Labels and Tags

Accountability (69) Adequate documentation (6) ADR in procurement (3) Allocation of risks (5) Best interest of government (11) Best practices (19) Best value (15) Bidder prejudice (11) Blanket purchase agreement (1) Bridge contract (2) Bundling (6) Cancellation and rejection (2) Centralized procurement structure (12) Changes during bid process (13) Clarifications vs Discussions (1) Competence (9) Competition vs Efficiency (29) Competitive position (2) Compliance (33) Conflict of interest (30) Contract administration (25) Contract disputes (1) Contract extension or modification (8) Contract terms (2) Contract types (6) Contract vs solicitation dispute (2) Contractor responsibility (19) Conviction (3) Cooperative purchasing (3) Cost and pricing (13) Debarment (4) Determinations (8) Determining responsibility (34) Disclosure requirements (7) Discussions during solicitation (9) Disposal of surplus property (3) Effective enforcement requirement (35) Effective procurement management (3) Effective specifications (36) Emergency procurement (14) eProcurement (5) Equitable tolling (2) Evaluation of submissions (22) Fair and equitable treatment (14) Fair and reasonable value (23) Fiscal effect of procurement (14) Frivolous protest (1) Good governance (8) Governmental functions (26) Guam (14) Guam procurement law (12) Improper influence (11) Incumbency (12) Integrity of system (29) Interested party (7) Jurisdiction (1) Justification (1) Life-cycle cost (1) Limits of government contracting (5) Lore vs Law (4) market research (7) Materiality (3) Methods of source selection (32) Mistakes (4) Models of Procurement (1) Needs assessment (11) No harm no foul? (8) Other procurement links (14) Outsourcing (33) Past performance (12) Planning policy (33) Politics of procurement (47) PPPs (6) Prequalification (1) Principle of competition (92) Principles of procurement (24) Private vs public contract (15) Procurement authority (5) Procurement controversies series (78) Procurement ethics (18) Procurement fraud (27) Procurement lifecycle (9) Procurement philosophy (16) Procurement procedures (30) Procurement reform (62) Procurement theory (11) Procurement workforce (2) Procurment philosophy (6) Professionalism (17) Protest - formality (2) Protest - timing (12) Protests - general (37) Purposes and policies of procurement (10) Recusal (1) Remedies (16) Requirement for new procurement (4) Resolution of protests (4) Responsiveness (13) Restrictive specifications (4) Review procedures (12) Scope of contract (16) Settlement (2) Social preference provisions (59) Sole source (47) Sovereign immunity (2) Staffing (7) Standard commercial products (2) Standards of review (2) Standing (6) Stays and injunctions (6) Structure of procurement (1) Substantiation (9) Surety (1) Suspension (6) The procurement record (1) The role of price (10) The subject matter of procurement (22) Trade agreements vs procurement (1) Training (32) Transparency (60) Uniformity (6) Unsolicited proposals (2)

Monday, May 14, 2018

Reigning in the cozy relationships

The following article is interesting for the revelation of a statewide undeveloped procurement system that is finally seeing the light. It heralds new procurement reforms in the State of Arizona, "massive changes to how public schools will be allowed to hire builders for large construction projects, as well as harsh new penalties for malfeasance that occurs during the selection process". 

The things discussed in this article were mostly already dealt with long ago under Guam's procurement laws, taken from the ABA Model Procurement Code.

I only make reference to parts of this for its procurement lessons, so you should read the full article at the link.

Arizona upends school procurement laws in effort to cool cozy relationships with builders
Some in the construction industry, which was not consulted on the changes and fears a return to a system that prioritizes cost above outcomes, say the changes are a legislative overreaction to scandals that have roiled the Scottsdale Unified School District since late 2017.

The most significant change involves how construction companies will be selected. Beginning July 2019, instead of using a process that allows districts to subjectively score and select a construction manager to manage the entire project, builders will be selected based solely on who promises the lowest cost.
Comment: The new system can provide a lot of the accommodations allowed by the old one by use of the "multi-step" competitive sealed bid procurement method. It has been used extensively in recent times (some say too much so), which is known as the LPTA (Lowest Price, Technically Acceptable) source selection method. It involves two phases, the first of which is to assess the offers of the bidders to determine which qualify, followed by opening of sealed price bids. The first phase allows discussion to enable "potentially acceptable" bidders submit an acceptable bid.
Other provisions aim to prevent undue influence over the procurement process by restricting who gets to be part of the selection process and banning gifts given by contractors to district officials. Gifts from contractors to district procurement officials will be prohibited. “It was all aimed at trying to address corruption in financial management and procurement practices,” said House Speaker J.D. Mesnard, R-Chandler.
Comment: Guam law's ethics provisions prohibit the giving of gifts, gratuities and even "favors", deminimus benefits that may not even benefit a person but the organization. It is meant to stem paying to play relationships.
•Contracts will be awarded based on lowest price from a qualified bidder
•No contractor or subcontractor providing services to a district will be allowed to serve on a procurement selection committee
•Procurement officials will be prohibited from receiving a benefit to create a procurement specification in a particular way, such as to benefit a single company
•School districts must keep records that prove construction vendors are properly licensed.
The competitive sealed bid method is the preferred source selection model. Conflicts such as this are prohibited by ethics rules, and rules preventing non-government who consult in the preparation of specifications from being allowed to bid or have an interest in the bid. Procurement officials are required to keep extensive records related to procurements, which are public documents.
The Guam Supreme Court just published today a decision that held a solicitation had to be cancelled for failure to keep a the required record, thereby impeding a proper review of the conduct of the solicitation. Teleguam Holdings LLC v. Guam, 2018 Guam 5.
Charter schools will be exempt from the new rules.
Not on Guam, where the bulk of their money comes from public funds. Guam professes its purposes and policies of procurement to include to provide for increased public confidence in the procedures followed in public procurement; to ensure the fair and equitable treatment of all persons who deal with the procurement system; to provide increased economy in territorial activities and to maximize to the fullest extent practicable the purchasing value of public funds of the Territory; to foster effective broad-based competition within the free enterprise system; and, to provide safeguards for the maintenance of a procurement system of quality and integrity.

Tuesday, May 8, 2018

Look-see called for in not a good look government contract

The first thing you need to know, if you don't already, about this article is that it involves an Australian political party whose very name is a deceit. The "Liberal" Party is actually notoriously conservative. Oh, and it currently controls the Federal Government.

'Not a good look': Calls for transparency after Liberal Party donor wins Pacific cable contract
The Federal Government has been called on to publicly explain its decision to award a multi-million-dollar contract to a company that has previously donated tens of thousands of dollars to the Liberal Party.

Telecommunications company Vocus was last year awarded a $2.8 million contract to carry out a three-month scoping study on the planned undersea high-speed internet cable for Papua New Guinea and Solomon Islands. Vocus donated $44,000 to the Liberal Party of Australia in 2013, and a further $50,000 in 2016.

The Department of Foreign Affairs and Trade (DFAT) awarded the scoping study contract through a limited tender, a process where only one or more potential suppliers are approached to apply.

Marc Purcell, the chief executive of the Australian Council for International Development, told the ABC's Pacific Beat program the combination of the donations and the limited tender were "not a good look". "The Government does have the ability under the Commonwealth Procurement Guidelines to have a limited tender," he said. "While it has that power, the issue is the lack of transparency and what I think will raise eyebrows in Canberra is the fact that the preferred provider Vocus is a donor to the Coalition."

The company said the political donations were made by its former board and management team.

DFAT said Vocus was awarded the scoping study contract on account of its "extensive, recent experience with similar infrastructure projects", and that the company was "assessed as being best placed to explore potential cable solutions".

Australia made an offer to help with the Pacific cable project last year after the Solomon Islands signed a deal with Chinese communications giant Huawei. That deal unnerved security experts concerned about China's growing influence in the region, and the prospect of a Chinese company gaining access to Australia's internet infrastructure.

Thursday, March 29, 2018

Three strikes and these protests were out

Note to the wise and those who want to be: Read this decision in its full glory at the link. The rendition below is incomplete, perhaps inaccurate, and simply intended as an exposure to procurement problems for students of procurement; not to decide any particular controversy.

Matter of: AeroSage, LLC; SageCare, Inc., B-415267.13; B-415267.14, March 19, 2018
AeroSage LLC, of Tampa, Florida, and SageCare, Inc., also of Tampa, Florida, each a service-disabled veteran-owned small business (SDVOSB), protest various aspects of the structure and award of a request for proposals. Prior to filing the instant protests, the protesters each had a pending protest of the same procurement at issue here. In those protests, the protesters presented their grounds as “a protest of the Agency’s improprieties in negotiations and evaluation of protestor’s offers, improper contract terms, quantities, and technical requirements in violation of interagency fuel regulations, and procurement integrity violation prejudicing protestor and limiting ability to obtain certificates of analysis (COA) or best price for the government. The protesters filed the joint protests at issue here challenging DLA’s decision to continue with contract performance. The protesters also contested various aspects of the structure of the RFP and the agency’s evaluations and awards.

After reviewing the joint protests, the GAO attorney assigned to the protest instructed the protesters to indicate whether the February 9 joint protest raised new protests issues or whether the protest grounds were duplicative of those raised in the pending protests. The protesters summarized the new protest issues (i.e., those not previously raised in the pending protests) as allegations of: (1) improper pre-award and post-award notice; (2) violations of Defense Logistics Acquisition Directive (DLAD) 33.104; (3) improprieties with the override of the stay imposed by CICA; (4) problems with award and evaluation, including award made after override of the CICA stay and awards made based on allegedly flawed underlying specifications; (5) general errors in the solicitation (such as unspecified but “erroneous requirements which have just come to light”); (6) flaws in certain specifications in the solicitation, such a failure to follow the “Veterans Benefit Act”; (7) problems with the solicitation’s certification requirement; (8) failing to provide the protester with copies of certain documents; and (9) a faulty solicitation structure such that awards might decrease SDVOSB participation. In addition, the protesters provided the following statement regarding their protest grounds: “We do not know what awards were made, when, and why awards were made. Any awards that we might know about were improper and/or have been changed without notice.”

Although the protesters raise a multitude of protest grounds, each ground is dismissable under one or more of the three dismissal bases described below.

Untimely Protest Grounds

The protesters challenge various aspects of the solicitation and award, for example, the fact that awards were allegedly made on the basis of “erroneous [solicitation] requirements which have just come to light.” These challenges are untimely. These protests were filed several months after the proposal due date. Thus, to the extent that the protest grounds here, such as issues (4) and (5) above, challenge any aspect of the solicitation, they are untimely and are dismissed. (“Protests based upon alleged improprieties in a solicitation . . . shall be filed prior to bid opening or the time set for receipt of initial proposals.”). Similarly, protest grounds challenging any specific award are also untimely. In this regard, our Bid Protest Regulations provide that all protests other than challenges to a solicitation must be filed within 10 days after the basis of protest is known or should have been known.

Competition in Contracting Act (CICA)

Next, the protesters allege that the agency improperly failed to stay performance of the contract notwithstanding the protest, as required by CICA. In this regard, the protesters argue that “[t]here is no reasonable justification that these awards are urgent or compelling given they are currently available for performance by other proper acquisition vehicles.” The agency contends that “[t]his issue falls outside of GAO’s bid protest function and should be dismissed.” The protesters chose not to rebut this argument.

Under CICA, a contracting agency is required to suspend contract performance if it receives notice of a protest from our Office within 10 calendar days of the date of contract award. However, an agency’s failure to adhere to the stay requirement is not a valid basis of protest. (“GAO does not administer the requirements to stay award or suspend contract performance under CICA”.) To the extent that the protests challenge the agency’s decision to continue with performance, whether under CICA or any other statute, regulation, or guidance, those allegations are dismissed.
[NOTE TO THOSE OPERATING UNDER ABA MPC automatic stay provisions: The federal system operates differently. Do not try this at home.]
Failure to State a Valid Basis of Protest

The protesters also challenge the agency’s decision to make various awards. However, in summarizing their protest grounds, the protesters also advised our Office as follows: “We do not know what awards were made, when, and why awards were made. Any awards that we might know about were improper and/or have been changed without notice.” Our Bid Protest Regulations state that protesters must “[s]et forth a detailed statement of the legal and factual grounds of protest” and require a protester to “clearly state legally sufficient grounds of protest.” 4 C.F.R §§ 21.1(c)(4), (f). The regulations also provide for dismissal of protests that fail to satisfy either of these requirements. The statement above denies knowledge of basic, important facts relevant to the protest grounds and calls into question the existence of a factual predicate for any award-related protest ground. The statement shows that the protesters lack sufficient factual basis for their protests and the protest grounds contesting the basis of award are thus dismissed.

Similarly, the protesters raised several arguments related to lack of notice, such as “[a]wards made with [i]mproper, incorrect, and not provided pre-award and post-award notice and awards improperly changed without notice.” In all instances alleging a problem with notice, the protesters fail to state a sufficient legal basis for these protest grounds or a complete factual predicate. Thus, the protest grounds related to notice are similarly dismissed
You're out.

The ups and downs of procurement reform: the POGO schtick

has long supported common-sense solutions to streamline
 federal procurement processes, modernize procurement policies, and 
utilize commercial practices to the maximum extent practicable. 
Policies and programs that effectively and efficiently 
leverage the commercial marketplace are essential for the delivery of
 best value commercial products, services and solutions 
for federal customers and the American people.

Procurement reform is in the eye of the stakeholder

These days, it appears that increasingly the dialogue regarding the condition of the federal acquisition systems has soured, as a seemingly ever-growing inventory of the deficiencies and shortcomings has overtaken the conversation. Indeed, more and more we are told that the procurement process is in crisis, that it is unable to sustain access to innovative technologies, and that it is an obsolete relic of a bygone era.

The inherent reaction to this narrative is the call for the implementation of new reforms — i.e. policies, statutes, and regulations — to completely overhaul the procurement process. Before embracing this conclusion, however, we should reflect upon both the historical context of the procurement process and the lessons we have learned over time. In particular, it is important to understand how Congress, with the enactment of the Federal Acquisition Streamlining Act (FASA) in 1994, has already reformed the procurement system.

As recognized by the recently published first volume of the report of the Section 809 Advisory Panel on Streamlining and Codifying Acquisition (Section 809 Panel),  FASA 
established a definition for the term commercial item, a preference for procuring commercial items, an emphasis on commercial market research, greater reliance of commercial sector business processes, a requirement to use standard commercial terms and conditions to the maximum extent practicable, waiver of many statutes that would otherwise have been applicable to commercial items, and a framework for maintaining a limit on the number of future statutes that may be applied to procurements of commercial items.

However, since FASA was implemented, the number of DoD-related commercial buying provisions and clauses has increased by 188 percent, and the number of commercial clauses that may be flowed down has increased five-fold. In 1995, the FAR and DFARS contained a combined total of 57 government clauses applicable to commercial items. Today there are 165 clauses, with 122 originating in statute, 20 originating in executive orders, and 23 originating in agency-level policies.
In addition, we should consider the testimony on major weapons system acquisition provided in 2013 by Paul Francis of the Government Accountability Office before the House Armed Services Committee.
We should build on existing reforms — not necessarily by revisiting the process itself but by augmenting it by tackling incentives. To do this, we need to look differently at the familiar outcomes of weapon systems acquisition—such as cost growth, schedule delays, large support burdens, and reduced buying power.

Some of these undesirable outcomes … occur not because they are inadvertent but because they are encouraged by the incentive structure.

I do not think it is sufficient to define the problem as an objective process that is broken. Rather, it is more accurate to view the problem as a sophisticated process whose consistent results are indicative of its being in equilibrium.

The rules and policies are clear about what to do, but other incentives force compromises. The persistence of undesirable outcomes such as cost growth and schedule delays suggests that these are consequences that participants in the process have been willing to accept.
Before strapping dynamite to the procurement system, we would do well to reflect on the incentives inherent to the system, how they can be rebalanced in light of current policy imperatives, and adjust our buying practices, including our rules, accordingly. To do otherwise, risks perpetuating the cycle of reform and re-regulation that we have seen over the decades.

Wednesday, March 28, 2018

Oops -- My mistake

This article comes from Athol, Maine, and is a perfect textbook hypothetical procurement quiz question, played out in real life. It involves a bid error, and seeks to find a way to deal with it. The facts of mistake are always at the core of a problem such as this. But the clarity of the law would help its resolution.

I've set out the whole article as presented, but for our purposes, let's just pretend it is a test question. How would you analyze the problem and solution?

State AG’s office denies Kenefick bid protest
The attorney general has denied a protest by Kenefick Corp., which submitted the low bid to the town for the Queen Lake Dam rehabilitation project. Bids were opened Jan. 31, and the hearing was held March 9.

Kenefick’s bid of $268,150 was the lowest of the 11 bids received, but the town rejected it because the document was not properly filled out. Kenefick argued that the $60,435 error on the form was obvious and should have been corrected by the town.

On the form, Kenefick wrote the total bid price was $268,150. There was a unit price schedule attached to the form. Bidders were asked to provide a unit price for approximately 20 items. The bidders were expected to multiply each unit price by the estimated quantity to derive a total bid amount. Bidders were further instructed to write the extended price for each item in words.

Instead of listing the extended price for each item in words, Kenefick expressed its unit prices in words. The total of the amounts in written words equaled $207,715, which conflicted with the total bid price of $268,150. The town said it made Kenefick’s bid obscure, mandating the rejection.

In the town’s rules relating to bids, in case of a discrepancy between words and figures, the amount expressed in words governs.

Kenefick was notified that its bid read as $207,715. Project Engineer David Lenart told the selectmen this week that, “Kenefick was told to take the bid for the lower amount, or withdraw it. He filed a protest.”

Kenefick maintained the error was obvious, and the town should have corrected it.

The town argued that Kenefick’s bid was obscure because of its $60,435 discrepancy, and also that Kenefick is not a responsible bidder, because it does not have experience with three dam projects, which was called for by the bid specifications.

The company’s lack of experience was also a concern, the town said. Lenart said, “Kenefick could only come up with two projects, which were not comparable” to the scope of the work needed on the Queen Lake project.

State Assistant Attorney General Deborah A. Anderson wrote that the town was under no obligation to correct Kenefick’s bid price, noting if a bidder’s error makes the price or scope of work ambiguous, the bid must be rejected. She further stated the town did not abuse its discretion by failing to correct Kenefick’s error.

Anderson ruled, “I find that Kenefick’s error was an obvious one, even though Kenefick’s bid price could be read as either $207,715 or $268,150. The town had the discretion to correct this error, but it chose not to do so. This was not an arbitrary decision.’

Anderson said as protestor, Kenefick did not meet its burden to prove that its rejection was arbitrary. She said the town was rightfully concerned about allowing Kenefick to choose which bid price was the correct price, thus giving Kenefick ”two bites of the apple.” Also, she said the town followed its own rule. For those reasons the protest was denied.

The second-lowest bidder, R. Bates & Sons, who bid $270,540, made similar, though fewer, errors on the bid forms. He was informed of the same issue.

Selectmen signed two documents prepared by the town’s attorney, officially rejecting the Kenefick and Bates bids. Selectmen then voted to award the bid to the third lowest bidder, Edward Page Corp., which came in at $319,069 ($50,919 higher than the Kenefick bid).

Chairman Thomas Brouillet and John Telepciak signed the contract saying Page “did everything right, and has good experience.”

The project involves the demolition of the dam’s existing spillway and outlet conduit, and construction of a new concrete spillway and gate structure, outlet gates, trash racks, low level outlet pipe, riprap slope protection, gravel crest and landscaping.

Representing the town at the Boston hearing were Thomas McEnaney (town counsel) who filed a response to Kenefick’s protest, and David Lenart, the project engineer.

Work on the dam will begin after Labor Day.
So, what happened here? Kenefick presented a bid with itemized unit prices. In accordance with bid requirements, Kenfeck's bid amount was provided for each itemized line item, but was spelled out in word form. The total amount of all bids was then provided, in Arabic numerals.

Setting aside the question of Kenefick's responsibility for the moment, because the article makes it look like its bid was rejected on grounds of responsiveness, not responsibility, its bid was rejected because the bid "was obscure because of its $60,435 discrepancy" between the total bid price and the mathematical total of the itemized prices. Kenefick argued it was an obvious mistake, but the State Assistant Attorney General held that the town was under no obligation to correct the bid, on the ground that, if a bidder's error makes the price ambiguous, the bid must be rejected. She said the town did not abuse its discretion by failing to correct Kenefick's error.

That may well be the applicable law in Athol, which evidently has a rule that, "in case of a discrepancy between words and figures, the amount expressed in words governs." But this blog is about the ABA Model Procurement Code, and more particularly the Guam procurement law, which follows the ABA MPC, and there is no such law in that context. Remember, we are treating this article as a hypothetical factual situation for our analysis purposes.

MPC § 3-202(6) states that "correction ... of inadvertently erroneous bids before or after award ... shall be permitted in accordance with regulations. This is the same language in Guam law, 5 GCA § 5211(f).

The pertinent ABA MPC regulation is in R3-202.11 ("Mistakes in Bids"), in particular R3-202.11.4(b)("Mistakes where intended correct bid is evident"), which states, "if the mistake and the intended correct bid is clearly evident on the face of the bid document, the bid shall be corrected to the intended correct bid and may not be withdrawn. Examples of mistakes that may be clearly evident on the face of the bid document are ... errors in extending unit prices, ... and arithmetical errors." 

It might be the case that the town did not consider this to be a "clearly evident" mistake. But the AAG was certain it was a clearly evident mistake: "I find that Kenefick’s error was an obvious one...."

The AAG also said "the town was rightfully concerned about allowing Kenefick to choose which bid price was the correct price, thus giving Kenefick 'two bites of the apple'.” Again, I do not question the AAG's statement of applicable Maine law. But the "two bite at the apple" old saw is irrelevant in the MPC regulation, which says such a mistaken bid "shall be corrected ... and may not be withdrawn.

Moreover, there is another element here. Both bites of Kenefick's bid were the lowest prices bid. "Kenefick’s bid price could be read as either $207,715 or $268,150." The next lowest bid, at $270,540, was higher than both of those bids, if we assume, for argument, they were intended to be two separate bids. Even if the totaled low bid written in words,$207,715, the total bid expressed in Arabic numerals, $268,150, remained the low bid. For some reason, “Kenefick was told to take the bid for the lower amount, or withdraw it. He filed a protest."

I hope that there was a stronger reason to reject the bid because of issues of responsibility, though there is not much in this article that would help an analysis of that issue. This bid was rejected before it was evaluated from all appearances, even though it was the lowest bid. It was reported only that "Kenefick is not a responsible bidder, because it does not have experience with three dam projects, which was called for by the bid specifications." 

In the ABA MPC regulations (R3-401.10), it is not necessary to actually have all the experience at the time of bid if it can be obtained (R3-401.03) after bid evaluation, for instance by subcontractors or other professionals available for hire. This regulation requires a separate inquiry to determine responsibility after bid opening, so long as the low bidder's responsibility is determined to the satisfaction of the procurement officer before award (R3-401.04). There was evidently here no finding that Kenefick was nonresponsible (see, R3-401.05), merely "a concern".

And what did the town get from this? The obligation to pay $50,000 more for the next available bid, about 20% more than Kenefick's stated total bid.

It might be asked, why is the ABA MPC so lenient on allowing low bidders to correct bids? It would seem, unless the low bidder has determined to be nonresponsible, that government should be allowed the opportunity to take a low bid, notwithstanding technical mistakes in it that do not prejudice the competitive standing of other bidders. Here, correction of the bid, even to the higher amount, would not improve the competitive position of any of the other bidders.  

It is one of the foundation purposes and policies of the MPC, and Guam's procurement law, "to maximize to the fullest extent practicable the purchasing value of public funds". (MPC § 1-101(2)(f); 5 GCA § 5001(b)(5).)  It is mandated that the procurement law is to be construed and applied to promote its purposes and policies.  (MPC § 1-101(1); 5 GCA § 5001(a).)


Tuesday, March 27, 2018

Is Section 809 Panel playing for change that we don't need?

This is the second of two articles addressing the perennial changes that accompany all procurement regimes.  The first is the immediately prior post. The same rules and caveats about reading the original article apply here.


When it comes to bid protests, Section 809 panel should follow data
The Section 809 Panel, whose members were appointed by DoD and represent experts across the government contracting field, derives its name from the section in the 2016 National Defense Authorization (NDAA) that created the panel. Among the panel’s mandates is to streamline the acquisition process while protecting “the best interests of the Department of Defense.”

It is no secret that the Section 809 Panel also is looking at the bid protest system as part of its mandate. And it is also no secret that DoD takes a dim view of the current bid protest system. It is not a stretch to believe that, in DoD’s view, significant changes to protests would be in its “best interest.” That would be a mistake.

Bid protests provide a meaningful “check and balance” to help ensure the government consistently acts both in its best interests and in accordance with applicable procurement regulations. This is important to maintain the perception (and reality) that the federal contracting marketplace is characterized by open, robust competition. Without some third-party mechanism to review whether procurements are conducted reasonably and in accordance with federal procurement law, nontraditional federal contractors or established government contractors without established track records at particular agencies could come to view the federal marketplace as a de facto oligarchy of a few companies favored by specific agencies.

The promise of contractor-financed government oversight via the protest process gives companies comfort (especially when utilizing enormous and scarce resources) that their bids will be evaluated fairly and in accordance with the guidelines set forth by the agency in the solicitation. Without such a system, companies the government relies on will turn their backs on this marketplace to everyone’s detriment.

Those looking to change the system argue that protests are prolific, disruptive, and unnecessarily slow procurements. These arguments, however, have largely been debunked with the recent release of the most comprehensive study of the protest system in a generation by the RAND Corporation (through its National Defense Research Institute).

Among other things, the RAND Report found that protests are not at all prevalent when viewed against the backdrop of overall DoD procurement activity. The report found just 0.3 percent of DoD contract actions were protested, and most GAO protests are resolved in just over a month–hardly indicative of a system that causes governmentwide disruption. To make these conclusions, RAND studied 21,186 contract actions at GAO (average of 2,354 per year) and 475 cases filed at the Court of Federal Claims (average of 53 per year).

With respect to GAO, the data set (which runs from fiscal 2008 through fiscal 2016) showed that, while protests had increased, the effectiveness rate of protests (which is approximately 45 percent) remained steady throughout that time leading RAND to conclude that protesters were largely filing protests that had merit. The RAND study also found that 50 percent of protest actions at GAO are resolved within 30 days, and fully 70 percent of cases are resolved within 60 days.

Based on this data, RAND cautioned policy makers from tinkering substantively with GAO’s and COFC’s current bid protest jurisdiction, timelines and procedures.

RAND recommended against shortening GAO’s process to under the current 100 days, based on the data showing the vast majority of cases are resolved much sooner and that GAO reasonably needs additional time for more complex cases. RAND also recommended against reducing GAO’s task order jurisdiction, noting that those protests are more successful, on average, than non-task order protests.

The RAND report did make some recommendations for reform, which were closely aligned with the evidence it painstakingly collected and analyzed. For one, nearly 10 percent of protests at GAO are for procurements valued under $100,000. A streamlined protest process would benefit the quick adjudication of these protests (such, as RAND noted, a small claims-type procedure or mandatory ADR at GAO).

Second, RAND found that small businesses file more than 50 percent of protests though they account for 15-to-20 percent of contract dollars. While this may be because the average contract awarded to small businesses is smaller than large businesses, small businesses may benefit to a dedicated enhanced debriefing process and outside counsel or help from the SBA because protests where outside counsel is present and the underlying source selection record is reviewed lead to better outcomes for protesters with a higher success rate. Counsel are also bound by their ethical obligations to only file non-frivolous pleadings.

The current bid protest system plays an irreplaceable role in enhancing confidence in the integrity of federal procurement, which fosters a more robust marketplace with more participants offering greater innovation to federal agencies. The data in the RAND report shows that current jurisdiction and timelines result in effective, non-frivolous use of the bid protest mechanism by disappointed offerors without undue disruption or delay. While larger procurements are more susceptible to protest, these big dollar procurements are exactly what tax payers and policy makers should want to be the focus of the bid protest system.

Like with everything else, the Section 809 Panel’s recommendations with respect to the bid protest system should be based in fact. Thankfully, with the RAND report, the panel has those facts close at hand.
See previous post related to this topic, here.

For the times, they are a'changing -- or are they?

Here is the first of a couple of intriguing and thought-provoking current articles, each from very good sources (or so I've observed), considering aspects of the current "changes" in federal government acquisition. The second will be in the next post (see here). 

Remember, I take indecent liberty with articles advanced here, to provide context to students of local government procurement, and Guam's in particular. Thus, I slice and dice, omit great swaths of critical data, paraphrase, rearrange, and perhaps tilt to one side or the other, the original information in these articles. It is imperative that you read the articles in their original form and the authors' intent, and not rely on my iteration of them.



“Other Transaction Authorities” might seem like a risky new acquisition method, but it’s been around longer than the Federal Acquisition Regulation.
Before there was a Federal Acquisition Regulation regime describing the many procurement laws adopted at the federal level in the last three decades plus, there were “other transaction authorities,” also known by the shorthand OTAs or OTs. This contracting method, outside the usual federal process, is not widely used and even less understood. But that’s beginning to change. “Even though it’s been around for a fairly lengthy period of time, it’s just not been used very much. So, people are afraid of it because they haven’t seen how it’s worked,” Douglas Maughan, director of the Homeland Security Department's Science and Technology Directorate’s Cyber Security Division, told Nextgov.

It comes across as new and scary but is potentially a game-changing acquisition model and it is catching fire across government. After all, it has no structure, no built in roadmaps, accountability or paper trails. But, it doesn’t have to be scary and is not really all that new, if you are a big believer in getting to the future by going back before the dawn of modern procurement rules-based practices. It has roots going back to the 1950's, long before the FAR and the Competition in Contracting Act. Three decades later that same language came to be used to grant the Defense Department similar authorities. “Under these authorities, agencies may develop agreements that are not required to follow a standard format or include terms and conditions that are typically required when using traditional mechanisms,” according to a Government Accountability Office definition. In other words, OTAs rely more on principles than rules.

By 1994, that authority had been broadened beyond research to include prototyping and then updated again in 2017 to enable contracts to move into production after successful prototypes. Over that time, several departments have been granted other transaction authorities, including Defense, Energy, Health and Human Services, Homeland Security and Transportation. Under these departments, five component agencies have also been given explicit OT authority: the Federal Aviation Administration, Transportation Security Administration, National Institutes of Health, Domestic Nuclear Detection Office and Advanced Research Projects Agency-Energy, or ARPA-E.

Homeland Security’s Science and Technology Directorate awarded its first OT contract for cybersecurity in February 2016 after launching its Silicon Valley Innovation program. While the primary focus for OTs is on research and development, not all agencies are using them for that express purpose. For instance, TSA and NASA use them for other services, such as airport security, education and outreach, according to GAO.

The reluctance to use OTs is based on “fear of giving people a lot of discretion,” said Nash, the procurement law expert. “If you’re in a government agency and you’ve got an inspector general and you’ve got congressional oversight … there’s a tendency to be pretty cautious about how you do business.”

That said, “It’s the same oversight you have over any other transaction where you’re giving a company money,” Nash said. “The problem is, if you have a lot of discretion, you take away a lot of the rules, but you still have basic ethics problems. If you gave an OT to your father without telling anybody else about it, you’d have the same ethical violation you’d have with a contract or a grant.”

The other major roadblock is the fear of funding projects that don't pan out, Nash said. “People have a hard time understanding that when you fund research, over half the time you’re funding failure,” Nash said. “You do not get 100 percent payout from research; and you shouldn’t expect it.” If you were to see a 100 percent success rate in funding research, that would just mean you weren't looking far enough into the future. “There’s nothing wrong with failure,” Nash said.

Homeland Security’s Maughan agreed. “We have a lot of successes we can talk about with return on investment, but even the failures” have some return, he said. He cited a program to downsize a Defense Department radar system to fit on smaller drones used by U.S. Customs and Border Protection. The company awarded a contract ultimately failed to produce a working prototype, but everyone involved still consider it a successful venture. The company was able to get funding to move their research forward and CBP learned what is feasible for the size of drones they use. “They were still really happy about being part of the program,” Maughan said. “We helped them move the technology down the roadmap toward a smaller device and that will help them in some of their DOD missions.”

“I think there’s still some return on investment," Maughan added. "Our investment was less than $400,000 with them, so I think it falls into the category of: If you’re going to fail, fail quickly."

Had the office used a traditional contracting method for this project, it likely would have taken six to 12 months just to make an award, let alone discover that the idea would not work. Under the Science and Technology Directorate's OT authority, the time from application to award can be as short as 60 to 90 days.

Broadening OTs beyond research seems to increase their use accordingly. GAO reports that while most agencies do fewer than 75 OT transactions a year, TSA and NASA conducted 640 and 3,220, respectively, in 2014 alone.

Many in government have been reluctant to use their OT authorities precisely because of the lack of regulations governing their use. Since the contracts exist outside of the Federal Acquisition Regulation, they can be written with far less stringent requirements. But that also means there are fewer protections along the way to avoid a catastrophic contracting failure—one that could land a government official in front of a congressional committee.

“Even though it’s not FAR-based, we still have to do procurement documentation, we have to do a source-selection plan that says what are the criteria by which we’re going to evaluate proposals. For the most part, it’s the same as a traditional FAR-based contract, it’s just that the vehicle you’re using is not a FAR-based vehicle,” Maughan said. Despite appearances, “It’s not the wild, wild west,” Maughan added. “You still have to make sure the government is making the decisions on what gets awarded. Even still, we have a contracting officer—who’s called an ‘other transaction authority officer’—so you’re still doing the same kinds of things with the contracting folks as part of the team.”

The company was able to get funding to move their research forward and CBP learned what is feasible for the size of drones they use. “They were still really happy about being part of the program,” Maughan said. “We helped them move the technology down the roadmap toward a smaller device and that will help them in some of their DOD missions.”

“I think there’s still some return on investment," he added. "Our investment was less than $400,000 with them, so I think it falls into the category of: If you’re going to fail, fail quickly."

Had the office used a traditional contracting method for this project, it likely would have taken six to 12 months just to make an award, let alone discover that the idea would not work. Under the Science and Technology Directorate's OT authority, the time from application to award can be as short as 60 to 90 days.

“It’s not a solution for every case,” Maughan said. “It’s not the answer for all things,” he added. “If you’re trying to get startups with new innovation, then an OT might be good for you as an organization. There’s a little bit of risk working with a startup company—if you’re really just looking for a solutions provider and you’re not willing to take some risk, then an OT might not be for you.”

Nash agreed and offered some advice to agencies interested in getting in on OTs. “Let’s say you find a company out there that’s never done business with the government and that has some fascinating technology. You go to them and you say, ‘How could we sponsor you to do this? And we’ll give you all the money.’ Well, they may say, ‘The only way we’ll deal with you is this, this, this and this,’” Nash said. “We’re talking about intellectual property issues; we’re talking about accounting issues. And a normal contracting office might be pretty darn uncomfortable when they hear that because that’s not their norm.”

“You’ve got accounting problems. You want to make sure the company spends the money for what you gave them the money,” which can be particularly difficult, as one advantage of an OT contract is the company does not have to abide by government accounting standards. “But you need to make sure they have some systems.

“You need to worry about intellectual property—who’s going to have rights to it. And that would mean that if they said, ‘We’ll only do it if you take zero rights,’ that would be a problem. You might do it but you certainly would know that that’s a flashpoint that you would worry about. And then, of course, you’ve got to worry about audit rights because the government always wants to be able to audit and the contractor might not want to be audited.
Additional reading for this subject: Acquisition Disruption - Innovative Concepts in Government Contracting
Excerpt:  "This term is not defined by statute or regulation; it is best defined by what it is not. An OTA is not a procurement contract, grant, or cooperative agreement. It is a different type of agreement with the government – one that is not subject to the strict regulatory regimes that characterize other types of contracting." 

In my mind, adherence to principles is absolutely necessary for a successful procurement regime, but principles are not, in themselves, sufficient, any more than rules alone are.  See, The ethics of paper work.