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Moderator

Root Admin

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  1. "The Subcommittee’s investigation of food service contracts has revealed systemic deficiencies in the transparency and oversight of contractors’ rebate and discount policies. Chairman McCaskill asked Office of Management and Budget Director Zients to review the Subcommittee’s findings and issue guidance to federal agencies to address these deficiencies. She also requested that OMB consider how the federal government can better leverage its buying power through the strategic sourcing of food service."
    See it at hsgac.senate.gov. (The letter is on the upper left of the linked page in a pdf document.)
  2. The Fixed-Price Incentive Firm Target Contract:  Not As Firm As the Name Suggests
    At the end of 1976, I met the Director of the Procurement Control and Clearance Division of the Naval Material Command in Arlington, Virginia.  The Director was a legend of the contracting community and any significant Navy contract had to be approved by his office prior to award.  I was there because of a controversy involving a contract to acquire a new class of nuclear cruisers.  The attendees at the meeting surrounded a conference table and waited for the Director to make his appearance.  After several minutes, the Director entered the room and placed a chart on the table.  "What do you see?"  "What do you see?"  He demanded.  The fellow next to me said, "It says fixed-price incentive."  "No, no, look at it," the Director said.  It was a chart that depicted a fixed-price incentive (firm target) contract (FPIF). "Look how flat it is," the Director said.  I tried to look at the chart but I was more interested in seeing the Director.  Out of the corner of my eye, I saw him dressed in a dark suit, vest, watch chain connected to the middle button of his vest and dangling perfectly from one side to the other.  He had a paunch and tufts of white hair on his head and he looked like Winston Churchill—the World War II Prime Minister of the United Kingdom.  He was Gordon Wade Rule—the highest-ranking civilian in Navy contracting.  Years later, I met a colleague of Gordon Rule and told him about my first impressions.  The colleague looked at me and laughed, "Gordon not only looked like Churchill, he thought he was Churchill."  Since this first meeting with Gordon Rule, I have been interested in the FPIF contract type and how it can be used on government contracts. The Rule Contract
    Table 1 is the pricing structure that Gordon Rule was talking about during our meeting.  For the purpose of discussion in this article, it will be referred to as the "Rule Contract." 
    Structure
    Description
    Target Cost $76,000,000 Target Profit $9,700,000 Target Price $85,700,000 Ceiling Price 133 percent of Target Cost at $101,000,000 Share Ratio 95/5 between $64,600,000 and $87,400,000
    90/10 below $64,600,000 and from $87,400,000 to Point of Total Assumption Point of Total Assumption $92,366,660 Someone familiar with an FPIF contract will notice what Gordon Rule was talking about.  For those who are not, the following discussion explains the mechanics of an FPIF contract pricing structure.
    Mechanics of the FPIF Contract

    The FPIF contract includes cost and price points, a ratio, and a formula. They include
    Target Cost (TC): The initially negotiated figure for estimated contract costs and the point at which profit pivots.
      Target Profit (TP): The initially negotiated profit at the target cost.
      Target Price: Target cost plus the target profit.
      Ceiling Price (CP): Stated as a percent of the target cost, this is the maximum price the government expects to pay.  Once this amount is reached, the contractor pays all remaining costs for the original work.
      Share Ratio (SR): The government/contractor sharing ratio for cost savings or cost overruns that will increase or decrease the actual profit. The government percentage is listed first and the terms used are "government share" and "contractor share."  For example, on an 80/20 share ratio, the government's share is 80 percent and the contractor's share is 20 percent.
      Point of Total Assumption (PTA): The point where cost increases that exceed the target cost are no longer shared by the government according to the share ratio. At this point, the contractor’s profit is reduced one dollar for every additional dollar of cost.  The PTA is calculated with the following formula. PTA = (Ceiling Price - Target Price)/Government Share + Target Cost
    All of these points and shares have an effect on costs, profit, and price.  However, two tools in the structure—the ceiling price and the share ratio—dramatically affect the potential costs, profits, and prices.
    For the examples in tables 3, 4, and 5, I use the target cost, target profit, profit rate at target cost, and target price identified in Table 2.  The ceiling price and share ratio will vary according to example.
    Structure Elements Structure Amounts Target Cost $10,000,000 Target Profit $1,000,000 Profit Rate at Target Cost 10% Target Price $11,000,000 At the ceiling price, the government's liability for cost within the terms of the original contract ends and the contractor pays for all costs above the ceiling price.  The setting of the ceiling price significantly affects the relationship between the government and the contractor once the target cost has been reached.  The example in Table 3 includes 4 different ceiling prices and the same 70/30 share ratio.  Remember, the ceiling price is stated as a percentage of the target cost. 
    Dollar Costs Ceiling Prices (Percent of Target Cost)
    115 120 125 130 $8,000,000 $1,600,000 $1,600,000 $1,600,000 $1,600,000 9,000,000 1,300,000 1,300,000 1,300,000 1,300,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,500,000 850,000 850,000 850,000 850,000 11,000,000 500,000 700,000 700,000 700,000 11,500,000 0 500,000 550,000 550,000 12,000,000 500,000 0 400,000 400,000 12,500,000 1,000,000 500,000 0 250,000 13,000,000 1,500,000 1,000,000 500,000 0 PTA
    $10,714,286 $11,428,571 $12,142,857 $12,857,143 As can be seen, there is no difference in profit for any of the examples where costs are less than the target cost. This is because the ceiling price affects the cost and profit structure somewhere after the target cost is exceeded.  Since the ceiling price is used to determine the PTA, it also results in different PTAs.  Notice the PTAs for each ceiling price.  Prior to the PTA, but after the target cost is reached, the 70/30 share ratio is in effect and the government shares 70 percent of all overruns and the contractor shares 30 percent of all overruns.  Once the PTA is reached, the contractor’s profit will be reduced on a dollar-for-dollar basis up to the ceiling price.  Remember when Gordon Rule said "Look how flat it is?" He was referring to the incentive curve.  The incentive curve reflects the amount of potential profit for each cost level throughout the FPIF structure. The smaller the profit increment as costs increase, the flatter the incentive curve becomes.  The flatter the curve becomes, the closer it approaches a cost plus fixed-fee (CPFF) contract since the fixed-fee on a CPFF remains constant for all levels of costs.  By increasing the ceiling price on an FPIF contract, the government's share in cost overruns and the contractor's opportunity to recover costs is placed at a higher dollar level.  The higher the ceiling price, the flatter the FPIF incentive curve is because it is being stretched in length. 
    To compare the effect of share ratios on an FPIF structure, Table 4 includes 5 different share ratios ranging from 50/50 to 90/10.  As mentioned earlier, the government's share of savings or overruns is the first number in the share ratio.  In Table 4, a simple share ratio structure is used—one with the same share ratio throughout the structure— to analyze the effect of different share ratios.  Share ratios can be complex and can include more than one share ratio. However, to explain the effects of different share ratios, a simple structure is adequate.
    Dollar Costs
    Share Ratios (Government/Contractor)
    50/50 60/40 70/30 80/20 90/10 Contractor's Profit Based on Share Ratios Above and Costs In Left Column
    $8,000,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 8,500,000 1,750,000 1,600,000 1,450,000 1,300,000 1,150,000 9,000,000 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 9,500,000 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,500,000 750,000 800,000 850,000 900,000 950,000 10,600,000 700,000 760,000 820,000 880,000 900,000 10,700,000 650,000 720,000 790,000 800,000 800,000 10,800,000 600,000 680,000 700,000 700,000 700,000 10,900,000 550,000 600,000 600,000 600,000 600,000 11,000,000 500,000 500,000 500,000 500,000 500,000 11,500,000 0 0 0 0 0 PTA
    $11,000,000 $10,833,333 $10,714,286 $10,625,000 $10,555,556 Prior to the target cost, the different share ratios provide profits based on the contractor’s share of saved costs alone.  Under the 50/50 share ratio, a contractor can increase its profit by $1 million when costs are $2 million less than the target cost because its share is 50 percent of any savings.  On the other hand, with the 90/10 share ratio, a contractor can increase its profit by only $200,000 when costs are $2 million less than the target cost because its share is only 10 percent of any savings.  The message is clear—there is less incentive to reduce costs as the government share increases. 

    Once the target cost is exceeded, a contractor with a 50/50 share ratio has its profit reduced quickly below the PTA because it is sharing in half of the cost overruns above the target cost. On the other hand, the reduction in profit is less dramatic for the 90/10 ratio.  In effect, the incentive curve is being flattened below the PTA. Take another look at the overrun structure for the 50/50 and 90/10 share ratios. 
    Ceiling Prices and Share Ratios Working Together
    Now that you have seen the basics for different ceiling prices and different share ratios, it is time to see how they can work together.  Table 5 illustrates the effect of different share ratios coupled with different ceiling prices.  Compare a 50/50 share ratio with a 115 percent ceiling price structure to that of a 90/10 share ratio with a 135 percent ceiling price structure.  Quite a difference! 
     
    Dollar Costs
    Share Ratios Combined with Ceiling Prices
    50/50
    115
    60/40
    120 70/30
    125 80/20
    130 90/10
    135 $8,000,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 8,500,000 1,750,000 1,600,000 1,450,000 1,300,000 1,150,000 9,000,000 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 9,500,000 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 10,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,500,000 750,000 800,000 850,000 900,000 950,000 11,000,000 500,000 600,000 700,000 800,000 900,000 11,500,000 0 400,000 550,000 700,000 850,000 12,000,000 (500,000) 0 400,000 600,000 800,000 12,500,000 (1,000,000) (500,000) 0 500,000 750,000 13,000,000 (1,500,000) (1,000,000) (500,000) 0 500,000 13,500,000 (2,000,000) (1,500,000) (1,000,000) (500,000) 0 PTA
    $11,000,000 $11,666,667 $12,142,857 $12,500,000 $12,777,778 The 50/50 share ratio and 115 percent ceiling price structure is referred to as a “tight structure” because it places a good deal of cost control incentive on the contractor.  On the other hand, the 90/10 share ratio and 135 percent ceiling price structure is referred to as a “loose structure” because there is less cost control incentive placed on the contractor.  With the combination of a high ceiling price and a high government share, we have flattened the incentive curve significantly. 
    Now, with what we have seen so far, let's go back to the contract that Gordon Rule was complaining about in 1976.  To do this, we will compare a moderate FPIF structure with a 70/30 share ratio and 125 percent ceiling price to the Rule contract. 
    Dollar Costs
    Profit Dollars
    Profit Rate
    70/30
    125
    Rule Contract
    70/30
    125
    Rule Contract
    $60,000,000 $14,500,000 $10,730,000 24,17% 17.88% 65,000,000 13,000,000 10,250,000 20.00% 15.77% 70,000,000 11,500,000 10,000,000 16.43% 14.29% 75,000,000 10,000,000 9,750,000 13.33% 13.00% 76,000,000 9,700,000 9,700,000 12.76% 12.76% 80,000,000 8,500,000 9,500,000 10.63% 11.88% 85,000,000 7,000,000 9,250,000 8.24% 10.88% 90,000,000 5,000,000 8,870,000 5.56% 9.86% 95,000,000 0 6,000,000 0% 6.32% 100,000,000 5,000,000 1,000,000 Loss 1.00% 101,000,000 6,000,000 0 Loss 0% As Table 6 shows, there is quite a difference between our moderate FPIF structure and the Rule contract.  Look at the $95 million dollar cost level.  Here the moderate FPIF results in no profit while the Rule Contract provides a 6.32 percent profit rate and a dollar profit of $6 million.  This difference is caused by the higher ceiling price and the higher government share of overruns on the Rule Contract.  Take a look at the profit rate on costs before the target cost is reached.  It increases more slowly on the Rule contract as costs are reduced below the target cost of $76 million.  Here, the flattening effect of the higher government share on any cost savings is evident.

    What Was Gordon Rule Saying?

    With the basic mechanics of an FPIF contract under your belt, we can go back to that day in 1976 when Gordon Rule said "What do you see?"  "What do you see?”  "Look how flat it is."  Well, a CPFF is a flat curve.  For example, on a CPFF contract, the share ratio is 100/0 because the government shares all of the cost savings and overruns within the original contract terms.  Additionally, the ceiling price could be infinite if the government wishes.  So, a CPFF contract has a 100/0 share ratio and whatever ceiling price the government is willing to accept. Gordon Rule was claiming that the FPIF example in the "Rule Contract" was, in fact, a CPFF contract.  Was he right?  In Table 7, a CPFF contract structure is compared to the structure of the Rule Contract.
    Dollar Costs
    Profit Comparison (Dollars) Profit Comparison (Profit Rate) CPFF Rule Contract CPFF Rule Contract $60,000,000 $9,700,000 $10,730,000 16.17% 17.88% 65,000,000 9,700,000 10,250,000 14.92% 15.77% 70,000,000 9,700,000 10,000,000 13.86% 14.29% 75,000,000 9,700,000 9,750,000 12.93% 13.00% 76,000,000 9,700,000 9,700,000 12.76% 12.76% 80,000,000 9,700,000 9,500,000 12.13% 11.88% 85,000,000 9,700,000 9,250,000 11.41% 10.88% 90,000,000 9,700,000 8,870,000 10.78% 9.86% 95,000,000 9,700,000 6,000,000 10.21% 6.32% 100,000,000 9,700,000 1,000,000 9.70% 1.00% 101,000,000 9,700,000 0 9.60% 0% For the CPFF contract in Table 7, the fixed-fee is set at the same rate as the target profit on the Rule contract—$9.7 million at a cost of $76 million.  Remember that between $64,600,000 and $87,400,000, the share ratio on the Rule contract was 95/5.  So, the CPFF share ratio of 100/0 is quite close to that of the Rule contract at 95/5 between $64.6 million and $87.4 million.  After $87.4 million, the Rule contract converts to a 90/10 share ratio until the PTA which is between $92 and $93 million.  Notice how the percent of fee on costs closely parallels the percent of profit on the Rule contract.  As Gordon Rule emphasized, it is flat—it is nearly a CPFF contract.

    Abuses of the FPIF
    The Federal Acquisition Regulation (FAR) at 16.403-1 (b) explains that an FPIF contract is appropriate when a fair and reasonable incentive and a ceiling can be negotiated that provides the contractor with an appropriate share of the risk and the target profit should reflect this assumption of responsibility.  The FAR further points out that an FPIF is to be used only when there is adequate cost or pricing information for establishing reasonable firm targets at the time of initial contract negotiation.  Further, FAR 16.401 explains that incentives are designed to motivate contractors to meet government goals and objectives. 
    The guidance in the FAR, although general, appears sound.  However, what happens when people and the survival of their programs or their organizations are involved?  Unfortunately, the FPIF can be manipulated and abused by government and/or industry.  It can be used to submit below anticipated cost offers, to hide huge anticipated overruns, or to deceive the uninitiated who only recognize the phrase "fixed-price." 
    In the 1970s, 1980s, and into the 1990s, a series of General Accounting Office (GAO) reports discussed cost overruns on shipbuilding contracts.  For the most part, these reports discussed FPIF contracts.  Table 8 provides a summary of the anticipated cost overruns on most shipbuilding contracts during this period.
    Report Date Number of FPIF Contracts Expected Costs Above Target Costs Expected Savings Below Target Costs Number of Contracts Expected to Finish at  Target Number Dollars Number Dollars 1987a 22 19 $1,413,000,0000 3 $25,900,000 N/A 1989b 46 25 3,297,000,000 6 315,000,000 15 1990c 44 24 3,784,100,000 6 230,800,000 14 1992d 45 32 4,400,000,000 3 102,000,000 10 a Navy Contracting: Cost Overruns and Claims Potential on Navy Shipbuilding Contracts, GAO/NSIAD-88-15, October 16, 1987, p. 7
    b Navy Contracting: Status of Cost Growth and Claims on Shipbuilding Contracts, GAO/NSIAD-89-189, August 4, 1989, p. 2
    c Navy Contracting: Ship Construction Contracts Could Cost Billions Over Initial Target Costs, GAO/NSIAD-91-18, October 5, 1990, p. 12
    d Navy Contracting: Cost Growth Continues on Ship Construction Contracts, GAO/NSIAD-92-218, August 31, 1992, p. 11 As we can see from the table, the majority of the contracts had cost estimates for completion that exceeded the original target costs.  Additionally, the amount of estimated cost overruns dwarfed the amount of estimated savings in each GAO report.  These numbers defy the law of averages.  If we simply look at these results without asking questions, we would declare the FPIF contract type as ineffective. However, there is more to it than that. 

    During the 1970s and 1980s, the commercial shipbuilding market was shrinking for U. S. shipbuilders and the U. S. Navy became the “sole-customer” for their work.  At the same time, the Navy emphasized competition on its contracts and placed more emphasis on price in making decisions for contract awards.  Price became more important because of tight budgets.  The industry, recognizing that its commercial market had dried-up, placed survival above profit and cut prices in a frenzy of low-ball offers. Since the government was the sole customer, it had pricing power over its contractors.  According to the GAO
    How aggressive was the bidding?  Here is one example.
    Yes, under these two contracts target cost was not the issue.  The Navy concluded that the contractors offered to work at a loss somewhere beyond the ceiling price.
    If an industry or a contractor is trying to survive in a competitive environment, how might it approach the FPIF.  As we have seen, contractors will bid below cost when they believe it is in their interest.  Does the FPIF provide an opportunity for a contractor to offer a very low price, expect a very large overrun, and hope for a small profit?  Yes, it does.  Table 9 provides a theoretical example that includes an FPIF with a 95/5 share ratio and a 135 percent ceiling price.  Included in the table is a "proposed target cost" which is the official offer amount that the contractor submits to the government.  In the second column, there are a range of the contractor's real goals for its target cost.
    Contractor's Proposed Target Cost Contractor's Actual Goals  Target Cost Cost Overrun Overrun Rate Dollar Profit Profit Rate $100,000,000 $100,000,000 $0 0.00% $10,000,000 10.00% 100,000,000 105,000,000 5,000,000 5.00% 9,750,000 9.29% 100,000,000 110,000,000 10,000,000 10.00% 9,500,000 8.64% 100,000,000 115,000,000 15,000,000 15.00% 9,250,000 8.04% 100,000,000 120,000,000 20,000,000 20.00% 9,000,000 7.50% 100,000,000 125,000,000 25,000,000 25.00% 8,750,000 7.00% 100,000,000 126,315,789 26,315,789 26.32% 8,684,211 6.88% 100,000,000 129,807,000 29,807,000 29.81% 5,193,000 4.00% 100,000,000 130,000,000 30,000,000 30.00% 5,000,000 3.85% 100,000,000 135,000,000 35,000,000 35.00% 0 0 100,000,000 140,000,000 40,000,000 40.00% 5,000,000 Loss Assume that the contractor sets a goal of a 4 percent profit on costs.  From past experience, the contractor expects that the government will be willing to negotiate a 95/5 share ratio, a 135 percent ceiling price, and a 10 percent profit rate at target cost.  The contractor proposes a target cost of $100,000,000 but is really focusing on the 4 percent profit amount.  At that profit rate, the contractor's actual target cost goal is $129,807,000.  The government determines that the offer is fair and reasonable and negotiations are completed.  At the time of agreement on the pricing structure, $100,000,000 is the contractual target cost and the contractor's actual goal is $129,807,000 for a target cost.  In effect, the contract is negotiated with nearly a 30 percent cost overrun and a 4 percent profit.
    Does a government organization ever have an interest in understating the cost of an item?  The President's Blue Ribbon Commission on Defense Procurement, popularly known as the Packard Commission, gave us the following answer.
    If the government has an interest in underestimating the cost of a system, it can use an FPIF to its advantage by simply loosening the pricing structure of the FPIF contract.  Let's look at an actual example—the original contract for the Trident submarine awarded in 1974.
    Pricing Elements Pricing Structure Target Cost $253,000,000 Target Profit $32,400,000 (12.8% of Target Cost) Target Price $285,400,000 Ceiling Price $384,000,000 (152% of target cost) Share Ratio 95/5 from target cost to $279,600,000
    85/15 from $279,600,000 to PTA
    70/30 below target cost As can be seen, the contract had a 95/5 share ratio and an incredible ceiling price of 152 percent of target cost.  Here is what Gordon Rule had to say about this pricing structure
    Once a system receives budget approval with an understated cost, the government must find a way to contract for it at that underestimated cost.  The FPIF provides the opportunity in two ways. First, it allows the government to hide expected overruns at the time the contract is awarded. Or, in Gordon Rule's words, it allows the government to include "an obvious overrun of target cost built in." 6  Second, the term "fixed-price" can be used to disguise a cost-reimbursement contract.  For example, in regard to the Trident contract, the Commander of the Naval Ship Systems Command, explained 7
    Some Final Thoughts
    Does the FPIF contract have a place in federal contracting?  I think it does when it is used as it is intended.  However, it can and has been abused.  In testing an FPIF structure, there are a number of things I ask.  Here are several.
    Is the government's share of savings significantly lower below the target cost than its share of losses above the target cost.  For example, is there a 50/50 share ratio below the target cost while a 95/5 share ratio exists above target cost.  This alerts me to the possibility that the real target cost exceeds the negotiated target cost in the contract. 
     
    Is the ceiling price above 135 percent of target cost?  Although a 135 percent ceiling price is generous, anything above it is excessive.
     
    Does the share ratio flatten out around the target cost for an extended period?  For example, is there a share ratio of 95/5 or 100/0 from 10 percent below target cost to 10 percent above target cost?  This effectively converts the extended part of the FPIF structure to a cost plus fixed-fee contract. 
    If I do identify a suspicious FPIF structure, I turn to the facts surrounding the negotiation of the target cost.  For example,
    Is the government's budget for the item unrealistically low? 
     
    Does the government have pricing power over the contractor?  In short, can the government dictate the contractor's price because of market conditions? 
     
    Is the contractor in survival mode or is the contractor trying to gain a foothold in a program area?
     
    If there was a final proposal revision, did the contractor's price drop substantially?
    1 Navy Contracting: Cost Overruns and Claims Potential on Navy Shipbuilding Contracts, GAO/NSIAD-88-15, October 16, 1987, p. 9
    2 Ibid
    3 President's Blue Ribbon Commission on Defense Procurement, Final Report, June 30, 1986, p. 45.
    4 J. Ronald Fox and Mary Schumacher, "Trident Contracting (C): Negotiating the Contract," John F. Kennedy School of Government, 1988, pps 6 and 7.
    5 Hearings before the Committee on Armed Services, United States Senate, 94th Congress, Second Session, Part 8, Shipbuilding Cost Growth and Escalation, p. 4658.
    6 Fox and Schumacher, p. 8.
    7 In 1976, the Naval Ship Systems Command was renamed the Naval Sea Systems Command.
    Copyright © 2023 by Robert Antonio 
  3. Each year about this time, I read an editorial by Francis Pharcellus Church that was published in The Sun on September 21, 1897. The editorial is in response to a letter written by eight-year-old Virginia O’Hanlon.  Now, this entry is not about the contents of the editorial but I will add my favorite part of the editorial:
    Mr. Church's prose is beautiful.  He died in 1906 and Virgina died in 1971.  Check out the brief description of the two in Wikipedia.  In her letter to The Sun, Virginia printed her address as 115 W. 95th St.  Does it still exist?  Yes, see 115 W. 95th St.  Between 113 and 117 you will see 115 in the center above the windows.  To the left of 115, you will see The Studio School at the entrance.  The Studio School is a private, elementary-middle school and was founded in 1971, the year Virginia died.  In 2009, The Studio School honored Virginia by attaching a plaque to 115 which you can see on the Google Maps image.  What does the placque say?  You cannot read it on Google Maps but I've added the contents as the final part of this entry.
     
  4. On September 12, 1962, President Kennedy told us 
    On July 16, 1969, after a tumultuous decade, we, NASA, its contractors, and astronauts met President Kennedy's challenge, landed on the Moon and returned safely to Earth.  But, what were we ready to do after that?  While I was waiting for Captain Kirk to send us into warp drive much of the nation wanted a break.  There was a national letdown.  NASA's budget was put under pressure and they were asked to work more closely with the Department of Defense (DoD).  Time for a compromise, time for The Dump Truck to the Stars, time for The Space Shuttle.  Just something to keep manned space alive.
    The Space Shuttle was a very complex Space Transportation System (STS).  It was composed of the orbiter (Space Glider), external tank in the middle and 2 solid rocket motors on each side of the system.  The external tank was comprised of 2 inner tanks that fed liquid propellant into the orbiter's 3 engines.  The liquid system could be throttled up and back down within limits as needed.  The solid rocket motors were built in segments with an engine and then joined together.  The 2 SRMs were made with propellant that was mixed and cured and provided the shuttle with about 70 percent of its thrust.  The solid propellant surrounded an inner core that was empty.  At the top was a much smaller solid motor that would be ignited and then burn the fuel from the outside in and using the inner core as an exhaust outlet.  Once the SRMs were fired up there was no stopping them until the fuel was spent. 
    To give you an idea of the size and weights of the shuttle and SRMs, here are some approximate numbers when all propellant was loaded.
    the entire system weighed about 2,200 tons and was 184 feet high, the orbiter weighed about 120 tons, the external tank weighed about 700 tons, each SRM was about 154 feet tall and weighed about 600 tons. The Requirement
    In the 1980s, I wrote and taught a course called Introduction to Procurement for GAO auditors.  The course highlighted some gimmicks used in federal contracting.  One of those gimmicks was the Fixed-Price-Incentive-Contract which I wrote about and how it was abused years ago.  Another was concurrency -- "the fact of two or more events or circumstances happening or existing at the same time."  To show concurrency to my class, I would place an image of the system acquisition process on an overhead projector.  Yes, back then, we used overhead projectors to show images on a wall.  After I explained the process, I would walk to the image on the overhead projector and squish it together.  All that remained after the squishing was the beginning and end of the process.  I'd turn to the class and tell them:  That's concurrency.
    Here's another gimmick but just a little different.  It is a quote that I used in the Fixed-Price-Incentive Contract article but it is perfect now.
    The source for that quote was the President's Blue Ribbon Commission on Defense Procurement (Packard Commission) from 1986.  Although it refers to defense acquisition it can be applied to many acquisitions in the federal government. 
    My purpose for the course was to give GAO auditors the desire to find problems with federal contracting and report those problems to Congress.  Whether I was acting as General Bullmoose trying to intimidate operational test and evaluation analysts to approve a system that couldn't work or whether I was trying to make a point I would pour my heart and soul into teaching every class.  Maybe, I could prevent a future disaster from happening.
    When we reached the section on systems acquisition, this SRM procurement was my first example.  I call this example "Selling Your Program."   Let's get right to the requirement.  Fortunately, that is memorialized in GAO's protest.
    It's time to call up your calulator on your computer and do a little math because I have an important question to ask in Part 4.
  5. One of the things I first noticed when we drove from Marshall Space Flight Center (MSFC) to our hotel was a sign post that looked like a corkscrew with a road sign on top.  Someone told me:  "A tornado did that."  How could wind do that?  I was about to find out. 
    It was April 3, 1974.  When we left MSFC after work, there was a strange feeling in the air.  One that I have never forgotten.  In fact, I stll feel if it is there after all of these years.  There was no wind, no noise, just a stillness.  Nature was waiting for something.  As we approached our hotel in Huntsville, there were people on second floor balconies looking towards the southwest.  What was that about?
    We went straight to dinner that night and knew something was wrong but we didn't know what it was.  In the restaurant, the television was turned to a channel that had only white noise.  Everyone was watching it.  Later, I found out they were using the Weller Method of TV-Tornado Detection.  We asked the waitress: what's going on?  "Three tornados went north of us and hit Jeff and Toney."  Jeff and Toney were small villages just north of Huntsville.  We quickly finished dinner and I went back to my room to watch the weather on a local television station.
    The guy doing the weather was just finishing his coverage of a tornado that went south of Huntsville.  Tornado to the north of us, tornado to the south of us, and the night was still young.  As I noticed a storm on the television near Decatur pass over the Tennessee River, the weather guy said the worst was over and returned us to the regular programming. Decatur is southwest of Huntsville and Huntsville is northeast of Decatur.  In between them is the Huntsville International Airport.  But what about that tornado that just crossed the Tennessee River?
    I didn't have to wait long for an answer.  Within minutes, the weather guy was back on television telling us about the tornado that was taking aim on the Huntsville Airport.  He showed us the hook pattern in the storm that indicated it was a tornado and then reported that the tower at the airport had been evacuated and a tornado was crossing the runway.  The weather guy still didn't mention Huntsville and we were directly in the tornado's path.  I wasn't waiting for the weather guy.  That tornado had Huntsville in its crosshairs and I wasn't waiting for the weather guy to tell me.  I looked around the room and saw the bathtub and two sofa cushions I could use.  I jumped in the bathtub and put the cushions over my head.  Then I waited.  Finally, the weather guy said that the tornado was on University Drive. I was on University Drive too!  Then the power went out.  I slipped down into the bathtub and waited to die.  I continued to wait for a few minutes.  Then I got tired of waiting and looked out the window.  As I looked out, I could see power generators exploding on the top of Monte Sano mountain which was in back of our hotel.  The tornado missed me by 1/4 mile but mowed though Huntsville just east of me.
    I had survived the 1974 Super Outbreak of tornadoes that stretched from Ontario, Canada to Alabama.  One police officer, who saw the tornado that went through Huntsville, said it was one large tornado and two smaller ones on each side of the main tornado.  They flew in formation and left devastation behind.  All through the night, I heard ambulances.   It's not a good feeling.  I knew Huntsville had been hit hard but I didn't know how bad it was.  The next day, we went to MSFC where some windows were blown out of the Administration building.  Some furniture was on the ground and there were long white sheets of what looked like cloth hanging out of some of the windows.  After work, we found a place to eat on University Drive and passed by a 1,000 foot-wide path of destruction left by the tornado.  It was on both sides of the street.  I remember a hotel that looked much like the Tourway Inn where I stayed.  This hotel was demolished but a flimsy free-standing yellow wood wall was left standing.  The tornado sent several things through the wall that I could identify.  For example, I could see the outline of a bathroom sink that passed through the wall.  Don't ask, much like the cork-screw sign post, I still can't figure it out.
    Over the weekend, I drove up to Monte Sano mountain.  From the street, I could see a path cut through the trees.  The cut was cleanly done as if the tornado was giving the woods a manicure.  It even took the tops of the trees with it.
    At the end of April, I drove home to Maryland.  I can remember several things about my drive to Huntsville but I cannot remember one thing about the drive home.  Maybe, I was just glad to get home.
  6. What did I do in Huntsville, Wifcon?
    For the 3 months in 1974 that I was there, I worked, drove around the Huntsville area in my 1971 240Z and began collecting and reading books.  I'm looking at one of the those books now.  It's still in my library:  Will Rogers, The Man and His Times by Richard M. Ketchum.   One of my colleagues from Atlanta took me to see "Contractors Row," in Huntsville which is a group of federal contractors and subcontractors lined up together on the same street.  Then there was the French kid selling peanuts in one of the nearby shopping malls.  Me with a Philadelphia accent and him with a French one.  I bought a bag of the peanuts.
    The SRM Contractor Selection
    The Solid Rocket Motor (SRM) solicitation was for a Cost-Plus-Award-Fee procurement and the offerors in the table below were ranked according to technical factors in the following order.  Although, the first three offerors were rated very good the numerical score favored Lockheed by 4 points.  However, the Source Evaluation Board (SEB) evaluated Thiokol as the lowest most probable cost performer by $122 million on this estimated $800 million procurement.  The SEB submitted its written report to the NASA Administrator who was the Source Selection Official (SSO)
      Score Overall Adjective Rating Lockheed 714 Very Good Thiokol 710 Very Good UTC 710 Very Good Aerojet 655 Good After selecting Thiokol, the SSO issued a selection statement that read
    A protest was inevitable and Lockheed protested.
    My Work Evaluating Offerors' Proposals and NASA's Evaluation
    As I look back now, I believe my 3 months in Hunstville was supposed to be little more than a learning experience or a training exercise.  GAO was big on getting its auditors to experience field work and this was problably my chance.  I had graduated from college in May 1971 and now I was in Huntsville in the Spring of 1974 effectively delaying the Space Program.  GAO took pride in calling itself Congresses' Watchdog.  With my lack of experience I, at best, was a Watchpuppy.  In the beginning, I didn't know what a work breakdown structure (WBS) was nor did I know how a learning curve worked.  And I surely didn't know how to build a solid rocket motor.  By the end of my stay in Huntsville, I had memorized every WBS of manufacturing labor in both Thiokol's and Lockheed's proposals, understood Lockheed's Best & Final Offer with its troubling and unsupported learning curve projection, and knew enough to run the other way as fast as I could if someone mentioned ammonium perchlorate in my presence.
    Each member of our small audit team had a section of the offerors' proposals to study.  I had to study the manufacturing labor hours section of the two proposals and then NASA's evaluation of them.  In studying the two proposals, I noticed that one offeror presented manufacturing hours and quality assurance hours separately and the other presented them as one.  However, they came out roughly the same.  When I looked at NASA's evaluation of the offerors' presentation of labor hours, there was no mention of the differences.  I was looking for precision and there wasn't any.  
    After I finished my analysis, my Audit Manager from Washington arrived for my presentation to NASA's evaluators.  I discussed in detail, from the smallest WBS to the largest, what the NASA evaluators had missed.  In the end, I told the NASA evaluators they had compared apples to oranges in their evaluation.  Here is what GAO wrote in its bid protest decision.
    In English, that meant that NASA did not make any adjustment to either offerors' cost.  It accepted them as proposed.
    Then there was Lockheed's Best and Final Offer (BAFO) which reduced its estimated costs based on a learning curve adjustment.  Learning curves are based on the theory that the more times you do the same task, the less time it takes you to do the task as one gains experience at it.
    In the protest decision, GAO wrote
    GAO was being kind.  However, NASA accepted Lockheed's BAFO as submitted.
    What About Those O-rings
    Well, it comes from an offeror's technical proposal.  I don't remember which offeror but we were having a discussion with a NASA evaluator.  It was a drawing that showed the SRM before it was ignited and then after ignition.  After ignition the sides of the SRM expanded and the O-rings were shown holding the gasses within the SRM.  I was amazed that the O-rings could withstand that pressure.  That drawing remains etched in my brain.
    GAO's and NASA's Decision
    After about 6 months, GAO issued its bid protest decision on June 24, 1974.  GAO's decision lists 25 bullets.  The first one said
    Within hours of GAO's bid protest decision, NASA chose not to reconsider its selection decision and moved ahead with the Shuttle Program.
    Copyright © 1998 - 2023 Wifcon.com LLC
  7. My road to Huntsville was simple enough, drive through Tennessee, pass into Alabama, and find the Tourway Inn on Memorial Parkway.  Those were the exact directions given to me.  "Find the Tourway on Memorial Parkway."  I had a paper fold-up map to find Memorial Parkway.  So it was drive up and down Memorial Parkway to find the Tourway.  There, I would meet our staff from the Atlanta Regional Office and they would fill me in on our work.  This was my first trip into the deep south, and with my Philadelphia accent, it was as if I had an arrow pointing at me with the words "yankee here" as soon as I opened my mouth.
    We met outside of the Tourway at 7 AM and drove to Marshall Space Flight Center's Building 4200.  Inside the cafeteria, we picked a large table for the 5 or 6 of us.  I was told, we were there to audit the Source Evaluation Board's (SEB) evaluation of the Lockheed Propulsion Company's and Thiokol Corporation's proposals for the Solid Rocket Motors that would be developed and used to send the Space Shuttle into orbit. Thiokol Corporation had been awarded the contract and the Lockheed Propulsion Company had protested it to the General Accounting Office (GAO).  Remember, this was 1974, ten years before the Federal Acquisition Regulation and the Competition in Contracting Act.  The Federal Procurement Regulation was in effect for Civilian agencies and the Armed Servies Procurement Regulation (ASPR) was in effect for DoD agencies.
    Specifically, a GAO audit team was there because a powerful contingent of Senators and Congressmen asked (told) GAO to evaluate NASA's decision to award the contract to Thiokol. The Space Program had come to a standstill waiting for us to get done.  NASA didn't want us there and I didn't want to be there.  There I was, a 25 year-old auditor, away from home, working with strangers as part of a team, who were holding up the Space Program. It was early February and we would hold up the Space Program until the end of June. Wifcon.com was more than 20 years in my future.
    After watching my new colleagues slurp up their grits while I ate my chocolate covered donut, we walked to the Source Evaluation Board (SEB) Building.  There had been over 200 members of the SEB so they needed a building and several of them were still working in the building.  Then I was shown the Proposal Room where the proposals were stored.  It was a large room with rows of 3-prong thick binders.  The Proposal Room held the proposals from the four competitors:  Thiokol Corporation, Lockheed Propulsion Corporation, Aerojet Solid Propulsion Company and United Technology Center.  Fortunately, we only looked at the proposals from Thiokol and Lockheed.
  8. Using the Solid Rocket Motor requirement from the solicitation that appears in Part 3 of this article, you can see that NASA may have been thinking of Low Rate Initial Production (LRIP) for Increments 1 and 2 and Full Scale Production (FSP) for Increment 3.  In FSP, NASA planned 385 Space Shuttle flights between 1981 and 1988 or a little more than 1 Space Shuttle flight per week.
    Solicitation Increments Years Covered Planned Flights Planned Motors 1+2 1973 - 1981 54 108 3 1981 - 1988 385 770 Total Planned Flights & Motors   439 878 I cannot remember what time of day I placed the Space Shuttle example in my course for GAO Auditors but it always was after a break.  I had to prepare myself for it.  Perhaps, my voice would break.  Perhaps a tear would roll down my cheek while my voice was breaking.  It wasn't an act.  It's happening now.  
    My first question to the class was:  How many flights did NASA plan for the Space Shuttle in each year?  The guessing  usually started at around 20 but before it reached  50 I would chime in with 50.  The second question was: How was the program sold to Congress?  It was Cost Per Flight.  The more flights you plan, realistic or not, the lower the cost per flight, realistic or not.  Of course, the  last question was:  How do you fix problems on a tight budget?  After that, I simply looked into the eyes of the class members. I didn't have to say anything, the answer was obvious.  If you want a complete aswer to that question, I suggest reading:  Truth, Lies, and O-Rings: Inside the Space Shuttle Challenger Disaster, by Allan J. McDonald and James R. Hansen, Mar 11, 2012.
    Years Covered Actual Flights Actual Motors 1973 - 1981 2 4 1981 - 1988 25 50 1989 - 1995 46 92 1996 - 2000 28 56 2001 - 2005 13 26 2006 - 2011 21 42 Total Flights & Motors 135 270 Now, take a look at my 2nd table.  Let's see how NASA measured up to the solicitation's planned schedule.  I'll start with Increments 1 and 2 from the solicitation in the first table.  The solicitation planned for 54 flights between 1973 - 1981.  During that period, it actually achieved 2 flights.
    For increment 3 which appears to be full scale production during the years 1981 - 1988, the solicitation planned for 385 flights.  During that period, NASA actually achieved 25 flights.
    We might as well look at the entire program schedule.  The solicitation planned for the program to last from 1973 to 1988 (15 years) with 439 flights.  It actually lasted between 1974 and 2011 (37) years with 135 flights.
    The simple facts are that the Space Shuttle Program missed, by a huge margin, the delivery requirements laid out in the solicitation for the SRMs and without the SRMs, the Shuttle was going nowhere.   The solicitation requirement was for about 1 flight each week during production for about 7 years. I was going to descibe how the 2,200 tons of the Shuttle was going to be built by different contractors and shipped to Florida for assembly but why belabor the point.  The best NASA could do was about 6 or 7 flights a year--not 1 per week.  The solicitation was issued in 1973 and since then no agency, no contractor, no country, nor the entire planet Earth has been able to come close to such a requirement for manned space flight.  Richard P. Feynman recognized it in 1986 as a bogus requirement.  The bogus requirement had its cost per flight purpose needed for Congress but meeting the requirement was an impossibility.   Just read the quote I added from the Packard Commission in Part 3.
    So, how do we judge the Space Shuttle program against a bogus requirement?  That too is an impossibility.  Decide for yourself.
    _______________________________________________________________________
    The source for the totals in the second table is from Wikepedia.com's List of Space Shuttle Missions
    Copyright © 1998 - 2023 Wifcon.com LLC
  9. It was Friday, February 1, 1974, when out of the blue, my supervisor asked me: Do you have anything against going to Huntsville, Alabama for a week?  The person that asked that question was the one that I needed to file my paperwork for promotion.   I immediately said no and asked when do I go?  Monday was the answer.  Since it was Friday and I was in Washington, D.C, I had a couple of days to get going and hundreds of miles to drive.  Stunned, I left my office space amd began walking around the dismal GAO Building in a stupor.  Over the years, I found that the halls of the GAO building were a wonderful place to think.  The halls were dimly lit and neary devoid of people.
    The one week in Huntsville lasted for 3 months and I almost died there in the April 3, 1974 historic tornado outbeak.  I would be working on the above mentioned bid protest with our Atlanta staff in Huntsville, Alabama at the Marshall Space Flight Center.  Few people know it but this protest was the last time that GAO's General Counsel was stupid enough to involve GAO auditors in a bid protest.  They now do desk top reviews.  At the end of our work, GAO issued a 98 page bid protest decision.  To my knowledge, it remains the longest bid protest decision that GAO ever issued.  When I retired in 2003, I was the last person in GAO that had worked on that protest and I became a momentary celebrity in GAO's General Council.  It's nearly half a century since that protest and now, after giving it much thought over the years, I am writing about my experiences on that protest.  Many of my experiences are personal but many others are protest-related.  The only protest-related source material I am using is my memory  and the original protest decision.  Additionally, I am writing this entry in parts so that I don't end up with something so long that no one would even attempt to read it.  
    Monday, February 4, 1974, came quickly and it was time to go.  I told my friends and family where I was going, packed my 1971 Datsun 240Z with as much as is would hold, and headed southwest through Virginia.   
  10. In the middle of July 2023, Wifcon.com will begin its 25th year online, if I'm still alive and functioning.  I'm Bob Antonio, I'm Wifcon.com, I'm 73 years old now, and I started Wifcon.com in 1998, before many of you were born.  I'm well but I am mortal.   
    Over the years, I've met a handful of you in person including Vern Edwards, Ralph Nash and Joel Hoffman.  Others I've met by accident include a Procurement Executive at the Department of Commerce when I was a member of the workaday world.  That's it.  I've simply been the man behind the curtain.   I'm writing this because I want to share some of my thoughts about the changes in contracting that I've noticed.     
    Wifcon.com started when Steve Kelman was the Administrator of the Office of Federal Procurement Policy (OFPP).  He was a vibrant leader who tried to make changes in procurement policy and tried to connect directly with contract specialists.  One of the ways he connected with contract specialists was through a discussion board.  When that discussion board died in 1998, Wifcon.com started its own Discussion Forum immediately.  Many, if not all, of OFPP's users moved to Wifcon.com's Discussion Forum.  Yes, if you look at Wifcon.com's Discussion Archives, you will notice that some discussions are over 20 years old.  It seems to me that in the early years of the Wifcon Forum there were more seasoned contract specialists participating.  I'm really not sure.  On the other hand, there are many more industry members using the Wifcon Forum.  Although the Wifcon Forum is viewed about 250,000 times a month, the users are mostly quiet with only a handful participating regularly.  As the regular posters age and disappear, I don't know who will replace them.  Participation is the lifeblood of discussion forums.  Without active participation, discussion boards die.  To try to enhance the Wifcon Forum, I have started adding specialized blogs that can provide feeds to Wifcon.com.  In that way, I can provide them with silent and unpaid advertising while providing information to you.
    Wifcon.com's Home Page and its daily update preceded the Discussion Forum by a few days in 1998.  When I began the Home Page my goal was to provide important information faster to you than was available from other sources.  In many cases, I have done that for most of Wifcon.com's life.  At first, there was a good deal of information to publish.  However, over the years, agencies published less and less useful information.  Where OFPP was once vibrant in 1998 it is now comatose.  It hasn't had an Administrator for years and I don't even check it anymore.  Contracting information has always taken a back-seat to most anything else but the goveernment seems to have forgotten what it is altogether.   Why pay attention to contracting with only hundreds of billions of dollars spent annually, with the defense of the nation depending on it, with the pandemic defeated by it?  Forget us at your own risk.  With the exception of the Departments of Defense and Energy, information from agancy sites is hard to find.  To counter this lack of information, I have had to search for more and more sources to find contracting information.  Since Wifcon.com is a one-person show, that additional time to find sources takes more and more of my time and I only have so much time in a day.
    In 2008, Wifcon.com stopped for a week.  I decided to quit.  Instead, I converted it to a commercial site and accepted advertising.  Until then, I paid all costs myself.  The advertising increased until the pandemic and the business slowdown reduced advertising throughout the economy.   I've lost advertisers as have some of the largest companies in the United States.  I'm still covering my costs to maintain the site and now pay myself about $.10 (ten cents) an hour for my effort.  That's down from a high of about $.25 (25 cents) an hour.  Someone once told me that Wifcon.com was a labor of love.  Maybe it's just a bad habit.
    Over the next couple of months and before Wifcon.com's 25th anniversary, I hope to convert the outdated--non-discussion board--software to a current software that looks attractive.  At that time, I will reduce the number of site pages from the current hundreds of pages to something manageable.  Currently, the advertising on the Discussion Forum conflicts with the software used to operate the Forum.  I also hope to hire someone to fix the flaws in the Disscussion Board software and to correct its conficts with my advertising.
    Before I end, I want to thank my former and current advertisers, especially Vern Edwards, who also contributes articles for publication on the Discussion Forum and has written wonderful Articles over the years for Wifcon.com's main site.  If you see something posted from him, read it, study it!  Also, I would be remiss if I didn't thank the regular posters on the Disscussion Forum.  Without them and all posters, the Discussion Forum would die.  I cannot keep it alive, only you can.  I just wish some of the thousands of lurkers would participate before it is gone. 
    There are times when I think of myself as a dinosaur from another era.  I can neither explain to you nor to myself why I maintain this site.  There are others you will find more interesting and knowledgeable on the Discussion Forums.  However, I know they are aging as I am and they are mortal too.  Take advantage of them while you can.  Myself and the regular posters that you see on the Discussion Forum have one thing in common.  We are all here to share our knowledge with those who ask and we do it for free.  We have done that from the start of Wifcon.com.  Quite often, I see a poster thanking those that respond to their question on the Discussion Forum.  I like that and appreciate that.  
  11. Many years ago, as a teen, I noticed a magazine on a barbershop table with an incredible black airplane on the cover. Huge engines on each side of a delta wing and a long thin fuselage with a cockpit near the front. I never forgot that airplane, it was an SR-71 Blackbird. Fifty-five years later, I wrote a brief article about the first Blackbird -- the A-12. It's the fastest and highest flying jet airplane that was ever built. Everything about the A-12 was incredible. A requirement was developed to:
    make an airplane so fast that nothing could catch it, make it fly so high that nothing could reach it, and make it nearly invisible. Add to that the fact that no one knew how to do it, the materials didn't exist and it had to be done quickly.  Groom Lake and Area 51 were built for the U-2 and then used for the A-12, Clarence "Kelly" Johnson and his Skunk Works built the U-2 and then built the A-12.  The A-12 was a Central Intelligence Agency (CIA) spy plane just as the U-2 was originally. 
    ----------------------------------------------------
    In September 2020, I finished this 20 page article on the A-12 and placed it on the Analysis Page.  I never thought to post it to the Wifcon Blog.  I'm doing that now.  The article took a long time to write because the building of the A-12 was incredible.  Much of the material used to write this article was from 60 years ago and many potential sources confused the SR-71 story with that of the A-12 story.    Others were flat out wrong.  I used sources from people who worked on or flew the A-12.  Fortunately, the CIA finally declassified some documents on the A-12 sometime after 2000--maybe 2007 or 2013--and made it available to the public.  There wasn't much of it but it filled in some of the missing pieces.
    There are many facts and stories about the A-12 that are of interest.  One is that, in the A-12, the engines produced only about 20 percent of the power at crusing speeds.  Most of the power came from from the pointed cones sticking out of the nacelles.  Also, the A-12 ran its afterburners continuously.  Then there were the 2 Buick "nailhead" V-8s that were conected to each other to "spool-up" and start each A-12 engine.
    At the end of the article, I list the places you can still see an A-12 and added links to Google Maps.  If you look closely at the maps, you will find an image of an A-12.  I also list where the only YF-12A, a derivative of the A-12, is at.  Now, the YF-12A is another story.
    Please read:  Faster Than A Speeding Bullet, Three Times Higher Than The Tallest Mountain.

  12. We Did It, Let's Quit!

    · Moderator · 07/06/2020 12:03 AM

    Last week, I posted an article on the Wifcon Forum in which Dr. Mark J. Lewis, the Director of Defense Research and Engineering for Modernization provided some thoughts about defense projects.  The article was entitled Risk Aversion Impedes Hypersonics Development.  Within the article was a 44- minute video that includes, in part, his discussion of the race for hypersonic weapons systems.  I listened to the video and found it interesting.  The article itself started with this quote:
    I lived through the 1960s and I'm in no hurry to go back there.  What did Dr. Lewis mean?  In so many words he was saying, being the fallible humans that we are, expect failures as we push the current envelope of technology.  It's hard moving forward into something new.  He mentioned two types of failures, the first one he called a noble failure.  Think about it.  We do our homework, test, and something unexpected happens.  From that failure, learn from it, and move forward with the program.  The second type of failure is one that is caused by a stupid mistake and you don't learn much, if anything, from it.  He also noted that since we must expect failures, we must have the resources to test, correct, and move the system forward. 
    As an example of having available resources for testing, he mentioned the X-15 research vehicle that had 199 test flights in the 1950s and 1960s.  The X-15 was dropped from a B-52, its small rocket engine was ignited for a little over a minute so it could reach space.  It would then glide to earth and land on its skis.  He contrasted that to DoD's X-51 program that had 4 test flights planned from 2010 through 2013.  In short, looking back to the 1960s means that you learn from testing if you plan for enough tests.  I agree.
    I took Dr. Lewis's advice and went back to the 1960s and looked on my own.  In truth, I've been looking at the 1960s for some time.   Here is an excerpt from Dr. Lewis's article that caught my attention.  About hypersonic weapons, he said.
    If DoD and Dr. Lewis believe hypersonic weapons are important to develop again and field again, then do it with adequate testing and resources.  But what if we already tested such a system in a real operational airplane, in less than 5 years, over 60 years ago.  Here is an excerpt from Clarence  L "Kelly" Johnson's book, KELLEY, More than My Share of it All.  He was writing about the Air Force's YF-12A, first flown in 1963, which is a derivative of the CIA's A-12, first flown in 1962.  The YF-12A was being tested to drop missiles from its bomb-bay doors.  Now compare the numbers in the quote below to those in Dr. Lewis's above quote.
    Although the YF-12A was sending hypersonic missiles at targets successfully in 1963, we now are hoping to do it in 2025.  That's over 60 years after we first did it.  What happened?  Well, the YF-12A program was killed by Robert Strange McNamara, then Secretary of Defense, who is infamous for his efforts in Southeast Asia.  Accoding to Kelley Johnson, McNamara said:
    McNamara was working in the moment and had no vision of the future.  Although Congress appropriated money for the YF-12A program for three successive years, McNamara refused to use our technological advantage with hypersonic systems and move forward with it.  Before the program was killed, there were 3 YF-12A's built but only one exists today at the National Museum of the United States Air Force in Dayton, Ohio.  Here it is.  
    Now, let me take you and Dr. Lewis back to the 1960s and design, develop, and field real airplanes and beat his 5-year window.  Let's start at the beginning of 1960 when the A-12 contract was signed by Kelly Johnson and the CIA.  In April 1962, 2 1/2 years later, the A-12 was on its first flight.  The YF-12A was an A-12 derivative that the Air Force and Kelly Johnson converted to an interceptor.  It's first flight was in August 1963.  The SR-71, another A-12 derivative, built by Kelly Johnson and the Air Force, had its first flight in November 1964--less than 5 years after the award of the A-12 contract.  Let's slip back into the mid 1950s for a moment and the U-2.  Kelly Johnson built the U-2 in 8 months.  You've caught on--Kelly Johnson was an absolute aviation genius and his U-2, A-12, YF-12A, and SR-71 were incredible operational airplanes.  The A-12, YF-12A, and SR-71 were all Mach 3.2 airplanes.  They didn't reach Mach 3.2 with afterburners for a few minutes.  They cruised at that speed for hours.  By the way, the U-2 is still flying and Lockheed is still selling it--about 65 years after its first flight.  
    If Dr. Lewis wants to go back to the 1960s for ideas on how to field real airpalnes quickly, he's going to have to go back and resurrect Kelly Johnson.   
    Let's take one last brief trip back to the 1960s.  How about July 20, 1969 as the United States was landing humans on the Moon.  A few years later, that program was ended as a result of budget cuts.  After the Moon landing, I went to my Summer job in the factory that I worked at during my college years.  I expected to see happy faces and hear loud talk about our country's great achievement.  As I approached my workspace on the factory floor, I heard grumbling from the workers.  It was depressing, I was ready for Mars and theses guys were still dreaming about P-38s--which, of course, Kelly Johnson helped to build.  All I heard from the workers was something like:  we did it, let's quit.
    I agree with much of what Dr. Lewis says but he stated the obvious.  However, more is needed.  We built technology to down enemy aircraft with hypersonic missiles in 1963 but that achievement was squandered by a politiical appointee who couldn't see past his green eyeshades when he terminated the YF-12A.  Now, nearly 60 years later, we're competing with China and Russia in a race to build hypersonic weapons.  Did we take a technology break so the rest of Earth could catch-up?
    We landed humans on the moon in 1969, politicians terminated the program to save money, and we are now among several nations hoping to land on the moon--50 years after the United States did it before.  Did we take a success break?
    If we achieve something truly remarkable and important this year, how do we know our politicians and political appointees will recognize its importance and build on the achievement.  Or, will they decide that we did it, let's quit.

  13. The Guy Lacks Initiative

    · Moderator · 05/10/2019 12:48 PM

    I've been reading some discussions from the Contracting Workforce Forum.  As some of you know, I abhor the use of management phrases like "cool kids organizations."  What the hell is a "cool kids organization?"  Is it an excuse for something?  I spent my working career listenting to the latest meaningless phrases like that.  I was around when the words Human Capital became popular.  The words Human Resource preceded it.  If you look at the definition for capital and resource, you will see they are much the same.  Perhaps it is my own personal perception but I always hated the thought of being considered an inanimate object by some stiff holding a management position.  Why not get rid of the words capital and resource and just treat each other as human?
    That leads me to a story about a so-called manager--think Senior Executive Service--who clearly had risen beyond his abilities within an organizaion and one of his unfortunate underlings.  The manager wanted to fire the underling because the manager claimed that the underling lacked any initiative.  Oh, how things can go so wrong for an incompetent manager.
    I remember the manager's face as having a permanent scowl and marching around looking like that.  He must have been permanently constipated.  No one wanted to work for the manager because he was an asshole and he screamed at people.  All I can remember about the underling is that he reminded me of one of the Mario Brothers because of his mustache.  
    One morning, the underling was standing on a crowded subway platform waiting for a train.  The signal showed that the train was approaching the platform when a woman fell onto the track.  To save the woman on the track, someone had to quickly jump down onto the track--avoid electrocution by the 3rd rail--and lift the woman to the platform.  There was no time to hesitate.  Only one person jumped onto the tracks that morning to save the woman.   He didn't have time to think about what to do, he didn't have time to change into a Superman outfit, he just did it within seconds.  The moment that he saved the woman and climbed back onto the platform, the underling was hailed as a hero.  I can still see the newspaper article in my mind describing the hero's actions.
    How do you fire a hero because he lacked initiative?  You don't.  You pull the paperwork that the manager was planning to use to fire the underling and you make sure it never finds the light of day.  And, that's what happened.  Years later on the day I retired, I remember seeing the hero in the GAO lobby.  He still had that mustache.  The manager went no futher in GAO and was no longer there.
    So what's the moral of this story?  Its obvious.  You'll figure it out.
     
  14. In 1972, the Commission on Government Procurement wrote that Congress should limit its acquisition legislation to fundamental acquisition matters and let the Executive Branch implement Congress's policies through specific acquisition regulation.  If Congress had listened, it would be passing less acquisition legislation, doing a better jub of fulfilling its oversight responsibility of acquisition activities, and the FAR Councils would be performing their regulatory duty to implement Congress's acquisition policies.
    Unfortunately, Congress didn't listen--to its own creation. Today, Congress doesn't deal with fundamental acquisition matters, it deals with acquisition minutiae and esoteric details--especially when it comes to the Department of Defense (DoD). Someone has an idea and before you know Congress is passing another section of acquisition legislation. No idea is too small for Congress to more on its acquisition legislation dump-truck.  For the most part, Congress meddles in the acquisition process through the House and Senate Armed Services Committees. These committees propose acquisition legislation in their annual National Defense Authorization Acts (NDAA) with much of it in Title VIII of the NDAAs. Title VIII is usually labeled: Acquisition Policy, Acquisition Management, and Related Matters.  You can run from it, you can stall it, but you cannot hide from it.
    In the past 17 NDAAs, Congress has passed 725 sections of legislation in Title VIII of the NDAAs.  Another 166 sections of acquisition legislation are included in other Titles of the 17 NDAAs.  That's at least 891 sections of acquisition legislation in the past 17 NDAAs.  What is worse, Congress is picking up its legislative pace and has passed more sections of acquisition legislation in the past 3 years than ever before. 
    If you have been a follower of Wifcon.com for the past 17 years, you would be familiar with the 17 NDAAs by viewing them here.  Take a look at the National Defense Authorization Act for Fiscal Year 2018 sections for Title VIII.  Do you see coherent acquisition policy?  No, you do not!  Its a lot of junk legislation patched onto a growing body of junk legislation that is called Title 10 of the U. S. Code. 
    Don't think you are safe if you are in a civilian agency.  Remember, the NDAA is an annual event and during debate on the Senate or House NDAA versions, any stray piece of legislation may attach itself to the NDAA.  It's kind of like a tick or leech latching onto you.  Take another look at the sticky bomb idea on another of my blog entries.  If you throw an amendment at the NDAA during the debate process, it might stick to the NDAA and become law.  See if you can identify the source of TITLE XVII that is included in this year's NDAA.
    I'm getting angry again just thinking about this so I better end here.  However, you should get angry too.  Your the ones who have to deal with it on a daily basis.  If you need some incentive to get angry, there are about 250 sections from the last 3 NDAAs waiting for the FAR Councils to deal with them.  
    I've posted an article with tables to the Analysis Page with the same name as this blog entry.  You can probably see my anger growing with sarcasm as I progress towards the end of that article--see the part on zombie legislation.
    Some of you are too young to remember the movie Network.  However, there is a part of the movie where the character Howard Beale decides he has had enough.  I looked at it again this morning. 
  15. 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:
    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
    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:
    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:  
    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: 
    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:
    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:
    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:
    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:
    February 27, 1978:  The United States Court of Appeals, Fourth Circuit ruled that
     
  16. At the end of calendar year 2014, I analyzed the number of Federal Acquisition Circulars (FACs) issued by the FAR Council, by month, from 2014 through 2000.  I had mentally noticed that the Council had a penchant for issuing FACs in December so I wanted to see if the actual numbers matched what I thought was happening.  The numbers did!  My mind was still working.  So this year, I updated my 2014 analysis. Well, in 2016 and 2015, the Council was quite merry in December.  They issued 2 FACs during December in each of those years. Since the beginning of 2000, or for the past 17 years, there have been 133 FACs issued. They are grouped by the 12 months of the year below.  (By the way, in 2014 I typed the incorrect number.  I typed 188 when the actual number was 118.)
    January -- 11 FACs February -- 4 FACs March -- 16 FACs April -- 13 FACs May -- 10 FACs June -- 11 FACs July -- 14 FACs August -- 7 FACs September -- 9 FACs October -- 7 FACs November -- 11 FACs, and December -- 20 FACs. As you can see, the FAR Council celebrates the December holidays by issuing FACs. The largest number of FACs--20--have been issued in December. Additionally, the FAR Council has issued FACs in 14 of the 17 Decembers. The only years that they missed were 2011, 2008, and 2005. (I just noticed that the years they missed were three years apart.  Obviously, a government conspiracy.)  In those 3 years, only 6 FACs were issued--the lowest number of FACs issued in any year. Perhaps, they just ran out of gas in those years.
    Getting back to December, in 6 of the 17 years, including 2016 and 2015, the Council issued 2 FACs in December.  Again, that is the most for any month.  What can we conclude?  How about this.  Since the Council spreads holiday cheer in the only way it can during December by issuing FACs, they just love all of you.  And guess what.  There are still several business days left in 2016 and the Council has never issued 3 FAC's in any December, or for that matter, in any month.  If they feel extra cheery this year, maybe they will give you a third to ponder.
  17. 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, FY 2015, and FY 2016. 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 366 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.
    For FY 2016, there were 139 sustained protests compared to the 227 protests for the previous 3 Fiscal Years. Since GAO does not provide the number of sustained protests by most prevalent causes, I have ranked the most prevalent causes considering the number of sustained protests during a year.  For example, I divided the number of protests in each of FY 2016, 2015, 2014, and 2013 by 1.  That resulted in the following factors:
    FY 2016 (139/100=1.39) FY 2015 (68/100=.68) FY 2014 (72/100=.72) FY 2013 (82/100=.82) I then multiplied each factor by each most prevalent reason in each Fiscal Year using GAO's ranking.  Then I added my raw rankings of individual reasons for each Fiscal Year to come up with my final numerical ranking.  Yes, it's somewhat crude but all that GAO provides is general information.  
    Below is my ranking of the most prevalent reasons for sustained protests listed by GAO for FY 2016 through FY 2013 with my numerical ranking:
    failure to follow the evaluation criteria (Numerical Ranking of 8.4 and it was listed 3rd in FY 2015 and 1st in FYs 2014 and 2013) unreasonable technical evaluation (Numerical Ranking of 8.28 and it was listed 5th in FY 2015, 3rd in FY 2014, and 1st in FY 2016) unreasonable cost or price evaluation (Numerical Ranking of 7.05 and it was listed 1st in FY 2015, 4th in FY 2013, and 3rd in FY 2016) and unreasonable past performance evaluation (Numerical Ranking of 6.89 and it was listed 2nd in FY 2015 and FY 2016) inadequate documentation of the record (Numerical Ranking of 3.97 and it was listed 4th in FY 2015 and 2nd in FY 2013) Anyway, that is my way of trying to quantify the reasons.  
    Other reasons for sustained protests GAO listed include
    flawed selection decision (Numerical Ranking of 2.75 and it was listed 2nd in FY 2014) unequal treatment of offerors (Numerical Ranking of 2.42 and it was listed 4th in FY 2014 and 3rd in FY 2013) 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 technical evaluation which GAO placed first in FY 2015, GAO lists Deloitte Consulting, LLP, B-412125.2, B-412125.3, Apr. 7, 2016, 2016 CPD ¶ 119.
    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.
  18. On June 20, 2015, Vern Edwards introduced us to F & F Laboratories, Inc., ASBCA 33007, 89-1 BCA ¶ 21207 (Sept. 14, 1988).
    In early 1986, the Defense Personnel Support Center (DPSC) awarded a contract to F & F Laboratories, Inc. (F & F) for "starch jelly bars" as part of the military's abandon ship ration procurement. F & F offered its commercial jelly bar as part of its proposal and it was incorporated into the contract documents. Unfortunately, the commercial product didn't fit into the abandon ship ration package and F & F was terminated for default. In an Armed Services Board of Contract Appeals (ASBCA) decision, the termination for default was converted into a termination for convenience because DPSC "was obligated to reject [F & F's] offer prior to award and that its failure to do so until [F & F] manufactured over half the supplies after award was a material breach of the contract."
    If life was simple and straightforward, we could end there.
    In 1985, DPSC's records showed that its last procurement for jelly bars was with the Chuckles Division of Nabisco in 1982. The Chuckles bar came in 5 pieces to a bar and one current image shows the bar is nearly 5 Inches long today. That is larger than the federal specification size from the ASBCA case. The F & F bar, in 1986, was over 6 inches with 5 pieces also. Since both firms were Illinois firms, I assume that the sizes of the commercial bars were about the same in the 1980s. That is a long way of concluding that the Chuckles Division probably produced a non-commercial jelly bar for DPSC's needs in 1982.
    Chuckles is now part of the Ferrara Candy Company which, in addition to Chuckles and other candies, makes "Atomic Fireball" candies. I may not have been a fan of Chuckles as a kid but I can remember those fireballs. F & F was in bankruptcy in 2010 and is now The Smith Brothers Co. You can track it down with Google Maps.
    So what's the punch-line here? That's the funny part. I never saw an F & F jelly candy bar--until a day or two ago. Read through the discussion on this site and pay special attention to the image of the "Jelly Bar." You can enlarge the size of the image. The Abandon Ship ration the fellow tested was probably made between 1986 and 1992. You will see that the jelly bar was made by Lucy Ellen Candies which, if you do a bit of research, was a division of F & F. We can assume that after the ASBCA decision F & F and DPSC worked things out and F & F produced a non-commercial jelly bar to federal specifications. For that brief period of time, Lucy Ellen may have found happiness at DPSC.

  19. DIVAD Versus 60 Minutes

    · Moderator · 03/08/2015 05:22 PM

    Yesterday, Don Mansfield posted an article entitled Lying to Ourselves: Dishonesty in the Army Profession. After reading the digest of the article and bristling at some of the jargon used, I can report on what was written in simple language. It is: under some circumstances Army officers can accept a lie as truth. Why single out Army officers? I won't. The truth is that humans can accept a lie as truth. I've written about that before.
    The article made me remember an episode of 60 Minutes from the early to mid-1980s, possibly 1985. For some reason, the Army had agreed to a television test of the Division Air Defense Gun System (DIVAD). DIVAD's mission was to guard tanks on the battlefield from hostile fixed-wing aircraft, helicopters, and lightly armored ground vehicles. Yes, this is the legendary system that was claimed to have identified a latrine fan as an enemy. However, this blog entry is not about the system nor is it about the Army. It's about us. I have been unable to obtain a tape of the program from 60 Minutes so I will explain what I remember.
    The show began and DIVAD's representative (an Army officer) explained what was going to happen. There would be two types of tests--one stationary and several drones. Off in the distance was a white object--the apparent stationary target. DIVAD's turret whirred back and forth, locked onto the target, and began firing its cannons in anger. After the cloud of dust cleared, the target appeared--unharmed. Next was the drone test. From the left side of the television screen a slow moving aircraft appeared. DIVAD gave it a taste of shock and awe with its cannon and the drone disappeared to the right of the screen--unharmed. A second drone appeared on the left side of the screen. Once again, DIVAD's cannon unleashed a merciless barrage but the drone flew off--unharmed. Finally, a third drone appeared from the left of the screen and DIVAD gave it everything it had. I saw a slight hit on the wing of the drone as it flew off to the right of the screen. Shortly after the drone disappeared from view, there was an explosion. (Later it was reported that the third drone was detonated by a self-destruct device.)
    Now it was time to hear from DIVAD's representative about the test. I was young and naïve back then so I felt bad for the guy and wouldn't have blamed him a bit if he ran off and disappeared to the right of the television screen too. The person from 60 Minutes sheepishly approached the DIVAD guy not knowing what to say. However, the DIVAD guy jovially declared success for DIVAD. What did I miss? What did the entire audience miss? I don't know if the Secretary of Defense was watching but he cancelled the system after this episode of 60 minutes aired. Maybe the DIVAD representative had his fingers and toes crossed. Maybe he was conditioned to view the test as a success. All I know is I sat in front of the television stunned.
    What's the moral of the story? Again it's simple: As humans, we all can lie. We even will lie about a lie. It isn't restricted to any organization nor is it restricted to any national border. Its universal. Try this. If you're going to a business meeting today, tell your boss that his/her stupid idea is stupid. Maybe you're going to a party this weekend. Tell everyone what you really think about them and see how that works for you. Remember those little white lies our Mothers told us about after we told a whopper. An online dictionary defines them as: an often trivial, diplomatic or well-intentioned untruth. It's not a lie; its an untruth. Maybe that is a fib. One of my most used lines when I was a kid was: she did it! She being my sister. We all can lie--we're human! We may call it a social grace, more than likely, its a survival tactic. Just don't be surprised if the person on the other side of the negotiation table is telling you an untruth. Its part of our life experience. Besides, I'd never lie to you.
  20. No, they are not candy; no they are not turtles. However, they did have an iron shell. Pook Turtles were designed by Samuel M. Pook and were the "City Class" of armored gunboats that sailed the Mississippi and its tributaries beginning in early 1862. They were called Pook Turtles because people thought they looked like turtles. The seven ships were the USS Cairo, Carondelet, Cincinnati, Louisville, Mound City, Pittsburg, and St. Louis. The recovered remnants of the USS Cairo now rest at the National Military Park in Vicksburg, Mississippi.
    The contract is between James B. Eads, the ships' builder, and Montgomery C. Meigs. Among other accomplishments, Meigs was the architect and engineer of the Pension Building, now the National Building Museum, across G street from the GAO Building. In the contract, Eads is referred to as the "first part" and Meigs is referred to as the "second part." You will see reference to an 1808 act in the contract. That was a law passed to prevent members of Congress from benefiting from government contracts.
    I found this 1861 contract while I was doing research for a future article. As you read it, you will notice some concepts that are in current government contracts. In fact, as you read the Wifcon Forum, you will note that its members ask questions about some of the same concepts that are in the following contract
    Oh! About the price and delivery date--the price more than doubled and the delivery slipped by several months due to design changes. Some things never change!

  21. Why GAGAS Should Make You Gag

    · Moderator · 10/11/2014 05:00 PM

    For those of you who are not familiar with the auditing world, GAGAS is the acronym for Generally Accepted Government Auditing Standards and it is written and maintained by the Government Accountability Office (GAO). Compliance with GAGAS is mandatory for an auditor during the conduct of an audit and a memo noting compliance with GAGAS should be in the auditor's assignment folder for each audit.
    Although I was a member of the auditing community during my career with the GAO, I also viewed myself as a member of the contracting community, As an auditor, I too was bound by GAGAS and I satisfied all of the training necessary to be a professional auditor. As a member of the contracting community, I reviewed thousands of contract files at contracting offices throughout the United States. In addition, I gained an MS in Procurement Management and I wrote GAO's contracting course which I specifically designed for auditors.
    Before you think I'm a braggart of some sort, let me explain that I never awarded a federal contract, never wrote a justification and approval, never wrote a determination and findings, never wrote a negotiator's memorandum, etc. I never was a contract specialist and I don't think any auditor should have been one. My interest as an auditor was in how contracting should be done; not how it was being done. There could be a big difference between the two. But enough of this. Why am I writing this entry?
    GAGAS CAN BE A SHAM
    Recently, I read one of the worst pieces of garbage issued by an auditing activity in my lifetime. It was so pathetically awful that I couldn't read the report. It was page after page of unintelligible gibberish. That brought me back to a longstanding problem I have with GAGAS. It is why GAGAS should make you gag. GAGAS includes things that an auditor should possess for an audit. Below, is an excerpt from GAGAS on an auditor's Competence at section 3.69. I bolded and italicized the word collectively.

    If an auditor does an audit on contracting, must the individual auditor know something about contracting? Simple answer. No! Let's dive a little deeper into the area covering an auditor's Technical Knowledge at section 3.72.

    Let's ask another question. If an auditor does an audit on contracting, must the individual auditor know what the auditor is talking about? Simple answer. No!
    Go back and look at the two quotes. Notice how I highlighted the word "collectively." Collectively is an agency's way out. The staff assigned to an audit might include an attorney assigned to review the draft audit report once the audit is finished. Maybe, the attorney has some familiarity with contracting but the attorney will not be involved in doing the work. Perhaps, the staff assigned to an audit has an advisor who is knowledgeable but that advisor has no real authority over the conduct of the audit. I served as such an advisor. So much for "collectively possess." GAGAS can be a sham.
    Over the years, I listened to agency officials' stories about ignorant auditors who would review their contracts. One of my favorites was the auditor who asked the contracting officer to point out the solicitation for him in the contract file. I wonder what the auditor was going to do with it when he was shown which document it was. You may have had your own unfortunate experiences.
    During one of the final audits that I performed, I had contract files stacked in an agency conference room. From time to time, contract specialists would stop in the conference room and talk to me and we would discuss contracting issues. Towards the end of my stay in that conference room, an experienced contracting officer stopped in to see the anomaly--an auditor who could talk intelligently about contracting. I was proud of that. It let that contracting officer and other contract specialists know that I, as a reviewer of their work, took the time in my life to become familiar with the subject matter of their careers.
    If the current version of GAGAS ensures an auditor's technical competence, why are there so many horror stories about auditors contracting ignorance? Why was I viewed as the anomaly during my entire career? The honest answer is that GAGAS, as it is currently written, does not ensure an auditor's technical competence in the field of contracting. That's it!
    GAGAS CAN BE REVISED EASILY
    Now for my suggestion. GAO should rewrite GAGAS's section 3.69 on Competence as I describe below.

    GAO should rewrite GAGAS section 3.72 on Technical Knowledge as I describe below.

    My suggestion places responsibility for Competence and Technical Knowledge in one individual--the person who directs the audit. Normally, that person is called an auditor-in-charge or something similar. This can easily be done for contracting audits. For example, I was responsible for the conduct of an audit that included 17 subordinate auditors who had no experience with contracts. The work was done at several agencies and several sites around the country. To do the audit, I brought all members of the team to Washington, D. C. and trained them specifically for the work to be done. By the time we were done with the training, my staff knew what to look for and what the documents would look like. They had no trouble identifying problems and documents. As my staff performed their work, I visited with each of them, reviewed their workpapers, and reviewed the contract files, if it was necessary. Throughout the audit, I was available to assist and answer contracting questions. The audit was successful and it had an effect on the way you do contracting.
    More and more, an ignorant Congress depends on what auditors report as contracting findings and recommendations. As a result, the work of ignorant auditors can affect contracting careers and contracting laws. Additionally, when an agency sends an ignorant auditor out to identify contracting problems the ignorant auditor doesn't know what to look for and couldn't identify the problem if it him him/her.
    MORE SUGGESTIONS
    In addition to GAO making the changes I noted to GAGAS, I suggest that agencies that conduct audits

    identify auditors who have an interest in contracting and provide the technical training and knowledge they will need as they become auditors-in-charge on contracting audits.

    require officials signing an audit to identify the auditor-in-charge on the signature page and certify that the auditor complies with the revised version of GAGAS's Competence and Technical Competence standards. Further, I suggest that contracting agencies who are the subject of an audit require

    their procurement executive or designee to request proof of auditor compliance with GAGAS sections 3.69 and 3.72.
    officials that comment on the draft audit report to note any auditor non-compliance with GAGAS sections 3.69 and 3.72 in their comment letter.
  22. In Thomas F. Neenan, as Trustee of the Thomas F. Neenan, Sr., Revocable Trust, v. U. S., No. 11-733C, August 22, 2013, you are taken through some of the basics of federal contracting. How many basic points can you identify in this 10-page opinion? I've listed those that I identified below:
    1. Offer and acceptance, unconditional offer, preliminary negotiations.
    2. Change in ownership, death of party, trust agreement.
    3. Pattern or practice.
    4. Contract specialist's authority, integral part of the duties assigned.
    5. Express authority, implied authority, actual authority, apparent authority.
  23. In my last post on the Wifcon Blog, I proposed a House and Senate Committee on Contracting and Assistance. Why, you might ask? Remember the Clinger-Cohen Act? It was part of the National Defense Authorization Act for Fiscal Year 1996, P. L 104-106. What about the SBIR/STTR Reauthorization Act of 2011? It was part of the National Defense Authorization Act for Fiscal Year 2012, P. L. 112-81. What about the new Limitations on Subcontracting provision that was mentioned on the Wifcon Forum? You may have guessed: The National Defense Authorization Act for Fiscal Year 2013, P. L. 112-239, Section 1651.
    So how does government-wide contracting legislation end up in the annual National Defense Authorization Acts? Think "sticky bill!" To be more exact, and maybe more accurate as it affects contracting, remember the scene in Saving Private Ryan where Tom Hanks' character explains how the remnants of his unit will deal with tanks--"
    ." As the annual National Defense Authorization Act makes its way through the corridors of Congress, you throw your sticky bill at it and hope it sticks.It doesn't begin nor end there. Remember our old friend the Federal Acquisition Streamlining Act of 1994? It was originally introduced in the old Senate Committee on Government Affairs, now the Senate Committee on Homeland Security and Governmental Affairs. This Senate Committee has a counterpart in the House of Representatives--the House Committee on Oversight and Government Reform, formerly the old Committee on Government Operations. If Congress cannot keep the names of its committees simple, how can it keep contracting legislation streamlined? I'll answer that--it cannot. Getting back to the House Committee on Oversight and Government Reform, this year its chairman introduced H. R. 1232, the Federal Information Technology Acquisition Reform Act. Currently, H. R. 1232 is wallowing in the full House of Representatives. It may eventually stick to something and get passed. Pray it doesn't.
    Finally, there are agencies totally overseen by a single committee in the House and Senate. These committees treat their agencies as their own turf, and of course, write agency-specific contracting laws. I remember sitting with some bright, young, eager, staff members of one such committee. They were writing a piece of legislation that would affect an agency's contracting law. As I read the bill, all I could think of was--at least they heard of the Competition-in-Contracting Act. Eventually, the bill was passed without question and became another piece of garbage legislation affecting one agency's contracting. If you are working in one of these agencies' contracting offices, woe are you.
    I only will briefly mention that the House and Senate Small Business Committees can initiate their own legislation and eventually pass it too.
    In our wonderful game of baseball, one pitcher stands on a hill and throws the ball towards the batter to start the action. If Congress wrote the rules for baseball, all 8 players facing the batter would throw balls toward the batter and the catcher squatting behind the batter would take some cheap shots at the batter. If you work in a contracting office or if you are a contractor, you are the batter in Congress's version of baseball.
  24. I had planned to write a detailed article about my plan for the above committees. However, I'm never going to get to it. So, I'm going to try a series of quick posts to get my thoughts published. Don't tell me that these committees will never be formed. I know they won't. Committees and subcommittees are entities run by politicians for politicians. However, I can dream.
    You can see from the titles of my proposed committees that they would deal with federal contracting and federal assistance. For now, this blog entry will deal with federal contracting only. In fact, this blog entry will deal only with the structure of the committees. Both the House and Senate committees will have the same jurisdiction and subcommittees. Here we go!

    I view the first 4 subcommittees as oversight committees that would work with the last 2 subcommittees. However, I see much work for the final 2 subcommittees beginning with Day 1.
    More later.
  25. Imagine quoting on a procurement in which you submitted the lowest-priced, technically acceptable quote. Instead of winning the award, you were told that your quote was unacceptable and ineligible for award because you did not possess the requisite facility clearance prior to award. Although you submitted your facility clearance information to the contracting officer on December 6, 2012, nearly two months later on February 1, 2013, little had been done on it.
    You protest to the U. S. Court of Federal Claims and everything seems to be going your way until you read the following quote from the opinion:
    Nonsense! Even the dictionary cannot tell me what propinquent means. However, the dictionary does define propinquity. My interpretation of the phrase that I italicized is "good enough for government work." That's not good enough for me. I disagree with the judge's ruling! In addition, I disagree with the judge's singling out one individual for a process issue.
    Now, let's look at the cause for the nearly 2-month delay in processing the facility clearance. I blocked out the individual's name because I want you to look at this as a process issue.

    I'm asking you to look at the above quote and the entire opinion to identify ways to improve the process in this procurement. I'm not looking for an answer here. Instead, how would you initiate the improvements? I'll point out a few items to give you a start.
    He was on personal leave for sixteen days during that time period.
    He halted the processing of DD Form 254 requests for a two-week period in January while the Defense Security Service was questioning whether a bona fide need existed for any facility clearances under SINs 132-54 and 132-55 under Schedule 70.
    The splitting of responsibilities in the Memorandum of Agreement between the Defense Information Systems Agency and the General Services Administration.

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