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Saturday, June 29, 2013

Standardizing commercial goods and services but not contract terms

How often do you read the terms of your, say, phone contract, or equipment rental agreement? Are they even negotiable? Your standard commercial purchases come with industry standard terms, and you usually have the choice of taking it or leaving it.

Not so if you are a monopsony. The federal government is one, but small government entities most often are not. I am amazed at the way large manufacturers jam their own contract terms down the throat of our local government.

Lawyers Michael D. McGill and C. Peter Dungan from the firm Hogan Lovells have provided a note on the federal government's start to pushback on this idea. You should read the whole article at the link below.

New procurement rule is intended to limit the Government’s acceptance of standard commercial terms of service for social media applications
The interim rule, which is effective immediately, is specifically aimed to curb the practice of contracting officials agreeing to open-ended indemnification provisions in standard contracts for web-based social media applications. The Government will not agree to certain contract terms that are standard in the commercial space, and even when its officials agree to those terms, some of them may be unenforceable.

The impetus for this rulemaking can be traced back to a June 2011 letter from the Department of Commerce (Commerce) to the Department of Justice (DOJ) seeking the DOJ’s views on the application of the Anti-Deficiency Act to terms of service (TOS} agreements for social media applications.The Anti-Deficiency Act generally prohibits agencies from entering into contracts or other obligations in advance of or beyond the scope of appropriated funding.

In response, the DOJ Office of Legal Counsel (OLC) issued an opinion indicating that the Anti-Deficiency Act is violated when a contracting official or other employee with authority to bind the Government agrees, without statutory authorization or an applicable exception, to an open-ended, unrestricted indemnification provision. The OLC opinion, and the Commerce letter that prompted it, focused specifically on web-based TOS agreements, such as “clickwrap” and “browsewrap” agreements. The Opinion describes a situation in which a Government official holding a purchase card consents to an online TOS agreement containing an open-ended indemnification clause in the course of registering for an account with a commercial social media service, and the Government, under the TOS, holds the service provider harmless for damages caused to a third party when the Government uses the application. The contracting officer’s agreement to such TOS creates an immediate Anti-Deficiency Act violation insofar as the agency, upon agreement to the indemnification provision, is legally liable—or at least potentially legally liable8—for an amount in excess of appropriations.

I think there is plenty of scope to expand this concept to other one-sided contract terms, many of which are found in the "standard" contract terms found in the GSA Schedule contracts. Certainly smaller governments may want this kind of protection by law, because they will rarely if ever get it by negotiation. 

 UPDATE: This subject has reached final regulation status. See articles below:

•  GSA Issues Final Rule Governing Negotiations of Common Commercial Terms 

•  GSA Regulation, Unenforceable Commercial Supplier Agreement Terms 

• Final GSA Rule on Commercial License Terms that Conflict with Federal Law

The Desiderata of the value of local preference rules

Local preference rule on government contracts an ineffective gimmick
The Hernando Commission just can't resist feel-good, but ineffective, public relations gimmicks. It is again considering skewing its procurement rules to benefit local bidders. It is at least the fifth time since 2008 that commissioners have considered rewriting their rules even though their own attorneys and the previous purchasing staff frowned on this poor public policy which has the potential to raise taxpayers' costs.

The county's standards include promises: To deal fairly and equitably with all suppliers wishing to do business with Hernando County; to maximize competition for all procurements; and to purchase goods and services at the lowest price, consistent with quality, performance, and delivery requirements from capable suppliers meeting the county's requirements. Except, under the proposed ordinance, none of that matters if you have a local zip code. Fair treatment, maximum competition and lowest prices no longer apply.

The misguided plan calls for giving local companies a 5 percent credit on contracts up to $500,000. Local companies bidding on projects exceeding that amount can get a 3 percent discount and other considerations by documenting local vendors to be used as subcontractors. Essentially, a local company bidding within 5 percent of the lowest bid coming from an out-of-towner can be awarded the contract.

Commissioners, charged with the duty of being stewards of the public purse, need to ensure the public receives the best product for the best cost, regardless of the address of the supplier.
This article succinctly summarizes the main points in opposition to local preferences, such as "Buy American" rules of the federal government. It does not even mention what some might say are benefits. The author might consider the observations of Prof. Steven Schooner.

Desiderata: Objectives for a System of Government Contract Law, by Professor Steven L. Schooner, George Washington University Law School, Washington, D.C.
Sometimes the most simple questions prove the most vexing. For example, what does your government hope to achieve through its government procurement law? It is possible to draft and enact a new law without answering the question, and experience demonstrates that this is often the case. (Arguably, it is equally challenging to sustain a commitment to these objectives over time, but that is a topic for another day.) Nonetheless, it seems reasonable to attempt to describe general aspirations for a procurement system before drafting begins.

Unfortunately, it is difficult to articulate objectives for a procurement system. There are many options, and most are contradictory.

At a macro level, the author prefers to begin with three “pillars” that, in my opinion, underlie the United States procurement system: system transparency; procurement integrity; and competition. In the United States, we believe that, as a general rule, our government enjoys access to the best contractors, lowest prices, most advanced technology, favourable contract terms and conditions, and the highest quality goods and services. We think this is so because our system, for the most part, encourages participation by the widest possible pools of potential competitors; it consistently demonstrates that competitors will be impartially considered for award of our contracts; and it treats all contractors in a manner that balances appropriate risks with meaningful profit incentives and rewards.

There are plentiful exceptions to this description, and a number are identified below. [You will have to read the article, at the link above, for the full discussion; here I just cut to the chase run in the lead article above.]

Historically, our elected representatives have viewed our procurement system as a vehicle to distribute wealth. For example, our government has chosen to leverage its purchases to support domestic firms and, more specifically, small businesses.29 At the same time, our procurement dollars may be directed towards specific manufacturers to maintain sufficient expertise or industrial base capacity in anticipation of future contingencies. You may target your buying towards contractors located in geographical areas of high unemployment. It is axiomatic that government spending can influence behaviour and infuse growth in communities and economic sectors. Conversely, efforts to redistribute wealth through the procurement system – by their very nature – restrict competition.

No system can achieve all of these goals. Nor can a state expect that its objectives for its system will remain constant over time. Determining which goals are most important is a daunting, ever-evolving challenge. Because no system can achieve all of the goals here (or the many not discussed), your desiderata entails important tradeoffs. There are significant transactional, economic, and social costs associated with maximizing transparency, integrity, and competition. Nonetheless, the author believes these costs are an excellent long-term investment.

Thursday, June 27, 2013

Comparative procurement law resource

The Law Business Research Limited organisation, in association with Global Competition Review, provides useful comparative data on many fields of business law, and in particular from time to time publishes and updates a Public Procurement synopsis. It describes its resource:
Getting the Deal Through is a database of law and regulation in 56 practice areas and more than 150 jurisdictions containing concise explanations to the most important legal and regulatory matters that arise in business deals and disputes worldwide.
And it can be accessed at http://gettingthedealthrough.com/.

It has just released a new procurement review, Public Procurement 2013.   I'm not sure if you need to register to have access to the document's data online; I have been a registered user for a few years, and it is easy to do and free to inhouse counsel.  If you can access it, it provides a handy query facility to zero in on particular issues across any or all of the 37 countries included in its review.

The book is available for purchase here

This is a handy resource for global practitioners and the book would be a valuable addition to any library.

Procurement controversy -- Augusta, Georgia, USA

Judge orders city to rebid employee health insurance contract
Aetna subsidiary Meritain Health protested the bid award last year, but the commission voted to deny the company’s protest and gave the contract to Blue Cross. Richmond County Super­i­or Court Judge David Rop­er blasted the Augusta Commission and city procure­ment department in a Wednes­day order demanding the city re-bid its new employee health insurance contract. The order comes in response to a lawsuit filed by Aetna subsidiary Meritain Health over Augusta’s award of the contract to administer a new self-funded health insurance pool, valued in excess of $20 million, to Blue Cross, the city’s existing provider.

Meritain alleged that procurement engaged in “11th hour” manipulation of the bid award, changing contract terms and ranking criteria to benefit Blue Cross, and Roper agreed. “Simply put, Ms. Sams, Ms. Kelley and the selection committee changed the rules at the 11th hour to require no lasering at inception, and decided that Total Maximum Costs was the driving factor,” he wrote. “No lasering” refers to an insurance practice that divides employees into low- and high-risk groups, covering each differently.

When the “no lasering” requirement was introduced, Aetna vice president of public sector sales Marcus Duckworth complained in two e-mails that only Blue Cross had access to recent claims data to formulate an accurate bid. “The court finds that Meritain was prejudiced thereby,” Roper said.

He also points to Kelley’s romantic involvement with Blue Cross sales representative Mark Dukes throughout the process, citing Commissioner Alvin Mason’s questioning of Kelley about the relationship during commission meetings.

Wednesday, June 26, 2013

Framing the problem

The Inside Story of Russia's Fight to Keep the U.N. Corrupt
When U.N. Secretary-General Ban Ki-moon and Russian President Vladimir Putin met in Sochi, Russia, they were supposed to discuss the civil war in Syria. But the Russian leader -- joined by his top diplomat, Sergei Lavrov, and defense secretary, Sergei Shoigu -- suddenly changed the subject to more mundane matters. A series of U.N. reforms aimed at streamlining billions of dollars of spending on U.N. peacekeeping was posing a threat to Russia's commercial interests. Putin and his national security team politely but firmly pressed the U.N. leader to back off, according to several senior U.N.-based sources briefed on the meeting.

Since the end of the Cold War, Russian entrepreneurs have turned the Soviet-era air fleet into a thriving business, supplying the U.N. and other international agencies with low-cost surplus aircraft, including Antonov transport planes and Mi-8 and Mi-26 helicopters. The low-cost aircraft -- which Russian factories continue to produce -- have largely dissuaded Western air operators from competing for U.N. contracts, which must go to the lowest bidder. Russian companies now account for about 75 percent of all contracts for commercial helicopters, the most lucrative segment of U.N. peacekeeping's multibillion-dollar marketplace.

The dispute provides a textbook example of the difficulties of implementing basic financial reforms at the United Nations when major powers have conflicting commercial interests in the outcome. The United States and European powers like Germany, France, Italy, and Spain are also looking for new business opportunities as the NATO mission in Afghanistan winds down. Those countries have privately raised concern with the U.N. about the integrity of its procurement process. They claim that the U.N.'s purchasing system is rigged to favor Russian aircraft; its bidding specifications -- for instance, requirements of seating capacity for more than 20 passengers -- are tailored to exclude most competitors. "Procurement is done in a way which directly specifies a Russian helicopter," said one senior European diplomat. "We have asked for more transparency; we want to change to a new [bidding] system as soon as possible."

But a spokesman for the U.N. peacekeeping department, Kieran Dwyer, dismissed those concerns. "The secretariat has a system of management checks and balances that mean that no one individual can unilaterally set the procurement specifications for aviation requirements," he said. "It is true that helicopters from the Mi-8 family of aircraft do play a leading role in peacekeeping aviation assets and operations. These helicopters have key features which make them suitable to peacekeeping needs, including their flying range and payload capacities and the fact that they are economical."

Despite Dwyer's claim, the U.N.'s internal corruption watchdog, the Office of Internal Oversight Services, said that the failure to open up the bidding to a broader range of aircraft has exposed the U.N. to a "high risk of acquiring air charter services at a higher cost than necessary," according to a confidential internal audit. The audit does not mention which aircraft get preferential treatment. Nor does it name the favored vendors or identify their nationalities. But it does raise concern about the fairness of the U.N. bidding process, which, for instance, fails to measure fuel efficiency in determining a helicopter's cost.
This is a long article with more turns and wrinkles than reported here, so you should read the whole thing, at the link above. Some of the comments are interesting, too.

Methods of source selection in a nutshell


Steve Charles has provided, in the article Selling To The Government: Contracting Methods, a handy guide to the usual, basic procurement methods used, particularly by the federal government. It is a thumbnail picture of a complex regime, useful to get a quick focus on the various methods and distinguish them from each other. It is part of an "ongoing series on selling to the government" that I commend to you for an introduction to a comprehensive regime.

The methods he describes are:
Sealed Bidding

Sealed bidding works like this: Agencies describe exactly what they want to buy in a solicitation called an invitation for bid (IFB). Companies submit secret bids to provide it. The award goes to the company that is considered to be the "lowest responsive, responsible bidder."

"Responsive" means the bid conforms exactly to the solicitation's specifications; "responsible" means the government makes a determination that the winning company can deliver on its offer.

Reverse Auctions


In which companies publicly underbid each other, with the lowest bidder winning the business. Reverse auctions are a method for buying commodity items, often small quantities of brand-specific part numbers. A handful of agencies use them to conduct quarterly or semi-annual procurements of products from approved vendors for predetermined configurations and quantities of office machines such as desktops, laptops and printers, but few manage to have the discipline necessary to aggregate requirements and pool money like that.

[I describe this method as the "Ebay method", the distinguishing feature being that all bid prices are disclosed and serial bids are allowed, allowing the strongest player to crowd out the competition; good for the government, maybe, but not so good at creating a loyal and willing pool of competitors.]

Negotiated Procurement (RFPs)

Contracting by negotiation is the underlying premise of a solicitation issued as a request for proposals (RFP). After companies submit proposals, federal source selection teams can ask for clarification and hold discussions with companies. It isn't much less competitive than sealed bidding, but it's much more complex.

Like sealed bidding, this approach is full and open. It's slightly less price-competitive than sealed bidding because an award may hinge on factors other than price, giving an advantage to companies that understand the wider context and intent of the procurement. Also, especially in large procurements, agencies can exclude companies from the original round of consideration based on the quality of companies' proposals, whereas the point of sealed bidding is to examine every bid for the absolutely lowest price.
He finishes his article with tips on how to approach an RFP, from the perspective of an offeror.  Have a read, particularly if you are new to this game.

The bumpy federal government contracting playing field

Marriage is Great. Now How About Government Contracts?
Two Supreme Court rulings on Wednesday greatly expanded the rights of LGBT people to marry. But for gay and lesbian business owners, the issues around work are still thorny. For them, same-sex marriage is only the beginning of a much longer road toward full acceptance. Though expansion of the federal definition of marriage to include same sex couples will markedly change the social landscape, there is still no federal recognition of LGBT people as a minority, and until the SCOTUS ruling on Wednesday, the Federal Defense of Marriage Act singled out LGBT people as a class that did not deserve equivalent treatment when it comes to federal benefits.

The 8a program is intended to open the doors for minority-owned small businesses under the fiercely competitive federal contracting program. At stake is approximately $100 million worth of federal contracts awarded annually to small businesses. Among the business owners that the government regularly recognizes under 8a are minorities such as women, Asian Americans, African Americans, and so-called disadvantaged businesses. (Disabled and veteran entrepreneurs are included elsewhere in the contracting process.)

Columbia Consulting is certified as gay-owned under a program conceived and rolled out about five years ago by the National Gay and Lesbian Chamber of Commerce. The certification is similar to that of many women and other minorities, who can get certification for their businesses from programs overseen by the Women's Business Enterprise National Council and the National Minority Supplier Development Council. While the federal government recognizes these other certifications in an attempt to make the federal contracting process more diverse, it does not officially recognize the NGLCC certification.

Less than 10% of LGBT-owned businesses currently work as contractors for state and local government, according to NGLCC research, although 80% say they would like that opportunity.

James Nowlin, co-founder and Excel Global Partners of Dallas, Texas, a small business that provides financial accounting and enterprise resource planning consulting services, says the federal playing field needs to be leveled for LGBT-owned business to participate and grow. "When you look at federal contracting opportunities for the federal government, those opportunities are really provided because of the money from taxes, and there are opportunities for all kinds of businesses and owners of all kinds of backgrounds," Nowlin says. "LGBT owners and employees pay taxes as well."

Thursday, June 20, 2013

Contractor responsibility: appropriate financial resources to indicate capability to perform

Under the ABA Model Procurement Code and Regulations, which form the principle part of Guam's procurement law, a prospective contractor must be responsible before being issued an award. One of the factors to be considered amongst the standards of responsibility is "appropriate financial ... resources ..., or the ability to obtain them, necessary to indicate its capability to meet all contractual requirements". Cash in the bank is a financial resource. Available credit or creditworthiness shows the ability to obtain a financial resource.

But what criteria is used to judge whether the resource is sufficient "to indicated capability to meet all contractual requirements"? This is not a one-size fits all test. It is relative to the needs of the contract, nothing more.

All of which is backdrop to the following story from the UK.

Builders blackballed by poor procurement practice
A report from the National Federation of Builders (NFB) suggests that local government’s use of credit reports could be excluding SMEs from public sector work worth as much as £2bn a year. With 40% of construction work traditionally coming from the public sector, fair access to contracts is crucial for the survival of SMEs, the NFB said.

The NFB report, The use of credit reference agency reports in local government procurement, found that the use of credit reports as part of financial assessments is widespread. Of the 288 local authorities that responded to its survey, 66% said that they use credit reports as part of the procurement process. Just over 13% of local authorities stated that they used credit reports to make pass or fail judgements. While this does not signify extensive use of CRA reports to make pass or fail judgements, the NFB is concerned that this may be a growing problem, particularly where the same company can get different scores from different credit reference agencies.

Chief executive Julia Evans said: “The use of credit reports as the sole or principal means of assessment can lead to SME contractors being discriminated against as this approach fails to take into account variations in smaller contractors’ accounts. The NFB wants to discourage the use of credit reports in this way. Such usage wields CRA reports as an unnecessarily blunt instrument for deciding who passes and who fails in the tendering process and does little to support the very good and supportive practices of many local authorities.” The NFB believes it is poor practice not rely on credit reports as the sole means of financial assessment.

Outsourcing pendulum starting to swing back?

Analysis: Government Privatization Paves the Way for Crony Corruption By Norm Ornstein
There are good reasons why not all governmental functions can or should be done by government employees or officials. It can be more cost-effective to hire contractors instead of training government employees; contractors can have more expertise; and contractors can do many things more efficiently. Some states have privatized such things as toll roads in order to raise cash in the short run to resolve serious budget problems (in the process, of course, sacrificing long-term revenue). In other cases, such as infrastructure, public-private partnerships can be the most cost-effective and efficient way to accomplish public and private ends.

But in recent decades, the dramatic push for more and more privatization of federal functions has gone beyond a discussion or analysis about how to best sort out public and private functions, turning into a headlong rush to privatize more. A good part of this is ideological in nature—driven by vociferously antigovernment ideologues who want to squeeze the size and role of government, decapitate government-employee unions, and discredit government generally along the way. Another part is greed: Sell off parts of government, or hand out contracts, in ways that reward one’s cronies and campaign benefactors. And a third part is to hide the costs of difficult or unpopular activities such as war or spying. Mixed in with these motives is a broader, less malign one: As government has been squeezed and public employees vilified and cut back, the only feasible way to hire competent people who are needed to fill important functions is to do it through the back door.

The intelligence brouhaha and Snowden fiasco—how could this guy have been hired, given his high-level classification, paid $122,000 a year, and gain access to areas expressly off-limits for someone at his level?—should make us focus on the bigger issue, and bigger problem, here. We have vastly over-privatized, and in the process lost control over swaths of important policy areas while allowing unaccountable and even outlaw behavior to expand. There were at times more than 100,000 contractors in Iraq, including nearly 50,000 “soldiers,” many making $1,000 a day, far more than active-duty military, with the money coming from American taxpayers. Conveniently for politicians, if these “soldiers” died, they were not counted in the official death toll of Americans killed in the war.

And we have created areas where crony capitalism can meet crony government to create crony corruption that cheats all taxpayers. If multiple public functions are privatized, or partially privatized, government employees have huge incentives to curry favor with potential private employers by granting them rich contracts or consulting fees, and then subsequently getting jobs paying multiples of their government salaries—or just giving nice perks to one’s former colleagues and friends who left for the private sector. Private contractors know the game well; they can recruit top government employees and then effectively lease them back to the government, where they do the same jobs and stick taxpayers with much higher bills.

Wednesday, June 19, 2013

Private Attorneys General and frivolous protests

I have often made the claim that we outsource the policing of defects in the procurement system to protestors, and that frivolous protests are frivolously over-hyped.

Now comes Danial I. Gordon, currently Associate Dean for government procurement law at the George Washington University, and formerly administrator of the Office of Federal Procurement Policy. So you don't have to take it from some small island lawyer who dabbles in local procurement. Take it from a pro. 

His paper, Bid Protests: The Costs are Real, but the Benefits Outweigh Them, is soon to be published in the American Bar Association Public Contract Law Journal, and freely downloaded at the link below. Here's a few tidbits intended to tempt you to read the whole piece.  And if you are a student of procurement law, you must read it for the citations and explanatory footnotes.

Bid Protests: The Costs are Real, but the Benefits Outweigh Them

In the U.S. federal procurement system, bid protests have existed since the 1920s. Despite its longevity, however, critics have come to characterize the bid protest process as costly and overly complex. This Article explains why, in the author’s view, the benefits of the bid protest system substantially outweigh the burdens it imposes on the procurement system.

In 1925, a company wrote to the GAO alleging that Panama Canal officials had issued a solicitation with specifications for a truck that were “wired” to a particular brand name and that thereby unfairly precluded the complaining firm from fair consideration for the contract. The GAO requested the agency’s views on the matter, and, when the Canal authorities admitted that they had used the specifications of one company’s truck in the solicitation, the GAO issued the first published bid protest decision, ruling that the challenged solicitation was unlawful. For many years, courts did not consider bid protests, so that the GAO (and the contracting agencies themselves) represented the only place to file a protest.

For more than a decade now, the only places outside the contracting agency where disappointed bidders have been able to file protests have been the GAO and the Court of Federal Claims. One forum is administrative and the other is judicial. In any event, having two fora hear bid protests may be healthy for the procurement system.

It is worth looking outside the United States, because the protest process has received substantial attention around the world in recent years. A protest system has come to be seen as a required part of a good public procurement regime. Perhaps most interesting is the attention bid protests have received during the past twenty years in the European Union (EU). Not mentioned in the EU’s Public Procurement Directives, protests were first addressed by the European Commission in what is known as the Remedies Directive. The Remedies Directive has had an enormous impact, requiring all member states to have a forum that considers protests. Furthermore, the Court of Justice of the European Union has also issued decisions that have reshaped the protest process in the EU. Of particular importance was the Alcatel decision that led to the requirement (codified in Article 2a of the 2007 revision to the Remedies Directive) that there be a “standstill” period (typically ten days) between the announcement of a potential awardee and contract signing to allow a window for filing protests.

What about the mantra we often hear about increases in protest numbers? It is true that the GAO has reported a substantial increase in the number of cases filed over the past few years, but even if the numbers doubled, from .5% of procurements to 1%, it would still mean that something like 99% of procurements are not protested. Thus far, among the hundreds of thousands of federal procurements that occurred in FY 2010, there were only 45 procurements for which the GAO sustained bid protests. What happened in those 45 procurements, after the GAO sustained the protests? Did the protester that was successful in the GAO litigation succeed in obtaining the contract? The answer: rarely.

Protests impose litigation costs on the parties, including attorney costs, although the author is unaware of data regarding those costs. Moreover, even when a bid protest is denied, it usually holds up the protested acquisition. The automatic stay for protests filed with the GAO can last up to 100 days and even the most promptly dismissed protests may trigger a CICA stay that is in place for at least a few days. In short, the CICA stay does disrupt procurements. Moreover, the fact that a protest has triggered a CICA stay does not mean that the procurement will be on hold for 100 days.
Most protests are resolved well before the 100th day, which is the maximum length of time the GAO has for resolving a protest. In 2009, the GAO reported to Congress that it “consistently closed more than half of all [Department of Defense (DoD)] protests within 30 days.”

A CICA stay may end because the protester has withdrawn the protest, or because the GAO has dismissed the case.1 When an agency takes corrective action, that also ends the stay, but, of course, the corrective action itself will generally delay progress in the procurement. Even for the minority of protests that make it to the published decision stage, the GAO has reported that, on average, it issues a decision within 80 days. Truly long procurement delays lasting for months really only occur when the GAO issues a decision sustaining a protest and the agency implements the GAO’s recommendation, which typically calls for the agency to re-do at least part of the competition for the contract.

Finally, in the author’s view, there is adequate justification for a substantial delay in a procurement where the GAO has determined that the agency violated procurement law, and that the violation has harmed the protester. At the very least, any delay that such an agency’s unlawful action has caused should not be blamed on the bid protest system.

Critics of the protest system may also view the GAO’s authority to recommend that successful protesters be reimbursed the costs of filing and pursuing their protests, including costs attributable to attorneys’ fees, as another cost of associated with bid protests. This situation arises only when the GAO finds that a protest is clearly meritorious, which means that the contracting agency violated procurement law to the detriment of the protester, and when the agency has unduly delayed taking corrective action. In the author’s view, reimbursing protesters for their actions as “private attorneys general” is justifiable.

critics point to abuse of the protest system in particular contexts as causes for concern. Specifically, there are persistent complaints that abuse arises in the form of “frivolous” protests, and the author has often heard calls for imposing sanctions on firms that file frivolous protests. In the 2009 report to Congress on DoD procurements, the GAO responded to a request from the House Armed Services Committee to address frivolous protests filed in connection with DoD procurements. The GAO pointed out that the fact that a protest is denied or even dismissed does not mean that it is frivolous; instead, the GAO expressed the view that only a protest filed in bad faith should be viewed as frivolous. It did point out, however, that contracting agencies rarely assert that protests are frivolous. In a footnote, the GAO indicated that the last reported decision noting that an agency had characterized a protest as frivolous was issued in 1996, and that in that case, the agency subsequently acknowledged that the evaluation scheme used in the protested procurement was flawed.

The GAO also expressed concern that any effort to impose sanctions on frivolous protests (such as imposing a fine or requiring the protester to reimburse the Government for costs incurred in defending against the protest) would risk “the unintended consequence of discouraging participation in federal contracting and, in turn, limiting competition.” The GAO also pointed out that penalties could not properly be imposed on “frivolous” protesters without adding a new layer of litigation, for which the GAO would then need to determine whether protesters had filed their protests in bad faith. Besides the burden that such litigation would place on the GAO, distracting it from its focus on resolving protests as quickly as possible, a new layer of litigation could impose additional costs on agencies and protesters, the burden for which might fall disproportionately heavily on small businesses and protesters not represented by counsel that may have protested in good faith but acted with a misunderstanding of the facts or the law. The appropriate response, in any event, would appear to be to press the GAO to continue (or intensify) its efforts to resolve protests promptly, not to create a new round of litigation about the imposition of sanctions, and certainly not to limit or abolish vendors’ right to have an independent body consider their claims of unlawful action by contracting agencies.

Benefits of the Protest Process: First, protests introduce a relatively low-cost form of accountability into acquisition systems by providing disgruntled participants a forum for airing their complaints. Protesting firms decide which procurements are to be investigated: if no one protests, then neither the GAO nor the Court of Federal Claims would look into a procurement. While reliance on audits by government officials would also inject accountability into the workings of procurement systems, it may be more efficient to focus on procurements where a participant is dissatisfied by a government agency’s conduct; that is what the “private attorney general” model of a protest provides. In blunt terms, if no one is dissatisfied with the way the Government conducted a procurement, then it may not be a wise use of auditors’ time to investigate it.

Second, by being directly responsive to participants’ complaints, protests can increase potential bidders’ confidence in the integrity of the procurement process, and thereby lead more players to participate, thus increasing competition. Increasing competition, in turn, can translate into bidders offering lower prices, higher quality, or both, to contracting agencies.

Third, protests can increase the public’s confidence in the integrity of the public procurement process. While the public only rarely focuses on public contracting, having a protest process mentioned in the press – as happened when The Boeing Company successfully protested the Air Force’s award of a tanker contract to Northrop Grumman151 - may raise the public’s trust in the fairness of the Government’s acquisition system and the way it spends taxpayer funds.

Fourth, because protests are a known avenue for complaints, their availability empowers those in contracting agencies who face pressure to act improperly. Thus, if a Contracting Officer were to be pressed by users within an agency to award a solesource contract to a favored firm, the Contracting Officer, who may lack the bureaucratic clout to resist the pressure, could point to the risk of a successful protest as one additional reason to follow the statutory and regulatory requirements for competition.

Fifth, protest decisions, because they are public, and have been released publicly since the GAO issued the first one in 1926, provide a high level of transparency into what is happening in the federal procurement system; protest decisions can often provide more useful information than databases. This is particularly the case where protests demonstrate how problematic certain issues are.

Finally, the fact that protest decisions are published and widely read by practitioners brings an additional benefit: the decisions provide guidance, particularly to agency counsel and attorneys representing potential protesters, as well as to their clients.
Conclusion: The Costs of the Bid Protest System are Overstated, and the System’s Benefits Outweigh Them

Tuesday, June 18, 2013

The pause that reflexes

The solicitation process, from issuing the solicitation to commencement of contract work, can be a long, long time. But no part of it gets the knee-jerk "Oh Man!" reaction like the completely routine protest.

155 workers in Elizabeth City furloughed after protest over Coast Guard contract
After winning a five-year, $200 million contract from the Coast Guard, one Elizabeth City company still has to temporarily lay off more than 150 of their workers.

This protest is the latest in a long line of hiccups for DRS. Their contract was first put on hold because of sequestration, and now that is has been awarded, they still can only go ahead in a limited capacity.

It will take 90 days for the Government Accountability Office to decide on the protest, and the city is preparing for the effects of the temporary loss of these high paying jobs.
I have to wonder if the sequestration also made the news, or the other "long line of hiccups"?

Ever ever there was a whipping boy in government contracting, it was (and is) the protest, the only way the system can be policed in real time.

Monday, June 10, 2013

India tells prospective contractors, "Let's Talk"

Govt bodies to give reasons for rejecting procurement tenders
The government awards public contracts worth lakhs of crores each year, but the process is fraught with delays as losing bidders often seek to stall their execution by filing vigilance complaints and mounting multiple legal challenges. Congress president Sonia Gandhi has identified public procurement as the biggest source of corruption along with the allocation of natural resources.

Finance Minister P Chidambaram had told Parliament in 2011 that even buying a pencil is a painstaking process in government. "Every time you go for procurement, on the day you are going to place the order, you will have a complaint on your table," he had said in his earlier avatar as home minister.

"It has been observed that there are many instances of a tender being rejected or tender documents not being issued and when the party enquires reasons, the same are not communicated," the procurement division in the expenditure department has said in a memo sent to government departments last month. "In such cases, the first round of litigation is to find out the reasons and the second round is to challenge the reasons," it noted.

The finance ministry has asked all government bodies to disclose the reasons for rejecting or excluding bidders from contracts awarded by them in order to bring more transparency into public procurement and avoid litigations from losing bidders.

Procurements made by the central government are currently regulated by the General Financial Rules of 2005, which only have the status of a subordinate legislation and are generic guidelines on government expenditure. Violations of these rules seldom attract penalties, noted a recent report on probity in India's public procurement by the United Nations Office on Drugs and Crime. The finance ministry has, however, pointed out that the rules clearly require that "every authority delegated with the financial powers of procuring goods in public interest" shall be responsible for bringing transparency in such procurements and ensuring "fair and equitable treatment of suppliers and promotion of competition." The rules also stipulate that suitable provisions be made in the bidding document "to enable a bidder to question the bidding conditions, process and/or rejection" of its bid. "The reasons for rejecting a tender or non-issuing a tender document to a prospective bidder must be disclosed where enquiries are made by the bidder," the finance ministry has said.

The ministry has pointed departments to a recent order on the issue by the Delhi High Court and said that importance of complying with it 'in letter and spirit cannot be over-emphasised.' Adjudging a case filed by a contractor who was not being issued tender documents by a government department, the court had said: "We have repeatedly emphasised in various orders that whenever a tender is rejected or tender documents are not issued and a party enquires reasons, it is necessary that the reasons be communicated to avoid unnecessary litigation...Despite this, the authorities persist in keeping silent over such representations, which we strongly deprecate."
In the US federal government contracting system, this is called "debriefing". It is a process that has been adopted in the last decade or so.

Contract Debriefings
Debriefings instill confidence in the contracting process by affirming that proposals were treated fairly. Statutory and regulatory changes to the debriefing rules better establish the debriefing as an offeror right that can reduce the number of protest filings, and strengthens the Government’s relationship with industry.

Debriefing means informing unsuccessful offerors of the basis of the selection decision and contract award. This information includes the Government’s evaluation of the significant weaknesses or deficiencies in the offeror’s proposal. Debriefings provide offerors to a competitive solicitation with an explanation of the evaluation process, an assessment of their proposal in relation to the evaluation criteria, a general understanding of the basis of the award decision, and the rationale for their exclusion from the competition.

Debriefings are different than notifications to unsuccessful offerors. The contracting officer must notify the offerors promptly in writing when their proposals are excluded from the competitive range or otherwise eliminated from the competition. See FAR 15.503for detailed coverage of notifications.
Legal and Practical Aspects of Debriefings: Adding Value to the Procurement Process (You may have to "trust" the site and click through a series of alerts. I do.)
Properly conducted, debriefings can greatly aid offerors, who can obtain insights for improving their proposals in future procurements. A skillfully performed debriefing also can ward off a potential protest by an unsuccessful offeror to the agency, the General Accounting Office (GAO), or the United States Court of Federal Claims whereby the agency allays the debriefed offeror’s concerns about possible prejudicial error in the evaluation or selection decision.

Poorly conducted, debriefings can decrease an offeror’s confidence in the agency’s evaluation practices, and can discourage that offeror from pursuing future business with that agency, thereby decreasing competition. A confusing or poorly executed debriefing also can spark a protest when the offeror was not otherwise so inclined. Most protests consume extensive agency resources in defending the procurement before the protest decision maker.5

In a debriefing, which can occur before or after contract award, agency representatives inform the offeror, commonly face to face, of the proposal’s weaknesses and deficiencies. The procuring agency in a postaward debriefing will further disclose limited information relating to the awardee’s proposal, such as the awardee’s overall evaluated cost or price, and the rationale for the source selection. The debriefed offeror either before or after award is entitled to receive certain other information, such as whether the agency followed the applicable source selection procedures. Debriefings are closely regulated by statute3 and the FAR,4 which identify appropriate topics for further discussion in this article.
Of course, the legal eagles do not warm easily to commercial realism, because they know how to make the worm turn.

Should government attorneys attend debriefings?
At the Nash & Cibinic Roundtable this past December 2 and 3 in Washington, DC, an issue came up that has bothered me for many years. The issue is the role of the government contract lawyer in the contracting process. Specifically, what role does the government contract lawyer play in debriefings of unsuccessful offerors? During a discussion of debriefings, one of the attendees identified herself as a government attorney and said that she always made a point of attending debriefings given by the contracting officers of her agency. I don't remember the entire comment, but the impression that I got was that she did so in order to ensure that all went well.

The comment made my contracting officer blood boil. I oppose the practice of having government lawyers attend debriefings. The main reason is that it sends the wrong signal to the company that is being debriefed. If I go to a meeting with someone who is unhappy with me and bring my lawyer, it sends a signal (whether accurate or not) that I expect trouble and feel the need to have a counselor present. Another reason is that I don't want any interruptions, interjections, note passing, whispering in my ear, or requests to caucus. Those things look bad. A debriefing is not supposed to be an interrogation, a negotiation, a debate, or an adversarial proceeding.

Of course, I am assuming that the CO is competent, that he or she understands the rules of the source selection process, understands how the source selection in question was conducted, knows the facts of the evaluation of the proposal in question, can explain the findings and conclusions of the evaluation team, and understands the basis for the source selection decision. If that is not the case, it raises the question of whether the CO should provide a face-to-face or telephonic debriefing. If the person responsible for the debriefing, the CO, cannot be trusted to do a good job, then perhaps a written debriefing, prepared or reviewed by an attorney, is the thing to do. But to send an incompetent CO into a debriefing armed with his or her lawyer does not strike me as a particularly intelligent course of action.

At one point during the Roundtable discussion, someone in the audience shouted out, "What if the offeror brings an attorney?" So what? As a CO, I asked offerors on more than one occasion if they had an attorney and, if so, would they please bring him or her to the debriefing. Why? I respect attorneys for their ability to think clearly and be dispassionate. An attorney is likely to recognize and acknowledge that a source selection was conducted properly even when their client is climbing the walls. If we did a good job and if I could explain the job that we did, then there was nothing to worry about. In my last source selection as a government CO, the loser filed a protest with the GAO right away. I called the protester, asked them to attend a debriefing, and asked them to bring their lawyer. They brought Professor Gilbert J. Ginsburg of The George Washington University Law School, a renowned government contracts expert. At the debriefing I handed them a copy of our request for proposals, a copy of their proposal, our complete source selection file for their proposal, including the write-ups by the individual evaluators and the scores, and told them to go through the material and to ask any questions they had. I left them in the conference room. They called me about an hour later, thanked me, and said goodbye. The next day I received a copy of their communication with the GAO withdrawing their protest.

Would I meet with my attorney before a debriefing? Not unless I had a legal question. As a CO, I would not need advice about what to say and what not to say. I believe in full disclosure debriefings. I believe in giving the loser everything. If a protest is filed, the protester?s lawyer is going to get everything anyway, including the proposals of the other offerors, so why withhold? While as a CO I cannot release the proposals of the other offerors, I see no reason to withhold anything else. if we made a mistake I would rather be told and be given a chance to take corrective action before a protest is filed. Full disclosure shows no fear.

Don't take this as dislike of attorneys. I work with them all the time and both like and admire most of the ones I meet. I have deep respect for the profession, which I consider to be admirable. But as I see it they and the CO have different roles to play in acquisition. If the attorney reviewed the source selection decision and found it to be legally sufficient, then he or she has played their part. Debriefing the losers is the CO?s role. If the CO is competent, then he or she will not need an attorney's services during the debriefings. If the CO is not competent, then a face-to-face or telephonic debriefing should be avoided at all costs. Having an attorney present will not make things go better.

Sunday, June 9, 2013

Of foxes and hen houses

Conflict of interest in $4 billion government minority program
The conflict in the federal Department of Transportation’s program, which is administered by each of the states, occurs because civil rights personnel with an explicit mission to expand the number of minority contractors and the amount of taxpayer dollars awarded to them are the same people tasked with policing and banishing the bad actors.

An audit last month of Minnesota’s program by state investigators illustrates the typical setup.

“One task of the Office of Civil Rights is to monitor the companies in the [Disadvantaged Business Enterprise] pool for those firms who no longer qualify as a DBE company. The other task of this office is to grow the pool and increase participation within the pool. This clearly is a conflict of interest,” the audit said. Companies “eventually earn enough money to be eliminated from the DBE pool.”

“However, it is those companies that aid MnDOT in reaching its participation goal. Audit has found several companies that no longer meet the DBE requirements.”

Further, the minority office’s specialists had neither the “technical knowledge” nor “level of effort” to properly set goals, and they could provide no documentation for the percentage of contracting dollars it said were given to minority firms, or duplicate its calculations. And “our review found little to no monitoring or enforcement mechanisms to ensure compliance.”

As a Transportation Department inspector general’s report put it last month, states “place more emphasis on getting firms certified as” disadvantaged rather than keeping track of the work they do. The report said the Office of Civil Rights is responsible for certification, appeals and coordination of enforcement.

In Maryland, the same office that oversees federal minority contracts also runs a parallel program with even laxer restrictions to disburse state money to contractors. Last month, the governor's office announced it was raising that percentage from 25 percent to 29 percent, one of the highest in the nation.

Maryland’s minority contracting program differs from comparable programs in that it would rather give a contract to a black businessman from out of state than a taxpaying resident, with no requirement that participants in its preference program be based in the jurisdiction.

Read more: http://www.washingtontimes.com/news/2013/jun/9/conflict-interest-4-billion-government-minority-pr/?utm_source=RSS_Feed&utm_medium=RSS#ixzz2VpbDjdvt Follow us: @washtimes on Twitter


No love for tennis coach

It has been said before, hard facts make bad law. This story has had its analogues on Guam and surely elsewhere: a well-meaning and enterprising citizen takes an unused bit of government property and turns it into a well-used community asset, but does that citizen then own the property and the community program?

Coach Mike debacle a ‘teaching moment’
A collision of values at Salt Lake City Hall last week left many shaking their heads after their sense of community was smashed by a process designed to keep government free of cronyism. The victims of the train wreck were Mike Martines and the community built around Coach Mike’s Tennis Academy.

For the past 15 years, Martines has toiled at the Dee Smith Tennis Center, 1216 Wasatch Drive, building Coach Mike’s Tennis Academy. He has raised about $500,000 in private money to spruce up the city-owned facility, including the purchase of a bubble that allows for year-round play.

When the veteran tennis coach took the reins at the Dee Smith Center in the late ’90s, there were no other takers for the rundown facility. "I’ve never bid for this place," Martines said. "They always renewed my contract."

According to those gathered at City Hall, he did more than transform forsaken courts into a gem of a tennis center. He built a community of folks who see Coach Mike’s Academy as a focal point of their lives and those of their children, they said. But soon, Martines could be out of a job and the tennis center he has built could be operated by someone else. Salt Lake City, through its procurement process ­— which apparently didn’t take into account such things as facility improvements and community building — has selected another vendor to operate the Dee Smith Center, as well as the tennis facility at Liberty Park.

In a prepared statement, Graham said the management of Liberty Park and Dee Smith tennis was being combined as a cost-saving measure. The selection committee took into account evaluation criteria including years of experience in the tennis industry, willingness to pay rent or share revenue and willingness to assume facility maintenance.

Martines has filed a protest against the decision, claiming the selection committee and process were flawed. Martines said in an interview he didn’t want to operate two tennis centers but was forced to bid on the joint contract when the Public Services Department determined Liberty Park would be combined with Dee Smith.

"They turned the decision over to the bureaucrats," Martines said.

The city’s request for proposal (RFP) calling for bids is public information. But the bids from various entities are secret to ensure that the process is free from fixes. Once a contract is signed, however, all the information becomes public. It would be illegal for the mayor or the City Council to interfere with the procurement process while it is ongoing.

The office of Mayor Ralph Becker has been inundated with emails and phone calls regarding Coach Mike’s Academy, said spokesman Art Raymond. "All the negative feelings let us know we have to rethink things," Raymond said. "It’s a teaching moment for us. We’re looking at how we could have done this better."

Show me the money

Let the People Know – Put Full Texts of Government Contracts Online
Each year hundreds of billions of dollars in federal government contracts, grants, leaseholds and licenses are awarded to corporations. Taxpayers should be able to easily access clear and concise information on how their tax dollars are being spent by the government at all levels. This is especially needed in an era of massive outsourcing to large private corporations.

States across the country have been implementing their own open government initiatives in the past several years. States leading the way by consistently moving toward making full contract texts of all direct government spending available online include Arizona, Arkansas, Connecticut, Delaware, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Nebraska, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, and Texas. Requiring federal agencies and departments to post the full text of all federal contracts online would be the logical next step.

Attempting to build on the foundation of the 2006 and 2009 transparency laws, Republican Congressman Darrell Issa and Democrat Senator Mark Warner have been working to advance the DATA Act in the House and Senate. The DATA Act passed the House in April 2012, but was not acted on in the Senate and died in committee in the 112th Congress. The Senate Committee on Homeland Security and Government Affairs did, however, hold a hearing to discuss the bill, titled “Show Me the Money: Improving Transparency of Federal Spending.”

During this hearing, despite bipartisan support in Congress, White House representatives from the Office of Management and Budget and the Treasury Department balked at the bill, giving insight to improvements that could be made. Comptroller General Gene Dodaro, however, made it clear that a law is needed to specifically enumerate what information must be reported.

The DATA Act was reintroduced in the 113th Congress (H.R. 2061 and S. 994) at the end of May 2013 and unanimously passed the House Committee on Oversight and Government Reform. It aims to improve the quality of publicly accessible government information, set uniform data standards, collect spending data, and examine the information to root out waste, fraud or abuse.

Neither the President’s Executive Order nor the DATA Act, however, has gone far enough. There remains one crucial provision that is notably absent from both proposals: making full contract texts available online. Unfortunately, when it comes to government spending and government contracts, the devil is in the details. Providing this degree of public access to reporters, scholars, taxpayer associations, and more competitive bidders would be an important step forward. It would help keep corruption in check, hold government accountable for its actions, propagate best practices in contracting, give rise to significant taxpayer savings, and encourage fiscal responsibility.

Thursday, June 6, 2013

FAS made a Mess of MAS

Improper Management Intervention in Multiple Award Schedule Contracts, Report Number A120161/Q/6/P13003, June 4, 2013, by Office of Audits, Office of Inspector General, U.S. General Services Administration
OBJECTIVE -- The objective of this audit was to review the circumstances related to FAS management intervention in contracting actions related to MAS contracts.

Finding - Improper Federal Acquisition Service (FAS) management intervention in Multiple Award Schedule (MAS) contracts resulted in inflated pricing and/or unfavorable contract terms, and undermined the authority of contracting officers.

Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions. [FAR 3.101-1]

In the course of performing Multiple Award Schedule (MAS) contract audits, the Office of Inspector General (OIG) identified numerous instances where Federal Acquisition Service (FAS) management, based on complaints from contractors, overrode contracting officer determinations without proper justification, pressured contracting officers to extend or award contracts, and reassigned contracts to different contracting officers. In the Oracle contract, the directors did not provide justification for transferring the contract to another contracting officer. In addition, the contracting officer who was replaced stated that the Division Director said, “Oracle is done with you as a CO.” In addition, when the OIG asked why some standard GSA contract language was changed in Deloitte’s contract, the contracting officer stated that Deloitte would not agree to a contract without the revised language.

These instances of FAS management intervention included direct communications between contractors and FAS management, often without the knowledge and participation of the responsible contracting officers.

In at least one case, FAS management interference resulted in a contract with higher prices and less favorable terms than those recommended by the original contracting officers. In other cases, interference resulted in questionable contract extensions.

To more fully assess the extent and possible impact of these cases on the integrity of the MAS contracting process, we reviewed the circumstances related to some of these management intervention actions. This report focuses on three large MAS contracts representing over $900 million in contract sales in calendar year 2011 (CY 2011).

The Federal Acquisition Regulation (FAR) Part 1 includes a “Statement of guiding principles,” as well as the authorities and responsibilities of the contracting officer.
FAR 1.102-4(a) states: "Government members of the [acquisition] Team must be empowered to make acquisition decisions within their areas of responsibility, including selection, negotiation, and administration of contracts consistent with the Guiding Principles. In particular, the contracting officer must have the authority to the maximum extent practicable and consistent with law, to determine the application of rules, regulations, and policies, on a specific contract."

In addition, the following FAR citations outline the authorities and responsibilities of the contracting officer. "No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met. [FAR 1.602-1(b)] Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment."

The concentration of authority in the contracting officer is critical to maintain the integrity of the contracting process. FAR 4.1 requires that, “Only contracting officers shall sign contracts on behalf of the United States.” In addition to the FAR requirement of wide latitude, contracting officers must also complete educational and training requirements before being granted a contracting warrant. The FAR, therefore, vests significant contracting authority and responsibility in the contracting officer and ensures that the contracting process is independent from all impairments.

FAS management intervention undermined the authority and morale of GSA contracting officers. FAS management (1) allowed contractors to circumvent contracting officers when the contractors disagreed with contracting staff determinations, and (2) supported the contractors’ positions, including reassigning contracts to different contracting officers. In each reassignment case, the new contracting officer awarded or extended contracts without properly addressing significant issues identified by previous contracting officers.

Although we have noted instances of improper management interference across several MAS Schedules, the three examples included in this report relate to FAS Schedule 70 Information Technology contracts. We will primarily focus on the actions of the Deputy Director and a Division Director (directors) of the Schedule 70 program.

FAS directors’ interference in the Oracle contract included undocumented discussions with Oracle representatives without the knowledge or participation of contracting staff, directives to the contracting officer to take actions contrary to the contracting officer’s determinations, and reassignment of the contract to another contracting officer. The evidence shows that Oracle officials went over the heads of the contracting staff to FAS management to have contracting staff replaced and to obtain decisions favorable to the company. This intervention usurped the contracting officer’s authority and resulted in the extension of the contract with questionable pricing, terms, and conditions. The Division Director twice intervened by directing the extension of the contract, despite contracting officers’ determinations that extensions were not in the best interests of the United States. The directors’ explanation for extending the contract was that the volume of sales under Oracle’s contract demonstrated a need by federal agencies. However, no examples were provided to demonstrate how government agencies would be negatively impacted if the contract were allowed to expire.

Oracle’s Senior Director of Government Affairs sent an e-mail to the Associate Administrator for GSA’s Office of Governmentwide Policy that stated, “Regarding GSA. We’re having a miserable time with our contracting officer on ge! tting [sic] our schedule contract modified. How would we go about getting a new one?” The GSA official asked Oracle if it was referring to a FAS contracting officer and Oracle responded that it was. Oracle also provided the June 29 letter and stated, “We find it a bit difficult when a CO is telling us which of our job titles do not qualify to be on a schedule. Can fill you in on the rest.”

FAS management intervention in the Carahsoft contract included undocumented discussions with Carahsoft representatives without the knowledge or participation of contracting staff, directives to the contracting officer to take actions contrary to the contracting officer’s determinations, and reassignment of the contract to another contracting officer. This intervention usurped contracting officer authority and resulted in the lengthy extension of a contract with inflated pricing and other terms and conditions unfavorable to the Government. Carahsoft’s MAS Contract Number GS-35F-0131R was scheduled to expire on November 18, 2009, but has been repeatedly extended on a temporary basis and is still currently under temporary extension.

On March 30, 2011, the contracting officer sent an e-mail to the OIG that stated:
The pressure is coming from my boss who has told me he doesn't want Carahsoft to call their Congressman. They have already called their Congressman before, so . . . my Division Director, said if we don't work with them (which means bend the rules that we have in place and make other vendors follow) that they will call the Congressman, and he doesn't want that. I just feel stuck between a rock and a hard place. I don't feel like Carahsoft wants to negotiate . . . they want to dictate. When I try to negotiate, or ask for information, they don't want to provide it, and [the Division Director] has told me they are going to call their Congressman, and it will come right back down to [their] or my lap to fix.
FAS management intervention in the Deloitte contracts included undocumented director discussions with Deloitte representatives without the knowledge or participation of contracting staff, directives to the contracting officer to take actions contrary to the contracting officer’s determinations, and reassignment of the contract to another contracting officer. This intervention usurped contracting officer authority and resulted in the award of a contract with inflated pricing and other terms and conditions unfavorable to the Government.
To me, one of the teachable moments of this report is that when structures are set up to "streamline" procurement, to place efficiency over integrity, issues such as this cannot come to light because there is no competitor in the process who would step in to complain. In this case it is a necessary precondition to having such a mechanism, in my mind, to have an independent and robust review mechanism that the contracting professionals can turn to and trust to "have their back".

While this post is has run on a bit, there is a lot more very interesting and human interaction detailed in the report that makes for valuable insight of what goes on at the coalface of procurement, and I highly recommend a read of it. It's only 15 pages long and you have already read a lot of it here.

Cleaning up the mess on your own dime

DOJ warns of fallout in Army-KBR contract dispute
Awarded to KBR in 2001, LOGCAP III — the Logistics Civil Augmentation Program III — has resulted in 160 task orders for everything from dining services for U.S. troops to in-theater delivery of housing. The outcome of a court battle between the Army and KBR over the final stages of LOGCAP III, the largest government services contract in U.S. history, could affect tens of thousands of federal contracts while creating “enormous uncertainty” for vendors and the government alike, according to the Justice Department.

The warning, delivered in the footnote of a recent U.S. Court of Federal Claims pleading, marks the latest development in a dispute to decide how to close out the 12-year-old, $38 billion military logistics contract supporting military operations in Iraq. In explaining the potentialimpact, lawyers speculated that if closeout activities had to be performed during the performance period of a contract, then the government could be forced to end deliveries to accommodate the closeout.

“For example, if an existing contract was for five years of performance, and closeout is estimated at one year, the government would need to direct the contractor to cease deliveries by year four to ensure that sufficient time exists to perform closeout,” the Justice Department filing stated.

While the Army has pushed to change the LOGCAP III pricing structure to a firm, fixed-price basis, KBR has sued to keep the closeout work under the existing cost-reimbursable arrangement. The company says the cost-reimbursable model is better because neither the company nor the Army can estimate the scope or duration of closeout work. “Legal, administrative, compliance, audit response, vendor issues, subcontract close-out and dispute resolution, to name a few, are all unknowns,” the company told the Army in a letter last summer.

KBR lawyers argue that LOGCAP III ended in December 2011 without any provisions to close out the contract. When the Army requested a proposal in 2013 for closeout activities under a firm fixed-price basis, the request was “unquestionably a solicitation for a new contract,” KBR argued.

Doth we protest too much? Methinks not

Protests delay Air Force contracts for firefighting, war planes
Protests have jumped 87 percent to a record 2,475 in the fiscal year ended Sept. 30 from fiscal 2006, which may be partly due to increased competition over declining awards in recent years. U.S. contracts fell about 4 percent to $512 billion last year from fiscal 2010, according to data compiled by Bloomberg.

The U.S. Air Force was set to deliver aircraft to the Afghan military in April. Its suppliers have only now started building them — after the contract was contested, canceled, re-bid, re-awarded, and contested yet again. Instead, they won’t be delivered until mid- to late 2014, as the U.S. plans to withdraw the last of its combat troops from Afghanistan.

The Air Force contract, with a maximum value of $950 million, was awarded to closely held Sierra Nevada Corp. and Brazilian subcontractor Embraer in December 2011. It has since been protested by Beechcraft. At the U.S. Forest Service, a protest of a contract for up to seven air tankers used to drop flame retardant means the 2013 wildfire season may be over by the time the planes are flying, said a spokesman for Sen. Mark Udall, D-Colo. Sierra Nevada officials had planned to supply the first of Embraer’s 20 turboprop aircraft in April 2013, said Taco Gilbert, a vice president at Sparks, Nev.-based Sierra Nevada, which is providing avionics and instruction under the contract.

For companies such as closely held Beechcraft, securing contracts is key as the Pentagon and other agencies slow spending. The company’s direct military contracts plunged about 68 percent to $331 million in fiscal 2012 from fiscal 2009, according to data compiled by Bloomberg. Beechcraft announced on Feb. 19 that it had emerged from bankruptcy protection. For Embraer, the award is a coup. The company is trying to tap the U.S. military market and expand its defense unit, which produced 15 percent of its 2011 sales.

There’s little the agencies can do to prevent the automatic, 100-day work delays triggered by protests to the U.S. Government Accountability Office, which arbitrates contract disputes. As a last-ditch effort, the government can supersede the stays with an override, which requires the officials to justify an urgent need or show that it’s in the best interest of U.S. taxpayers.

There have been no significant changes to the automatic delays in almost two decades. Congress in 2009 requested that GAO assess whether frivolous protests were rising. The office responded that attempts to discourage those challenges might backfire by adding costs and deterring “good-faith protests.”

Protests can serve as checks and balances to a sometimes opaque and flawed contracting process.

A prime example is the Air Force’s attempt to procure aerial refueling tankers. Chicago-based Boeing eventually prevailed against competitors European Aeronautic, Defence & Space Co. and Northrop Grumman.

Boeing’s first attempt at the $35 billion contract was derailed in 2004 by a scandal involving former top Air Force procurement official Darleen Druyun and then-Boeing Chief Financial Officer Michael Sears. Sears offered Druyun a job in October 2002 during the initial tanker negotiations. She was hired in January 2003. Sears and Druyun were convicted of violating federal conflict-of-interest laws.

Boeing was awarded the contract in February 2011, about 10 years after the Air Force first proposed the tanker-replacement program.

In March, the Air Force chose to override the latest protest from Wichita, Kansas-based Beechcraft, authorizing Sierra and subcontractor Embraer to resume work. Beechcraft has called the override unjustified, saying in a statement that the Air Force’s decision would lead to higher costs to taxpayers. It lost its challenge of the override at the U.S. Court of Federal Claims. The GAO has until June 17 to make a decision on the company’s protest of the contract.

Agency officials rarely use overrides. Even as protests soared, overrides have dropped by almost half to 33 in fiscal 2012 from 62 in fiscal 2006, according to GAO data obtained through a Freedom of Information Act request. Their waning popularity may be a result of increasing scrutiny from the Court of Federal Claims, which has let agencies know that it’s “not going to give them a free pass,” said Daniel Forman, a partner and co-chairman of the government contracting unit at the Washington-based law firm Crowell & Moring LLP.

Sue Payton, who was assistant secretary for acquisition at the Air Force from 2006 to 2009, said she used to build potential delays into the timeline for planning contracts. “Getting the requirements right up front saves you from protest hell,” Payton said.

The most effective way of avoiding challenges, though, is making sure the contracting process is fair and complete from beginning to end, according to current and former military officials. The Army tries to deter protests with contract solicitations that are “thoroughly scrubbed” to make sure they are clear, concise and compliant with federal regulations, said Matthew Bourke, a spokesman for the service. It also works to keep “a very open dialog with our industry partners,” he said in an e-mail.