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Wednesday, March 31, 2010

Ghana trains lawmakers and administrators about procurement

District assemblies educated on procurement laws
The Coordinating Director of the Central Regional Coordinating Council, Mr. Kwame Oppong, pointed out that district assemblies in the region were still struggling to fully grasp the requirements of the procurement law

The assemblies were taken through the role of procurement and legal framework, procurement principles, methods and ethics, tender evaluation procedures, and contract management.

The workshop, was jointly organised by the Ministry of Local Government and Rural Development, the Local Service Secretariat, Regional Coordinating Council, and the Public Procurement Authority, to bring sanity into public sector procurement practices in the region, and throughout the country.

The Principal Operations Officer at the Public Procurement Authority, Nana Asiedu Kotwi, added that the workshop would harmonise public procurement processes in the public service. According to him, public procurement accounts for 50% to 70% of the national budget, as well as 14% of the country's Gross Domestic Product (GDP), while it claims 24% of the country's total imports.

He said public procurement would ensure the successful delivery of government policies and public service, reduce corruption, encourage private sector growth and investments, as well as ensure sound public financial management.

Monday, March 29, 2010

Procurement controversies -- NSW, Australia

NSW govt defends Lotteries sale
The 40-year contract has been awarded to Tatts Group, which The Sydney Morning Herald newspaper reported on Tuesday lodged only the third highest bid, leaving rival bidders concerned.

On Tuesday, the Herald reported that original bids came from Tatts Group at $700 million, G-Tech at $730 million and Centrebet at $750 million.

It said Tatts Group then boosted its bid to $850 million in a package to include unclaimed prizes, estimated to be worth some $200 million over the life of the contract, the report said.

However, within hours of the paper's publication, Acting Treasurer John Hatzistergos shot down the report.

"Tatts was the largest bid," Mr Hatzistergos said in a statement.

Mr Hatzistergos denied on Tuesday that Tatts had been given preferential treatment.

"Every shortlisted proponent in the NSW Lotteries transaction process received identical information and bid instructions," his statement said.

"Bidders were also provided an opportunity to bid on any other basis they chose, and all bidders availed themselves of this opportunity."
Auditor to investigate allegations of impropriety in Tatts purchase
Auditor Peter Acherstraat's office has released a statement saying that the deal would be scrutinized, although investigations would "take time" to be completed.

The state appointed investment bank which oversaw the sale process, Goldman Sach's, has been accused of having previous business dealings with Tatts, especially with regards to a merger with Unitab four years ago.

The state opposition in particular has expressed concern over the deal, with shadow treasurer Mike Baird demanding that the state treasurer publicly prove the deal was above-board.

More on this story:

NSW Lotteries sale hits legal snag
A critical, eleventh-hour change to the deal between the State Government and the Tatts Group breaches the legislation that allows the sale.

The Government announced its intention to sell NSW Lotteries last year, but told prospective bidders it would not include unclaimed prizes.

The Acting Treasurer John Hatzistergos says the Tatts Group was the only one which put in what is called a non-conforming bid, offering $850 million if the Government threw in the unclaimed prizes.

That bid was accepted.

The problem is the legislation permitting the sell-off had already gone through Parliament and it says the Government will keep that unclaimed prize money.

But a spokesman for the Treasurer says he has legal advice saying there is discretion in the legislation that would allow it to ignore the breach.

But a rival bidder has legal advice saying that would be against the spirit of the law.

Under US procurement norms, it is improper (illegal) to alter the terms of the solicitation midstream. Any bid (tender) which fails to stick to the terms of the bid is non-responsive, and must be disregarded.

Sunday, March 28, 2010

Procurement controversies -- Ottawa, Canada

Federal agency accused of sole-sourcing contracts
A federal agency that's supposed to ensure government hiring is fair and transparent is being accused of cooking four employment contracts.

The Public Service Commission of Canada issued four sole-source contracts last fall after allowing the favoured candidates to vet their own job descriptions beforehand, says a public watchdog group.

And that amounts to stacking the deck so that any other potential candidates don't stand a chance, charges Canadians for Accountability.

Commission officials "consulted with the designated consultants to tailor the contracts to those individuals," spokesman Michael Dagg wrote last week in a letter of complaint to Treasury Board President Stockwell Day.

But a spokeswoman for the Public Service Commission says no rules were broken.

She called it "common practice" to allow a proposed contractor to see a job description before it's posted to ensure the person meets the minimum requirements.

These so-called Advance Contract Award Notices or ACANs have been a source of aggravation for the business community, which says the notices often provide cover for departments that want to put the fix in for favoured contractors.

A business magazine compared ACANs with a "race where one contestant gets a head start, before the others even know there's a race."

Procurement controversies -- Zambia

The rot in public procurement
PUBLIC procurement is one of the main areas open to abuse and corruption in the country.

It is very clear that people in the public service are not ready to follow procedure and have resorted to shortcuts when it comes to procurement of goods and services. The tender procedures are very clear but in most cases these procedures are ignored with impunity. In other instances, guidelines are followed just for formality because the government already know the company they will award a particular contract.

It is more worrying that the government has actually turned to single sourcing as its preferred mode of procurement in most of these ministries. Deals are being sealed for big projects involving the supply of various goods, services, the construction of infrastructure and many other key works without following proper procedure.

We need to ensure that public service workers adhere to the guidelines set by the Zambia Public Procurement Authority (ZPPA) when contracting suppliers of goods and services. ZPPA cannot just be there to rubberstamp deals that are sealed at midnight by the powerful without their involvement. ZPPA cannot just be there to issue statements at press briefings, endorsing certain transactions even when the people in that institution know deep down in their hearts that they have nothing to do with a particular contract. We have seen this happen and it should not be tolerated.

The corruption in procurement is also disadvantaging other companies, which have the capacity to supply goods and services to the government. We have cases where projects that can be handled by small local companies are given to foreigners at a huge cost while in other cases, big contracts are given to companies or friends of the powerful whose briefcase companies’ capacity to deliver is questionable. You cannot have a country where the preoccupation of those running its institutions is to amass wealth, expect kickbacks, cuts and favours in every transaction.

We will not make any development progress as a country if we do not spend our country’s resources prudently. If the insatiable appetite to seal questionable deals at midnight in exchange for kickbacks, cuts and favours is not addressed, we will continue to lag behind as a country and poverty will continue to ravage our people. No matter how much we publicise the national anti-corruption policy and the implementation plan, corruption will reign if nothing is done to stop it in the various key areas such as procurement. We will continue to talk about unemployment, disease, floods, illiteracy, poor infrastructure, poor healthcare and education services for years to come if Rupiah and his friends do not stop the rot that is going on in procurement.

We know that contracting is the main way in which any government operates and spends public money. We know that these contracts are the vehicles for implementing public policy but these vehicles should not be used to amass wealth at the expense of poor Zambians. The country’s efficiency in delivering services and ensuring development to the people will largely depend on how much we control corruption in procurement and it is possible to do this.

We need to understand that corruption in procurement impedes economic development, affects the efficiency of public spending, creates waste and affects the quality of service provided and ultimately the quality of life.

Developing competitive specifications by Wiki

GSA tries wiki approach to develop RFPs
GSA is asking members of the public to provide advice for features and performance requirements for these applications, as well as other elements of the RFPs. Specifically, GSA is asking for members of the public to point out mistakes and engage in "meaningful technical debate."

Given the endemic problems government has developing good requirements for IT acquisitions, the idea of drawing on the public for suggestions is in principle a great one.

The kind of advice GSA is seeking from the general public is thus the kind of advice the government has solicited from potential bidders for a while. Asking for the advice to put out there for everyone to see, as GSA is doing, actually creates problems when done for potential bidders specifically, because companies are loathe to say anything meaningful for fear of revealing information about their bid strategies to competitors.

This shouldn't be an issue for the general public, but here the issue is how many members of the public -- beyond companies thinking of bidding on the contract, who already get to make suggestions without this new wiki -- are likely to have the knowledge or interest to become engaged in the arcana of requirements for a speific procurement.

Buffalo, NY ordered to repay FEMA for improper emergency procurement

City must pay back $4 million in storm aid
Federal auditors determined that the city didn't comply with procurement standards when contracting for debris removal and other services. Auditors also concluded that the city overspent when it hired companies to remove storm debris.

A 2006 investigation by The Buffalo News several weeks after the storm revealed that Buffalo and Erie County paid top dollar for cleanup, as much as 50 percent to 85 percent higher than some suburban communities.

In Buffalo, city leaders skipped the public bidding process, reasoning that safety concerns took priority. In Erie County, the investigation concluded that the county paid more for debris removal because of its decision to focus on hiring local contractors.

Gillibrand was equally critical of the determination, saying local citizens should not be forced to shoulder the fiscal burden for Buffalo's "efficient" actions after the disaster. "If it weren't for the city's quick response to the Surprise October storm, the toll on its residents and properties could have been much worse," she said. "Local residents should not be left shouldering all of the costs from this storm."

"We did everything by the numbers," the mayor said. "We were one of the communities that most quickly recovered after the storm ... and we had the debris up most quickly."

Saturday, March 27, 2010

Procurement works when politics fail

Aqueduct Casino Deal is Dead
Gov. David A. Paterson’s office announced on Thursday that the company he had chosen to build and run a casino at the Aqueduct racetrack could not pass muster with state licensing officials and would not be awarded the lucrative contract.

The governor’s office said it now wanted to pursue a traditional, though rapid, procurement process, rather than the process that has been underway for eight years, of trying to reach a consensus pick among the leaders of the legislature and the governor.

A senior administration official said the company that had been selected, Aqueduct Entertainment Group, had supplied insufficient financial details for some of its investors. In other cases, the state’s Lottery Division was not comfortable licensing some of the company’s investors. The state had given the company until Tuesday to supply the information.

Barry Berke, a lawyer for Aqueduct Entertainment Group, called the state’s decision “arbitrary and capricious” and suggested the group is considering filing a lawsuit
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Thursday, March 25, 2010

A Procurement Insider's view of Best Practices

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Procurement Often Pits Bureaucracy Against Best Practice By Liza Lowery Massey
Pressure from elected officials and special interest groups, overwhelming workloads, outdated rules and processes, and a lack of support can stymie the best efforts. Despite these issues, because government requires competitive processes that are open to public scrutiny and feedback, it leads to better practices.

Why are public-sector agencies experiencing procurement problems? First, agencies that stray from or fail to follow their own rules and processes can find trouble. This occurs when resources are stretched too thin from staff reductions or increased procurement workloads without increased staffing resources. It also occurs when experienced employees leave and new hires aren't adequately trained.

Some business units handle their own procurement with little or no oversight. The excuse is that a central procurement authority is too slow. Often the real reason is a lack of planning by the business unit or failure to involve central procurement early in the process. The lack of external oversight makes it easier for intentional misconduct to occur and fosters unintentional problems and mistakes.

Familiarity can lead to complacency among co-workers. Recently a government official partially blamed an agency's procurement scandal on employees trusting what other employees told them. External oversight and formal auditing deter inappropriate actions, or at the very least, uncover problems after that fact to prevent them in the future. Auditing, if used effectively, also can lead to process improvements.

The bottom line is government can do procurement better. Following public-sector best practices and using technology make it possible.
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Tuesday, March 23, 2010

Procurement controversies -- Uganda

German firm wins national ID contract
A GERMAN firm yesterday confirmed that it had won the controversial national identification project. The deal comprises the provision of mobile data enrollment systems for the capturing of personal data, the creation of a central population data base as well as the establishment of a personalisation centre for the biometric identity documents

The Government last week signed the contract with the firm at the offices of the Ministry of Internal Affairs.

The German-based company was, however, sourced in contravention of procurement rules, according to sources. Efforts to get a comment from the Public Procurement and Disposal of Public Assets Authority were futile as the board chairman and executive director were said to be out of the country.

“The deal was treated as confidential and documents related to it were sent to the board chairman and executive director,” said a source at the authority.

Minister for Internal Affairs Kirunda Kivejinja, also chairman of the security committee handling the project, declined to give details on the role played by the Government but said the project would soon be implemented.

“There are certain things that I do not have to go to Cabinet and Parliament for,” said Kivejinja, before asking, “Do you think it is such a big deal? If it is your mandate, you implement it.”

Reasoning that the national identification project was a matter of national security, the minister declined to give details on when and how the project would be implemented.

The revelation that the project has been awarded to the German company brought a new twist to the court battle between the Government and the South African data processing company, Face Technologies.

The firm sued the Government for breach of contract, saying it had an existing contract with the Government to implement the national identity project, having emerged winner in the bidding process in 2006.

Though the Government declined to discuss the fate of Face Technologies, it said the country could not be held hostage indefinitely by the court process.

The IGG stopped the procurement process in 2006 and investigations revealed that the process was marred with irregularities.


FOLLOW-UP REPORTAGE:

ID deal not approved, says PPDA

Monday, March 22, 2010

The perils of preference


It is a rare jurisdiction which doesn't have a local preference provision. Such a provision is intended to provide varying degrees of preferential consideration for bidders from the soliciting jurisdiction.


Because procurement law is a specie of government, be it municipal, state, national or whatever, matters of community welfare weigh heavier than they would in a strictly commercial context. Some preference may be justifiable as a means of putting money back to work in the community from which the tax dollars came. That argument is supported by need of government to shore up and expand its tax base.

As with many good ideas, though, it can often be abused or lead to more detriment than benefit. Where particular preference is given to particular interests, for instance, favoritism begins to seep in, which begins to feed on itself and spread corruption of the whole system. It can lead to propping up failing ventures that do not really benefit the community at large; that do not expand the tax base but consign it to old technology or the maintenance of inefficient production or outmoded products.

Moreover, there becomes the question as to just what is a local provider? The world is by an large a much more complex and interconnected economy, and the geographic "home" of enterprise often belies its supply lines and production base. This is true at a legal level as much as at a political or economic level. We aren't in Kansas anymore, Toto.

Finally, there comes the big economic-political issues involving trade subsidy and protectionism. We learned from the world wide Great Depression of the early 20th Century that protectionism can horribly exacerbate the economic downside of the business cycle. However popular it may be with the populace, where a little local preference may be a good thing, we find out too late that a lot of it is not such a good thing.

The recent posturing in the United States and China illustrate the political as well as economic ills when local preference takes on more political importance than economically justified.

“Buy American” Provision in Stimulus Legislation Poses Serious Compliance Challenges for Public Works Contractors and DHS Suppliers
the financial stimulus legislation (American Recovery and Reinvestment Act, or ARRA) passed by Congress late last week contains a strong “Buy American” provision mandating that all iron, steel, and manufactured products used in ARRA-funded public building and works projects be produced in the United States. The ARRA also imposes a sweeping prohibition on the Department of Homeland Security (DHS) that precludes DHS from using any appropriated funds to acquire clothing, individual equipment, and textile products made outside the United States.

he ARRA's Buy American provision, enacted as Section 1605, actually overlays and combines aspects of two existing, oft-confused, and quite different U.S. domestic content laws — the “Buy American Act” and the “Buy America” statute. The first statute, the Buy American Act, enacted in 1933 and since amended, applies only to U.S. government procurements and construction projects — that is, when the federal government directly buys products or itself builds public buildings or works via a procurement covered by the Federal Acquisition Regulation. The second statute, the Buy America law, first enacted in 1964 and amended on numerous occasions since, applies principally to Federal Transit Administration (FTA) grants provided to states and localities.

While both the Buy American Act and the Buy America law require that final products delivered to the government be made domestically, the 1964 Buy America law is much more demanding than the Buy American Act in keys respects — for example, the treatment of manufactured goods and construction materials components, which generally are parts and supplies incorporated directly into the final manufactured product or construction material. Buy America mandates that 100 percent of the components be made in the United States for the final manufactured good or construction material to qualify as U.S.-made. By contrast, the Buy American Act requires only 51 percent of the components of supplies and construction materials be made domestically for the final product to qualify as U.S.-made. In like manner, under Buy America, the cost of domestic materials must be 25 percent more expensive than foreign materials for a cost-based waiver, while under the Buy American Act the cost differential is just six percent (12 percent for a small business.)

ARRA Section 1605 combines the coverage of both the Buy American Act and the Buy America law. Because Section 1605 applies to both federal ARRA-funded public building and works projects, and all state and local ARRA grant-funded public buildings and works projects, and because Section 1605 tracks the statutory language of the Buy America law, it will likely apply that law's more exacting requirements. Thus, federal, state, and local public buildings and works procurements using ARRA funds will likely require a 100-percent U.S. component test, rather than the 51-percent component test, for end products to qualify for U.S.-made status.

Canada–U.S. "Buy American" Agreement
These [ARRA] provisions were a cause of concern to Canadian industry in that they restricted Canadian access to the U.S. procurement market and did so in areas in which Canadian suppliers had traditionally enjoyed access even in the absence of formalized access commitments. As a result, the Canadian government engaged in discussions with the U.S., with the goal of providing to Canadian suppliers an exemption from these restrictions. Those discussions resulted in the [US-Canada] Agreement, which was announced on February 5, 2010.

Buy American’ loophole is big enough for Navistar to drive armored truck through
"Buy American" provisions in procurement laws are so loose that bullets made in China and Israel now are used routinely by U.S. troops fighting in Afghanistan along with hundreds of other foreign-made items, said Sheila Ronis, a director of the National Defense University, an arm of the Pentagon that trains military officers.

Only weeks after landing a $752 million Pentagon order for 1,050 armored trucks, Navistar International will close its massive Indianapolis iron foundry in April, dismiss the final 130 workers, and then most likely buy iron engine parts for the military trucks from a Mexican foundry.

Losing the entire Navistar complex, which employed 2,250 in the foundry and diesel assembly plant next door in 2001, disgruntles workers in Indianapolis. And it hits the pocketbook of taxpayers paying to retrain workers dislocated by foreign trade.

Grass is Really Greener on the Otherside
a new analysis of green energy projects shows 79 percent of stimulus money for wind and solar projects went to overseas companies, according to the Investigative Reporting Workshop. A second study by Bloomberg New Energy Finance shows Chinese corporations taking over the solar panel market, jumping from a 3 percent share in California early in 2007 to 46 percent today.

"The Chinese have such low manufacturing costs, the U.S. may need protections like we have in farming."

Australian company Babcock and Brown received $178 million to install Japanese turbines on a Texas wind farm. French Co. enXco received $69 million to install German turbines on an Indiana wind farm. Eurus Energy from Japan received $91 million to erect its towers in Texas.

No one paid much attention to these American subsidies until the Department of Energy granted $450 million to A-Power of China to install its turbines in Texas.

‘Buy American’ solar rules threaten tit-for-tat
“Buy American” provisions that could be attached to government-funded stimulus projects have foreign solar panel manufacturers scurrying to set up U.S. facilities — and worrying that countries like China might follow suit.

Several Chinese companies with U.S. headquarters in the Bay Area, including Yingli Green Energy Americas and UpSolar, have said they will build manufacturing facilities here in part because of “Buy America” clauses in the American Recovery and Reinvestment Act and in rules that govern other financing programs.

But it’s a potentially treacherous line to toe, said Steve Chadima, a spokesman for San Francisco-based Suntech America.

“There’s the catch 22. It may look like … that will encourage more companies to build more factories in the U.S.,” Chadima said. “But the problem with this whole thing is escalating protectionism. We’re trying hard to work with the Chinese government to not include a ‘Made in China’ clause for Chinese government-funded projects.”

A Made in China clause could threaten U.S. projects like that of Tempe, Ariz.-based First Solar, which has a 50-person office in Oakland.

Report says China is squeezing U.S. firms out of its massive wind-power market
U.S. companies are getting squeezed out of the big Chinese wind-power market even as Dallas investors are bringing Chinese firms here via a big wind farm in Texas, according to a new industry report.

U.S. Trade Representative Ron Kirk won a pledge from the Chinese last fall to drop rules giving preference to Chinese makers of wind-power equipment. But Kirk's office hasn't seen any evidence that the pledge has been carried out, said spokeswoman Carol Guthrie.

Meanwhile, Chinese manufacturers are entering the U.S. wind market under a joint venture led by Dallas investor Cappy McGarr.

McGarr's Chinese partners announced plans last week to build a wind turbine factory in Nevada, and McGarr says most of the jobs for the West Texas project will be American.

"A minimum of 70 percent of each wind turbine in the ... project, including the massive towers and blades, will be wholly manufactured in the United States and made entirely of American steel," McGarr said.

China Rules Hurt U.S. Companies as Google Exit Looms (Update1)
China’s new rules to encourage home-grown technology are eroding sales at U.S. companies and raising concern these losses may multiply, according to an American Chamber of Commerce survey released today in Beijing.

Foreign companies with operations in China are concerned the rules are discriminatory and may extend beyond the 599 billion yuan ($87.8 billion) government-procurement market to orders from state-owned enterprises, which last year had combined revenue of 22.5 trillion yuan. The chamber represents companies including Microsoft Corp., JPMorgan Chase & Co. and United Technologies Corp.

“Many foreign companies are starting to believe that the future China business opportunity is shrinking,” said James McGregor, a senior counselor in Beijing at APCO Worldwide, a public affairs company. “This indigenous innovation policy seems clearly aimed at forcing foreign technology here so that Chinese companies can tweak it and call it their own.”

Sunday, March 21, 2010

Bangladesh procurement reform

Citizen engagement in procurement
The process of public procurement had exclusively been confined to the government procuring entities and the members of the private bidding community like contractors, suppliers and intellectual service providers since the British era.

The scope for public access to such information has not been as wide as of today. And the good intention of the government is reflected in the remarks of the minister in the first meeting of the PPSC that day. He said, "This is a step forward from our traditional age-old practices, often controversial and opaque, and so predicates the necessity of an articulated balance in the short run. It is my view that we must begin and the sooner it is, the better will be for improving governance in public procurement practices in Bangladesh.

Headed by the Minister for Planning, the 27-member PPSC comprises representatives from the business community, private sector, bidding community, civil society, media and academics.

Public procurement is a governance issue. To ensure discipline in the sector, the Public Procurement Act 2006 and the Public Procurement Rules 2008 were made effective since January 31, 2008.

The bidding community, procuring entities and other stakeholders of public procurement are not yet fully equipped with the knowledge and skills of the provisions of PPR. Compliance with any law or rules becomes easier when the concerned stakeholders are aware about the benefits and necessity of abiding by those provisions. Experiences show that the more they are informed and convinced, the more is the compliance level.

Social accountability and citizen engagement in public procurement will benefit all concerned in the process. The procuring entities and the bidders will abide by provisions of the PPR in all their procurement activities, thus ensuring transparency. If transparency is ensured in any process, then there is no difficulty in being accountable.

Before, the Official Secrets Act was in place in Bangladesh. This was often used as an excuse for not disclosing even any harmless but necessary public information. The government has repealed it. A culture of openness in the public service is being established with the disclosure of citizen charters for all government entities. Citizen charters can be made more effective and meaningful and it is expected that in course of time it will be done. Moreover, the good intention of the government to build a digital Bangladesh by 2012 will further remove barriers to the path of disclosing public information and delivering public services.

Thursday, March 18, 2010

US Court of Claims rules HUBZone preference trumps Section 8(a) preference


US federal laws and regulations include various mandated social preference "set asides", intended to extend availability of government purchasing to directed classes of providers.


The so-called Section 8(a) preferences, for instance, are aimed at personal status of the owners, based on various criteria, such as veteran, women and Native American. It is a program operated by the US Small Business Administration under 15 U.S.C. § 637(a).

Another such program operated by SBA, under 15 U.S.C. § 657a. It is aimed at particular geographic locales; it is called the HUBZone preference, for Historically Underutilized Business Zone.

In the contest for preference, it is sometimes argued that one class of preference beneficiary should have priority over another. In this case, Mission Critical Solutions v. US, No. 09-864 C March 2, 2010, the US Court of Claims held that a HUBZone preference takes priority over a Section 8(a) Veteran preference, with possible implications for other 8(a) preference groups.

This is important for Guam businesses seeking federal contracts because the whole of Guam has been identified as a HUBZone.

An easily read description of the implications and circumstances of this case is here:
HUBZone Firms Take Top Priority For Small Business Set-Asides .

An extracted abstract of this case, set in the context of other decisions concerning the particular preference provisions involved in this case is here.

The Court of Claims decision is here: Mission Critical Solutions v. US.
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Another reason for competition


Encouraging competition amongst supply and service providers is at the core of most procurement regimes around the world. The usual justification for that is to assist the government to get the lowest price it can. It is a cornerstone of traditional economics that open competition tends to bring prices down for the consumer towards the level of cost of production.


Many of the strictures of procurement regimes, including fair procurement processes, are intended to encourage competition, apart from any notions of due process rights, because businesses tend to be deterred from competing in rigged contests.

The US Department of Defense recently issued an Interim Rule which notes an additional reason to insist on competition: it tends to encourage best performance by the contractors.

The new rule is made to implement the Weapon Systems Acquisition Reform Act of 2009, Section 202, Acquisition Strategies to Ensure Competition throughout the Lifecycle of Major Defense Acquisition Programs.

Its DFARS Case 2009-D014 states the rule is being adopted in part,
to ensure that the acquisition strategy for each MDAP includes: (1) Measures to
ensure competition at both the prime contract and subcontract level of
the MDAP throughout its life cycle as a means to improve contractor performance

The Interim Rule goes beyond that, specifying other requirements and measures intended to enhance competition amongst bidders for DOD weapons systems work.

More on that here: Interim Rule to Increase Competition in Major Defense Acquisition Programs and Impact DoD Acquisition Strategies for Technical Data Packages

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Wednesday, March 17, 2010

Peering through the fog of war and procurement protests

Fog of war no reason to skirt contracting rules
The Army issued the task order solicitations under multiple-award indefinite-delivery/indefinite-quantity (IDIQ) contracts. However, DynCorp argued, and GAO agreed, the orders were outside of the scope of the IDIQ contract’s counter-narcoterrorism-related work.

“We recognize the Army’s position that it needs to swiftly award a contract for these services,” said Ralph White, GAO’s acting managing associate general counsel for procurement law. However the existing IDIQ contracts were limited to providing counter-narcoterrorism support services worldwide.

Alan Chvotkin, executive vice president and counsel for the Professional Services Council, said GAO’s decision tells agencies they must adhere to the rules of contracting over their desire for expediency.

“The decision is a clear statement from GAO that, notwithstanding important national and international priorities, the contracting rules still matter,” Chvotkin said.

In the Matter of: DynCorp International LLC, B-402349 March 15, 2010
The scope of work for the ID/IQ contracts was limited to providing the "necessary goods and services required by the [Counter Narcoterrorism Technology Program Office] to support the counter-narcoterrorism mission" of the above listed agencies, nations, and authorities in three "program performance areas": technology development and application; training, operations, and logistics support; and program and executive support.

The performance work statement indicated that although these services would be provided worldwide, the current "primary countries of interest" were Colombia and Afghanistan.

With regard to training and security services specifically, the performance work statement stated that the services would be "in support of counter-narcoterrorism missions and objectives."

The sample task orders were to: (1) develop high resolution short-wave infrared cameras for surveillance and reconnaissance aircraft; (2) provide intelligence surveillance and reconnaissance support in the Trans-Sahara region of Africa; and (3) train Afghan Border Police to perform functions necessary to deny the flow of illegal persons, drugs, and weapons across borders.

The first of the two task order requests at issue here seeks mentoring and training services for the Afghan Ministry of the Interior and Afghan National Police. The remaining mentors support Ministry of Interior operations or law enforcement activities generally.

Notably, none of the descriptions of the mentoring and training tasks describe or mention responsibilities directly related to counter-narcoterrorism.

The second of the two task order requests at issue here seeks facility maintenance and logistics support .

DynCorp, which does not hold an ID/IQ contract with the Counter Narcoterrorism Technology Program Office, protests that [the task orders] are outside the scope of the underlying ID/IQ contracts because the requested services are unrelated to counter-narcoterrorism. The Army asserts that the ID/IQ contracts are written broadly so as to include the services requested here.

our Office is authorized to hear protests of task orders that are issued under multiple-award contracts where the protester asserts that the task order increases the scope, period, or maximum value of the contract under which the order is issued.

Task orders that are outside the scope of the underlying multiple-award contract are subject to the statutory requirement for full and open competition, absent a valid determination that the work is appropriate for procurement on a sole-source basis

The analysis of whether a task order is outside the scope of a multiple-award contract is the same as the analysis of whether a contract modification is outside the scope of a single-award contract.

In addition, the law in this area is well-settled. In determining whether a task order is beyond the scope of the contract, GAO and the courts look to whether there is a material difference between the task order and that contract.

Evidence of such a material difference is found by reviewing the circumstances attending the procurement that was conducted; examining any changes in the type of work, performance period, and costs between the contract as awarded and as modified by the task order; and considering whether the original contract solicitation adequately advised offerors of the potential for the type of task order issued.

The overall inquiry is whether the task order is of a nature that potential offerors would reasonably have anticipated.

DynCorp argues that the services requested by the TORPs at issue here are outside the scope of the underlying ID/IQ contracts, because the requested services are broader than and only indirectly related to the underlying contracts' counter-narcoterrorism efforts. In DynCorp's view, these TORPs involve support services for counter-insurgency and other efforts unrelated to counter-narcoterrorism

The Army admits that the Ministry of the Interior and Afghan National Police are primarily involved in counter-insurgency activities. However, according to the Army, there is a "nexus" between these counter-insurgency activities and counter-narcoterrorism "because in Afghanistan the insurgency is funded by drug trafficking" and therefore "any organization or ministry conducting counter[-] insurgency operations in Afghanistan necessarily is involved in countering illegal drug trafficking."

Based on our review of the record, we find that the underlying ID/IQ contracts do not contemplate providing the services requested by the TORPs here. Although the ID/IQ contracts were broadly written and included some training and logistics support, these contracts made clear that the activities had to be related to counter‑narcoterrorism operations.

The fact that there may be some small overlap in the services requested by the TORPs with those required under the ID/IQ contracts does not permit an agency to purchase other services under the ID/IQ contracts that were not reasonably contemplated when the ID/IQ contracts were issued.

Although the agency argues that the services sought by the TORPs are within the scope of the underlying ID/IQ contracts because the insurgency in Afghanistan is funded, at least in part, by money from drug trafficking, AR 34-38, our analysis is necessarily focused on the contract vehicles at issue here--i.e., the underlying ID/IQ contracts and the two TORPs for task orders the agency seeks to place against them. As noted above, the ID/IQ contracts do not include counter-insurgency activities and did not advise offerors that mentoring, training, facilities, and logistics support for counter-insurgency, general law enforcement, or the administration of the Ministry of the Interior or the Afghan National Police unrelated to counter-narcoterrorism operations could be provided. Instead, as discussed above, the ID/IQ contracts limited the training and support to activities that supported counter-narcoterrorism operations.

Finally, we find unpersuasive the agency's reliance on general statements in the TORPs and ID/IQ contracts to show that the TORPs are within the scope of the ID/IQ contracts. For example, we note that the "mission objective" for each of the TORPs generally states that the services sought "support the Warfighter in globally combating Narcoterrorism." We also acknowledge the presence of general statements in the ID/IQ contracts that indicate that the Counter Narcoterrorism Technology Program Office will acquire goods and services "that cross traditional Department of Defense acquisition and contracting scopes," cover a "full spectrum of support," and include "[s]upport for training, operations, and logistic[s] for military and civilian missions."

However, these statements must be read in the context of the solicitations as a whole. As noted above, the underlying ID/IQ contracts make clear that the services involved were to be provided in connection with counter-narcoterrorism operations, while the TORPs sought services that were much broader than counter-narcoterrorism and, therefore, are outside the scope of the ID/IQ contracts.

A contracting agency cannot extract isolated "catch all" words and phrases from a contract, or stretch the flexibility of that contract, in order to justify issuing a task order whose nature would not reasonably have been anticipated by potential offerors; to countenance such a justification would eviscerate the requirements of CICA.

Tuesday, March 16, 2010

Procurement controversies -- Chicago, Ill.,

City probes big no-bid deal
$26 MIL. | Firm tied to ex-official got contract extension
The Daley administration is conducting an internal investigation to determine why a technology consulting firm that employs a former city budget director got a $26 million contract expansion from the Health Department without competitive bidding or sign-off from the Sole Source Advisory Board.

The $26 million expansion was the second modification of EKI’s no-bid contract. An increase of that magnitude should have sparked a new round of competition. At the very least, it should have been authorized by the Sole Source Advisory Board.

As for the $26 million expansion of EKI’s contract, Johnson said, “As far as I know, it was within the authority of the chief procurement officer to do that. He looked at it. He talked it over with the Health Department and that’s what they decided to do.”

Wednesday, March 10, 2010

Procurement controversies -- Czech Republic

Czech-American Business Body Seeks Tender Rule Change
PRAGUE (Dow Jones)--The American Chamber of Commerce in the Czech Republic, known as AmCham, Wednesday invited peers from other countries to join forces and push for revisions of government public tender regulations in order to stem alleged corruption.

According to recent research by the Association of Small and Medium-sized Enterprises and Crafts in the Czech Republic, known as AMSP, bribes account for 15% of the value of public contracts, including procurement and construction, awarded by local government offices.

Last year, Czech local and national governments awarded contracts and procurement deals worth over 200 billion koruna ($10.6 billion), AMSP said.

AMSP also said kickbacks account for less than 9% for contracts in the Czech private sector, although the union has no data on the overall volume of contracts tendered by nongovernment-affiliated companies.

A key element of AmCham's proposed changes would require companies to fully disclose their ownership structure to be allowed to bid for procurement or other contracts. At present closely-held companies with opaque ownership structures in the form of bearer, or anonymously-held, shares are allowed to bid in government tenders.

Soucek went on to say local government committee meetings held to pick public tender winners should be made public. Generally these meetings are held behind closed doors.

"The opening of envelopes with individual bids should be made transparent," she said.

Public tender committees should also follow standardized, clearer rules for the wording of tenders, she said. Often bidders are disqualified on the basis of formal mistakes in the wording of their bids, Soucek said.

Procurement controversies -- Pakistan

Audit finds financial irregularities in ERRA
ISLAMABAD: ERRA is full of financial irregularities with no following of PPRA rules in procurement and there are also irregular payments to some of the favourite parties, reveals the audit report of the Authority available with The News on Wednesday.

An amount of Rs1.46 billion has been observed under the head of irregular expenditure and payments while scrutinizing the accounts of the Earthquake Reconstruction & Rehabilitation Authority (ERRA) where it failed to comply with observations of the audit.

Procurement controversies -- South Africa

Tender fraud frequent - PSC
Corruption frequently occurs at the quotation stages for contracts under the R200 000 threshold [appx. USD 27,000], a Public Service Commission (PSC) presentation to the National Assembly's public service and administration committee showed on Wednesday.

The invitation for quotations, the required number of quotations obtained, and the evaluation of quotations received often do not comply with procurement rules.

he PSC found no quotations were obtained before orders were placed with service providers in 29% of all transactions evaluated.

In 45% of all transactions the required number of quotations was not called for, and in 46% of transactions the quotations were not evaluated as required by procurement rules.

The rate of compliance with procurement rules relating to the invitation of quotations in four provinces, including national departments, was below the average rate of 71%.

"However, these figures are most likely worse, as not all departments at both national and provincial level submitted the requested information," Dreyer said.

Monday, March 8, 2010

Procurement controversies -- Colorado, USA

Protest postpones award of bid for Glenwood Springs wastewater plant
An Aurora-based manufacturing company of water and wastewater equipment is questioning the validity of the bid process regarding the equipment to be used in the Glenwood Springs Wastewater Treatment Plant.

Kristy Schloss, president of Schloss Engineered Equipment Inc., told Glenwood City Councilors Thursday that she and her attorney believe that a sole-source provision included in the bid document specifying the equipment to be installed in the facility excludes a competitive bid process.

However, according to City Engineer Mike McDill, substitutions could be made if equipment specifications matched the city's request. “If a contractor wants to use another equipment manufacturer, that [meets] the specifications the city requests, the city would be willing to do that,” McDill said.

McDill said, the bid process does not exclude competitive bidding because the bid document specifies Vulcan or an “approved equivalent” that fits the project's design and process. where a facility is built around specific equipment, it's common to include a sole-source provision for that specific portion of the contract.

“You have to design the spaces around the specific dimensions of equipment,” McDill said. “And the process rate of the equipment has to closely match the rate of other equipment. They have to work together.”

COMMENT:

A primary principle of procurement is to promote competition. Specifications should not normally be drafted to favor one proprietary product.

Where specifications are written to describe a particular brand name "or equivalent", under Guam's version of the Model Procurement Code, the specifications must also identify at least three alternate brand name products which would satisfy the minimum needs.

Under that rule, if the Authority considered the protestor's product to be equivalent it should have said so. Failure to make that clear seems, in the facts of this case as recited in the article, to have significantly prejudiced the bidder in the eyes of some of the project contractors. The article noted " the majority of bidding contractors refused to review her company's bid, or list Schloss Engineered Equipment as a valued engineer substitution". And it's hard to blame the contracts, who could reasonably be expected to try to stick to products stated to be suited to the specifications; only one of five such contractors was willing to take the chance.

This case is excellent for pointing to the tensions arising in this circumstance, and it is often won on how the issue is framed. Here, the Authority has framed the issue as requiring a selective piece of equipment to fit within a broader project. It might alternatively be asked whether cost considerations favor altering the broader project if the cost savings in allowing alternate equipment is greater.

Those are factual issues, but whether that analysis was done or even considered weighs on the legal duty of the authority to maximize its purchasing value in a given instance while balancing that against the duty to promote broad-based competition for longer term savings.

There is a technical, procedural issue in this case, also. The protestor was not a bidder on the project. The bidders were contractors, and the protestor was a potential supplier for those contractors. In some jurisdictions, the protestor's interests may be considered too remote to constitute standing to bring a protest.


POST SCRIPT:


Glenwood Springs City Council OKs contract for wastewater plant
City Council unanimously approved the award of the wastewater treatment plant bid Thursday night at its regular scheduled meeting.

Council awarded the contract to Salida-based Moltz Construction at a low bid of $22.3 million.

Council postponed award of the bid twice, once in December after federal legislation required the bid to include a Davis-Bacon prevailing wage requirement after it had already been bid out.

Council then postponed the award again at its March 4 meeting, after a second round of bids had been returned by five of the six previous contractors, due to a protest from an Aurora-based water and wastewater equipment manufacturer questioning the validity of the bid process.

Out of the five bids that were returned, three slightly increased from the original bids, and two came back lower than the original bids. Moltz's second bid was $1.5 million lower than its original bid.

The numbers were a welcomed surprise since the Davis-Bacon requirement was estimated to increase the price of the contract.


COMMENT:

The complaint is often made that protests should be eliminated because the increased time and inconvenience adds unnecessary cost to the system.

Here it can be seen that an effective protest resolution process enhances open competition and can thereby result in lower bid prices.

10 year acquisition program may be nearing end

Northrop halts pursuit of tanker contract
The government has been trying for years to award a contract to replace the Air Force's aging fleet of planes used for refueling military aircraft midflight, but the effort to build 179 new tankers has been marred by controversy.

Northrop said that the government's requirements did not recognize the value of the larger refueling platform it had proposed and instead favored Boeing's proposal to build a smaller tanker using a prototype of its 767 aircraft.

Wes Bush, chief executive of Los Angeles-based Northrop, said that under those conditions, it no longer made financial sense to stay in the competition.

Northrop team threatened in December that it would walk away unless the Air Force changed its proposal. Northrop said the Air Force's requirements favored Boeing's smaller 767 plane, instead of its larger Airbus A330.

Northrop executives and defense industry analysts have questioned how profitable the tanker contract would be, given the Pentagon's push for setting a fixed price for the contract before design and testing of the aircraft are completed.

"The lesson is, if you push contractors too far they'll lose interest," said Loren Thompson, a defense industry consultant at the Lexington Institute.

Sen. Richard C. Shelby (R-Ala.), in whose state Northrop had planned to build an assembly plant for the tanker if it won the contract, said the Air Force "had a chance to deliver the most capable tanker possible to our war fighters and blew it."

He said that the "so-called competition" was "structured to produce the best outcome for Boeing" and that the Air Force's "refusal to make substantive changes to level the playing field shows that once again politics trumps the needs of our military."


The Buy Boeing Provision
Maybe one of these decades the U.S. Air Force will get to replace its Eisenhower-era fleet of aerial-refueling tankers with planes built after their pilots were born. Until then, the Pentagon's so-called highest priority procurement program can stand as a monument to the dysfunctional politics that drive America's military purchases.

Two years ago, Northrop won the contract in a competitive auction, in an upset over Boeing. Its bid came with a politically toxic catch: The Los Angeles-based company had joined with European Aeronautic Defense & Space Co. to build the planes.

EADS owns Airbus and its major shareholders are Daimler AG and the French, Spanish and Russian governments. Outraged Congresspersons from the Great State of Boeing—er, Washington—cloaked themselves in the American flag as cover for their pork-barreling.

Boeing lodged a protest with the Government Accountability Office, Congress's investigative arm, which soon found the Air Force had made miscalculations in awarding the contract to Northrop and EADS. The Pentagon promised to review the same offers again. But Boeing threatened to pull out and leave the field to Northrop. That was a no-no in an election year. So the Pentagon scrapped that auction and started anew this year. Northrop says the revised specifications insure that Boeing's smaller, cheaper modified 767 aircraft will win.

The protectionist-patriotic claims made on Boeing's behalf have left a bad aftertaste. As a matter of law, Pentagon rules explicitly prohibit the department from considering the impact on domestic jobs of a procurement decision and state that companies from some countries, such as EADS's home bases of France and Germany, are to compete on equal footing with the U.S. That's intended to ensure that U.S. forces get the best possible weapons based on price and quality. After this debacle, every bidder will know those rules can be violated with enough political pressure.

Procurement controversies -- Montgomery County, Maryland USA

Report on Md. police tuition aid cites poor oversight, abuse
Montgomery County awarded more than $600,000 in no-bid payments to nine companies that had ties to county police officers and were part of a controversial tuition-assistance program, Montgomery's inspector general said in a report released Monday.

The government provided little oversight for the program and in many cases appeared to have responded to invoices from the companies simply by cutting checks

Inspector General Thomas J. Dagley concluded that the close ties among the companies, employees and students enrolled in the classes have "and will continue to expose county taxpayer dollars to waste and abuse until more comprehensive guidelines and monitoring are put in place."

Montgomery County Council members criticized the way in which government administrators ran the program. "The executive branch just kind of puts these programs on autopilot and hopes everything will work out because the intentions are good," said Council member Michael Knapp (D-Upcounty).

"There is nobody over there minding the store," said Council member Valerie Ervin (D-Silver Spring).

County government departments and its Ethics Commission have not taken action sufficient to ensure that employees and training companies are in compliance with ethics, personnel and procurement regulations.

In response to the report, the county said Dagley violated county law by releasing a copy of the report to council members before the administration had submitted its response. "Not only does your early release of the report indicate a common lack of courtesy," wrote Chief Administrative Officer Timothy Firestine, "it is inconsistent with the law under which you operate."

Sunday, March 7, 2010

Procurement controversies -- Northern Ireland

‘Serious’ breaches of rules uncovered by probe into Northern Ireland Water contracts
Public sector bodies are expected to invite rival bids to ensure value for money. High-level approval is required if competitive tendering processes are not being followed.

The report has listed repeated cases where single tender contracts were awarded by NIW, without the authorisation of its board or the department.

It has centred on the awarding of contracts through “single tender actions” — where other potential suppliers have not been given the opportunity to compete for work.

The independent investigation team concluded the practices involved “a serious failure in procurement governance surrounding public funds”.
Read more.

Friday, March 5, 2010

US Federal agency failed to document non-competitive awards

DHS awarded noncompetitive contracts without having adequate records, IG says
The records for the majority of some Homeland Security Department’s noncompetitive contracts are either missing or inadequate, according to a new report from DHS Inspector General Richard Skinner.

The IG reviewed 39 DHS contract files valued at $196 million for fiscal 2009. Of those, 33 contract files, or 85 percent, lacked full documentation, said the report issued March 4.

“Acquisition personnel did not always follow regulations, policies, or procedures to support awarding the contracts through other than full and open competition,” Skinner wrote. “As a result, the department cannot ensure that it received the best possible value on the goods and services it acquired from these contracts.”

Under the Federal Acquisition Regulation, an agency contracting officer must provide a written justification when contracts of a certain size are awarded without full and open competition. The justification must have documentation of approvals and a certification that the information is complete and accurate.

Federal acquisition rules also require that agencies conduct market research for all procurements. Deficiencies were found with the market research for 31 of the 39 contracts reviewed.

The full report is here. It notes,
The Competition in Contracting Act of 1984 requires, with limited exceptions, that contracting officers promote and provide for full and open competition in soliciting offers and awarding United States government contracts.

Competition is desirable because it can result in timely delivery of quality products and services at reasonable costs. It encourages contractors to offer best value proposals for meeting mission needs and requirements when bidding on federal contracts, thereby reducing costs and protecting the interest of taxpayers.

Competition also discourages favoritism by leveling the playing field for contract competitors and curtailing opportunities for fraud and abuse.

Contract specialists are required to perform certain steps during the other than full and open contracting process.

The other than full and open competition process begins when a need is identified.

Afterwards, market research is performed to determine the most suitable approach for acquiring, distributing, and managing supplies and services to support the department’s mission. Acquisition planning helps ensure that the government is meeting its needs in the most effective, economical, and timely manner.

With this assurance, acquisition personnel announce a solicitation on FedBizOpps, the single, government-wide point of entry for federal procurement opportunities greater than $25,000.

Within 14 days of posting the solicitation, acquisition personnel award the contract and publish the justification and approval document on FedBizOpps, ending the contracting process.

The FAR requires that any agency contracting officer who approves the acquisition of goods or services through other than full and open competitions provides written justification. The justification must have the proper approvals from the appropriate authority based on an established dollar threshold.

For procurements that require written justification, the contracting officer must sign to certify that the information is complete and accurate.

Of the 39 noncompetitive procurements from fiscal year 2009 that we reviewed, 18 or 46% did not require written justification for the decision to award non-competitively because components awarded them under the Small Business Administration 8(a) sole source program exception.

However, FAR part 10 requires that agencies conduct market research for all procurements. Specifically, it requires that agencies perform research to identify the capabilities of small businesses that are available in the marketplace for meeting the requirements of the agency. It further states that agencies shall use this market research to determine whether sources capable of satisfying the agency’s requirements exist.

Based on our review of the contract files, 14, or 78% of the 18 small business 8(a) sole source procurement files lacked any evidence that procurement personnel conducted market research.

This documentation shows that procurement personnel did not consider any other small businesses under the 8(a) program for the procurements.
The Small Business Administration has a partnership agreement with the DHS where it delegates certain contract execution functions for sole source procurements under FAR part 19. This partnership agreement does not exempt procurement personnel from performing market research as required by FAR part 10.

FAR § 10.001 requires agencies to conduct market research before (1) developing new requirements documents for an acquisition, and (2) soliciting offers for an acquisition that exceeds $100,000, or is less than $100,000 when adequate information is not available and circumstances justify the cost, or could lead to a bundled contract. Market research should be conducted to ensure that the government is procuring goods and services at reasonable costs, regardless of the status of competition.

The FAR provides limited guidance on the extent of market research that agencies must conduct and document with procurements. This guidance required agencies to conduct market research, but did not require them to validate supporting documentation or assign responsibility to specific personnel. This allows personnel to apply market research requirements inconsistently.

DHS updated its Homeland Security Acquisition Manual in October 2009 to include a Market Research Guide in Appendix I.

The Market Research Guide emphasizes for DHS components that a market research plan is essential to ensure that the research conducted is adequate and appropriate to the requirement. The guide goes further to state that the market research plan should document the overall research techniques the acquisition team will employ, information sources to be used, responsibilities of the team members, decision points in the process, and the timeframe for each task. The guide also provides attachments that list specific resources for market research, rules for meeting with industry representatives, guidelines for one-on-one discussions, and a market research report template.

The DHS components we reviewed either did not prepare or could not provide the acquisition planning documentation required for some procurements awarded in fiscal year 2009. According to FAR §2.101, acquisition planning is the process by which the efforts of all personnel responsible for an acquisition are coordinated and integrated into a comprehensive plan for fulfilling an agency’s needs in a timely manner and at a reasonable cost. It entails developing the overall strategy for managing an acquisition. FAR § 7.102 requires that agencies perform acquisition planning and market research

The Advance Acquisition Plan (AAP) is a DHS plan of all anticipated procurements, including interagency agreements, blanket purchase agreements, and task orders greater than $100,000 for the upcoming fiscal year.

AAPs contain the integrated and coordinated efforts of all relevant acquisition personnel in determining acquisition requirements, financing, strategic planning, small business considerations, technical data requirements, contracting, and contract administration. Of the 39 noncompetitive procurements in our sample, 34 or 87% required an AAP. However, 18 or 53% of the 34 procurements, with a value of $46,618,206, either did not have an AAP, referenced the incorrect AAP number, did not have a printout in the contract file, or component personnel could not provide the AAP numbers

Without the AAP, supporting documentation is limited to confirm whether personnel adequately performed advanced acquisition planning. The department needs to place greater emphasis on better planning and documenting its acquisitions and decisions making processes. Making sure each component’s acquisition decisions are well documented, integrated, and coordinated in determining requirements, financing, strategic planning, small business considerations, technical data requirements, contracting, and contract administration, will assist the department in this effort, as well as in ensuring that the goods and services acquired are the best value.

Thursday, March 4, 2010

Woman-owned set aside for US federal contracts

Defense procurement case cited in delay of women's contracting program (January 2009)
The Small Business Administration has become one of the first agencies to explore whether a recent court ruling striking down the legality of the Defense Department's small disadvantaged business program has broader ramifications.

agency officials were assessing the November U.S. Court of Appeals for the Federal Circuit's Rothe Development Corp. v. Department of Defense decision and its potential relevance to the women's program.

"The Rothe decision, issued on Nov. 4, 2008, addressed the standards necessary to support the constitutional validity of certain contracting preference programs."

The Rothe case specifically dealt with Defense's small disadvantaged business program, which allowed for price adjustments to achieve the goal of awarding 5 percent of the department's contracting dollars to small businesses owned by certain minority groups.

Legal experts disagree on the potential significance Rothe could have for other preference programs, particularly those that are not race-based. In the past, the Supreme Court has applied different levels of legal scrutiny to affirmative action programs that are race-based than to those that are gender-based. But that doesn't mean the ruling won't set a broader precedent.

Administration takes first crack at controversial women's procurement program (March 2010)
The Obama administration has stepped in to address a controversial women's procurement program that was mired in rule-making and lawsuits during much of the Bush era.

The Small Business Administration on Tuesday released a proposed rule identifying 83 industries in which women-owned small businesses are underrepresented, a substantial departure from a 2008 proposal that identified only four such industries.

The 2008 rule set off a firestorm of complaints from lawmakers and women's advocates, who accused SBA of choosing the narrowest methodology for determining underrepresentation.

Procurement controversies -- Iowa, USA

USDA says food buyer for schools broke rules
The U.S. Department of Agriculture cites significant violations of regulations designed to protect taxpayers' money.

In addition, an Iowa food broker claims in a lawsuit that it has been unfairly squeezed out of the state's school lunch business.

An obscure corporation that helps buy millions of dollars' worth of food for Iowa's school lunch program has allegedly violated federal purchasing regulations and steered public money to a company with close ties to the group's top executive.

The private corporation, the Iowa Educators Consortium, was formed by the state's publicly funded Area Education Agencies to purchase supplies such as paper, furniture and food for schools.

The consortium buys food for 375 school districts in four states. In theory, its buying power enables it to negotiate a better price on the food consumed by students in those districts.

USDA officials told the Department of Education in December that there were "serious questions" about the consortium's status as a purchasing cooperative and "significant instances" of a failure to conform to purchasing regulations.

Specifically, the USDA said the consortium's contract with one unspecified food vendor allowed Iowa schools to skirt competitive bidding requirements.

The USDA also alleged that the consortium committed a "clear violation" of purchasing regulations by arranging for the schools to pay fees to the vendor that are based on a percentage the cost of the food they buy.

The article notes the allegations have been denied.

Procurement controversies -- New Jersey, US

State comptroller recommendations aimed at reducing government contract fraud
State Comptroller Matthew Boxer said ineffective rules and procedures related to government contract awards provide “ample opportunity to exercise favoritism or violate the law in awarding such contracts.”

“We’ve seen a litany of criminal convictions in New Jersey for unlawfully steering contracts for everything from audit services to insurance services to building inspection services,” Boxer said. “The public is tired of it.

The comptroller’s office is recommending that:

— Contracts should be awarded based on predetermined, merit-based criteria made known to vendors before proposals are submitted.

— Proposals should be judged by a qualified evaluation committee.

— The pool of contractors solicited should be as expansive as possible.

— Statements of work should be drafted in clear and unambiguous terms.

— Contracts should be awarded following a documented scoring process.

Tuesday, March 2, 2010

Procurement controversies -- Tonga

Major weaknesses in Tonga's procurement system
Large-scale procurements are signed with little public or internal oversight, which has been consistently reinforced by the Commission's findings. While procurement committee decisions are overseen by Parliament, the government has rarely made an effort to publicize the results of major government purchases meaning that those outside of government have little opportunity to monitor government procurements.

... the truth is that oversight was remiss due to a lack of clear reporting requirements for procurement decisions both within government and to the public.

While the choices and actions of individual procurement officials undoubtedly played a role in the purchase of a boat unfit for the seas, this tragedy cannot be blamed solely on poor decision-making of a few individuals. The porous legal and regulatory framework is the real culprit. Until Tonga's procurement systems are reformed to establish a clear reporting structure and to require the public announcement of decisions, it is only a matter of time until the next tragedy occurs.