MAY-D-FAR-B-WIT-U

13 hours ago, Vern Edwards said:

It's an old practice. I encountered it in my first Air Force source selection, which was in 1975. The idea, as I recall, was that seeing prices might affect technical evaluators' assessments of technical proposals. I don't recall whether it was official policy or just a practice norm.

As for policy today, see FAR 15.305(a)(4).

Thank you Vern. Sounds a bit like the Pot Roast Principle but I think there is a consensus here that seeing prices might affect technical evaluators' assessments of technical proposals.

3 hours ago, joel hoffman said:

 

I recommend waiting until after the TET evaluations and all (at least initial) consensus evaluation/ratings have been completed, if agency procedures don’t prohibit sharing the price/cost information.

Thank Joel. That will be my strategy if we decide to execute this approach. My concern is some element of price realism could kick-in from the TET without fully understanding the business decisions that could affect lower pricing. An evaluator could assign different ratings or a higher risk to two offers with similar solution simply because they looked at the total price and made a judgment that the price is too low to execute the solution without diving into possible business/pricing decisions that could explain the low prices.

I also thing providing the proposed hours to execute the solution is what the TET really needs not the prices.

I agree there is still a lot of benefit if price volume is provided after initial consensus evaluation and ratings. Any question from the TET can be addressed via price volume discussions. Have you had a scenario where you adjusted initial ratings or added a strength/weakness/deficiency to the technical evaluation after the TET reviewed the price volume?

Does anyone know the history behind the evaluation process of keeping price proposals from the technical evaluation team (TET)? The price team, generally contract specialist and contracting officer have access to both price and technical volumes, why not vice versa? 

I have always assumed I knew the answer to this question without asking more experienced contracting officer in my agency, unfortunately with almost 6 years as an 1102, I am now one of the more experienced KOs 🤦‍♀️. My assumption was this is done to prevent the technical team from consciously or subconsciously engaging in a trade-off analysis during the technical evaluation. Total evaluated price is generally an objective value and it's easy to see how seeing that bottom number could creep into the technical evaluation.

On the other hand, technical evaluations are very subjective and most KOs performing price analysis never bother to look at the technical volume. Most importantly the total evaluated price is an objective number with the exception of maybe a cost realism analysis where the team uses some subjective input to determine probable cost.

To give context, we have a source selection where there could be a benefit to allowing the TET access to the price proposal, but I want to make sure we have plans to mitigate any pitfall from allowing this approach. Two potential pitfalls I can think of is 1) The technical team performing tradeoff due to seeing the total price 2) The technical team heading down that cost-realism tunnel.

I appreciate all input.

17 hours ago, joel hoffman said:

Under an experience factor or sub factor, the government should be evaluating the extent or depth of recent experience that is relevant to the instant project.

Under a past performance factor or sub factor, the government is evaluating the QUALITY of the project experience. Naturally a project similar in nature will be more relevant than other experience for past performance.

 

 

I think Joel explanation lines up with the way I have heard a few people differentiate between experience and past performance.

Experience is, have you done this before? while past performance is, how well did you do it?

16 hours ago, Vern Edwards said:

You can award five "C" contracts from a single solicitation as long as you have the funds to do so. The government has been doing that for decades. Almost every major system began with awards to two or three contractors from a single solicitation. Off hand, I don't know of any regulation that describes the process, but you don't need express authority in order to do it. You just need enough money. It's a viable acquisition strategy.

I don't know off hand of any regulation that describes the process, but it is pretty common in some parts of the R&D world. You don't need special permission.

Thank you Vern

20 hours ago, Don Mansfield said:

No. 

Thank you Don

On 3/27/2021 at 12:26 PM, Vern Edwards said:

Feldman is a highly opinionated but highly respected authority.

 😀 Same thing was said to me by a Navy Attorney about Vern Edwards 4 years ago. I was about 2 years into my contracting career and taking his Procurement Law class.

In my limited experience in aviation and shipbuilding, recency is always defined and it is generally 5-10 years depending on the weapon system. I have seen the degree of relevance defined in a shipbuilding contract that I liked but decided against calling out something similar in my solicitation to make sure the past performance evaluation team (PPET) has more flexibility in their determination of relevance. This likely worked because the Navy was buying something unique and specific but as others have mentioned a similar language could be used under the experience factor and you will have the benefit of maybe assigning a strength or weakness for this type of specific experience. If you have both past performance and experience as a factor, be careful that you are not evaluating the same aspect of the offer twice, clearly distinguish between both and talk through what exactly you are looking for within both factors with your team.

In determining relevancy of an Offeror’s past performance, the order of relevancy is design and construction of heavy icebreakers, followed by design and construction of other marine vessels of similar size and complexity.

We also sometimes send the PP examples to the technical team to determine relevance to our requirement before the PPET begins their assessment/determination. With some of these systems most people on the PPET do not have the same level of technical expertise as the technical team. If we can, we try to have an engineer on the price and PP team but human resources are sometimes limited.

The Government has a requirement for the analysis of an existing system and the contract will have several deliverables (reports) analyzing different parts of the existing system over the course of a year. The deliverables will be used to develop the requirements for the next-generation version of this system. The Government will benefit from multiple companies specializing in this system providing their analysis and design recommendations, therefore the Government will be making multiple awards.

Is anyone aware of any regulation or decision that a multiple award contract must be an ID-DQ, R, or IQ? Can I award 5 "C" contracts using a single solicitation or do they have to be "D" contracts? Every search of the word "multiple award" takes me to part 16 and I see nothing is part 16 requiring a multiple award to be an indefinite delivery type contract. This requirement does not meet the definition of a definite quantity, requirements, or indefinite quantity in 16.501, 16.502, and 16.503.

The work, PoP, deliverables are all defined. The plan is to make multiple awards using Parts 13.5 and 12.603 to simplify things and award a "C" contract  to all offerors with experience with this system. I have heard of the NSA or CIA awarding multiple contracts at a fixed amount to several companies to do some form of penetration testing to their networks and results will be used to improve the network. Maybe that's a movie but I do draw some parallels between something similar to that and what we are trying to accomplish.

52.215-1 has the language below but did not find anything similar in 52.212-1.

     (f) Contract award.

(1) The Government intends to award a contract or contracts resulting from this solicitation to the responsible offeror(s) whose proposal(s) represents the best value after evaluation in accordance with the factors and subfactors in the solicitation.

Your input is appreciated

22 hours ago, Don Mansfield said:

What if instead of the Government structuring the FPIF, offerors were allowed to propose the parameters (target cost, target profit, ceiling price, and share ratios)? Let the invisible hand of competition do its thing?

We considered this but there is a concern that this may create too may apples to oranges comparison on proposed prices. The alternative I like is creating a ceiling on the ceiling price and profit %. Offerors obviously will propose their target price and the contract will stipulate the share ratios. But historically Offerors always propose to whatever ceiling we stipulate.

Truly appreciate your time and input.

22 hours ago, Don Mansfield said:

The reason I asked is because if you considered the difference in PTA between offerors proposing different amounts for target profit, you may not be as concerned about an offeror proposing an "excessive" profit. Think it through.

Yes, i found the inverse relationship between PTA and profit very intriguing. I will spend the weekend researching PTA a bit more.

1 hour ago, Don Mansfield said:

This approach is fundamentally flawed, but it seems like that ship has sailed and you're not asking for a better approach.

From what I understand, the problem you're trying to avoid is that two offerors can have the same TEP even though one can propose a higher target profit. 

If that were the case, which offeror's point of total assumption would be lower--the offeror who proposed the higher target profit or the lower target profit?

Don,

To be honest, PTA hasn't even come up at all in our incentive geometry discussions. I understand for the purpose of contract administration and risk identification it will be beneficial for the Govt to understand when the contractor is approaching PTA, but for the purpose of a source selection I am not sure what the benefit is to the Government. Offerors obviously want to identify the PTA but not sure when or where to use it from the Gov't perspective.

The PTA for Offerors A, B, and C in the scenario I put up is $121.43, $108.57, AND $102.30 . Using the same scenario (Ceiling 130%, SR 70/30) but changing all target cost to $100 the PTA is $121.43, $114.29, and $110  (Ceiling Price - Target Price/0.7) + target cost. Target profit is $15%, 20%, 23% for A, B, and C. Higher profit equals lower PTA.

The more input I get from this forum, the more I think the answer to my concern is Cost realism on fixed price type contracts aka price realism. My current thinking is the high profit is less of a problem, the problem is using the high profit to cover for understated or hidden target costs related to buy-in.

30 minutes ago, ji20874 said:

MDFBWU,

I did a multi-billion dollar source selection many years ago for a satellite system -- all the satellites, all the sensors on the satellites, all the ground stations, and all the data processing for an eighteen-year period of performance.  We had two offerors, both very big names.  We did a two-week oral presentation at each offeror's facility -- ten working days with evaluators from DoD, NASA, and Commerce.  And we allowed for multiple sessions at any given time.  As the contracting officer, I could only attend one session at any time, but I allowed other sessions to happen without me.  I issued a rules of engagement document to set the boundaries for all participants, government and contractor.  This was an oral presentation as part of the proposal submission process as contemplated by FAR 15.102, not a discussions session.

Think broadly.  Think strategically.  Understand your requirement, and then design an acquisition approach that fits.  Please don't use a cookie-cutter approach for an important acquisition.

If you are the contracting officer, let me recommend that you try to arrange for a private meeting with you and the source selection authority.  He or she can give you top cover for any good ideas you might have.  

"As the contracting officer, I could only attend one session at any time, but I allowed other sessions to happen without me."

In our current era of what I call defensive contracting where a lot of decisions are driven by the need to avoid a protest, this will never happen.

1 hour ago, Vern Edwards said:

What follows is not a criticism of ji20874. It is a criticism of an idea.

Apparently, the idea is that offerors will describe their "approach" and the agency will draw inferences about their relative understanding based on what it reads those descriptions and then make understanding/price tradeoffs.

I wish the folks who evaluate "understanding" and "approach" would explain those terms in their solicitations.

What is "understanding" and how do you measure it? On what kind of scale? Is it a dichotomous or polytomous attribute?

Whose understanding is being evaluated? Can a company have a discernible "understanding" or do only particular persons in a company have an "understanding"? If a company, in what consciousness does it reside? If only particular persons, do you ask for the names of those persons? Must they be the authors of the "approach" description? Would it matter if the "approach" description were authored by or with the assistance of a consultant or team of consultants who won't actually work on the contract?

What is an "approach"? Is it a set of promises about what an offeror will do or refrain from doing, or is it contractually irrelevant? If a set of promises, does a lawyer check it for essential language of promise?

The idea of the paper "technical" proposal can be traced back to the Air Corps Act of 1926, 44 Stat. 780, Section 10, which authorized the conduct of design competitions for airplanes. That was a major departure from the otherwise required method of "formal advertising" (now called "sealed bidding").The design competition idea was never fully successful, and in the early 1960s the military, led by the Air Force, began conducting "management" competitions, instead. They instructed offerors to describe their "approach" to design and program management, because paper designs were not sufficiently reliable. You can judge from the histories of weapon system programs how effective management competitions have been.

When CICA opened the doors to widespread use of competitively negotiated procurements by all agencies, instead of sealed bidding, everyone looked to the military for how to conduct source selections, and now we see requirements for technical proposals and descriptions of "approaches," and evaluations of "understanding" in all kinds of procurements---a product of our cut-and-paste, bandwagon-chasing acquisition culture. (It's what we have instead of a critical thinking culture.)

All that source selection hoorah that takes so long and costs so much and prevents contracts from being awarded at "the speed of relevance." The important DOD JEDI procurement has been delayed for more than a year due to a protest of a "technical evaluation." Other procurements have actually taken longer than World War II to complete, from release of the solicitation to successful source selection.

Oh, well. Never mind. Our acquisition "leaders" and their followers don't know the history of their business and don't have a simplicity gene.

And so we solicit essay type proposals and make understanding/price tradeoffs, as if we know what we are doing and what we are paying for. 

 

Vern,

What is your recommendation for source selection on these billion dollar weapon system contracts? I know on some older posts we have discussed how to speed up source selection and oral presentations comes to mind but I am not sure oral presentations answers the questions below

Whose understanding is being evaluated? Can a company have a discernible "understanding" or do only particular persons in a company have an "understanding"? If a company, in what consciousness does it reside? If only particular persons, do you ask for the names of those persons? Must they be the authors of the "approach" description? Would it matter if the "approach" description were authored by or with the assistance of a consultant or team of consultants who won't actually work on the contract?

What happens when the understanding rests with a particular persons and source selection decision is based on the individual's understanding and this person moves on from the company? Does this nullify the source selection decision?

Please share your other ideas and recommendation.

37 minutes ago, ji20874 said:

Anyone who uses low price (rather than tradeoff) to award FPIF contract might also be an ass.  If you set up an arrangement where offerors can game it, they just might.  Possible tradeoff factors:  your confidence in the offeror's understanding and approach, as well as your confidence in the offeror's pricing approach.  You can look at past performance in cost estimating and cost control.  

In your scenario looking only at ceiling price, you would award to offeror to offeror C ( not offeror B ).

• A = target cost $100⁰⁰ + target profit $15⁰⁰ = target price $115⁰⁰; ceiling = $130⁰⁰
• B = target cost $95⁰⁰ + target profit $19⁰⁰ = target price $114⁰⁰; ceiling = $124⁰⁰
• C = target cost $93⁰⁰ + target profit $21³⁹ = target price $114³⁹; ceiling = $117⁰⁰

If all else among the offerors is the same, award to offeror C.  You have price reasonableness with adequate price competition.

Why do you think B's or C's proposed target profit figures are too high?  I cannot tell that they are.

Thanks Ji,

I meant C not B and your math is off on the ceiling price for C, 130% of $93 is $120.90. This will be a trade-off with non-price factors significantly more important than price but this is a ACAT I acquisition in an industry where for the most part they can all do the job and source selection often becomes a price shootout. We are doing all we can including those factors your mentioned to differentiate between offers and to make sure our source selection decision does not come down to price. Thanks again for your input.

1 minute ago, Vern Edwards said:

@MAY-D-FAR-B-WIT-UOne day, probably when the Four Horsemen of the Apocalypse show up on the horizon, you people in the field will learn to keep it simple. You're well-intentioned, but incorrigible complexity fanatics. A threat to national security.

Source selection is child's play until it's in the hands of the "professionals."

I'm serious.

Deadly serious.

Thanks for the advice and a good laugh. Reminds me of my all time Vern Edwards post

"Anyone who uses LPTA to award a cost-reimbursement contract is an idiot or an ass, should lose any warrant they have, should have their head shaved and their buttons cut off in front of a mob, should have their shoes set on fire, and should never, ever be allowed within 1,000 miles of another government contracting office, which probably means that they'll have to leave the country. And if you need me to explain why, you are a danger to national security."

I have a poster in my cubicle with the Guinness guys saying "LPTA for CPFF, Brilliant"

4 minutes ago, Vern Edwards said:

B-417984, B-186873, B-233029, B-238496, B-249497.

You're going to be disappointed. They don't say much other than that the agency thought profit was too high. Literally one or two sentences, at most. There is no detailed analysis or discussion beyond that. There have been no protests sustained on that basis. Waste of time.

On the other hand, there have been 142 protest decisions involving FPI contracts since 1981. I have no idea what they have been about.

No, I'm not going to send you a list. I'm too busy. Get your lawyer to download the list for you from LEXIS or Westlaw, then use the B-number to Google them.

And I agree with ji20874 that you should look at the target price and forget about the profit. 

 

 

Thank you Vern.  Our attorney is digging and does not like the idea of deeming proposed profit unreasonable. Looking at target price also brings in the need for a price realism analysis which we are trying to avoid due to the high protest risk and I think Robert Antonio's 2003 article (The Fixed-Price Incentive Firm Target Contract:  Not As Firm As the Name Suggests) makes a good case as to why price realism is necessary when evaluating FPIF at target price. Our workaround or DoD is general is to evaluate at ceiling, the Govt's maximum liability but that creates one or two other problems.

I appreciate all the input, I am leaning towards dictating the the maximum profit in the RFP, run the WGL and use that as a reasonable profit and all offerors will likely propose that profit percentage.

52 minutes ago, ji20874 said:

Be careful -- don't do this hastily -- I don't think you understand enough about FPIF to eliminate the offeror.  Why would you want to?  If this offeror provides the best price (target cost plus target profit) and is otherwise the best value offeror, what do you care about a profit rate?  I don't know all of your facts, only that an offeror is proposing a potential for 25% profit in a FPIF arrangement -- my advice is to look at the big picture and not overly focus on profit.  An eventual 25% profit for underrunning (but successfully performing) a competitively-awarded FPIF contract is not necessarily bad.

Help me understand -- are you talking about a target profit of 25% (before application of the formula), where the final profit might end up higher or lower at the end of contract performance depending on the contractor's actual costs, or are you talking about a potential of 25% profit at the end of contract performance (after application of the formula)?

"If this offeror provides the best price (target cost plus target profit) "

We are evaluating at the ceiling price to avoid hidden target cost and offerors gaming the FPIF geometry, this is best practice within DoD at least in the last 5 years or so.

An eventual 25% profit for underrunning (but successfully performing) a competitively-awarded FPIF contract is not necessarily bad.

Ji,

In an ideal situation yes but in this industry, they never underrun.

Help me understand -- are you talking about a target profit of 25% (before application of the formula)

Yes, proposed target profit not the actual final profit.

34 minutes ago, ji20874 said:

Be careful -- don't do this hastily -- I don't think you understand enough about FPIF to eliminate the offeror.  Why would you want to?  If this offeror provides the best price (target cost plus target profit) and is otherwise the best value offeror, what do you care about a profit rate?  I don't know all of your facts, only that an offeror is proposing a potential for 25% profit in a FPIF arrangement -- my advice is to look at the big picture and not overly focus on profit.  An eventual 25% profit for underrunning (but successfully performing) a competitively-awarded FPIF contract is not necessarily bad.

Help me understand -- are you talking about a target profit of 25% (before application of the formula), where the final profit might end up higher or lower at the end of contract performance depending on the contractor's actual costs, or are you talking about a potential of 25% profit at the end of contract performance (after application of the formula)?

ji20874,

Consider the following scenario, FPIF with 130% Ceiling and 70/30 unsplit share ratio. Total evaluated price (TEP) is based on ceiling price, the Govt's maximum liability not the target price. I apologize for omitting the math but the scenario is accurate mathematically.

Offeror A

Target Cost of $100, target profit of 15%. Offeror A TEP will be $130 since we are not evaluating at target price, we are evaluating at ceiling. A's actual cost comes in at $105, 5% overrun and Govt pays a total of $118.50 after applying the incentive geometry. Final profit is 13%

Offeror B

Target cost $95, target profit 20%, Offeror B TEP is $123.50 (ceiling price). Actual cost is $115, 21% overrun and the Govt pays $123.59 the ceiling price. Total price is $128.00 which exceeds the ceiling. final Profit is 11%

Offeror C

Target Cost $93, target profit 23%, Offeror C TEP is $120.90 (ceiling price). Actual is $120, 29% overrun, Govt pays $120.90 the ceiling. Final profit is 11%

In the scenario above the Govt awards to a contractor with the lowest ceiling (offeror (B ) but ends up paying more because the Offeror has plenty of profit to offset their portion of the overrun.

The two options I am weighing is establish a limit on profit but this will lead to everyone proposing to that limit OR go into discussions with an offeror whose profit is unreasonable based on comparison with other offerors. The more I structure my FPIF the more I feel like there is always a hole to be exploited in a FPIF contract.

33 minutes ago, Vern Edwards said:

Yes.

Thanks Vern, can you please provide the case number if you have it?

43 minutes ago, Don Mansfield said:

What is the overrun share ratio?

70/30 for some CLINs and 50/50 for others

8 minutes ago, Don Mansfield said:

Does the RFP dictate any of the parameters of the FPIF arrangement (e.g., share ratios, ceiling price as a percentage of target cost, etc.)?

Don, yes it does. The share ratios, ceiling prices as a percentage of target cost are all dictated in the RFP. The ceiling price for some of the CLINs are as high as 130% leaving plenty of room for as much as 29% profit while still allowing offerors to propose below the ceiling.

50 minutes ago, Retreadfed said:

Have you read FAR 15.405?

Thanks Retreadfed, but I am not sure how to execute 15.405 in a competitive environment, or more accurately how it will hold up in a protest.  In a sole-source environment all of 15.405 makes sense but lets say in a competitive environment the "contracting officer has taken all authorized action without success" and decides to eliminate this Offeror from the competitive range or does not award to the Offeror, how will this hold up in a protest?

I guess this is one of the disadvantages of not performing price realism, in our case there is a scenario for understated or hidden target cost where the lowest price offeror will have a low target cost, very high profit and the ceiling price will also be low because its based on the target cost. In this worst case scenario, the offeror will blow past the target cost but will have plenty of profit to cover the overrun and the Govt will end up paying more when compared to other offerors with a more realistic target cost and reasonable profit.

More specifically we are weighing two options, imposing a limit on profit, say 15%, versus stating in the RFP that we will evaluate profit for reasonableness based on comparison to other offerors. If we impose a limit then everyone will simply propose to that limit. There is a concern that there is no way to argue that a profit is unreasonable or at least we will not be able to eliminate anyone for unreasonable profit. The ceiling percentage as well as share ratios will also be called out in the solicitation and be the same for all offerors.

Is anyone aware of any GAO decisions or case law where the Government deemed an Offeror's proposed profit unreasonable (too high) during a competitive negotiation? The outcome of the decision does not matter and it could be eliminating an offeror from the competitive range or not awarding to an offeoror for unreasonable profit.

Background

A FPI(F) contract where no cost realism will be performed and total evaluated price (TEP) is based on ceiling prices not target price. The concern is that an offeror could possibly propose profit as high as 25% and still come under the ceiling and this will not affect the offeror's TEP since ceiling is a % of target cost and the profit never comes into play. The RFP will include a language that the Government will evaluate the the reasonableness of the proposed price to include profit but the concern is there is no possible way the Government could argue the proposed profit is unreasonable.

I appreciate all feedback.

1 hour ago, Don Mansfield said:

I don't know of anything regulating this. I guess you can do it either way.

Thank you Don