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Monday, September 29, 2014

Girl talk

No offense intended to anyone, but this post is about confidential discussions, which immediately leads me to recall one of my favorite songs, called Girl Talk (get a taste of it here), by a sweet Hawaiian duet team that call themselves Hula Honeys.

It also happens that the articles cited here are written, in some cases co-written, by Attorney Michelle E. Litteken of the law firm Mayer Brown LLP, and collected on the Lexology website.  Attorney Litteken has produced a very informative collection of articles on the "problems" of engaging in discussions in the solicitation process of negotiated contract formation. I have already posted one such article here, and just came across these others, which add texture and color to this confusing and complex subject. Taken together, they provide a welcome tonic to the headache that comes from trying to sort out the ins and outs of permissible discussion.

Again, the caveat: read the whole article at the link. I cut, paste, leave out important stuff, paraphrase, rearrange and otherwise use great license to present articles on this post, doing them no justice, I am sure, but I do so with the best intention of bringing the subject to you, for you to discover and discern. Here, I have left out all discussions of cited cases, and that must be read to appreciate the nuances the cases deal with.

When does an agency cross the line from clarifications to discussions?
FAR 15.306 defines clarifications as “limited exchanges, between the Government and offerors, that may occur when award without discussions is contemplated.” The FAR does not expressly define “discussions,” but it explains that “discussions” include negotiations that “are undertaken with the intent of allowing the offeror to revise its proposal.” The FAR used to limit clarifications to communications about relatively small matters, such as eliminating clerical mistakes or minor irregularities. However, the rules were revised in 1997 to allow a free exchange of information without requiring discussions. Decisions from the GAO and CFC reveal that the two protest forums apply the FAR provisions differently, with the CFC appearing to embrace a more substantial exchange of information that can still be characterized as clarifications.

Both GAO and the CFC recognize that, if an offeror is given an opportunity to revise its proposal, the agency has engaged in discussions. Several GAO and CFC cases refer to this as the “acid test.” The tough cases come when either (i) questions (often called “clarifications” by the agency) seek information that is necessary to determine technical acceptability of the proposal, or (2) the agency seeks a substantial amount of “clarify[ing]” information and an offeror’s response approaches (or crosses) the line of changing the proposal.
Don’t be misled: what contractors should know about misleading discussions
Discussions can be useful to contractors because the questions asked and issues raised can direct an offeror to areas of its proposal needing improvement. In some situations, discussions can help a contractor turn an unacceptable proposal into a successful offer. However, information provided by an agency during discussions can also lead an offeror in the wrong direction. If the agency selects another proposal, the disappointed offeror may file a protest and argue that the discussions were misleading. But what qualifies as misleading discussions? How specific does an agency need to be when it engages in discussions? These are issues that contractors should be mindful of as they engage in discussions—and that they must understand to frame potential protest issues when they are not the prevailing offeror.

Although the FAR does not define misleading discussions, decisions from GAO and CFC provide guidance on when discussions are misleading. Both forums have stated: “An agency may not inadvertently mislead an offeror, through the framing of a discussion question, into responding in a manner that does not address the agency’s concerns; or that misinforms the offeror concerning its proposal weaknesses or deficiencies; or the government’s requirements.”

To succeed in a misleading discussions protest, the protester must show that the allegedly misleading discussions were prejudicial, i.e., made its proposal less competitive. For example, in Tech Systems, Inc., the protester claimed that the agency misled it by focusing on its proposed technical approach, which led the protester to overemphasize management, but refused to discuss pricing, which proved to be the determinative factor in source selection. The court rejected the protester’s argument that the discussions misled it into proposing a high-cost approach because the protester did not show that is costs were higher because of the management-centric approach the agency purportedly encouraged it to propose.

As is the case in challenges to the meaningfulness of discussions, the amount of specificity required to avoid misleading an offeror is highly fact dependent. Contractors should be aware of an agency’s obligation to refrain from misleading offerors as they engage in discussions and litigate bid protests.
What is required for discussions to be meaningful?
It’s basic procurement law that, when an agency engages in discussions with offerors under FAR Part 15, the discussions must be meaningful. FAR 15.306, which provides for exchanges with offerors after receipt of proposals, does not specifically define “meaningful” in the context of discussions. Instead, the FAR states that an agency must discuss “deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond.” GAO and the CFC have based their analyses of what discussions qualify as meaningful on this FAR provision. Issues that arise with respect to whether discussions were sufficiently meaningful include:

• When is a weakness significant?
• Do weaknesses that are discriminators have to be discussed?
• How specific does the agency need to be?
• Does an agency need to discuss a weakness if it first appears in an offeror’s FPR?

Since the FAR only requires that deficiencies and significant weaknesses be discussed, and because there is no obligation to discuss garden-variety weaknesses within a proposal, a protest ground regarding the failure to discuss such issues (absent an unequal discussions issue) would be dead on arrival.

The FAR (15.001) defines a “weakness” as “a flaw in the proposal that increases the risk of unsuccessful contract performance.” A weakness is “significant” when the concern “in the proposal is a flaw that appreciably increases the risk of unsuccessful contract performance.” So the distinction between a weakness and a significant weakness turns on the judgment of whether there is an “appreciable” effect on the risk of unsuccessful contract performance.

There are numerous bid protests in which offerors’ proposals are closely matched and a weakness that was not discussed (or group of such weaknesses) becomes the discriminator. Substantial precedent makes clear that the fact that a weakness eventually becomes the deciding factor does not create an obligation to conduct discussions.

In cases in which there is no dispute about the significance of a weakness, the parties may disagree over whether the discussions directed the offeror to the area of its proposal needing improvement. The boilerplate legal concepts applied by the CFC and GAO are clear. An agency is not required to “spoon feed” offerors during discussions; instead, the agency is merely required to lead offerors into the areas of their proposals requiring amplification or correction. Consistent application of these rules can be tricky.

In sum, although the failure to engage in meaningful discussions is a common protest ground, there are nuances in the law that may add complexity to what seems like a familiar argument.
“That wasn’t fair!”—protests based on unequal discussions
The principles of fair and equal competition drive many aspects of procurement law and policy. These principles are evident in the FAR’s requirement that when an agency engages in discussions with offerors, the agency cannot “engage in conduct that [f]avors one offeror over another.” Discussions often occur as part of the procurement process, and can be beneficial to the agency and offerors. However, discussions have their drawbacks. If an unsuccessful offeror believes that other offerors were given better direction or provided with more information, discussions can provide the basis for a protest based on purportedly unequal discussions.

At first glance, the rule that discussions between the Government and offerors must be equal and not favor one offeror over another seems clear. However, application of the rule can be complicated because agencies are not required to conduct identical discussions with offerors, and because discussions must be tailored to offerors’ different proposals. As such, when GAO or the CFC is faced with a protest alleging unequal discussions, it is not a simple matter of determining how many questions were asked, how long discussions were conducted, or the type and number of issues that were addressed. Instead, the question is whether the agency’s questions or statements made during discussions gave an offeror an unfair advantage.

One difficult aspect of unequal discussions issues is that in most cases, the issues can only be understood by bid protest counsel examining an administrative record released under a protective order (PO), and the issues usually cannot be discussed in any detail with the client (as doing so would be inconsistent with the PO).

When considering pursuing a protest, contractors should be mindful of an agency’s obligation to conduct equal discussions. It is important to remember that the number of questions raised or issues addressed is not decisive regarding whether discussions were unequal. Instead, contractors must consider the substance of the discussions—and whether they have any basis to believe the agency provided another offeror with an unfair advantage.
Finishing off her series is this reported on Mondaq: Discussions Round-up: Recent Protests Challenging Discussions
As this series has shown, disappointed offerors often raise protest allegations related to discussions. Although protesters frequently allege that discussions were unequal, misleading, or not meaningful, challenges based on these allegations can be difficult to win. In researching decisions to include in this round-up, I found only two decisions issued in 2014 sustaining a protest based on a discussions issue: Kardex Remstar LLC, which was discussed in the series' first post, and Marathon Medical Corp.). Of course, although many of the protests discussed didn't result in sustained protests based on the facts presented, they often provide useful insights for contractors in developing new claims and are worth close study.

When Does an Agency Cross the Line from Clarifications into Discussions?

The 2014 Windstream Communications protest followed a 2013 protest in which Windstream challenged the exclusion of its proposal from the competitive range. The agency took corrective action, and during the reevaluation, the agency contacted Windstream about its pricing. After reevaluating Windstream's proposal, the agency assessed two deficiencies under the "technical and management approach" subfactor and determined that Windstream's proposal was unacceptable. Windstream argued that the agency failed to engage in meaningful discussions because it raised concerns about Windtsream's prices but not the technical and management approach deficiencies. The Agency argued that it was not required to address the deficiencies with Windstream because it did not engage in discussions – the exchanges were clarifications. Windstream attempted to bolster its claims that the exchanges were discussions by pointing to the fact that it had submitted new detailed pricing information in response to the agency's questions – thereby revising its proposal – the "acid test" for discussions. However, in its submission to the agency, Windstream wrote: "We did not change any of our prices.". GAO denied the protest, finding that although the format of the pricing information was different, the elements and its proposed price were the same. As such, the exchanges were clarifications – not discussions – and the agency was not required to address the proposal's deficiencies.

What Does It Take for Discussions to Be Meaningful?

In our What Is Required for Discussions to Be Meaningful? post, we discussed Sentrillion Corp., a decision in which GAO sustained the protest because the agency failed to raise its concerns about the completeness of some of Sentrillion's business license applications. Based on GAO's recommendation, the agency reopened the competition and issued discussion letters. In its letter to Sentrillion, the agency stated that if Sentrillion was proposing to partner with other companies to perform the work, it must submit evidence of a partnership agreement along with any business licenses or applications. During the reevaluation, the agency deemed Sentrillion's proposal technically unacceptable because the teaming agreements it had submitted—which provided that the parties would negotiate a subcontract if Sentrillion was awarded the contract—were not binding partnership agreements. Sentrillion protested at the CFC, asserting (among other protest grounds) that the discussions were not meaningful because the agency never told Sentrillion to submit binding subcontract agreements or that teaming agreements were unacceptable. The court denied the protest, finding that the discussion letter adequately conveyed the need for finalized agreements.

What Constitutes Unequal Discussions?

In Bannum Inc., the agency determined that because the awardee was rated slightly better for past performance and technical/management, the benefits of its proposal justified paying a three percent price premium. During discussions, the agency had told the awardee that its proposed price was high but did not comment on the protester's pricing, and the protester asserted that discussions were unequal. GAO denied the protest, stating: "unless an offeror's proposed price is so high as to be unreasonable or unacceptable, an agency is not required to inform an offeror during discussions that its proposed price is high in comparison to a competitor's proposed price, even where price is the determinative factor for award." GAO stated that the requirement to conduct discussions does not depend on how an offeror's proposed price compares to the Independent Government Estimate (IGE). However, in support of its decision, GAO noted that the protester's price was the lowest received and less than the IGE–and the awardee's initial proposed price had been above the IGE.

No Matter What, a Protester Must Show Prejudice

As is the case in all bid protests, prejudice is a central requirement in challenging the way in which an agency conducted discussions. In some instances, GAO or the CFC may not address whether the agency violated the FAR provisions governing discussions because the protester failed to demonstrate how it was prejudiced by the alleged violation. For example, in Inchape Shipping Services, the protester argued that the agency engaged in unequal discussions because it allowed the awardee to revise its proposal by replacing the individual proposed for a key personnel role with another employee after the individual it initially proposed was placed on leave. GAO determined that it need not decide whether the change in key personnel constituted discussions because the protester had not demonstrated competitive prejudice.
On that last sentence about no competitive prejudice, I note that the notion of competitive prejudice is hard in the first instance to get hands around.  But it is easier once the concept is grasped. 

In this case, for instance, the protestor's competitor was allowed to change the name of a person with a key role to play in the performance of the contract. Whether a bidder or offeror has the capability to perform is an issue of "responsibility". In the framework of ABA Model Procurement Code law, such as is Guam's, "capability" is one of the standards of responsibility and need not be finally determined until just before award.

Bidder or offeror capability is not an issue that determines whether the bid or offer is responsive. Only issues concerning responsiveness affect bidder prejudice, and only if the matter is material. As the Guam regulations state, "Minor informalities are matters of form ... or insignificant mistakes that can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible." (2 GAR § 3109(m)(4)(B).) 

Thus, when the government determines responsibility, it is given great deference to make that judgment call about the person it wants to do business with; but, when it is determining whether a bid or offer proposes to provide the very thing or performance specified, to make sure everyone is proposing, say, apples if it is apples the government wants, the government must reject a bid or offer that proposes oranges, and it prejudices the other bidders if the government goes ahead and chooses an orange 

Matters of responsiveness are scrutinized more carefully and early in the game, by the time bids and offers are opened or considered, and cannot be waived or altered unless the matter is immaterial or negligible.

Issues dealing with whether the government wants to or should deal with a particular bidder or offeror relate to responsibility.  Issues dealing with price, quantity, quality, delivery or contractual terms or other specifications describing the product or service required to be delivered are issues of responsiveness.  Prospective contractor responsibility must be distinguished from product or service accepetability and responsiveness.

Thursday, September 25, 2014

Creating new ideas with a few old ones: competition, market research, planning

New Pentagon Procurement Rules Seek to Create Culture of Innovation
The U.S. military is in a technology rut. and although the Pentagon has far and away the world's biggest arms budget, military equipment is showing its age and efforts to modernize are sluggish at best.

The "better buying power" procurement rulebook the Pentagon unveiled, BBP 3.0, is a call to arms to engineers, researchers and technologists. "It's motivated in part by my continuing concern with technological superiority and the fact that our capabilities in the world are being contested by others — people developing, modernizing, and building systems that threaten our superiority," said Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall.

Kendall has been sounding alarms about the U.S. technology slump for years, and believes the Pentagon must rev up the innovation engine so it can deploy more advanced weaponry in the coming years. Also behind this new emphasis on technological achievement is Deputy Defense Secretary Robert Work, who is leading a separate study on military technology gaps that will shape future budgets.

BBP 3.0 is less about how the Pentagon acquires products and services, and more about what it needs to buy. In that vein, the Pentagon will more closely monitor the military services' research-and-development programs to ensure they are investing wisely, said Kendall.

One of the reasons the military is falling behind the technology curve is that weapons systems are not engineered for easy upgrades. So what might be cutting-edge technology at the outset of a program becomes outdated by the time it gets in the hands of military service members. Kendall does not see weapon development cycles getting much shorter, but he wants to be able to update weapon systems in response to emerging threats, without having to start over with new a design. He will direct procurement officials to stay in touch with the intelligence community and keep up with technology advances around the world that could potentially undermine U.S. weapons systems. Kendall will ask intelligence analysts to help Pentagon program managers understand what enemies might be doing to counter U.S. technology, "so we can anticipate that and account for that in our designs."

Some of the buzzwords in BBP 3.0, such as “technology insertion” and “refresh,” are not new, but “need to be emphasized,” said Kendall. “We have pushed for modular, open systems for a long time. We've had mixed success with that,” he said. “I think a lot of it has to do with successful management of intellectual property and managing design interfaces.”

Productivity has to increase both in industry and government, he said. The Pentagon believes that competitive market forces motivate suppliers to improve products and lower prices. "We're going to continue to emphasize incentive-type contracts," said Kendall. "Whether they're cost-plus or fixed-price, you tend to get the same type of improved results in either case."

The Defense Department is often criticized for favoring a handful of top prime contractors and not opening up the market to outsiders. Kendall said one of the goals of BBP 3.0 is to "lower the barriers" to competitors. This is imperative as most of the R&D investment now comes from the private sector. "There are a lot of technologies that are moving more quickly in the commercial world than they are in the military-unique technology world," Kendall said. "We want to be able to capitalize on them as much as we can." He suggested it would benefit the Pentagon to seek sources of technology globally and not just in domestic markets.

Many of the initiatives in BBP 3.0 aim to motivate the private sector to invest in military-relevant R&D and to help the Pentagon avoid costly procurement fiascos.
A long-standing gripe of defense contractors is that they have little time to respond to DoD solicitations, particularly those for complex systems. Kendall will be directing program officials to release requirements in draft form to industry early, to give contractors a chance to start to prepare for future acquisitions, “and also to give us some feedback on those requirements from the point of view of costs and technical feasibility and risk.”

Kendall insists that financial incentives are what ultimately influence contractor behavior. He insists the Pentagon will increase contract awards based on “best value,” as opposed to picking the lowest cost bid. “We're going to continue the practice of letting industry know what we're willing to pay for better performance so they can bid intelligently.”

The Defense Department has over the years wasted billions of dollars on programs that, from the outset, were doomed because the technology promised by the contractors was out of reach. Under the current system, contractors are rewarded for gee whiz Powerpoint slides rather than for being straight about the art of the possible. Kendall wants to change that by involving contractors earlier in the cycle and getting candid assessments of what is realistic and financially doable.

Analysts and industry insiders are skeptical that documents like BBP 3.0 will substantially change the status quo. The tenets of BBP 3.0 are motherhood and apple pie, but turning them into actionable policies will be a tall order, they contend. The highly bureaucratic procurement system — which emphasizes oversight, monitoring, reporting and top-down direction — is a hindrance to innovation, said military analyst Daniel Gouré, of the Lexington Institute, a think tank funded by top defense contractors.

“Russia and China are catching up technologically not because they are smarter or more inventive but because they are unencumbered by an archaic acquisition system,” he wrote in a blog post. “The real game changer would be if the Pentagon could acquire and field new capabilities in half the time and at reduced cost. Of equal significance would be using commercial best practices in maintenance, sustainment and supply chain management to lower the life cycle costs for military systems.”

He credits BBP 3.0 for promoting greater use of modular and open systems architectures and for suggesting contractors should be informed about military requirements earlier in the acquisition process. Gouré also gives Kendall kudos for seeking to remove obstacles to procuring commercial items from the global market.

Industry insiders have argued for years that, to be more nimble, the Pentagon should take a page from the book of one of its own organizations, the Defense Advanced Research Projects Agency. DARPA has been ahead of the rest of the Defense Department in recruiting new vendors and pushing the technology envelope, industry analysts point out. Its productivity also is significantly higher. With a $3 billion budget, DARPA can do the job with 1,000 people. The military’s major laboratories have smaller budgets but much larger workforces. Until the Pentagon tackles its bloated overhead, analysts said, it will be financially difficult to invest in equipment modernization.

Experts also question the Pentagon’s avowed commitment to market competition as the ticket to lower costs and better technology. Most of the Pentagon’s technology dollars are captured by a small group of prime contractors, and these firms likely will continue to have a stranglehold on the available budget. That puts greater pressure on the rest of the industry and on smaller firms that generate much of the innovative technology the Pentagon wants. Having the preponderance of defense R&D dollars concentrated in a handful of firms with huge overhead costs is unproductive, one executive noted.

Small businesses are now a hotbed of innovation, but getting their foot in the door is a Sisyphean climb. It is not clear how BBP 3.0 will change that reality.

Dealing with the defense procurement system is a “battle we face every day,” said Sean Varah, CEO of MotionDSP. The Silicon Valley firm develops image processing software used by military and intelligence analysts across the government. MotionDSP’s software is an example of a product the government didn’t know it needed until it saw it.

There are thousands of technologies funded by the private sector that might be of use to the military, if only government buyers knew where to look. “They need to be able to buy more readily available commercial products,” Varah said. The Defense Department pays contractors hundreds of millions of dollars to write government-owned software from scratch that becomes obsolete within months, while better and cheaper products already exist, he said. “Private funding is investing in commercial R&D and creating products, at no taxpayer cost.”
















Saturday, September 20, 2014

The key personnel difference between responsiveness and responsibility

Sometimes the difference between contractor responsibility and bid responsiveness can be slippery to catch. This is particularly true when services rather than things are being procured.

Under the ABA Model Procurement Code regime, as adopted on Guam, the determination of responsibility is made by examining certain standards of responsibility. Among relevant inquiries is the judgement of the prospective contractor's ability to perform the contract, or the ability to obtain the necessary requirements to perform when performance comes due. Capability is to be determined before award of contract, and can be assessed through an inquiry process after bids or offers are opened.

Responsiveness, however, means submitting all material requirements to provide the government the exact thing or service that the solicitation demands. Responsiveness is answered from data submitted in the bid or offer, and is not curable by submission of revised bids or offers after opening.

It is fundamental that matters of responsibility cannot be transformed into issues of responsiveness by requiring submission of evidence of responsibility in the bid or offer.

These general principles are often reflected in procurement regimes other than the ABA Model Code, such as the US federal acquisition rules for request for task order proposals ("RTOP"), as the following decision of the GAO indicates. Again, I remind readers to read the original material at the link; that which follows is edited in ways that may distort the actual case, and often excludes additional issues of interest.

Matter of: Paradigm Technologies, Inc., File: B-409221.2; B-409221.3, August 1, 2014
The RTOP was issued pursuant to Federal Acquisition Regulation (FAR) § 16.505 to holders of MDA Engineering and Support Services multiple award contracts. The solicitation provided for the issuance of a cost-plus-fixed-fee task order for various strategic planning and financial support services for a base year and two option years.

Offerors were informed that the task order would be issued on a best-value basis, considering technical, past performance, small business utilization past performance, cost, and small business utilization. The technical factor was considered to be significantly more important than all other factors, and consisted of four, equally-weighted subfactors: approach, labor mix, key personnel, and transition.

As relevant here, with respect to the key personnel subfactor, offerors were required to propose as key personnel a contract program manager and a task order lead. In this regard, offerors were instructed to submit resumes for these two key personnel, as well as for any subject matter experts that were proposed.

MDA received proposals from Paradigm (the incumbent) and Booz Allen, which were evaluated by the agency’s technical evaluation team, past performance evaluator, and cost/price evaluation team. The technical evaluation and past performance teams assigned adjectival ratings under the evaluation factors for each proposal, supported by a narrative that identified strengths, significant strengths, and weaknesses. MDA conducted several rounds of discussions with the offerors, and requested final proposal revisions (FPR). Booz Allen submitted its FPR on July 22, 2013, in which it provided resumes for the contract program manager (Ms. G) and the task order lead.

On August 5, Booz Allen’s proposed contract program manager, Ms. G, notified Booz Allen that she had accepted a position with another firm. On October 23, MDA selected Booz Allen for issuance of the task order, and on October 28, Booz Allen notified the contracting officer of Ms. G’s departure and proposed to provide Mr. H as the new contracts program manager.

Following a debriefing, Paradigm protested to our Office on November 4, arguing, among other things, that Booz Allen proposed a key person, Ms. G, that Booz Allen knew would be unavailable. MDA informed our Office that it would reevaluate proposals and make a new selection decision. We dismissed the protest as academic.

In the reevaluation of FPRs, as relevant here with respect to the evaluation of Booz Allen’s proposal under the key personnel subfactor, the technical evaluation team noted that, “on information and belief,” Booz Allen’s proposed contract program manager, Ms. G, was no longer employed by Booz Allen.

Although the evaluation team did not change Booz Allen’s satisfactory subfactor rating, it assigned a weakness for Booz Allen’s failure to provide one of the two required key personnel. In this regard, the evaluators stated that the risk regarding Booz Allen’s ability to satisfy key personnel requirements “is mitigated to some degree by the fact that [Booz Allen] has the demonstrated ability to recruit and hire qualified personnel to fulfill the Key Personnel ([contract program manager] in this case) duties.”

The selection authority recognized that Paradigm’s proposal was rated higher than Booz Allen’s under the technical and past performance factors, and that the technical factor was significantly more important than any other factor. The selection authority, however, concluded that the difference between the two technical proposals was not as significant as the adjectival ratings implied. In this regard, he also noted that, although Paradigm’s proposal presented virtually no performance risk to the government, Booz Allen’s proposal presented a low to moderate performance risk. The selection authority acknowledged that Paradigm’s highly-rated proposal was worth paying some amount of cost premium, but concluded that the merit of Paradigm’s proposal was not worth the substantial cost premium.

The selection authority again selected Booz Allen to receive the task order. After a debriefing, Paradigm protested to our Office.

As explained below, we sustain Paradigm’s challenge to the agency’s evaluation of Booz Allen’s contract program manager.

Paradigm argues that Booz Allen’s FPR was technically unacceptable, complaining that MDA in its reevaluation of proposals knew that Booz Allen’s proposed contract program manager, Ms. G, was no longer employed by the firm and would not be available to perform under the task order. Protest at 22. Paradigm contends that, because offerors were required to propose a contract program manager as a key person, Booz Allen’s lack of a contract program manager failed to satisfy a material solicitation requirement. Paradigm also argues, in the alternative, that MDA allowed Paradigm after the submission of FPRs to substitute a new contract program manager, in effect reopening discussions with only Booz Allen.

It is a fundamental principle in a negotiated procurement that a proposal that fails to conform to a material solicitation requirement is technically unacceptable and cannot form the basis for award.

The proposal of a contract program manager is a material solicitation requirement, as offerors were required to identify a specific individual for this key position by submitting a resume. When Ms. G left Booz Allen’s employment, Booz Allen’s FPR no longer satisfied this material requirement.

Although MDA considered this failure to be a weakness [affecting responsibility], it was in fact a deficiency. A weakness generally reflects a proposal flaw that increases the risk of unsuccessful performance, while a deficiency reflects the failure of a proposal to meet a material requirement.

Our concern here is with MDA’s failure to recognize that Booz Allen’s revised proposal could not be viewed as satisfying the solicitation’s key personnel requirements. That is, having been informed prior to its reevaluation of proposals and making a new selection decision that Booz Allen’s FPR no longer satisfied requirements concerning a key person, MDA could not simply accept Booz Allen’s revised proposal and consider the matter a weakness.

We recommend that MDA either reject Booz Allen’s proposal as unacceptable or reopen discussions, obtain revised proposals, and make a new selection decision. If Booz Allen’s proposal is rejected or Paradigm’s proposal is found to offer the best value to the government, the agency should terminate Booz Allen’s task order for the convenience of the government and issue a task order to Paradigm. We also recommend that the protester be reimbursed its reasonable costs of filing and pursuing the protest, including attorneys’ fees.
This case reflects that, just as a solicitation cannot convert a matter of responsibility into an issue of responsiveness, nor can an evaluator convert a material specification factor into a matter of responsibility.

The key to understanding this case is to focus first on what it was that the government demanded to receive. Here, the government demanded a particular service. It sought to acquire "various strategic planning and financial support services." Having sought services, it set parameters for the services it specifically wanted. This was not a case where the services were merely incidental to what was required. These services were precisely what the government wanted to acquire. Responsiveness speaks to the question, does this bid or offer give the government what it wants. Responsibility speaks to the question, does this bidder or offeror have the capability and integrity to give the government what it wants under the contract terms required for performance.

Thus, when the government described the specific services it wanted, it wanted to know who that service provider was and the qualifications of that person. When that person was not identified in the request for final proposals, the proposal was unacceptable, which is to say nonresponsive. 

The award was then made to the nonresponsive offeror anyway, because the agency changed focus, saying that while the offeror failed to have the thing needed at the time of submission of final proposals (the functional equivalent to bid opening), the offeror had the ability to obtain that requirement later.  

Having the ability to become capable of performance when it is required is an element of responsibility, however, not responsiveness.  It was error to treat an issue of responsiveness in the manner of determining responsibility. Weaknesses in evidence of responsibility can be cured after bid opening, up to time of award, or even required performance in some cases, whereas acceptability, that is responsiveness, is determined at bid opening and cannot be cured afterwards.

The GAO stated the obvious (but perhaps not so obviously): that a nonresponsive bid cannot be cured with a responsibility analysis.
"The proposal of a contract program manager is a material solicitation requirement [in a solicitation for "for various strategic planning and financial support services"], as offerors were required to identify a specific individual for this key position by submitting a resume. ... Although MDA considered this failure to be a weakness [affecting responsibility], it was in fact a deficiency. A weakness generally reflects a proposal flaw that increases the risk of unsuccessful performance, while a deficiency reflects the failure of a proposal to meet a material requirement."








Saturday, September 6, 2014

Contracting a bad case of contract management

NAO urges further government action on contract oversight From the UK
Government must do more to address "widespread problems" in how it manages contracts with private suppliers, according to new findings from the National Audit Office (NAO).

The MoJ and Home Office were among a number of departments that commissioned internal reviews of their agreements with private contractors last year after the former uncovered what is described as 'systemic malpractice' such as overcharging by G4S and Serco on its electronic monitoring contracts dating back to 2005.

Key issues identified in the report included:

•A failure across government to recognise the importance of contract management and a focus on trying to prevent errors within agreements rather than providing best possible value.
•Government being at a permanent disadvantage concerning its commercial capability compared to the private sector, with contract management traditionally being "vulnerable" to administration cuts and under-investment.
•A lack of pressure from departmental senior managers to demand visibility of contracts.
•Key figures in central government departments not taking contract management seriously as an issue.
The report is available in pdf form here.

Why won’t governments take contract management seriously? Commentary by Stuart Lauchlan
Specific criticism levelled by the NAO includes:
• Allowing the providers to ‘mark their own homework’ by relying on the information supplied by the outsourcing companies rather than carrying out their own checks.
• Lack of ownership with some government departments unable to cite which civil servant had responsbility for making sure that an outsourcing firm was honouring a particular contract.
• Government is too locked in to dealing with companies that are “too important to fail” on the basis that their collapse would cause far reaching disruption to public service delivery.
• Gaps between the numbers and capability of staff allocated to contract management and the level actually required.
• Limited interaction between finance, commercial and operational contract management functions.
• Senior management engagement with suppliers has not been widespread across government.
• A lack of meaningful incentives for innovation that inhibits shared approaches to problem solving and service improvement.
• Government is not fully using commercial incentives to improve public services with levels of payment deductions allowed by contracts are often insufficient to incentivise performance.
• Government does not have sufficient understanding of the level of risk it is retaining on contracted-out services with none of those examined in the cross-government review sharing risk registers with the contractors to ensure all understood who was managing what.

Ultimately, the NAO distills all this down to four major points:
• Failure to recognise the value of contract management meaning that it is seen as a way to avoid things going wrong, rather than unlocking value.
• Senior managers in central government departments don’t take contract management seriously with departments not adapting governance to the expanding role of government contracting.
• Lack of visibility over contracts with senior managers often only engaged on contracting issues to firefight problems and putting little pressure on teams to improve the information they rely on to manage the contract.
• Government has a permanent disadvantage in commercial capability with the Cabinet Office estimating that government as a whole deploys less of its specialist commercial resources on contract management than the private sector.
On this last point the NAO concludes gloomily:
Yet it is doubtful that the government can improve its capability to be able to have the best contract managers on all its contracts. It will not pay either to bring in or retain commercial experts to match the combined expertise of its contractors.

Reaction to the report was predicable.

Margaret Hodge MP, Chair of the Committee of Public Accounts, which is preparing its own report on public procurement, commented:
More and more of our public services are now being delivered by private companies, who between them received a huge £40bn last year from contracts funded by the British taxpayer.  These companies must be held to the same high standards as any government department, so that the public can have confidence that they are delivering the quality of service we are entitled to expect.  With so much taxpayers’ money at stake, departments must urgently put an end to the “out of sight, out of mind” mentality that has led them to be in this weakened position before even more taxpayers’ money is wasted.
Jim Bligh, Head of Public Services policy at the Confederation of British Industry, said:
The NAO is right to highlight that the Government sometimes sees contract management as an afterthought, focusing too much on getting the deal signed and too little on what will happen when the ink dries.

The Government has a sensible programme of commercial reform but progress is too slow. It needs to focus on quickly building up the skills and capabilities of the Civil Service to manage the growing complexity of contracts.  And the Cabinet Office must have the necessary levers at its disposal to make sure that Whitehall departments adopt new ways of working.

The industry recognises that it also needs to act differently.  Wider use of open book accounting would make sure that the Government has better access to financial information about its contracts with the private sector, and improve accountability for the taxpayer.
For its part, the Cabinet Office, which has been spearheading procurement reforms, commented:
The NAO acknowledge our work to overhaul government’s commercial activities which saved taxpayers £5.4billion last year alone, against a 2009/10 baseline. Compared to 2010, when there was no central grip on procurement, we are now taking a hard hitting business-like approach to managing contracts with suppliers.
As the author Stuart Lauchlan noted, this is probably pandemic.


Market research in R&D must be integrated with needs assesment and specification crafting

Procurement Reforms Reignite Feud Between Weapon Buyers and Testers
Pentagon procurement chief Frank Kendall is proposing changes in how weapon systems are tested. He suggests tests should be performed earlier in the design cycle than is customarily done.

The sooner the testing, he says, the sooner the Pentagon will catch problems before the military sinks huge amounts of money into a program. This would help avert expensive redesigns and modifications — a costly lesson the Pentagon learned over the past decade from the F-35 fighter program.

Kendall also believes that earlier "developmental" testing can help reduce the cost of "operational" testing — realistic live-fire drills that are mandated by law before any weapon systems goes into production.

"We are trying to have more efficient test programs overall, get the data out before we make production decisions. That's critical to design stability," Kendall told National Defense after delivering a speech at a recent conference on acquisition reform. Program managers should have more data about how their systems perform before they begin operational tests, Kendall said. "We will continue to try to blend operational testing and developmental testing."

Kendall's deputy, Darlene Costello, in a speech to a test-and-evaluation industry conference last month, explained the rationale for planned changes related to weapon tests. There is now a "big emphasis on what we do before an RFP goes out. ... Testing is a big part of that," said Costello, who is director of program and acquisition management.

But the Pentagon's plan to wring out more "efficiency" from testing has stirred old animosities between the procurement shop and the office of the director of operational test and evaluation — which operates independently from the procurement office and reports directly to the secretary of defense. DOT&E, as the testing office is known, has been a thorn in the side of many big-ticket weapon programs. Kendall's comments are raising fears in the testing community that their budgets will be gutted.

For many years, program managers have sought to have more control over test reports before DOT&E releases them to Congress and the news media. Procurement officials would rather have test results reported directly to them and have greater say in what information is disclosed.

After operational testers gave the Navy’s littoral combat ship a scathing review in their fiscal year 2012 annual report to Congress, service officials were unprepared for the political damage the report would cause. Testers concluded the ship lacked firepower and was not survivable in high intensity conflict.

Speaking at the same conference, Director of Operational Test and Evaluation J. Michael Gilmore pushed back on the notion that testing costs should be treated as expendable overhead. "How are you going to compress testing in this era of constrained budgets? I think it's a mistake. It accepts the premise that testing is driving increased cost," he said. "The facts don't support that premise. We want to make sure we do testing as rigorously and as often as we can."

Infighting between program officers and testers is par for the course at the Defense Department. Kendall's predecessor Ashton Carter commissioned an independent team in 2011 to probe complaints that developmental and operational testing contribute to excessive cost and schedule slippages in programs.

At the root of the problems that have plagued major Pentagon programs is the way the military services define their requirements, said Gilmore. "Oftentimes requirements are defined in technical specifications. That's OK, but insufficient to ensure a system provides military utility." He cited the Navy's P-8 maritime surveillance aircraft as a case in point. In operational tests last year, the aircraft showed it could fly, but it was not able to perform key missions like wide-area antisubmarine surveillance. Gilmore blamed the flap on the Navy because it had not specified antisubmarine warfare as a "key performance parameter."

Poorly written requirements continue to haunt programs, he said. "In this wonderful town, common sense doesn't play a role." Gilmore said many of the key parameters for the F-35 joint strike fighter relate to aircraft performance and payload capacity. "If we were just going to test KPPs, we would not fly combat missions, we would not penetrate air defenses, we would just fly off the carrier and back. ... How meaningful are these requirements?"

The Army, he said, wasted billions of dollars on a future combat system and on digital radios that never materialized. Its leaders were guilty of "approving requirements that are not achievable." Some programs get to operational testing and still don't have concepts for how they will operate, he said. "If the testing community played a more prominent role in requirements — and that's a big if — perhaps we could have avoided these mistakes," Gilmore said.

Gilmore suggested major programs should have a firm "test and evaluation master plan" before an RFP is written. "I have never understood when I am told we cannot do a T&E master plan until we get a response back from contractors. How can you generate a meaningful RFP without a draft test plan? Just as importantly, how can you evaluate the responses industry provides? I don't get it. What I fear is that some of these RFP evaluations are check mark exercises. I hope that's not the case."
The handy DAU ACQuipedia site (I trust it if my browser baulks; up to you) describes market research in the federal acquisition arena, probably a good best practices guide.

This is only an excerpt, which I, as usual, may feel free to cut, paste, rearrange, omit, etc.: read the whole piece at the link.
To understand the subject of market research we must begin within its definition of being described as a “continuous process for gathering data.” That process takes shape from both a strategic and a tactical vantage point. Strategic market research is that overarching process of market “surveillance” that will take place continuously throughout the entire acquisition lifecycle. From the early stages of the Material Solution Analysis Phase through to the final steps in the Operations and Support Phase; acquisition workforce members in all disciplines are engaged at varying degrees of market research to remain knowledgeable in market developments that may meet government requirements.

Market research is conducted by all members of the acquisition team including contracting (business advisors), program managers, engineers, logisticians, legal staff, test and evaluation personnel, cost specialists, the customer, etc. Though each may focus attention toward specific aspects, their ultimate goal is to pull together the necessary information to be analyzed so an informed decision can be achieved. While it is necessary for every acquisition as stated earlier, the extent of research that may be required is dependent on five variables which are, the complexity of the acquisition, how urgent the need, the estimated dollar value, how readily information is available, and past experience with the product or service being acquired.

In most occupations, they say “the job isn’t done til the paperwork’s complete!” Well, in contracting that axiom is especially true. There are a number of functions and tasks contracting professionals must engage in to exercise prudent use of taxpayer dollars and in many instances the trail of logic must be fully supported and documented for the official record to stand up to the possible scrutiny of public interest. Market research is one such task that the FAR both suggests and requires documentation.
I tend to think of R&D as practical market research: since the need is fuzzy to begin with, it requires a constant information loop to assure what the need is at the time of acquisition, what the market has, what the market has the ability to provide if it doesn't have it, and what's it going to cost (is it "worth" it?). 

It is certainly not a check-the-box exercise, as Director Gilmore mentioned. And it should never be one, even if acquiring routinely used products, such as the portable radio equipment the FBI had decided to purchase from Motorola on a sole-source basis.

Monday, September 1, 2014

Paying the fare for fair wages

Contractors, and their subcontractors, will have their feet held a little closer to the legal fires to get or keep their contracts with the US federal government under the Fair Pay and Safe Workplaces Executive Order released July 31, 2014.

It's a typically legalistic Order, so the President also released a "Fact Sheet" 'splaning what the Order is "supposed" to say (read the paper at the link; I'm as usual only cutting, pasting, deleting, paraphrasing, extracting, re-arranging, commenting, etc. to suit myself):

FACT SHEET: Fair Pay and Safe Workplaces Executive Order
The Department of Labor estimates that there are roughly 24,000 businesses with federal contracts, employing about 28 million workers.

Taxpayer dollars should not reward corporations that break the law, so today President Obama is cracking down on federal contractors who put workers’ safety and hard-earned pay at risk. As part of this Year of Action, the President will sign an Executive Order that will require prospective federal contractors to disclose labor law violations and will give agencies more guidance on how to consider labor violations when awarding federal contracts. By cracking down on federal contractors who break the law, the President is helping ensure that all hardworking Americans get the fair pay and safe workplaces they deserve. [So the Order does not apply to those workers who do not work hard?]

The Fair Pay and Safe Workplaces Executive Order will govern new federal procurement contracts valued at more than $500,000. We expect the Executive Order to be implemented on new contracts in stages, on a prioritized basis, during 2016.

Key Provisions

1. Hold Corporations Accountable: Under the terms of the Executive Order, agencies will require prospective contractors to disclose labor law violations from the past three years before they can get a contract. Agencies will also require contractors to collect similar information from many of their subcontractors.

2. Crack Down on Repeat Violators: Contracting officers will take into account only the most egregious violations, and each agency will designate a senior official as a Labor Compliance Advisor to provide consistent guidance on whether contractors’ actions rise to the level of a lack of integrity or business ethics. The Executive Order will ensure that the worst actors, who repeatedly violate the rights of their workers and put them in danger, don’t get contracts and thus can’t delay important projects and waste taxpayer money. [What bright lines are there to determine an egregious labor law violation, to ferret out from all egregious violations only the "most" egregious, and to decide how many repeats during what time frame constitutes "repeated" violations? Without those facts, this is just a policy statement.]

3. Promote Efficient Federal Contracting: Last year, Senate Health, Education, Labor, and Pensions Committee Chairman Tom Harkin issued a report revealing that dozens of contractors with significant health, safety, and wage and hour violations were continuing to be awarded federal contacts. Another study detailed that 28 of the companies with the top workplace violations from FY 2005 to FY 2009 subsequently received federal contracts, and a quarter of those companies eventually had significant performance problems as well—suggesting a strong relationship between contractors with a history of labor law violations and those that cannot deliver adequate performance for the taxpayer dollars they receive. Because the companies with workplace violations are more likely to encounter performance problems, today’s action will also improve the efficiency of federal contracting and result in greater returns on federal tax dollars. [That passes for a "finding" and a hope, not an order.]

4. Protect Responsible Contractors: The vast majority of federal contractors have clean records. The Executive Order builds on the existing procurement system, so it will be familiar to contractors and will fit into established contracting practices. Responsible businesses will check a single box on a bid form indicating that they don’t have a history of labor law violations.

5. Focus on Helping Companies Improve: The goal of the process created by the Executive Order is to help more contractors come into compliance with workplace protections, not to deny contracts to contractors. Companies with labor law violations will be offered the opportunity to receive early guidance on whether those violations are potentially problematic and remedy any problems. Contracting officers will take these steps into account before awarding a contract and ensure the contractor is living up to the terms of its agreement.

6. Give Employees a Day in Court: The Executive Order directs companies with federal contracts of $1 million or more not to require their employees to enter into predispute arbitration agreements for disputes arising out of Title VII of the Civil Rights Act or from torts related to sexual assault or harassment (except when valid contracts already exist).

7. Give Employees Information About their Paychecks: The Executive Order requires contractors to give their employees information with their pay stub concerning their hours worked, overtime hours, pay, and any additions to or deductions made from their pay, so workers can be sure they’re getting paid what they’re owed.

8. Streamline Implementation and Overall Contractor Reporting: The Executive Order directs the General Services Administration to develop a single website for contractors to meet their reporting requirements—for this order and for other contractor reporting. Contractors will only have to provide information to one location, even if they hold multiple contracts across different agencies. The desire to “report once in one place” is a key theme in the feedback received from current and potential contractors.