go a long way.

     

  4. In the 1973 futuristic mystery thriller Soylent Green there’s an exchange between Detective Thorn (Charlton Heston) and Hatcher (Brock Peters):

     

    Det. Thorn: Ocean's dying, plankton's dying . . . it's people. Soylent Green is made out of people. They're making our food out of people. Next thing they'll be breeding us like cattle for food. You've gotta tell them. You've gotta tell them!

     

    Hatcher: I promise, Tiger. I promise. I'll tell the Exchange.

     

    Det. Thorn: You tell everybody. Listen to me, Hatcher. You've gotta tell them! Soylent Green is people! We've gotta stop them somehow!

    Acquisition Reform is like Soylent Green, it’s people. I don’t mean the Congresscritters, like Representative Thornberry and Senator McCain, and their Committees. I don’t mean the Administrator of the Office of Federal Procurement Policy, whoever he or she may turn out to be. I don’t mean the acquisition and procurement policy wonks in the Pentagon and elsewhere.

    This past week (i.e., 14 – 20 May 2017) was a big week for the professional acquisition reformers:

     

    The Advisory Panel on Streamlining and Codifying Acquisition Regulations issued the “Section 809 Panel Interim Report” (May 2017). Read the 60 page report, and formulate your own opinion if it will fix the problems in Government acquisition. Frankly, I think it will take more than getting rid of the $1 coin requirement, but I could be wrong.

     

    Representative William McClellan "Mac" Thornberry introduced H.R. 2511 “To amend Title 10, United States Code, to streamline the acquisition system, invest early in acquisition programs, improve the acquisition workforce, and improve transparency in the acquisition system.” The short title on that would be ‘‘Defense Acquisition Streamlining and Transparency Act’’. (sic) Read the 80 page resolution, and formulate your own opinion if it will fix the problems in Government acquisition. [If we have Representative Thornberry, can Senator McCain be far behind? (Or, is that FAR behind?)]

     

    A (moderately) reliable source has told me that the Department of Defense will be leaving Better Buying Power behind, now that Mssrs. Carter and Kendall are gone. But, wait, acquisition reform has not been abandoned. Apparently, it will go on, but now as “Continued Acquisition Reform.” Presumably that will be abbreviated as “CAR.” Continued Acquisition Reform should not be confused with Continuous Acquisition Reform nor Continued Acquisition Reform, nor Continuous Process Improvement, for that matter, those would all be bygone days.

    The professional acquisition reformers have time and again passed legislation and issued regulations to “fix” the acquisition process.  This fiscal year (2017) Title VIII (i.e., Acquisition Policy, Acquisition Management, and Related Matters) of the National Defense Authorization Act (NDAA) had 88 sections. The year before, 77 items. And, yet, Representative Thornberry and Senator McCain believe there is a need for a lot more acquisition reform legislation this year. Title VIII has included over 500 sections over the last ten years, but we still need more. What we have at issue here is what is referred to as the Law of the Instrument. Although he was not the first to recognize the Law, Abraham Maslow is probably the one best remembered for articulating it, "I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail." For those of us on the receiving end of the Congressional output that would be, “I suppose it is tempting, if the only tool you have is a legislation, to treat everything as if it were a bill." I suspect, although I cannot be positive, that most, if not all, of the folks doing the legislating have never had to use the Federal Acquisition Regulation (FAR) to buy anything. If they had, they would not be nearly so cavalier in tossing around statements about how bad the acquisition process is, and how more legislation is the answer.

    Will such legislation solve the acquisition problem? According to the Honorable Frank Kendall the answer is a resounding “NO.”

     

    Quote

    Frank Kendall, then undersecretary of defense for acquisition, technology and logistics (USD(AT&L)), condemned, or “slammed,” or “blasted,” such legislation.

    Frank Kendall, who has served as the Pentagon's top weapons buyer since October 2011, blasted Congress's acquisition reform efforts, which he said almost inevitably create more bureaucracy and regulation.

    Kendall called legislative action “an imperfect tool to improve acquisition results.”

    “It is not a good instrument to achieve the results that I think the Hill is after, but they keep trying,” he said. “To be honest, I believe that as often as not, what they do does not help. In some cases, it has the opposite effect.”

    Bloomberg Federal Contracts Report, “Outgoing DOD Weapons Buyer Slams Congress’ Acquisition

    But, in all fairness, it’s not just them. Since we last had a reissuance of the FAR in March 2005, the FAR Council has brought us 95 Federal Acquisition Circulars (FACs) to update and expand the FAR. Since we last has a reissuance of the Defense Federal Acquisition Regulation Supplement (DFARS) in January 2008, the Defense Acquisition Regulations Council has brought us 211 Defense FAR Supplement Publication Notices (DPNs). With all of that, there are still dozens of open FAR and DFARS cases yet to be heaped on our plate. Although legislation may have been a major root cause of much that change activity, we can probably offer some of our “thanks” to the President, OMB, OFPP, GAO, Boards of Contract Appeals and Courts. Admittedly, now and again, a good idea actually gets slipped into the regulations. [Note: The number of FACs and DPNs issued in 2017 was artificially suppressed as a result of Executive Order 13771 – Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs. The two councils (i.e., FAR Council, Defense Acquisition Regulations Council (DAR Council) and the Civilian Agency Acquisition Council (CAA Council)) withheld publication of a large number of cases while policies and procedures were “sorted out.”]

    [Note: Refer to Augustine’s Laws, Law Number XLIX: Regulations grow at the same rate as weeds.]

    And, if that were not enough, we have institutional acquisition reform (e.g., policy letters, memoranda, directives, instructions, guidebooks, handbooks, manuals). Everyone seems to want to get into the act in one way or another. It is interesting to note, however, that the “perpetrators” of this institutional acquisition reform do not see it in the same light as acquisition reform legislation.

    But, I recognize the lesson that King Canute was trying to teach when, in the apocryphal anecdote, he had his throne taken to the sea and ordered the tides not to come in. They did anyway. Legislators will legislate, it’s what they do. Regulators will regulate, it’s what they do. Policy makers will policymake, it’s what they do. None of them will willingly give up their rice bowls.

    Let’s get back to Soylent Green.

     
    Quote

    “Acquisition improvement is going to have to come from within. It is not going to be engineered by Hill staffers writing laws for us,” Kendall said. “It's going to be done by people in the trenches every day, dealing with industry, trying to get incentives right, trying to get the performance right, trying to set up business deals and enforce them, set reasonable requirements in our contracts.”

    Bloomberg Federal Contracts Report, “Outgoing DOD Weapons Buyer Slams Congress’ Acquisition Fixes,” Andrew Clevenger, January 17, 2017

     

    Better Buying Power (BBP)? The Honorable Mssrs. Carter and Kendall were responsible for BBBP, in all its iterations. Did that rise up from the trenches? Or, was it handed (or pushed) down from above? Isn’t this a bit like the pot calling the kettle black? If you will permit the adding of a single letter to a line of Hamlet by William Shakespeare, "The laddy doth protest too much, methinks."

    [Note: Refer to Augustine’s Laws, Law Number L: The average regulation has a life span one-fifth as long as a chimpanzee's and one-tenth as long as a human's, but four times as long as the official's who created it.]

    Well, whichever way you look at it (i.e., upside, downside, sidewise) it is all more work for the acquisition professionals that must do the daily work of buying supplies and services for the Government. If you want to have an idea of how all of this acquisition reform weighs us down, then take a look at William Blake’s illustration “Christian Reading in His Book” for John Bunyan’s The Pilgrim's Progress. It will depend on how many pixels the image you find has, but it looks to me that he is reading the FAR.

    Who are the Soylent Green? Not the policymakers, but the people in the trenches, doing the hard work of acquisition on a daily basis, day in and day out, week in and week out, month in and month out, year in and year out. The contract specialist, contract negotiator, contract administrator, cost or price analyst, purchasing agent or procurement analyst just trying to get the job done. These are, for the most, part the unsung heroes and heroines of acquisition reform. These are the ones who, through innovation and personal initiative reform that acquisition process, one acquisition at a time. And, if we are lucky, or clever, are able to pass successes along to others.

    As acquisition professionals, we must pass on our successes, and failures, to others, so that they may join in the fruits of success, and avoid the pitfalls of failure. You cannot count on “Lessons Learned,” alone. How often do lessons learned go unread and unlearned? You cannot count on “Best Practices,” alone. How often do best practices, go unread and unpracticed? Share with others. Share quickly. Share often. Share wherever you can.

    A final thought.

    Quote

    So what is to be done? By and large the answer to that question is well understood—in fact, many friends of mine such as former Deputy Secretary of Defense David Packard; the head of the Skunk Works Kelly Johnson; Air Force General Bennie Schriever; Admiral Wayne Meyer and Army General Bob Baer, among others, were providing the answer decades ago. What is required is simply Management 101. That is, decide what is needed; create a plan to provide it, including assigning authority and responsibility; supply commensurate resources in the form of people, money, technology, time and infrastructure; provide qualified leadership; execute the plan; and monitor results and strenuously enforce accountability. Ironically, little of this requires legislation—but it does require massive amounts of will . . . from all levels of government. Unfortunately, many of the problems are cultural—and it is difficult to legislate culture. But there is much that could be done.

    Views from the Honorable Norman R. Augustine

    The Acquisition Conundrum

    DEFENSE ACQUISITION REFORM: WHERE DO WE GO FROM HERE? A Compendium of Views by Leading Experts, STAFF REPORT PERMANENT SUBCOMMITTEE ON INVESTIGATIONS UNITED STATES SENATE (October 2, 2014)

    The absolute final thought. I’m sorry, I can’t help myself. I don’t care about King Canute: Don’t legislate. Don’t regulate. Just leave us alone to do our work as best we can.

     

     

     

     

     

     

     

  5. Part 1: New Rules Go Into Effect December 31.

    Federal government agencies rely upon external contractors to carry out a wide range of functions. Many contractors have access to sensitive data that could, if compromised, potentially reveal classified information, threaten national security or even put lives at risk. As a result, cybersecurity is a critical and growing concern for both federal agencies and contractors.

    The issue has gained greater urgency, as contractors of all sizes must demonstrate compliance with new federal government rules by December 31, 2017.

    Understandably, many small business contractors feel overwhelmed. If you don’t comply, your contracts – and, perhaps, your business – are at risk. Yet you may not know where to begin. Common obstacles to compliance include:

    • Lack of knowledge of the rules,
    • Not knowing how to meet the requirements spelled out in the rules,
    • Lack of access to information security resources, and
    • Lack of financial resources to implement required safeguards.

    Many small businesses do not employ a dedicated information technology employee or consultant. Often, an owner or key employee performs IT functions in addition to their regular duties. And even Fortune 500 companies with vast resources struggle with information security. No wonder small business owners feel overwhelmed!

    Still, when you submit an RFP or sign a contract containing one or more information security clauses, you are affirming your ability to comply with the contract. You need to employ as many best practices as possible to show that you have employed good faith due diligence to achieve compliance. As with any compliance program, you must be able to demonstrate that you are doing – or trying to do – the right thing.

    This series of blog posts is designed to help small business contractors prepare to meet the December 31 deadline. We’ll break down compliance into bite-size, manageable and affordable chunks that an average small business of a few to up to 50 employees can tackle. Let’s start with the rules.

    Federal Cybersecurity Rules

    FAR 52.204-21

    DFARS 252.204-7008

    DFARS 252.204-7012

    DFARS 204.7300

    NIST (SP) 800-171

    FAR Case 2011-020

    Federal Information Security Rules

    In June 2016, the US Department of Defense, General Services Administration, and National Aeronautics and Space Administration published a new rule entitled “Basic Safeguarding of Contractor Information Systems.” The new requirements supplement DFARS 252.204-7012 (Safeguarding Covered Defense Information and Cyber Incident Reporting), which imposes several more requirements on covered DoD contractors.

    Safeguarding requirements are based on security requirements published in the Department of Commerce National Institute of Standards and Technology’s Special Publication (SP) 800-171, “Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations.” However, several other overlapping rules and regulations may apply (see box).

    These rules and regulations require contractors of all sizes to comply with two key information security requirements:

    • Maintain Adequate Security
    • Report any Incidents

    In the case of defense contracts, within 30 days of contract award, a contractor must notify the DoD Chief Information Officer of any security requirements not implemented at the time of contract award. The contractor can propose alternate, equally effective measures to DoD through the contracting officer.

    Where Must You Maintain Adequate Security?

    Security requirements affect any system for the collection, processing, maintenance, use, sharing, dissemination, or disposition of information, including:

    • Email
    • Social media
    • Cloud storage
    • Online accounts
    • Mobile devices
    • Personal computers
    • Software
    • Corporate networks
    • Storage devices

    Requirements under NIST (SP) 800-171

    Nearly 80 pages in length, NIST Special Publication 800-171 includes 109 items broken into 14 categories. Under these guidelines, the purpose of computer security is to protect an organization’s valuable resources, such as information, hardware, and software. Through the selection and application of appropriate safeguards, security helps the organization’s mission by protecting its physical and financial resources, reputation, legal position, employees, and other tangible and intangible assets.

    The document covers the NIST framework for Improving Critical Infrastructure, details on each of the 14 security requirements, mapping tables and a special section dedicated to acronyms. See below for an outline of each category, with tips for compliance.

    1. Access Control: Limit physical access to building and servers. Limit access to accounts and services through assigned users. Only those who need access should be granted access.

    Tip: Review active users on accounts at least annually (best practice involves quarterly or semi-annual review). Look for terminated employees and employees whose duties have changed (they no longer need access to a server, site, folder, file, or account). Revoke their access.

    1. Awareness and Training: Provide annual training to all employees on existing policies and procedures. Provide updated training as appropriate for changes in laws, regulations, etc.

    Tip: Document the training. Be able to prove due diligence in training your employees to do the right thing.

    1. Audit & Accountability: Perform internal and external audits. Have someone outside the company or department review policies against actual practices. Hire an outside firm. Have individual team, department, or project managers review user access to their sites, servers, folders, files, and accounts.

    Tip: Document the audit, as well as any remedial training, new policies, or other mitigation strategies that arise as a result of the audit.

    1. Configuration Management: Keep track of hardware and software. Know who has possession of equipment and what is installed on each machine. Ensure that users have limited ability to download and install software. Have a defined list of preapproved software. Have a formal process to request and vet new software.

    Tip: Perform audits of your system and software. See #3 above.

    1. Identification and Authentication: Identify and authenticate any user gaining access to your facility, servers, or accounts. Assign unique logins for each user; do not use shared logins. Use electronic key cards for physical access to facilities and rooms. Authenticate users through some other tool such as a password, PIN, one-time password, or biometrics. Access to server rooms may require a key card and PIN.

    Tip: Review access control on regular basis. See #1 above.

    1. Incident Response: Document an incident response process including roles and responsibilities. Incident response should include or be coordinated with your disaster recovery plan. With government contracts and data breaches, there are specific reporting requirements.

    Tip: Your response plan must specify how you are notified internally, who you need to notify and how (such as customers and government entities), response times, and public relations outreach.

    1. Maintenance: Keep all hardware, software, and firmware updated with the latest patches. Perform routine preventive maintenance such as backups and destruction of backups.

    Tip: Automate as much as possible. Have a calendar to track needed items. Document all updates.

    1. Media Protection: Physically limit access to the media. Limit or prohibit use of removable media or portable storage devices such as thumb drives. Protect backup media the same as live data.

    Tip: Enable system/network protocols that identify removable media or portable storage devices.

    1. Personnel Security: Screen personnel before providing access. This may be as simple as validating a need-to-know for basic access and as complex as performing background checks on individuals with advanced access or responsibilities.

    Tip: Ensure terminated employees are removed from all access and accounts.

    1. Physical Protection: Allow only authorized access to systems, equipment, and facilities. Maintain audit logs of physical access (may be automated with electronic key cards), monitor and escort visitors.

    Tip: Implement a visitor policy and process with logs and badges.

    1. Risk Assessment: Perform a risk analysis to identify vulnerabilities. If this happened, what would it mean to us, our business, our reputation. Compare analysis to existing policies and practices, and then remediate accordingly.

    Tip: Perform a risk assessment when acquiring another company, moving locations, adding new technology, or changing providers.

    1. Security Assessment: Assess effectiveness of existing controls. Are controls doing what they’re supposed to do? Can someone bypass a control?

    Tip: Perform spot checks on controls. These should be unannounced “audits.” See if an unauthorized user can gain access to a facility, server, folder, or file.

    1. System and Communications Protection: In comparison to protecting the storage of data, this is meant to protect the flow of data between systems. It also includes boundaries between systems such as between private and guest networks.

    Tip: Deny network communications by default. Permit authorized communication by exception.

    1. System and Information Integrity: Monitor activity to detect flaws, irregularities, and malicious code. Perform system and file scans for viruses and malware. Irregularities may include size, volume, and timing of network traffic.

    Tip: Install antivirus and malware protection. Perform routine system and file scans.

    From Understanding to Compliance

    After reading this summary, you should have a general understanding of what the new rules require. Although the topic may still seem overwhelming, our next post will help you get a handle on practical steps you can take to comply by the December 31 deadline. We’ll review information security requirements for individual systems, with a discussion of best practices and affordably priced tools suitable for small business use.

    The post Cybersecurity Best Practices for Small Business Contractors – Part 1 appeared first on Left Brain Professionals.


    leftbrainpro.com

  6. Of all areas in contracting, the one often taken most for granted, yet of vital importance, is that of the prime contractor/subcontractor relationship. We all know how much the requirements, contractual specifications, terms and conditions, and funding on a prime contract flow down the supply chain, but this flowdown doesn’t just happen. Although some may argue it’s as easy as placing clauses into a subcontract, it more complex than that. Subcontracting can exponentially increase the complexity of whatever product or service is to be delivered to the ultimate customer. 

    For all the attention placed on the customer and prime contract, all these same complex issues, and more, are placed on firms managing both ends of the subsequent subcontracting relationships at each successive tier. These firms may be competitors with each other in some respects, yet working for one another in other respects. Prime and subcontractors must develop tools and systems for tracking performance, compliance, and results—not only of themselves, but of each other. Creating these processes, systems, and documents defines their relationship and responsibilities. Determining the terms and conditions of what the prime needs—including what, how, where, and when—must be precisely articulated to ensure the sub delivers exactly what the prime customer asked for (as defined in the prime’s solicitation, the sub’s proposal, and subsequent (proper) communications). 

    Within both federal and commercial contracting, competitive pressures and expectations continue to dramatically increase. In most cases, everyone has increasing alternatives to go elsewhere if needed to get their requirements met. The prime customer, as we know, is obligated to flow down certain expectations, and to manage the increased pressures “downhill.” Within federal contracting, increased oversight and review of the managing of subcontracts or purchasing has increased from the contracting office to the Defense Contract Management Agency.

    As in all things, this comes down to people. While many of these activities lend themselves to automation, much also requires the ever-growing need for professionals with interpersonal skills—particularly relationship building. Hard and so-called “soft” skills (or competencies) such as contract management, pricing, written and verbal communication, knowledge of technology, research, finance, marketing, or general business acumen—as well as adaptability to change—are competencies no firm can short-change in the people that ensure this is done internally, or in representing itself to the outside business world.

    Subcontracting, supply chain, or purchasing managers; buyers, contract specialists, pricing specialists, estimators, or category managers—whatever the title, they are interrelated within the same overall profession. Whether on the buying or selling side, the prime or the subcontractor, the top-tier or several layers down the supply chain, this is as important a relationship and imperative a technical expertise as ever there was in how our economy is driven. 

    Within small businesses, it can be well argued that these activities are everyone’s responsibility. Whether it’s someone working in finance, information technology, law, or business development; even the CEO needs to understand and perform parts or all of these subcontract management functions.

    So what are you waiting for? The business that you may help thrive or just survive may be your own. Good Luck!

    Michael P. Fischetti

    Executive Director

    National Contract Management Association

    NCMA invites you and your colleagues to attend SubCon Training Workshops—NCMA’s new training event for subcontracting professionals—March 30–31, 2017, in Dulles, VA; offering four workshops, each with six sessions to choose from. Participants can choose their own schedule or come for two full days of training and networking. Learn more at www.ncmahq.org/subcon17

     

  7. In early 1977, Gordon Wade Rule (Rule) sat in a chair in a corner of a conference room at the Naval Material Command reading a document that I had prepared about his negotiations on the CGN-41, a nuclear-powered guided missile cruiser.  Days earlier, I was among a group that was briefed by a staff member of Admiral Hyman Rickover (Rickover), the Director of the Naval Nuclear Propulsion Program.  Although, the briefing was supposed to be about the CGN-41 negotiation, we were treated to a 3-hour lecture on how the Navy's shipbuilders were trying to "pin the rose" on Rickover. In this case, pinning the rose had nothing to do with the shipbuilders asking the Admiral to a prom.

    When I began writing this blog entry, I had planned to include only the work I had done decades ago for the Chairman, House Committee on Armed Services.  That work involved Rule's negotiation of Modification 31 to the contract that included the CGN-41, the eventual USS Arkansas. I wanted you to figure out if the modification that Rule signed was done in a manner that would allow it to survive a court test.  It took 2 courts to decide that question so it wasn't as easy as it sounded.  Unfortunately I read too much surrounding material and I realized that I was taking Rule's actions out of the context in which they happened back in the 1970s.  So, I added a bit more information.  You will see Rule as the contracting officer, Rickover as a program officer interfering with the contracting officer, Senator William Proxmire apparently acting for Rickover and himself, and Deputy Secretary of Defense William P. Clements, Jr. (Clements) trying to resolve the shipbuilding claims problem in any manner he could.  You cannot choose sides on this one.  All characters, including government agencies and shipbuilders, were trying to manipulate and influence anyone that became involved with the CGN-41.  It seemed as if sides were drawn by identifying the enemy of an individual's enemy.  

    A Brief Introduction to the Shipbuilding Claims Era

    In the early 1970s, cost overruns and shipbuilders' claims had become a major problem.  By 1976, it had reached epidemic proportions with $1.9 billion in shipbuilder claims.  The shipbuilders, the Navy, the Department of Justice, and Rickover were in a war.  In the case of the CGN-41, Newport News Shipbuilding and Drydock Company was the industry player.  

    Clements wanted to settle the ship claims problem with the use of P. L. 85-804.  A June 21, 1976, Business Week article explains his early effort.  The excerpt below is a quote from the article entitled:  The Shipbuilders Balk at 40 Cents on the Dollar.  The article explained that Clements had planned to settle $1.9 billion of shipbuilding claims against the Navy for "between $500 million and $700 million" but that plan fell fiat with the Navy's shipbuilders.  He explained that "the shipyards are giving me trouble."  The article further described:

    Quote

    On Apr. 30 Clements informed both the Senate and the House Armed Services Committees of his unusual plan to clear up long-pending claims, which he said are largely responsible for the "acrimonious and adversarial environment that now marks Navy-shipbuilders business relations." He promised the legislators a progress report on June 10. At the same time, he predicted privately that he would have the claims situation wrapped up by that date.

    The settlements would be under terms of Public Law 85-804, enacted by Congress in the early 1960s to enable the Defense Dept. to modify contracts when it is in the interest of national defense. The law was amended in 1973 to require that Congress be notified prior to use of the law for any modification exceeding $25 million and be given 60 days to disapprove.

    Clements intended to use this program to bypass traditional, drawn-out appeals board procedures and to wipe the slate clean of the massive extra dollar amounts demanded by shipbuilders to compensate them for such things as Navy-ordered design changes, late delivery of government-furnished equipment, and higher-than-anticipated inflation rates. But at midweek Clements was far short of his goal. The two shipyards with the bulk of the outstanding claims were reluctant to accept his offer of roughly 40¢ on the dollar in immediate cash.

    A lot of money. Tenneco Inc.'s Newport News Shipbuilding & Dry Dock Co. filed the largest of the outstanding claims-some $894 million. After meeting Wednesday morning with Clements, Newport News President John P. Diesel said: "We have failed. We can't get together on money, and the Navy has not done a damn thing about changing contracting procedures."

    After failing to reach a settlement himself, Clements called Navy management to his office for a meeting of the status of shipbuilding claims.  Nothing had been accomplished by them either.  He then focused on the CGN-41.  The work on this ship had been stopped by Newport News because of issues it was having with the Navy.  The contract was in court and work had started again under the condition that the Navy negotiated in good faith with Newport News to resolve the issues.  The court's time limit for good faith negotiations was running out and something had to be done.  Since the CGN-41 contract was in court, the Department of Justice was required to play a part in the review of any settlement proposed to the court.  

    This is where our story begins.  I have added the dates on which the actions occurred so that you can follow.  All facts are based on documents that I had reviewed in the 1970s or documents that I recently reviewed.  I needed to limit the length of this entry so I added enough information to give you a flavor of the times.  Sometime in the future, I may write a larger article.  Rule was appointed as a special contracting officer on the CGN-41 to resolve the issues that the Navy and the Secretary of Defense could not accomplish.  Undoubtedly he knew he was heading into a mighty storm that might harm him.  

    Contract Modification P00031 To CGN-41:  Chronology of Events

    July 13, 1976:  Clements held a meeting to discuss Navy shipbuilding claims.  Among those in attendance were:

    • Deputy Secretary of Defense (Clements)
    • Consultant to the Deputy Secretary of Defense
    • Assistant Secretary of the Navy (Installations and Logistics) (ASN (I & L))
    • Chief of the Naval Material Command (NAVMAT)
    • Vice-Chief of the Naval Material Command  (NAVSEA)
    • General Counsel of the Navy, and 
    • Gordon Rule, Director, Procurement Control and Clearance Division, Naval Material Command. (Rule)

    In regard to the Newport News claims, a member of the meeting quoted Clements as saying that he was "irrevocably committed to solving this problem; unlike Admiral Rickover."  Clements then asked the Navy officials why they had not reformed the contract, indicating that if they would not, he would.  He then stated that he wanted to see four changes incorporated in the CGN-41 contract:  (1)  a new escalation clause; (2) a new "changes" clause; (3) a new ceiling price; and (4) a new delivery date.  (emphasis added)

    During the meeting it was agreed that Rule would become negotiator for the CGN-41.  He was to report directly to the Chief, NAVMAT and the Vice Chief, NAVMAT was to meet with Clements each day at 9:15 a.m to report on the progress of the negotiation.

    July 14, 1976:  Rule telephoned Newport News to explain that he had been assigned principal negotiator on the CGN-41 and requested a meeting.

    July 15, 1976:  Newport News was contacted by a consultant to Clements who explained Rule's authority. Rule and Newport News held their first meeting.

    July 16, 1976:  The Assistant Secretary of the Navy (Installations and Logistics) wrote to the Chief, NAVMAT informing him that the Chief would be responsible for the direct discussions between Rule and Newport News.  Rule would be the principal negotiator and Rule would be assisted by NAVSEA and the Navy General Counsel, as required.

    July 16, 1976:  Rule sent a memo to Clements describing his first meeting with Newport News.  As a note, he mentioned that he intentionally did not contact the Navy's Supervisor of Shipbuiliding, Conversion and Repair (SUPSHIPS), Newport News.

    July 19, 1976:   Rule sent a memo to the Deputy Commander for Contracts, NAVSEA asking for brief descriptions of what the Navy considered as key issues for negotiation and the Navy's negotiating position so he could develop his own negotiation position.

    July 28, 1976:  The Vice Chief, NAVMAT and a consultant to Clements held discussions with Newport News.  Areas discussed were: when the CGN 41 problems would be solved, ceiling price, and escalation provisions.

    August 10, 1976:  Rule telephoned Newport News and requested a meeting in Washington on August 12,1976.

    August 12, 1976:  During a meeting in Washington between Rule and Newport News, Newport News left a general outline for negotiations.

    August 12 and 13, 1976:  The Vice Chief, NAVMAT asked Rule about the August 12 meeting so he could inform Clements.  Rule explained that Newport News had delivered a proposal and he did not approve of it.

    August 17, 1976:  Rule telephoned Newport News and requested a negotiating session to be held on August 20, 1976.

    August 19, 1976:  The Deputy Chief of Naval Material (Procurement and Production) issued Rule an appointment as Contracting Officer with "unlimited authority with respect to negotiations with Newport News."

    August 20, 1976:  Negotiations were held between Rule and Newport News.

    August 23, 1976:  The Vice Chief, NAVMAT and Rule met with Clements to brief him on the August 20th negotiations.  According to Rule, Clements' comment on the negotiations was "fine."  After the meeting with Clements, Rule received a note from the Chief, NAVMAT to meet him in the Office of the Assistant Secretary of the Navy (Installations and Logistics).  Among those attending were:

    • Assistant Secretary of the Navy (Installations and Logistics),
    • Chief, NAVMAT, 
    • Vice Chief, NAVMAT,
    • Rule, Director, Procurement Control and Clearance Division, Naval Material Command,
    • Commander, NAVSEA,
    • Deputy Commander for Contracts, NAVSEA,

    At this meeting, the Chief, NAVMAT ordered Rule to describe the results of the August 20 negotiations.

    August 24, 1976:  Rickover wrote to the Chief, NAVMAT that he had heard a rumor of a settlement on the CGN-41 between Rule and Newport News.  Rickover commented point-by-point about the rumored settlement and said such a settlement "would show that the Government will not require Newport News to honor its contracts."  Rickover recommended that any

    Quote

    settlement be referred formally to the Naval Sea Systems Command for review and comment by knowledgeable personnel directly responsible for the work in question. In this regard I [Rickover] will be glad to provide assistance based on my own knowledge of the events in question.

    August 24, 1976:  Senator William Proxmire wrote to the Attorney General, Department of Justice expressing concerns about Gordon Rule's views on the CGN-41 negotiations and telling the Attorney General:

    Quote

    I understand that the Department of Justice has sole responsibility within the Government for approving out-of-court settlements involving Government matters under litigation. I assume that the Justice Department will review any such settlements proposed by the Navy in the CGN-41 case. However. in view of the importance of the CGN-41 case to the overall shipbuilding claims problem, I request that you direct the Navy to keep you fully informed of any negotiations and that you review any settlement offer to ensure that it is on sound legal ground and in the public interest before the Government becomes a party to it.

    August 25, 1976:  Newport News telephoned Clements and read a prepared press release.  The consultant to Clements said he and Clements approved of the press release, an excerpt of which stated:  "The parties have agreed to sign a definitive contractual document embodying the negotiated agreement for the construction of the CGN-41."  Later that day, the Assistant Secretary of the Navy (Installation and Logistics) telephoned Newport News, informed them that he was perturbed by the Newport News press release and stated that the Navy would issue its own press release stating that agreement had been reached in principle but that the matter was to be reviewed by higher authority.  On this same date the Navy issued a press release explaining an "agreement in principle" was being drafted for review and approval.  (Emphasis added)

    August 26, 1976:  The Chief, NAVMAT sent Rickover a response to his August 24, 2016 letter stating:  

    Quote

    From your many, years in government service I know you realize that business sensitive negotiations should not be influenced by sources outside of the designated negotiating parties, and that a broadly distributed letter from you, such as reference (a) [August 24, 1976 memo from Rickover described above], cannot help but cause perturbation in the negotiating process, disrupting the efforts of the assigned negotiator. 

    The Chief, NAVMAT further wrote:  For reasons such as this, you must stand apart from these negotiations unless the technical areas regarding naval nuclear reactors become involved.

    August 27, 1976:  Rickover responded to the Chief's, August 26, 1976 letter to him.   In response to the wide distribution he used for his letter of August 24, 1976, Rickover explained that: 

    Quote

    I felt obliged to inform them of what I had heard. I am sure you are not implying that it is improper for me to call such matters to the attention of those responsible, and point out potential problems. To remain silent would be analogous to not warning my mother that she was about to fall off a cliff.

    He used the same distribution list for this 6-page letter as he did in his August 24, 1976 letter.

    August 30, 1976:  Newport News met with Rule in Washington and delivered the first draft of Modification P00031.

    The Chief, NAVMAT sent a letter to Rule explaining that, prior to a binding agreement on the CGN-41, the elements of the agreement must be submitted to the Chief, NAVMAT for review and approval.  The review was to be conducted by the Vice Chief, NAVMAT, the Deputy Chief, NAVMAT (Procurement and Production), the NAVSEA Deputy Commander for Contracts; and the General Counsel for the Navy.  Mr. Rule was to provide the proposed contract modification, the business clearance justifications, and other supporting papers for review prior to signature by the contracting officer.

    Gordon Rule forwarded a draft memorandum to the Chief, Naval Material that summarized his negotiations with Newport News.

    August 31, 1976:  The General Counsel of the Navy noted the Rule draft memorandum and told Rule of the General Counsel's responsibility to review the summary of negotiations.  Additionally, the General Counsel requested more information to support Rules' summary.

    September 1, 1976:  Rule sent a summary of his negotiations to the Chief, NAVMAT.

    September 3 1976:  In response to the August 31, 1976 memo from the Navy General Counsel, Rule sent him additional information supporting his summary of negotiations.  He also provided a copy of the first draft of Modification P00031.

    September 14, 1976:  Members of Rule's and Newport News negotiating teams and DCAA auditors met in Washington to discuss provisions in the first draft of Modification P00031.  DCAA was asked to review certain provisions of the proposed modification.

    September 16, 1976:  The Attorney General, Department of Justice, responded to Senator Proxmire's August 24th letter by writing:

    Quote

    Your letter requests that I direct the Navy to keep me fully informed of any negotiations and that I review any settlement offer to insure that it is on sound legal ground and in the public interest. The Justice Department intends to review any proposal and/or papers before submission to the court. We would request the court to approve any settlement only if we are satisfied that it is on sound legal ground and in the public interest.

    September 20, 1976:  NAVSEA's Deputy Commander for Contracts and a member of the "review team" submitted his analysis of the first draft to the Vice Chief, NAVMAT.  This analysis was not made available to Rule.

    September 24, 1976:  DCAA submitted its analysis of certain provisions of the first draft to a member of Rule's negotiating team.

    September 27, 1976:  Newport News delivered a second draft of the modification to Rule and Rule requested DCAA to review the draft.

    [September 28, 1976:  Clements wrote a letter to the Attorney General, Department of Justice, commenting on the August 24 letter of Senator Proxmire.  In regard to Rule, he wrote:

    Quote

    Senator Proxmire in his letter suggests that Mr. Gordon Rule is not impartial and that he might not act in the Government's interest but would so act as to undermine the Government's ability to enforce contracts. This is a serious charge by the Senator and defames both the character and competence of Mr. Rule. As I have indicated, it was at my suggestion that Mr. Rule was appointed by the Navy as the senior negotiator in the CGN-41 matter. I know Mr. Rule's background and work experience during his years as a Navy procurement official, and I am familiar with his current work as the CGN-41 negotiator. I consider Senator Proxmire's remarks regarding Mr. Rule ground-less, ill-tempered and unworthy of a member of the U.S. Senate.

    In regard to the Department of Justice's review of the CGN-41 negotiation, he said:  "Let me assure you that we in DoD have no intention to by-pass or withhold from your department any information which you determine that your department needs in connection with legal proceedings under the court order."

    September 28, 1976:  DCAA submitted its analysis of the second draft to Rule.  

    October 4, 1976:  NAVSEA submitted its estimate of the cost of the draft modification.  Rule rejected the NAVSEA estimate.

    October 5, 1976:  Rule submitted a memorandum to the Chief, NAVMAT for his approval.  It included the estimated dollar impact of his negotiated settlement.  For those in contracting, it would be similar to a negotiator's memorandum.  The Navy General Counsel sent its analysis of the information supplied by Rule to the Attorney General.  In the memorandum, Rule noted that a member of his negotiating team could not complete an analysis he requested because of interference from Rickover and his staff.  However, he was able to devise a workaround to complete his cost estimate of the modification for the Chief's review and approval.

    October 7, 1976:  Newport News carried a third draft of the proposed modification to Rule.  The cover letter from Newport News attached to the modification said "I have executed the enclosed modification on behalf of the company and request you immediately return a fully executed copy."

    Rule took a copy of the cover letter to the Chief and Vice Chief, NAVMAT in the afternoon.  He returned to his office and received a letter from the Chief, NAVMAT telling him that neither he nor his review group had a copy of the proposed modification that accurately reflected the results of Rule's efforts.  Final review had not been completed and the proposed modification could not be consummated before the review was done.

    According to Rule, he thought about the CGN-41 negotiation effort all afternoon after he met with the Chief and Vice-Chief, NAVMAT.  He explained in a deposition that he:

    Quote

    could see what was happening to this whole negotiated settlement. I knew the object of the negotiation. I knew why I had been picked to negotiate a settlement pursuant to the order of the court, which I had done. I could see the Rickover-Proxmire, et al., influence at work everywhere.

    And I decided those things all-those things all ran through my mind-I wasn't unmindful of the roadblocks and the lack of cooperation that I had gotten and was getting from the office of General Counsel. When my Contracting Officers statement was turned over to the Office of General Counsel for their review, they then asked me for substantiating documents. I gave them those documents . . . . They were requested by Admiral Lascara [Vice Chief, NAVMAT] to please not write anything until we can get together and discuss this: Let's at least discuss it. Rule had said one thing. Now, review it and let's get together and discuss it before you write anything. They never did. They wrote a 85-page document. They had lawyers working their butts off. They wrote an 85-page document and turned it over to the Department of Justice. And I don't know what it says today. They won't tell me. These are my own lawyers that are supposed to be helping me. They've never told me what was in there. Well, on the 7th of October when these things ran across my face, before my eyes, I said: Something's got to be done. I'm a Contracting Officer. I've got the authority. Now-I'm going to sign the goddam thing. And I signed it.

    October 8, 1976:  The Vice Chief, NAVMAT called Rule into his office at 8:22 a. m.  He gave Rule a letter dated October 7, 1976 that explained that he did not have authority to sign the modification.  Rule explained he had signed it and the Vice Chief requested Rule to give him all signed copies.  Rule refused but said he would give them to Clements.  The Vice Chief then left for his 9:15 am meeting with Clements.  Rule returned to his office dictated a transmittal letter imposing two conditions upon the modification and gave Newport News a copy.  The Vice Chief, NAVMAT called Rule into his office and told him that the Undersecretary of the Navy would keep all executed copies of the modification but Rule told him that he already had signed it.  He returned to his office, signed the transmittal sheet, and handed it to Newport News at 10 A. M.  Shortly afterward at 11:50 a. m., Rule was notified that his appointment as contracting officer was rescinded.  

    March 8, 1977:  The District Court for the Eastern District of Virginia ruled that:

    Quote

    There was a meeting of the minds of the parties on August 20, 1976; there is adequate consideration to support this compromise agreement; and failure to provide cost of pricing data does not invalidate the agreement.  We find that Deputy Secretary of Defense Clements, who initiated the negotiation efforts, has approved the compromise agreement.

    February 27, 1978:  The United States Court of Appeals, Fourth Circuit ruled that

    Quote

    We vacate this order [District Court's above] because we conclude that the parties' negotiators did not settle the case orally and because the Attorney General, whose approval was essential, rejected the terms that were ultimately reduced to writing.

     

  8. I always thought that the FAR Matrix was a good idea that was poorly executed. To begin with, it's notorious for containing errors. Second, most of the entries in the "Principle Type and/or Purpose of Contract" columns are "A", Required when applicable, which means you have to look up the prescription anyway. Lastly, the matrix isn't going to tell you if your agency deviates from the FAR prescription, which DoD does a lot. As such, I created a matrix that I think overcomes these problems.

    A few things about the matrix:

    • It contains every provision and clause in the FAR, DFARS, and in DoD Class Deviation memoranda.
    • It doesn't have any "Principle Type and/or Purpose of Contract" columns except for a Commercial Items column.
    • It contains the actual prescription of the provision or clause. For readability, I removed the number and title of the provision or clause in the block and just wrote "use this provision..." or "use this clause..." The identifying information for the provision or clause is already contained in the row.
    • For DoD, it contains additional instructions for the use of FAR clauses that is contained in the DFARS or in a class deviation. This information appears in bold. If you work for a civilian agency, just ignore what's in bold.
    • In the "IBR" column (Incorporation by Reference), there are no "N" entries for "no", with the exception of the provisions and clauses prescribed at FAR 52.107. This may cause some people to freak out, so I'll explain. FAR 52.102(c) states:
    Quote

    Agency approved provisions and clauses prescribed in agency acquisition regulations, and provisions and clauses not authorized by Subpart 52.3 to be incorporated by reference, need not be incorporated in full text, provided the contracting officer includes in the solicitation and contract a statement that—

    (1) Identifies all provisions and clauses that require completion by the offeror or prospective contractor;

    (2) Specifies that the provisions and clauses must be completed by the offeror or prospective contractor and must be submitted with the quotation or offer; and

    (3) Identifies to the offeror or prospective contractor at least one electronic address where the full text may be accessed.

    Thus, if the FAR Matrix contained a "Y" in the IBR column, my matrix will also contain a "Y". If the FAR Matrix contained an "N" in the IBR column, or the provision or clause came from the DFARS or a DoD class deviation, then my matrix will contain a "Y*". The key at the top of the matrix contains an explanation for the "Y*" entry. If you're wondering how to incorporate a provision or clause that contains fill-in material or something the offeror must complete, see FAR 52.102(a) and FAR 52.104(d).

    You can see the matrix on the DAU Acquisition Community Connection. I'm open to suggestions for making it better. Also, I would like to think that it doesn't contain any errors. However, if you spot one please let me know. As an incentive, I will add your agency's provisions and clauses (the ones in Title 48 of the CFR) to the matrix if you point out a mistake.

     

  9. 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

  10. 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