Labels and Tags

Accountability (71) Adequate documentation (7) ADR in procurement (4) Allocation of risks (6) 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 (14) Clarifications vs Discussions (1) Competence (9) Competition vs Efficiency (29) Competitive position (3) Compliance (35) Conflict of interest (32) Contract administration (26) Contract disputes (4) Contract extension or modification (9) Contract formation (1) Contract interpretation (1) Contract terms (3) Contract types (6) Contract vs solicitation dispute (2) Contractor responsibility (20) Conviction (4) Cooperative purchasing (3) Corrective action (1) Cost and pricing (13) Debarment (4) Determinations (8) Determining responsibility (37) Disclosure requirements (7) Discussions during solicitation (10) Disposal of surplus property (3) Effective enforcement requirement (35) Effective procurement management (5) 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 (12) Governmental functions (27) Guam (14) Guam procurement law (12) Improper influence (11) Incumbency (13) Integrity of system (31) 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 (33) Mistakes (4) Models of Procurement (1) Needs assessment (11) No harm no foul? (8) Offer & acceptance (1) Other procurement links (14) Outsourcing (34) Past performance (12) Planning policy (34) Politics of procurement (52) PPPs (6) Prequalification (1) Principle of competition (95) Principles of procurement (25) Private vs public contract (17) Procurement authority (5) Procurement controversies series (79) Procurement ethics (19) Procurement fraud (31) Procurement lifecycle (9) Procurement philosophy (17) Procurement procedures (30) Procurement reform (63) 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 (11) Recusal (1) Remedies (17) Requirement for new procurement (4) Resolution of protests (4) Responsiveness (14) Restrictive specifications (5) Review procedures (13) RFQ vs RFP (1) Scope of contract (16) Settlement (2) Social preference provisions (60) Sole source (48) Sovereign immunity (3) Staffing (8) Standard commercial products (3) 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 (23) Trade agreements vs procurement (1) Training (33) Transparency (63) Uniformity (6) Unsolicited proposals (3)

Sunday, February 20, 2011

The uneasy fit of wage determination standards in the procurement process

The Guam Public Auditor issued a Decision recently (actually two decisions, but in parallel cases), once again wading into the thicket the legislature created when it tried to bolt on a labor law regulation to the procurement law, without proper appreciation of the limits and language of procurement law.

In this case, the legislature desired to ensure labor wage rates are paid on government contracts by putting some onus on the procurement system to do something about it. That something is not much, when analyzed, as the Public Auditor rightly did.

First, there is the labor issue. Consistent with certain Federal law, Guam law requires, in some instances, that wages be paid according to a scale determined from time to time by the Department of Labor. That is a labor law that the DOL is meant to police.

The procurement problem arises because the legislature seems to have found that the DOL was not entirely effective in enforcing the labor laws, so decided to place some of that onus on the procurement contracting process. In the Wage and Hour Determination Article 13 of the Procurement Act, the law requires: “In such cases where the government of Guam enters into contractual arrangements ... for the provision of a service to the government of Guam, ... then the contractor shall pay such employee(s)”, the required wage rates. (5 GCA § 5801.)

Having clearly made this a “contracting” issue, the legislature muddied the water by adding: “The Chief Procurement Officer shall require bidders to submit declarations ... to demonstrate their compliance with [§ 5801], if applicable”. (5 GCA § 5805.)

It has to be appreciated that bidders are not contractors. The obligation of Article 13 to pay wage rates is on contractors. Bidders should not be made to submit any declarations that they comply with Article 13 because they cannot: they are not contractors.

The simple way to read § 5805 us to say that bidders might have had to submit the declaration to demonstrate compliance, but they don’t have to because Article 13 is not applicable to them; by its own terms, § 5805 only applies to bidders if § 5801 applies, and it does not. Bidding is not one of those "cases where the government of Guam enters into contractual arrangements". Bidding precedes those arrangements.

The Public Auditor’s decision did not take that simplistic route, however. Her route was through jurisdiction. She rightly pointed out that enforcement of payment of the wage rate was the responsibility of the DOL (5 GCA § 5803). She concluded, her jurisdiction, regardless whether Article 13 applies to bidders, does not extend to enforcing the payment of wage rates, so she washed her hands of further consideration of that matter.

But the story does not end there.

Not content with Article 13, the legislature also meddled with the procurement process to require that IFBs contain “a recitation of the Wage Determination most recently issued ... including a demonstration of compliance with [Article 13], if applicable.”

In this case, the government did not put the most recent determination in the IFB, but did require the bidders to put a wage determination schedule in with their bids. It turns out, each of the three bidders submitted a different schedule, and that the lowest bid was traceable to the use of a wage determination schedule that was lower then the others.

The Public Auditor ruled that the failure of the government to specify “the most recent” wage determination resulted in the bidders basing their bids on differing criteria. The Decision held this defect in the bid specifications violated the rule that “those criteria that will affect the bid price and be considered in evaluation for award shall be objectively measurable.”

As a remedy, the Public Auditor negated the contract. That is a result I would have reached, also, but perhaps by emphasizing slightly different law and language than was used.

Taking first the language that was used, the Public Auditor found “that DOE's award of the contract to J&B is void.” (Decision, p 14.) That is an unfortunate use of the term “void”, and is a use inconsistent with what she said in her conclusion: “DOE's contract with J&B, arising from the IFB, is hereby terminated.” Whether a contract is void or terminated is an important distinction in the law; that is why I used the term “negated”, which is not a legal term of art but could include both a “void” contract and a “terminated” contract. (A void contract is treated as an empty act that never occurred, but a terminated contract raises the possibility of damages for a breach that is so material that it allowed the contract to be terminated.)

This is not mere semantics. The Procurement Law specifically allows a contract to be made “void” only if there is a showing of fraud or bad faith. (5 GCA § 5452(a)(2)(i).) Here, the Public Auditor made a specific finding there was no such fraud or bad faith. In this instance, as the Public Auditor also held, the appropriate remedy is to “terminate” the contract. (5 GCA § 5452(a)(1)(ii).)

As to the law used to reach the result, I would have relied more heavily on the government’s obligation to provide appropriate specifications, which it failed to do, leaving the IFB too vague to satisfy the law’s requirement for certainty.

“Purchase descriptions shall describe the salient technical requirements or desired performance characteristics of supplies or services to be procured....” (5 GCA § 5268(c).) “Specifications shall be drafted with the objective of clearly describing the territory’s requirements.” (2 GAR § 4102(a)(1).) “The Invitation for Bids shall set forth the requirements and criteria which will be used to determine the lowest responsive bidder.” (2 GAR § 3109(n)(1).)

Importantly, after bids are opened, all bids should be rejected if “ambiguous or otherwise inadequate specifications were part of the solicitation.” (2 GAR § 3115(d)(2)(A)(ii).) That was certainly the case here. It was the government’s inadequate specifications that were at the root of the bid dispute.

In my line of reasoning, I would start with the proposition that the government was required to provide the current wage determination schedule. Having failed to do so, it invited confusion with inadequate specifications, did not specify the performance pay standards it desired, and let itself be misled into evaluating the bids based on criteria not provided in the IFB.

I would not have paid any attention to what the IFB required the bidders to produce in terms of wage determination schedules, and I would consider any such requirement to be void as beyond the power of the government to compel. First, the law requires the government to provide the information, not bidders. Second, bidders are only required to comply with the wage determination laws “if applicable”, and the law is not applicable to them. And finally, the government cannot compel empty acts, and this case illustrates just how emptythe act is; how empty is it to require the bidders to do something that the government is already supposed to have done?

Now there’s one more small item, but one easily dismissed. 5 GCA § 5211(g) puts the onus on the government purchasing agency to award to the lowest responsive and responsible bidder “whose bid amount is sufficient to comply with Article 13". But how is the government to make such a determination if the bidder is content to come a bit out of pocket to pay any shortfall to get the contract for other reasons? The government is not given access to all internal information a bidder may have. The only information the government has to hand is the total bid price and the total possible wage expenditure, assuming it may accurately know the manning requirements. It is rare, if ever, that such information would be adequate to make such a calculation without resort to pure speculation.

Fortunately, that is a question that does not need an answer because, just like in Article 13, that determination is only required where the “bid amount is sufficient to comply with Article 13 ..., if applicable”. Awarding a bid is not “entering into a contractual relationship”, so Article 13 should not be deemed to be applicable to require any such indeterminable determination. The law does not require the impossible.

The companion cases are IN THE APPEAL OF JRN AIR CONDITIONING & REFRIGERATION, INC. OPA-PA-10-007 and 10-008, and the Decision in one is the same as the other.

Saturday, February 19, 2011

A model for improving competition

I was reading the article discussed in this post and drew from it almost the opposite conclusion than intended, but quite a valuable one, perhaps.

The article is a paper evidently presented at the World Academy of Science, Engineering and Technology 65 2010, entitled A Simulation Model for Bid Price Decision Making by R.Sammoura, who is with the Industrial Engineering and Management Department, Beirut Arab University, Lebanon. It offers a mathematical model to enable bidders to more carefully hone their bid prices to achieve success without leaving too much on the table.

My extracts, edited and arranged to suit myself, are as follows, but you should read the source paper for better accuracy.
Abstract—In Lebanon, public construction projects are awarded
to the contractor submitting the lowest bid price based on a
competitive bidding process. The contractor has to make a strategic
decision in choosing the appropriate bid price that will offer a
satisfactory profit with a greater probability to win. A simulation
model for bid price decision making based on the lowest bid price
evaluation is developed. The model, built using Crystal Ball decision engineering
software, considers two main factors affecting the
bidding process: the number of qualified bidders and the size of the
project.

The behavior of contractors as a group (market conditions, number and identity
of competitors), individual contractor behavior (contractor
size, work and tenders in hand, availability of staff), and
behavior toward the characteristics of the contract (type and
size of construction work, bid related factors) are the main
factors influencing the contractor’s bidding behavior.
Since it is not usually an easy job to describe the bidding
process by a realistic mathematical model interrelating all the
above influencing factors, a simulation model for bid price
decision making based on the evaluation of the lowest bid
price at a pre-contract stage is developed. The model
considers two main factors influencing bidding behavior: the
project size expressed by the average bid price and the level of
competition presented by the number of qualified participating
bidders. However, in order to reduce extraneous factors that
may distort the study results, all the selected projects
constituting the data sample are of the same type (in the field
of road construction and rehabilitation projects), awarded
according to the same Lebanese formal bidding procedures,
and executed in the same Lebanese market conditions.

The data for the study were collected from the archived
records of Council for Development and Construction (CDR).
All projects selected for inclusion in the
study were in the field of road construction and rehabilitation
in Lebanon. They were publicly bid under a relatively uniform
and formal bidding procedure according to the Lebanese
tendering law. The data collected from a sample of forty-one
awarded projects focused on the value of the lowest bid price
for each awarded contract. It also included the number of
qualified bidders participating in the bid process and their
corresponding bidding prices covering a time period for the
years (1996-2006). Among these forty one awarded projects,
twenty three are completely executed, nine are still in
progress, and nine are not executed. These forty one awarded
projects comprised 275 bidding attempts.

The paper goes on through a series of analysis including stochastic and regression analysis that I don't understand but was regularly exposed to in stock market technical analysis.

Essentially, to my unscientific mind, he looked at the proven standardized data that the government had available from past solicitations and came up with a trend following algorithm of the kind that tries to give lie to the common phrase, "past performance is no prediction of the future". I am reminded of the many financial wizardry schemes concocted by rocket scientists in the financial industry whose blind faith in such schemes brought the world to its financial knees over the course of this last decade.

So, while I appreciate the work in the model, for my money, it would be of little utility in terms of trying to price a contract.

But, it occurred to me, what a wonderful tool the data collection he describes would be to help government reduce its costs of acquisitions. What he did was aggregate and publicize certain bid abstract sheets. Over the course of time, this data would fairly begin to suggest, broadly, trends in project costs, and at the recent margin, a fair indication of expected costs on current projects.

If the government provided this data on all contracting, that would give bidders sharper pencils since they will have a more accurate picture of market pricing. Think of the stock market. You know the likely price of a share of, say, Google, because the stock market makes available to you all recent sale prices. Where pricing data is available, market transactions are more efficient (as a general rule).

If, say, the government has been buying plumbing equipment, getting the same bids from the same players, would a new market entrant know whether to go to the time and trouble to bid? If the new entrant knows what the government has been paying, it probably would attract him, especially if his pricing can beat the old regulars. And the more widespread the information is cast, the more likely others will come along to join in, bringing down government costs.

In the same way I think the government ought to cull, aggregate and make public recorded sales of real estate so that market participants are more equally placed to trade, it occurs to me that public dissemination of historical and recent bid pricing, available from bid abstracts, could help reduce the price government pays for its goods and services and, as this paper discusses, construction.

One of the core principles of government contracting is generating competition. Nothing generates competition like transparent pricing mechanisms.

Just saying.

Valuing the bid -- Timor Leste

I came across this easy to read and understand "DRAFT Best Practice Guide on Procurement Bid Evaluation" prepared for the government of Timor. The message here is on "value for money" determinations for bid selection. Here are some excerpts I've selected and edited for my own understanding.
Decisions on government procurement should be made on the basis of value for money. The tendered purchase price alone is seldom an accurate indicator for comparison of other the potential contractor’s ability to perform the required task, or the total cost of performing the task over time. Value for money requires a comparison of costs, benefits and alternative outcomes. An assessment of the best net overall outcome for government is to take account of all relevant ‘whole of life’ costs and benefits, that is the full cost of each good, service, construction or consultancy over its expected useful life, not just at time of purchase.

However this quantitative whole of life cost is only one consideration when selecting a government contractor. Other qualitative factors such as, the financial strength of the contractor’s business, their past performance and capacity for customer service, along with boosting local economic development are important matters which also must be considered when evaluating bids. The supplier must be able to provide the Government with a good and reliable service to ensure the smooth
running of government and lower the risk of any disruption or delay to public services. A detailed technical or professional capability assessment and a commercial and financial analysis of the bids, and the businesses tendering, must be made to determine which tender represents best value for government and the public interest.

To make this analysis, it is necessary to obtain all information on the goods or services tendered, and details of all significant costs associated, not just with the initial purchase, but also during the use or application of the goods and services along with any associated future costs.
The paper gives this example:
The Government Procurement Office was required to purchase five new trucks for the Water and Sanitation Department. Ten tenders were recieved and three were selected for consideration: Mobil Biru Motors (US$450,500); Truk Bot (US$465,000); Maria and Jose Imports (US$488,550). Even though the last bid was the most expensive it contained a significant number of benefits. They could supply quickly — a central requirement of Government, the trucks included the latest model with tipping technology. The company also offered to set up a truck service centre that would employ and train 20 Timorese mechanics. This bid was recommended dependent upon checks being made on the company’s compliance with local laws, financial strength and their having existing shipping orders for the latest model vehicles underway.
I have objections to this approach, however reasonable and seductive it appears at face value. This approach conflates evaluation of price and cost evaluation with the evaluation of the bidder's responsibility. Bidder responsibility can be a highly subjective matter, and when a decision is made mainly on that basis, the process moves away from objectivity to preference and favoritism. Care should be taken to segregate the evaluation of cost and price from the determination of bidder responsibility.

In the example, for instance, the point made was that one bidder had better delivery times. First, if a specific delivery time was part of the specifications, that bidder would have been preferred based on the tender, not on some post facto rationalization. Second, delivery times can be very easily manipulated, by, for instance, tipping a preferred bidder in advance so that he is prepared. Delivery times must be reasonably attainable by all bidder to have any fair and equitable competition. It is a very rare case where the Government could not foresee a need so far in advance that it needs an unreasonably short delivery time.

The example says, the preferred tenderer offered to set up a service and training centre. If that was part of the tender so that other tenderers had equal opportunity to make similar offers, then competition is fair. But if the offer was made outside the scope of the solicitation, it should be ignored. Just as a point of difference, the ABA Model Code/Guam procurement regulations say:
The Invitation for Bids shall set forth any evaluation criterion to be used in determining product acceptability.

The acceptability evaluation is not conducted for the purpose of determining whether one bidder's item is superior to another, but only to determine that a bidder's offering is acceptable as set forth in the Invitation for Bids.

Only objectively measurable criteria which are set forth in the Invitation for Bids shall be applied in determining the lowest bidder. Examples of such criteria include, but are not limited to, transportation cost, and ownership or life cycle cost formulas.

Nothing in this Section shall be deemed to permit contract award to a bidder submitting a higher quality item than that designated in the Invitation for Bids if such bidder is not also the lowest bidder. Further, this Section does not permit
negotiations with any bidder.
The determination of bidder responsibility, however, is conducted in a different time and manner, using different standards than those used to evaluate bid responsiveness. When done in this manner, it becomes more transparent as to what really motivated the award.

Value, like beauty, is too often in the eye of the beholder. That is not the best basis for treating bidders fairly and equitably, and if government fails to offer that impartial treatment, it will not receive the necessary competition to assure the government is getting best value for its money. In fact, it will just encourage the use of covert influence and back room deal pedaling.

US aims to myth bust

Daniel I. Gordon, Administrator for Federal Procurement Policy, has launched a "myth-busting" campaign to educate the federal procurement workforce, to address so-called misconceptions and improve communications with the procurement industry. It's a back-to-basic building blocks reminder.

His "
MEMORANDUM FOR CHIEF ACQUISITION OFFICERS, SENIOR PROCUREMENT EXECUTIVES, and CHIEF INFORMATION OFFICERS" is dated February 2, 2011, but went public on February 17, as reported in media stories here and here.

Here are some selected excerpts, arranged and edited to suit myself.
Access to current market information is critical for agency program managers as they define requirements and for contracting officers as they develop acquisition strategies, seek opportunities for small businesses, and negotiate contract terms. Our industry partners are often the best source of this information, so productive interactions between federal agencies and our industry partners should be encouraged to ensure that the government clearly understands the marketplace and can award a contract or order for an effective solution at a reasonable price. Early, frequent, and constructive engagement with industry is especially important for complex, high-risk procurements, including (but not limited to) those for large information technology (IT) projects. This is why increasing communication, in the form of a “myth-busters” educational campaign, is one of the key tenets of the Office of Management and Budget’s 25 Point Implementation Plan to Reform Federal IT Management.

Some agency officials may be reluctant to engage in these exchanges out of fear of protests or fear of binding the agency in an unauthorized manner; others may be unaware of effective strategies that can help the acquisition workforce and industry make the best use of their time and resources. Similarly, industry may be concerned that talking with an agency may create a conflict of interest that will preclude them from competing on future requirements, or industry may be apprehensive about engaging in meaningful conversations in the presence of other vendors.

In light of these challenges, the purposes of this memorandum are to:
1) identify common misconceptions about vendor engagement that may be unnecessarily hindering agencies’ appropriate use of the existing flexibilities, and provide facts and strategies to help acquisition professionals benefit from industry’s knowledge and insight;
2) direct agencies to remove unnecessary barriers to reasonable communication and develop vendor communications plans, consistent with existing law and regulation, that promote responsible and constructive exchanges; and
3) outline steps for continued engagement with agencies and industry to increase awareness and education.

Nothing in this memorandum should be read to alter, or authorize violations of, applicable ethics rules, procurement integrity requirements, or other statutes or regulations that govern communication and information sharing. However, all methods of communication that are not prohibited, either by those rules or otherwise, should be considered, if they would be helpful.3 In addition, contracting officers, program managers, and other acquisition officials should continue to exercise appropriate discretion to balance the practical limitations of frequent vendor engagement, including the demand such engagement places on the time of the acquisition workforce, with the need to better understand the market and make decisions in the best interest of the government.
His Memorandum introduces the "Top 10 Misconceptions and Facts". My favorites among the Top 10 are:

1. Misconception – “We can’t meet one-on-one with a potential offeror.”
Fact – Government officials can generally meet one-on-one with potential offerors as long as no vendor receives preferential treatment.
Prior to issuance of the solicitation, government officials – including the program manager, users, or contracting officer – may meet with potential offerors to exchange general information and conduct market research related to an acquisition. In fact, the FAR, in Part 15, encourages exchanges of information with interested parties during the solicitation process, ending with the receipt of proposals. There is no requirement that the meetings include all possible offerors, nor is there a prohibition on one-on-one meetings. Any information that is shared in a meeting that could directly affect proposal preparation must be shared in a timely manner with all potential offerors to avoid providing any offeror with an unfair advantage (FAR 15.201(f)).
The government ethics rules and Competition in Contracting Act, (10 U.S.C. § 2304), prohibit preferential treatment of one vendor over another.

While a vendor who, as part of contract performance, drafts the specification for a future procurement will almost certainly be barred by OCI rules from competing for that future procurement, pre-solicitation communications are generally less structured, less binding, and much less problematic. When a vendor, in its role supporting the government, is drafting specifications for a future acquisition, the government is relying on the vendor to provide impartial advice regarding the requirements needed to meet the government’s future needs. Ensuring that the vendor will not be motivated by a desire to win the future contract is the way we try to ensure that this advice will be impartial. This differs dramatically from the pre-solicitation context. In the latter context, the government is not looking for impartial advice from one source, but is instead looking for a variety of options from a variety of sources, each one understandably, and reasonably, attempting to demonstrate the value of its own approach. These marketing efforts, in themselves, do not raise OCI concerns.
3. Misconception – “A protest is something to be avoided at all costs - even if it means the government limits conversations with industry.”
Fact – Restricting communication won’t prevent a protest, and limiting communication might actually increase the chance of a protest – in addition to depriving the government of potentially useful information.
Protests are, in fact, quite rare. At least 99 percent of procurements are never protested, although high dollar procurements, of course, are more likely to be protested. The overriding goal of the agency and its program managers, contracting officers, and attorneys should be the best procurement solution, and industry engagement can improve the supplies or services received or can reduce the price paid by the government. If contracting officers conduct responsible, meaningful, and constructive communications during the course of a procurement, issues that could give rise to a bid protest are likely eliminated. Trying to make a procurement ‘protest-proof’ is rarely a good use of agency resources, and it may lead to decisions that aren’t in the interest of the government. Moreover, restricting communication for fear of protests may actually increase the likelihood of a protest – for example, by a vendor that hopes to get more information through ‘discovery’ during the protest.
7. Misconception – “Industry days and similar events attended by multiple vendors are of low value to industry and the government because industry won’t provide useful information in front of competitors, and the government doesn’t release new information.”
Fact – Well-organized industry days, as well as pre-solicitation and pre-proposal conferences, are valuable opportunities for the government and for potential vendors – both prime contractors and subcontractors, many of whom are small businesses.
Industry days, as well as pre-solicitation and pre-proposal conferences, directly benefit the government by promoting a common understanding of the procurement requirements, the solicitation terms and conditions, and the evaluation criteria. These events also benefit industry – especially small businesses – by providing prime contractors and subcontractors an opportunity to meet and develop relationships or teaming agreements that benefit contract performance. However, the value of these events derives from the government providing the maximum information to potential offerors on its requirements, answering questions, and improving the solicitation based on feedback from the potential offerors. In that way, the requirements can be made as clear as possible to assist potential offerors in providing the best solution to the government.
8. Misconception – “The program manager already talked to industry to develop the technical requirements, so the contracting officer doesn’t need to do anything else before issuing the RFP.”
Fact – The technical requirements are only part of the acquisition; getting feedback on terms and conditions, pricing structure, performance metrics, evaluation criteria, and contract administration matters will improve the award and implementation process.
Issuing a high quality solicitation requires engaging with industry on issues that go beyond the government’s technical requirements. In order to appropriately price proposals and reduce the number of potential change orders, industry needs information about any unique terms and conditions, small business set-aside requirements, subcontracting goals, and other matters about which the contracting officer is the expert. Although industry may have had their best technical representatives engaged with the program manager, the contracting officer should communicate to vendors as much information as possible about the government’s needs as early as possible. As a result of early communication, the contracting officer may learn some things that suggest that an approach somewhat different than planned may cause increased competition, more small business participation, lower prices, or even a better definition of the government’s technical requirements.

Issue an RFI to make sure the government not only understands the capabilities of industry, but can develop or improve its acquisition strategy regarding contract type, performance requirements, performance work statements/statements of work, and performance metrics. Release a draft request for proposal to be sure the solicitation instructions are clear.
9. Misconception – “Giving industry only a few days to respond to an RFP is OK since the government has been talking to industry about this procurement for over a year.”
Fact – Providing only short response times may result in the government receiving fewer proposals and the ones received may not be as well-developed - which can lead to a flawed contract. This approach signals that the government isn’t really interested in competition.
Contracting officers should consider that allowing offerors additional time to prepare their proposals will likely yield better proposals, streamlined evaluations, and a reduction in the need for (or scope of) discussions. While the workforce is stretched thin and requirements often arise unexpectedly, shortcutting the proposal development process often results in fewer proposals, and/or proposals that are more difficult to evaluate. This situation can lead to expensive outcomes. Providing adequate time for vendor communication throughout the procurement process – including adequate time for proposals – indicates that the government is interested in obtaining the best outcomes. Contracting officers should have the full support of their customers in determining the right amount of time for receipt of proposals.
10. Misconception – “Getting broad participation by many different vendors is too difficult; we’re better off dealing with the established companies we know.”
Fact – The government loses when we limit ourselves to the companies we already work with. Instead, we need to look for opportunities to increase competition and ensure that all vendors, including small businesses, get fair consideration.
Use the procurement forecast to generate interest. Consider holding an outreach session to announce the release or update, and don’t bundle or over-promise requirements. Hold industry days, public meetings, or small business conferences, and consider hosting multiple outreach sessions for large or complex requirements.
What are your favorite ones?

Related to the media campaign conducted by Gordon is this item from Federal News Radio:

OFPP zeroes in on acquisition workforce
Dan Gordon, administrator of the Office of Federal Procurement Policy (OFPP), said the acquisition workforce isn't equipped to manage the large number of government contracts. His office wants to change that.

Gordon said over the past 15 years the government has been on an unsustainable path of increased contracting and a flat acquisition workforce.

"Putting that tsunami of spending onto an acquisition workforce that had shrunk and wasn't getting the investment and training was a recipe for problems, and we've had a good number of problems," Gordon said.

"Our number one priority is strengthening the acquisition workforce."

Gordon said agencies can help the existing acquisition workforce by improving internal communication. He said poor communication within agencies leads to significant problems with contract design.

"We have our IT shops that are often focused on sophisticated IT solutions," Gordon said. "We have the program shops - the people who actually need what the contract is for - who may not be explaining to the IT people what they need properly. We have a contract shop that doesn't define requirements. They just listen to make sure they've got requirements that make sense in terms of 'will this be a competitive situation', but contract people can't define requirements. They need input from the program people and the IT people to do that."

Gordon also said he wants to increase training for the acquisition workforce. One of OMB's goals in scaling back contract spending was to reduce the number of high risk contracts such as time-and-materials and labor-hours contracts.

"We're not telling agencies to go fixed-price no matter what," Gordon said. "Sometimes is just a matter of looking. Have we come far enough that we can define our requirements and switch to fixed price? Then we should. But we shouldn't switch to fixed price without thinking."

Gordon said insufficient contract management personnel also is a significant challenge. "Of course we need contractors, but contractors support us in the federal government, which means that we have to be in charge," Gordon said. "There are too many situations where there is no federal employee that has oversight of what's going on, or there aren't enough federal employees so that they maintain control. That is an unbalanced, unhealthy situation."

Sunday, February 13, 2011

Small steps taken to boost small business

This article is another in a series from Robert O'Harrow Jr. in the Washington Post discussing the goings on in the US Federal Small Business Administration's set-aside program, and government contracting more widely.

Small Business Administration changes rules for set-aside contracting program
The Small Business Administration has overhauled the rules for its main set-aside contracting program, including minor administrative matters and substantial particulars such as defining for the first time how much money an individual can have and still be considered economically disadvantaged.

The changes also clarify the rules for joint ventures between small and large businesses, requiring the small firms to do at least 40 percent of the work. Until now, the government did not specify how much work had to be done. The rules also will prohibit consultants and non-disadvantaged managers of 8(a) companies from receiving pay based on a percentage of gross revenue.

For years, the SBA's 8(a) Business Development program has been vulnerable to abuses as large companies and non-disadvantaged entrepreneurs have taken advantage of the rules.

The government sometimes has done little to enforce the rules. The rules remain complex, and, under the current system, it will be up to procurement officials at other agencies to enforce them. Government audits have found that procurement officials often do not understand the rules or choose to ignore them.

Tuesday, February 8, 2011

Bidder dobs self in

There is probably more to this than meets the eye, but on face value, you have to admire the principled action taken by this preferred bidder.

Search and rescue helicopter bid process is halted
the preferred supplier, Soteria, admitted it had access to commercially sensitive information.

The Department for Transport and Ministry of Defence (MoD) said the preferred supplier would not be used.

In a statement to Parliament regarding the £6bn procurement programme, Transport Secretary Philip Hammond said: "In mid December, the Preferred Bidder in the SAR-H competition, Soteria, had come forward to inform the government of irregularities regarding the conduct of their bid team which had only then recently come to light.

"The irregularities included access by one of the consortium members, CHC Helicopter, to commercially sensitive information regarding the joint MOD/DfT project team's evaluations of industry bids and evidence that a former member of that project team had assisted the consortium in its bid preparation, contrary to explicit assurances given to the project team."


MORE: As I noted above, there would likely be more to this story. Evidently, this is having major ramifications, based on a report in the Financial Times, which says:
Cancelling the privatisation will also require the government to put in place some potentially costly interim measures to provide a continuation of service. Depending on the length of delay, this could include an upgrade to extend the air life of the existing Sea King helicopter fleet.

It will also amplify calls for a review of MoD rules on the employment of civil servants and military officers by defence companies during sensitive commercial competitions.
FT's report contains much more detail of the players and consequences of the situation. The Wall Street Journal also reported on the story, impressed by the size of the project and the global players involved in it.

Printing money

Collusion in the private sector is as deleterious to effective competition as corruption inside the government sector. Both undermine faith in good government.

Consider this report from Ghana:
Intelligence picked up by The Herald have revealed that the US$50 million 2010 Population and Housing Census and the GH¢35million 2010 District Assembly Election organized by the Ghana Statistical Service and the Electoral Commission respectively failed due to the existence of a mafia within the commercial printing industry, called the Big Six.

They hold meetings where figures are cooked and decisions made as to which of the companies should win the contract and share it amongst the groups to execute. Most often, the Public Procurement Authority, which by the public procurement law, is to give approval before these jobs are executed, is ignored by the state agencies.

Insiders in the printing industry, the Controller and Accountant General’s Department, and the Electoral Commission informed The Herald that the companies have strategically positioned themselves with state agencies which do huge volumes of commercial printing.

Deliberate delays are created to avoid any competitive tendering processes during the award of the huge printing jobs hence there are no advertisements in the newspapers as specified by public procurement law, and this enables the printing jobs to be awarded under a cloak of emergency.

Accountability is a two way street

Much of what gets discussed under the topic of accountability has to do with procedures and safeguards intended to assure we get what's expected from government buying agencies. But the story of this post has to do with getting what's expected from the contractor. How can we expect to get what's coming from the contractor?

The most effective means of assuring performance is to require that the contract provide a performance bond. Sure, the cost of that, as with most costs, gets factored into the price of the job, but the owner (the government here, and us, the taxpayers) nevertheless benefits from the cost when there is a penal sum available to absorb some of the damages the owner suffers when the contractor defaults.

With that in mind, consider what's happening in the US State of Virginia:

Rolling The Dice With Taxpayer’s Money
Virginia State legislators recently passed a new law that boosts the minimum contract amount required for bid, performance, or payment bonds from $100,000 to $1 million. This means jobs that fall under $1 million are not required to obtain a surety bond to guarantee their work; it's risky business for both contractors and taxpayer's.

When it comes to trying to rationalize the new enactment, it does give previously unqualified contractor's more opportunities to work on bigger jobs that formerly required a surety bond. But whose interest does that serve? Just because some contractors may not have been able to qualify for Performance Surety bonds bond doesn't mean it's a clever idea to raise the minimum contract amount so they have more chances to work on larger projects. I will agree that surety underwriting is rather conservative these days, but that only lends to an environment of financially sound contractors getting good public work.

The HB 1951 Public Procurement Act that changes the surety bond requirements threatens taxpayer's dollars and future construction projects.