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Sunday, October 18, 2015

A bridge not FAR enough

United States Government Accountability Office Report to Congressional Requesters, October 2015

Note that the usual caveats of this blawg apply: read the articles in original at the links. I cut, paste, omit, rearrange, paraphrase and otherwise take great liberties with the material.  Do not rely on my version.
SOLE SOURCE CONTRACTING: Defining and Tracking Bridge Contracts Would Help Agencies Manage Their Use
Certain members of the Committee on Homeland Security and Governmental Affairs, United States Senate, asked GAO to assess the use of bridge contracts by federal agencies. This report examines (1) the insights of selected agencies into their use of bridge contracts; (2) key characteristics of selected bridge contracts; and (3) the reasons why bridge contracts are being used.

When a contract is set to expire and there is a continuing need for services, but the follow-on contract is not ready to be awarded, the government can extend the existing contract or award a short-term sole-source contract to an incumbent contractor. These types of contracting arrangements have been referred to as “bridge contracts” and are used to ensure there is no gap in services. While bridge contracts can be a necessary and appropriate tool, their use has also been associated with negative effects, such as higher contract prices due to a lack of competition and the inefficient use of staff and resources.

Because bridge contracts are not defined in the FAR, GAO constructed a definition based on its prior work and that of other federal agencies. GAO reviewed policies and procedures at three agencies that were among those with the highest number of potential bridge contracts. The agencies included in GAO’s review—the Departments of Defense (DOD), Health and Human Services, and Justice—had limited or no insight into their use of bridge contracts, as bridge contracts were not defined or addressed in department-level guidance or in the Federal Acquisition Regulation (FAR).

However, GAO found that two DOD components, the Navy and Defense Logistics Agency, have instituted definitions, policies, and procedures to manage and track their use. The components took these steps due to concerns that bridge contracts were being used too frequently and reducing competition. Federal internal control standards stipulate that management should identify, analyze, and monitor risks associated with achieving objectives, such as maximizing competition. Staff from the Office of Federal Procurement Policy (OFPP), which provides direction for government-wide procurement policies so as to promote efficiency and effectiveness in government acquisitions, acknowledge that the use of bridge contracts may introduce risks related to a lack of competition.

Without a definition of bridge contracts and guidance for tracking and managing their use, agencies are not able to fully identify and monitor these risks and increase opportunities for competition.

Based on our reviews of contract documentation and information provided by agency officials, we found that the most commonly cited reasons for the use of a bridge contract across the 73 contracts were related to acquisition planning issues—in particular the late completion of key acquisition planning documentation, such as statements of work, that are needed to begin a solicitation. Acquisition planning activities generally begin when the program office identifies a need, involves research and preparation of acquisition documents by both the program office and the contracting office, and concludes when the contracting office issues a solicitation. Our prior work has identified challenges that agencies faced in relation to acquisition planning on contracts for services, such as defining their needs and providing guidance to program offices on timeframes for pre-solicitation activities, such as defining requirements in a statement of work document.

Acquisition planning delays, such as revisions to statements of work and delays in source selection, as well as an inexperienced and overwhelmed acquisition workforce, bid protests, and budget uncertainties contributed to the use of bridge contracts in the cases GAO studied. Often, more than one of these factors led to the use of a bridge contract. Of the 26 cases in GAO's review where follow-on contracts were awarded, 23 were awarded competitively, in some instances leading to savings. The fact that competition occurred in almost all cases, which can save the government money, highlights the importance of better management controls over use of bridge contracts.

To gain insights into the selected agencies’ use of bridge contracts, we collected and analyzed any policies and procedures on bridge contracts and interviewed officials about their knowledge of the use of bridge contracts and any management controls that may be in place. The agencies we reviewed had limited or no insights into their use of bridge contracts. None of the agencies have agency-level policies to manage and track their use of bridge contracts, nor do their acquisition regulations define bridge contracts. HHS officials told us that their agency has no overarching policy because the agency does not have a standard definition for bridge contracts. Officials at DOD said that, at the department-level, the agency did not have any policies because bridge contracts had not previously been raised as a specific concern at the department. DOJ officials indicated they see defining bridge contracts as a government-wide issue, and officials from one of their components told us that the concept of defining bridge contracts was a new one to them.

Because of its role to provide direction for government-wide procurement policies, regulations, and procedures and to promote economy, efficiency, and effectiveness in government acquisitions, we interviewed staff at the Office of Management and Budget’s (OMB) Office of Federal Procurement Policy (OFPP) to discuss their views on the benefits and challenges on the use of bridge contracts. We also used federal internal control standards as criteria for assessing agencies’ insights into the use of bridge contracts.

To identify key characteristics of selected bridge contracts and assess the reasons why bridge contracts are being used, we selected a nongeneralizable sample of 73 bridge contracts for services. We focused on service contracts since agency officials and our prior work indicated that bridge contracts were predominantly used for services. We conducted a high level review of the 73 contracts—collecting and reviewing contract award and extension documentation, such as justification and approval (J&A) documents, price negotiation memorandums, relevant contract modifications, and file memoranda.

We then selected a subset of 29 contracts from 6 of the 8 components for a more in-depth review, based on several factors, specifically the contract value, obtaining a mix of contract extensions and stand-alone bridge contracts, and the location of the contract files. For this in-depth review, we reviewed the bridge contract, the contract preceding it, and, if awarded at the time of our review, the follow-on contract. The results from the sample of contracts included in our review are not generalizable, but are designed to provide illustrative examples of the characteristics and rationale for the use of bridge contracts at the selected agencies and components and supplement the information obtained from our interviews and review of agency policies and procedures. We also interviewed contracting and program officials to discuss the facts and circumstances related to the award of the bridge contracts for the subset of 29 contracts in our sample, and the challenges, if any, related to their use.

The federal government contracts for a variety of services, from elevator maintenance to program management support, and often has a need to continue these services beyond the lifespan of an individual contract. However, in certain situations, it may become evident that a base contract and any option years will expire before a subsequent contract to meet the same need can be awarded. In these cases, because of time constraints, contracting officers generally use one of two options: (1) extend the existing contract for up to 6 months or (2) award a short-term stand-alone contract to the incumbent contractor on a sole-source basis to avoid a lapse in services. While these contracting options have been informally referred to as bridge contracts by some in the acquisition community, no formal definition of bridge contracts exists nor is there a requirement to track them in the Federal Acquisition Regulation (FAR). For the purposes of this report, we established the following definitions:
Bridge contract. An extension to an existing contract beyond the period of performance (including option years), or a new, short-term contract awarded on a sole-source basis to an incumbent contractor to avoid a lapse in service caused by a delay in awarding a follow-on contract.
Predecessor contract. The contract in place prior to the award of a bridge contract.
Follow-on contract. A longer-term contract that follows a bridge contract for the same or similar services. This contract can be competitively awarded or awarded on a sole-source basis.
Contract extensions and the award of stand-alone bridge contracts are established in different ways. If a contracting officer needs a bridge contract and opts to extend an existing, predecessor contract, the contracting officer may use a number of different authorities to do this. If the predecessor contract included the “option to extend services clause,” the contracting officer could use this clause to extend the contract for up to six months, based on the FAR. If the contracting officer determines that a new short-term sole-source contract should be awarded to avoid a gap in services, the FAR generally requires that the contract award be supported by a written justification known as a justification and approval document (J&A). The J&A must include sufficient facts and rationale to justify the use of a sole-source contract.

While OMB has stated that noncompetitive contracts can play an important role in helping agencies address the needs that arise during emergencies, we and others have noted that competition is the cornerstone of a sound acquisition process and OMB has issued guidelines for federal agencies to increase competition and reduce their spending on sole-source contracts.

Navy, and Defense Logistics Agency (DLA) DLA—established policies in 2012 and 2013, respectively, regarding the use of bridge contracts. Both components’ policies were established to reduce reliance on bridge contracts and note that bridge contracts can be an impediment to competition. DLA’s policy further states that bridge contracts may be indicative of a lack of adequate preparation for follow-on acquisitions. DLA officials we spoke with told us that there was concern at DLA regarding the impact bridge contracts could have on competition, since they effectively delay competition by extending existing contracts or awarding sole-source contracts to incumbent contractors. Officials said that they hope the policy will increase competition at DLA by focusing management attention on the use of bridge contracts and tracking their use. In both cases, these components’ policies go beyond the standard J&A requirements for sole-source contracts to specifically address bridge contracts:
• Explanation as to why the need for a bridge contract is not due to lack of advanced planning or inadequate procurement execution.
• Justification for the length of the bridge contract.
• Discussion of actions to be taken to avoid additional bridge contracts.
Navy further requires:
• Certification of the urgency of the requirement.
• Signature of the program manager and the contracting officer.
In addition, one activity within the Army—the Health Care Acquisition Activity (HCAA), which was not included as part of our review—issued a policy memorandum in November 2008 that established a definition and an approval and tracking mechanism for bridge contracts. Similar to the policies at the Navy and DLA, HCAA’s policy was established due to concern over the increasing reliance on bridge contracts at the activity. In particular, the policy stated that there was concern that bridge contracts, which prevent competition, were being awarded to expand the scope of the original requirement, which was increasing costs. The policy and compliance branch at HCAA developed a tracking system to account for the number of bridge contracts awarded. According to HCAA officials, issuing the policy memorandum and requiring officials to report their use of bridge contracts has enhanced the activity’s ability to track bridge contract use and prevented the award of bridge contracts that increase the scope of work established by the predecessor contract.

The fact that the full length of a bridge contract, or multiple bridge contracts for the same requirement, is not readily apparent from the review of an individual J&A presents a challenge for those agency officials responsible for approving the use of bridge contracts. Approving officials, signing off on individual J&As, would not have insight into the total number of bridge contracts that may be put in place by looking at individual J&As alone. Without a definition and a policy for bridge contracts, J&A documentation generally provides information on the individual contract covered by the J&A, and on the anticipated period of performance and estimated contract value at the time of award, rather than a full picture of the cumulative time and cost associated with bridging a gap in services for a requirement.

The FAR requires that contracting officers establish that the prices paid for contracts are fair and reasonable and expresses a preference for comparison of prices obtained through competition. Because competition is absent with the award of a bridge contract, contracting officers’ fair and reasonable price determinations become imperative. To determine the extent to which the price paid by the government changed when a bridge contract was awarded to the incumbent contractor for the same services acquired under a previous contract, we conducted a price analysis for 10 of the 29 bridge contracts included in our in-depth review. We found that for 5 of the 10 contracts, the price paid for services on the initial stand-alone bridge contract or contract extension increased from that of the predecessor contract. Of the remaining 5 contracts, in 4 cases the price paid remained the same, and for the remaining contract the price decreased.

Follow-on contracts were competitively awarded for 23 of 26 contracts included in our in-depth review. The 3 remaining follow-on contracts were awarded on a sole-source basis. As noted above, competition generally leads to more favorable pricing. The fact that the vast majority of follow-on contracts were competed after the bridge contract expired highlights the urgency of ending bridge contracts as soon as possible. For example, one contracting official responsible for a contract told us that by awarding the follow-on contract competitively, the incumbent contractor had to re-evaluate what price the market demands for these services. Competition has generally been considered to be associated with achieving more favorable prices, and we and others have cited potential savings from competition in prior work.

A variety of reasons caused delays that resulted in the use of bridge contracts, but late completion of documentation needed to solicit follow-on contracts was the most frequent reason that we identified across our sample of 73 contracts. Contracting officials told us that acquisition workforce problems—such as inexperienced staff and frequent turnover of contracting and program office staff—also led to the use of bridge contracts and influenced other delays, such as late completion of acquisition planning documentation and challenges during source selection. The majority of agency officials that we interviewed identified bid protests as a common reason for the use of bridge contracts, and we found that bid protests had caused delays in only eight of the 29 contracts included in our in-depth review and that bid protests created substantial delays in awarding follow-on contracts.

Our in-depth review of 29 contracts further underscored that acquisition planning issues frequently led to the use of bridge contracts and provided additional insights into the nature of these issues. For example, the majority of the contracting officials that we interviewed cited the late submission of key acquisition planning documentation from program officials as one of the most common reasons why bridge contracts are needed. For 18 of the contracts, contracting officials told us that the statement of work, in particular, was either submitted late by the program office, required multiple rounds of revisions before it was ready to be published, or a combination of those two factors contributed to the need for a bridge contract. Acquisition planning challenges stemming from the coordination of program and contracting offices have been highlighted in some of our past work.

Contracting officials from multiple agencies told us that late statements of work were often a symptom of a lack of knowledgeable and seasoned staff in program offices. We found that acquisition workforce challenges—in particular, inexperienced and overwhelmed staff, as well as staff turnover—led to the use of bridge contracts and influenced other delays, such as the late completion of acquisition planning documentation and challenges during source selection. Contracting officials from multiple agencies told us that late statements of work were often a symptom of a lack of knowledgeable and seasoned staff in program offices. We have found and reported on government-wide acquisition workforce challenges for many years, including DOD’s efforts to rebuild the capacity of its acquisition workforce.

Contracting and program officials from all three agencies cited staff turnover as another driver of bridge contracts. As a point of comparison, the Navy had greater institutional knowledge regardless of staff turnover due to the high level of detail provided in their J&As and contract documentation.

The majority of agency officials that we interviewed identified bid protests as a common reason for the use of bridge contracts. While contract documentation cited bid protests as reasons for delay in five of the contracts in our high-level review, when we reviewed the contracts in-depth we found that bid protests caused delays in only eight of the 29 contracts but that the protests introduced substantial delays to the acquisition process.

In seven of the eight instances of bid protests that we identified, the incumbent contractor protested the award of a follow-on contract to a new vendor or the terms of the solicitation. However, only two of those protests were sustained. Most of the losing incumbents were unsuccessful in obtaining follow-on contracts. We also found that as a result of the incumbent’s protests, incumbent vendors kept providing services — in a noncompetitive environment — well after the predecessor contracts expired.

While bridge contracts can be a useful tool in certain circumstances to avoid a gap in services, they are typically envisioned to be used for short periods of time. When these noncompetitive contracts are used frequently or for prolonged periods of time, the government is at risk of paying more than it should for goods and services. Because we found that almost all of the bridge contracts in our review were ultimately followed by competitive contracts—which can lead to savings for the taxpayer—the importance of awarding these contracts in a timely manner is heightened.

Bridge contracts have been identified not only across the three agencies and eight components included in our review, but at other agencies as well, as evidenced by our past work and that of others. Thus, the importance of defining and tracking bridge contracts. A uniform, government-wide definition and strategies for tracking and managing the use of bridge contracts would help ensure all agencies have better insights into their use of these contracts and provide agencies with the information necessary to manage their use. Otherwise, agencies are left without a complete picture or understanding of how long a bridge contract has been in place. Without such information, it is difficult for agencies to take steps to reduce their reliance on noncompetitive bridge contracts or remediate internal deficiencies—such as issues related to acquisition planning or challenges with the acquisition workforce—that may lead to delays in the award of follow-on contracts.

we recommend that the Administrator of OFPP take the following two actions:
1. Take appropriate steps to develop a standardized definition for bridge contracts and incorporate it as appropriate into relevant FAR sections, and
2. As an interim measure, until the FAR is amended, provide guidance to agencies on
• a definition of bridge contracts, with consideration of contract extensions as well as stand-alone bridge contracts; and
• suggestions for agencies to track and manage their use of these contracts, such as identifying a contract as a bridge in a J&A when it meets the definition, and listing the history of previous extensions and stand-alone bridge contracts back to the predecessor contract in the J&A.

Further articles on this GAO report:
Bridge Contracts Need Improved Oversight, Says GAO

Temporary 'Bridge Contracts' Risk Overpayments

When a 'short-term' extension is a bridge too far

Thursday, October 15, 2015

Speak to thee only with thine ayes?

The whole purpose of corrective action and discussions in best value procurement is to make sure everyone (government and offerors alike) is on the same page. If you're already on the page, you don't need further discussion. It's a process driven more by the principle that government should maximize its spending requires by getting fair and reasonable prices for things it buys, egged on by the principle of competition (the more, the merrier) rather by the principle of fairness and equity.

In the GAO case below, there were three competing offerors for a project: the incumbent (Northrop Grumman), who pretty much already knew what was required, and two relevant others (Solers, and Pragmatics). Each offeror proposed vastly different means and methods of achieving the desired outcome. It was a best value solicitation, so price was not alone determinant, but the offered prices had to be evaluated as reasonable in the context of each bid.

The two non-incumbents protested award to the incumbent, arguing they didn't get a fair shake in the evaluation. Corrective action, including further discussions, took place, but the incumbent then protested it was disadvantaged in the process.

Of course, you should read the decision at the link below. This presentation is crafted for my own purposes and does not fully or contextually represent the original.

Matter of: Northrop Grumman Systems Corporation, B-410990.3, October 5, 2015
Northrop Grumman Systems Corporation (Northrop Grumman) of Herndon, Virginia, protests the corrective action being taken by the Department of Defense, Defense Information System Agency (DISA), in connection with earlier protests of a task order issued to Northrop Grumman for software development and integration services. Northrop Grumman contends that the corrective action, which included reopening discussions with offerors in the competitive range, is unreasonable and competitively prejudices Northrop Grumman, because its award price and evaluation ratings were disclosed after award. We deny the protest.

The RFP provided for the issuance of a hybrid task order on a best-value basis considering the following evaluation factors in descending order of importance: technical/ management approach, present/past performance, and cost/price. The non-cost evaluation factors, when combined were significantly more important than the cost/price factor. The solicitation provided detailed instructions for submitting separate technical/management approach, present/past performance, and cost/price proposals, including sanitized and unsanitized copies of cost/price proposals.

The RFP stated that cost/price proposals would be evaluated for completeness, reasonableness, unbalanced pricing, and realism. Offerors were also advised that cost/price proposals could be rejected for being unrealistically low, unreasonably high, or unbalanced.

As relevant here, the agency found that the offerors’ final cost/price proposals were complete and reasonable, and that the offerors could realistically perform the effort at their proposed costs/prices. No probable cost adjustments were made to their final proposals. DISA’s contracting officer conducted a cost/technical tradeoff among the FPRs submitted by Northrop Grumman, Solers, and Pragmatics, and determined that Northrop Grumman’s proposal provided the best value to the government.

Pragmatics and Solers were provided written debriefings that disclosed Northrop Grumman’s technical/management approach and present/past performance ratings and included summary discussions of the agency’s cost/technical tradeoff between the awardee and the respective unsuccessful offeror. Solers and Pragmatics filed protests challenging DISA’s cost evaluation, best-value determination, and selection decision. Solers also challenged the agency’s technical and past performance evaluations.

DISA advised the parties that it would take corrective action in response to the protests. The agency stated that it would reevaluate Northrop Grumman’s, Pragmatics’s and Solers’s FPRs; conduct additional discussions and request and evaluate further FPRs, if necessary; and make a new source selection decision. We subsequently dismissed Solers’s and Pragmatics’s protests as academic.

During the corrective action process, DISA determined that there were flaws in its pre-corrective action cost realism analysis that required further discussions and proposal revisions. DISA contends that the cost realism analysis and source selection decision were inadequately documented and contained conclusory statements that failed to explain the evaluators’ rationale for finding that the three offerors’ vastly different proposals were realistic.

Northrop Grumman protests DISA’s decision to reopen discussions and permit Pragmatics and Solers to fully revise their proposals. The protester contends that these actions competitively harm Northrop Grumman, because its award price and evaluation ratings were disclosed. Northrop Grumman asserts that DISA’s pre-corrective action cost realism analysis was substantively correct, and that the alleged error that DISA was trying to correct was, at most, a perceived failure to document the analysis as explicitly as agency counsel would have liked. Northrop Grumman asserts that DISA has not otherwise identified any substantive, prejudicial errors in the cost realism analysis or initial award that required reopening discussions. In this regard, the protester maintains that DISA’s corrective action was unreasonable and disproportionate to the alleged error, and yields no benefits to the procurement process that would outweigh the competitive harm to Northrop Grumman.

DISA readily acknowledges that the disclosure of Northrop Grumman’s winning price puts the protester at a competitive disadvantage, but the agency argues that it reasonably determined that reopening discussions was necessary to correct deficiencies in its cost/price evaluation and to ensure that the new award decision would be based on a fair best-value determination. DISA contends that its pre-corrective action cost realism analysis and source selection decision were inadequately documented and contained conclusory statements that failed to explain the evaluators’ rationale for finding that such vastly different proposals were realistic. In this regard, DISA maintains that in taking corrective action, the agency could not determine that its cost evaluators’ conclusions and DISA’s earlier best-value determination were reasonable, and that the other competitive range offerors were not prejudiced. DISA argues that a more accurate and comprehensive realism analysis could have a significant impact on the agency’s best-value tradeoff decision.

Northrop Grumman responds that DISA had more tailored options to address the alleged evaluation error, such as seeking clarifications, limiting discussions, or restricting Pragmatics and Solers from revising their proposed labor mixes, FTEs, or technical/management approach proposals. Northrop Grumman claims that the evaluation notices that were provided to Pragmatics and Solers had nothing to do with the alleged error, i.e., further documenting DISA’s earlier cost realism analyses. The protester also points out that simply because offerors propose different technical approaches does not necessarily mean that their proposals are unrealistic. Moreover, to the extent that DISA had new concerns during reevaluation about the offerors’ proposed labor categories, key personnel, or past performance projects, Northrop Grumman complains that the agency should have addressed such concerns during its pre-award discussions.

DISA disputes the protester’s assertion that the information needed to perform a proper cost realism analysis could be obtained through clarifications or limited discussions with the offerors. Rather, DISA argues that in order to correct key personnel discrepancies and unrealistic aspects of their cost/price proposals, offerors would have to make corresponding revisions to their technical/management approach proposals. In this respect, DISA asserts that its cost evaluators could not perform a proper realism analysis or recommend cost adjustments without knowing what each proposed labor category would be performing under each CLIN. DISA also maintains that its discussions had to be meaningful and permit the offerors to address new technical deficiencies that were uncovered as part of the agency’s reevaluation.

Contracting officers in negotiated procurements have broad discretion to take corrective action where the agency determines that such action is necessary to ensure a fair and impartial competition. As a general matter, the details of a corrective action are within the sound discretion and judgment of the contracting agency. The decision whether to reopen discussions is largely a matter left to the agency’s discretion. We have repeatedly observed that the possibility that the contract may not have been awarded based on the most advantageous proposal has a more harmful effect on the integrity of the competitive procurement system than does the possibility that the original awardee, whose price has been properly disclosed, will be at a disadvantage in the reopened competition. Where the corrective action taken by an agency is otherwise unobjectionable, a request for revised price proposals is not improper merely because the awardee’s price has been exposed.

DISA has presented both a flaw in its cost/price evaluation requiring corrective action, and a reasonable basis for reopening the competition. DISA’s concern--that the evaluators failed to explain their rationale for finding the vastly different proposals realistic--provided a reasonable basis for the agency to question its best-value determination. Based on our review of the record and the parties’ arguments, we find that any competitive harm to Northrop Grumman by the disclosure of its award price, is outweighed by DISA’s reasonable concern that its earlier best-value determination was tainted by a flawed cost/price evaluation that prejudiced other competitive range offerors.

We also find that DISA reasonably determined that it should reopen discussions and permit the competitive range offerors to submit fully revised FPRs. In our view, DISA was not required to tailor the scope of its corrective action to clarifications or limited discussions. Generally, offerors in response to an agency request that discussions be opened or reopened may revise any aspect of their proposals they see fit--including portions of their proposals which were not the subject of discussions. Moreover, as part of its corrective action, an agency can, as here, amend the RFP to add requirements that will require the submission of revised proposals and is not required to limit proposal revisions to only address these changes.

DISA discovered that the offerors’ (including the protester’s) FPRs contained deficiencies and discrepancies in their technical, past performance, and/or cost/price volumes. Where an agency identifies new weaknesses in a proposal during a reevaluation of that proposal in an acquisition where discussions have previously occurred, the agency is required to discuss the new weaknesses with the offeror. The possibility that an award may not have been based on the most advantageous proposal because, for example, discussions are not meaningful, has a more harmful effect on the integrity of the competitive procurement system than the fear of an auction; generally the statutory requirements for competition take priority over any possible concern regarding auction techniques.
Nick Wakeman, whose blog post brought this to my attention, said:
But don’t cry for Northrop; they still very well might win the contract. They are the incumbent, and despite the challenges incumbents have faced in winning recompetes, incumbency is still an advantage. As the incumbent, you would think this also gives an advantage to Northrop because of the customer intimacy. So, stayed tuned and we’ll see how this one turns out.

Wednesday, October 7, 2015

The tenacity - and audacity - of incumbent legacy

Although not part of the ABA Model Procurement Code which is Guam's model for its own Procurement Act, 5 GCA 5210, which summarizes the various authorized procurement methods, says "(a) Unless other wise authorized by law, all territorial contracts shall be awarded by competitive sealed bidding [except as authorized by other specified procurement methods. (b) Nothing in this Section requiring competitive bidding shall prohibit the development of specifications which require compatibility with existing supplies, equipment or data processing systems."

On the face of it, such compatibility seems rational enough. The Guam drafters of this provision thought so, commenting "In the past, some problems have arisen due to the requirement for competitive bidding for equipment which should have been, but was not, compatible with existing equipment. The reason alleged was that the lowest bidder had to be chosen. Of course, the proper writing of specifications could have prevented the problem and Subsection (b) makes clear that compatibility may be a legitimate part of the specifications."

Fortunately, the provisions on specifications, in Article 4 of the procurement law, is not part of "this Section", so are not, on the face of the provision, restricted by it, and the provisions of Article 4 are replete with requirements for competition, saying nothing of compatibility. This become important when one stops to consider that compatibility is a substitute for legacy, old school technology and creative destruction.

Which brings me back to yet another Motorola case, this one decided by the federal GAO, related to Motorola's lock on the radio communications market. As always, read the cases and articles in the original, and don't rely on my creative destruction of them in my rendering.

Matter of: Harris IT Services Corporation B-411699; B-411796, October 2, 2015
Harris IT Services Corporation protests the terms of two requests for proposal issued by the Department of Justice, Federal Bureau of Investigation (FBI), to acquire land mobile radio (LMR) equipment through the issuance of a single delivery order under each RFP. Harris maintains that both of these RFPs improperly contemplate the issuance of a single, second-tier, indefinite-delivery, indefinite-quantity (IDIQ) instrument (labelled by the FBI as a delivery order), under which the agency will place subsequent delivery orders for this equipment without providing Harris a fair opportunity to compete for those orders, in violation of the statute authorizing the use of multiple-award IDIQ contracts. Harris also argues that the RFPs contemplate the issuance of orders that potentially exceed the scope of the underlying multiple-award IDIQ contract program, and include unduly restrictive specifications.

We sustain the protests.

Both solicitations have been issued under the Department of Homeland Security’s (DHS) tactical communications (TacCom) IDIQ multiple award contracts program and competition has been limited to concerns that previously have been awarded contracts under the DHS TacCom program. The underlying DHS TacCom multiple award IDIQ contract program solicitation contemplated the award of IDIQ contracts for a full array of communications equipment and services ("commodity products, infrastructure and services"). "DHS seeks to establish a multi-vendor approach to implementing fully interoperable solutions to support mission critical, public safety communications." In effect, the equipment to be purchased using the TacCom program is required to employ open systems architecture so that each contractor’s equipment will “interoperate” with equipment manufactured by other concerns.

The current RFPs represent the FBI’s second attempt to meet its requirements for the equipment being solicited. The first attempt sought the award of a sole-source contract for these requirements, and supported its solicitation with a justification and approval ("J&A"; aka "determination")) document maintaining that only one source--Motorola--was capable of meeting its requirements. After protests, this approach was abandoned.

This is the second attempt. RFP 68 is for the acquisition of “subscriber base radio” LMR equipment and is valued at approximately $200 million. RFP 81 is for the acquisition of infrastructure LMR equipment and is valued at approximately $135 million. Both RFPs contemplate the issuance of what the FBI characterizes as a single delivery order for a base year, with 4 one-year options.

The Federal Acquisition and Streamlining Act of 1994 (FASA) provided agencies with express authority to award task and delivery order type contracts. Broadly speaking, the statutory and regulatory framework favors the award of multiple task or delivery order contracts for the same requirements, rather than the award of a single task or delivery order contract for an agency’s requirements.
The drafters of this federal law said the use of task order contracts for advisory and assistance services and establishing a requirement that solicitations for such contracts shall ordinarily provide for multiple awards and for fair consideration of each awardee for task orders issued under the contracts; indiscriminate use of task order contracts for broad categories of ill-defined services unnecessarily diminishes competition and results in the waste of taxpayer dollars; in many cases, this problem can effectively be addressed, without significantly burdening the procurement system, by awarding multiple task order contracts for the same or similar services and providing reasonable consideration to all such contractors in the award of such task orders under such contracts; and, all federal agencies should move to the use of multiple task order contracts, in lieu of single task order contracts, wherever it is practical to do so.

[Similarly, see Guam procurement regulations: 2 GAR 3122(b): A multiple award is an award of an indefinite quantity contract for one or more similar supplies or services to more than one bidder or offeror when the territory is obligated to order all of its actual requirements for the specified supplies or services from those contractors. A multiple award may be made when award to two or more bidders or offerors for similar products is necessary for adequate delivery, service, or product compatibility.]

The statutory and regulatory framework contemplates that, where an agency is issuing task or delivery orders using a multiple-award IDIQ contract program, it is not required to engage in full and open competition, and may instead confine its competition to firms that have been awarded an underlying multiple-award IDIQ contract. However, those same provisions require agencies to give each contractor that has been awarded a contract a “fair opportunity” to be considered for each task or delivery order in excess of $3,500, and to provide for “enhanced competition” for orders in excess of $5.5 million. Finally, each task or delivery order must specify all of the services to be performed or all the property to be delivered under the order.

Harris first argues that the RFPs impermissibly call for the issuance of what amounts to IDIQ instruments to the successful contractor for a 5-year period. The protester maintains that the RFPs effectively remove the agency’s requirements from further competition for an extended period and amount to an impermissible “downselect” to a single vendor. Harris maintains that this is inconsistent with the terms of the underlying TacCom contracts, as well as applicable statutes and regulations which, the protester maintains, require the FBI to permit all of the eligible TacCom vendors to compete for every delivery order that the FBI may issue to meet its requirements.

The FBI explains that it elected to take this approach to meet its ongoing and future, geographically diverse, requirements in the most streamlined manner possible. According to the agency, its approach will allow it to avoid individually having to compete potentially dozens of delivery orders for varying quantities of equipment over a 5-year period. According to the agency, the latter approach--competing potentially dozens of separate delivery orders--“would place an enormous administrative burden on the FBI.” Legal Memorandum at 5. The agency states that its approach will result in substantial savings of both time and money over the contemplated 5-year period of the delivery orders.

As set forth below [sorry: you're going to have to read the case decision], we conclude that the FBI’s solicitations contemplate the award of what, in effect, would amount to single, multi-year, second-tier IDIQ instruments that are not permitted under the requirements discussed above. The FBI’s contemplated award of a 5-year second-tier IDIQ instrument to a single contractor is inconsistent with the requirements of the applicable statutes and FAR provisions regarding what constitutes a “delivery order.” Those requirements are, at a minimum, that the delivery order be defined as to quantity, place of delivery and schedule.

[Compare Guam's definition of an "incremental" contract, which is distinct from the "multiple award" contract mentioned earlier, in 2 GAR 3122(a). An incremental award is an award of portions of a definite quantity requirement to more than one contractor. Each portion is for a definite quantity and the sum of the portions is the total definite quantity required. An incremental award may be used only when awards to more than one bidder or offeror for different amounts of the same item are necessary to obtain the total quantity or the required delivery. The right to make such an award and the criteria for award shall be stated in the solicitation. Thus, multiple awards, for indefinite quantities, and incremental awards, for definite quantities, are limited to cases where awards to more than one contractor are necessary to obtain the total quantity of the required delivery.]

In essence, the two orders contemplated under these RFPs will deprive all the other TacCom contractors of a fair opportunity to compete for each of the delivery orders that will be issued in the future, despite their aggregate value of approximately $335 million. We therefore sustain this aspect of Harris’s protest.

Harris also maintains that the RFPs impermissibly include a period of performance that exceeds the period of performance of the underlying TacCom contracts. In this connection the FBI’s RFPs contemplate the issuance of delivery orders until August 31, 2020 (whereas the TacCom contracts only allow for issuance of delivery orders until March 25, 2019), and contemplate fulfilling those delivery orders by August 31, 2021 (whereas the TacCom contracts contemplate fulfilling all delivery orders by May 25, 2021). The FBI notes in connection with this allegation that both RFPs incorporate the terms of the underlying TacCom IDIQ contracts and provide that, in the event of a conflict, the terms of the underlying TacCom contracts control. According to the agency, to the extent its RFPs specify a period of performance longer than that contemplated under the TacCom contracts, the terms of the TacCom contracts supersede the terms of its RFPs.

We agree with Harris that the RFPs seek impermissibly to increase the scope of the underlying TacCom contracts. As noted, the agency does not deny that its contemplated delivery schedules vary from, and increase the period of performance beyond, the terms of the underlying TacCom contracts. Rather, the FBI merely asserts that the terms of the TacCom contracts will supersede the inconsistent terms of its solicitations. However, the fact remains that the RFPs expressly contemplate a period of performance longer than the period of performance included in the TacCom contracts.

In addition, and more fundamentally (as discussed above), neither RFP includes a maximum quantity, but, rather, specifies only an estimated quantity. As we conclude above, there essentially is no limit on the quantities the agency could order under the second-tier IDIQ instruments contemplated by the RFPs. It follows that the agency could order quantities that exceed not only the estimated quantities specified in the RFPs, but also the maximum value of the underlying TacCom contracts. In view of the foregoing, we conclude that the FBIs RFPs contemplate delivery orders that potentially are beyond the scope of the underlying TacCom contracts. We therefore sustain this aspect of Harris’s protest.

As a final matter, Harris’s protests that certain specifications are unduly restrictive and are designed to result in the award of the delivery orders to Motorola. Because we recommend below that the agency cancel the RFPs and consider alternatives to how it intends to meet its requirements, we need not consider these allegations in great detail. Nonetheless, we discuss several obvious solicitation requirements that even the agency concedes call for Motorola-specific products.

RFP 68 requires that all radios provided be compatible with a standards based radio system called “SmartNet.” In a similar vein, RFP 68 calls for providing radios that can be reprogrammed using “over-the-air-rekeying” when used with a “key variable loader.”

Harris maintains that these requirements are proprietary to Motorola and that, for all intents and purposes, they limit competition under RFP 68 to products made by Motorola. Harris also maintains that specifying such requirements is inconsistent with the overarching requirement of the TacCom contracts to provide equipment that is interoperable and that meets the P25 open architecture standards.

The agency does not challenge Harris’s fundamental assertion, but nonetheless maintains that these requirements are necessary in order for the radios that it acquires to meet the agency’s needs for data security, and in order for them to be useable with state and local law enforcement entities that still use legacy radio systems that depend on the Motorola-proprietary standards specified.

Where an agency seeks to issue a task or delivery order to acquire items peculiar to one manufacturer, it must execute a J&A in support of its specification for the task or delivery order, unless it has otherwise executed a J&A for other than full and open competition. Here, the agency concedes that it has specified Motorola-specific requirements. However, the record does not include the required J&A, and the agency has offered no explanation regarding its failure to execute such a J&A.

The agency previously attempted to meet its requirements on a sole-source basis, but concluded that the J&A prepared in connection with that acquisition was inadequate to support its attempted sole-source acquisition of Motorola products. Here, the agency again is attempting to acquire Motorola-specific products, but has not executed the required J&A, or even, for that matter, explained or demonstrated why it is not required to execute the J&A. Under the circumstances, we conclude that the RFPs include specifications for products that are specific to Motorola, and that the agency has failed to justify its inclusion of such requirements. We agree with Harris that the agency’s attempt to acquire Motorola-specific equipment appears fundamentally inconsistent with the underlying interoperability objective of the TacCom IDIQ contract program.

We recommend that the FBI cancel the solicitations.









Monday, October 5, 2015

Taking the cash stream out of streamlining

DCYF likely to bring some services back in-house as part of an overhaul
When Rhode Iland's financially ailing child welfare system decided to purchase most of its services from two private nonprofit networks three years ago, officials praised the new "system of care" as a model for streamlining services and cutting costs. A little more than three-and-a-half years later the continuation of the practice appears unlikely.

After years of cost overruns, Jamia R. McDonald, chief strategy officer and the agency's new de facto head, no longer believes that networks are the most efficient way to deliver services. Instead, it's likely that the agency will bring some services back in house and bid out others individually. "The theory was these administrative efficiencies could be gained by overseeing multiple activities .... The agency didn't posture itself well to manage that. We moved administrative oversight. We didn't restructure in any way in-house, and we also didn't create any oversight that ensured [the networks] delivered," McDonald said.

"When you have to change a system, I don't think you turn it off one day and turn on another. If we really want to think differently, the longer we bind ourselves into certain activities, the less opportunity we have to pivot," McDonald said.

Marty Sinnott, chief executive officer of Child & Family Rhode Island and head of the Rhode Island Care Management Network, put it more bluntly: "The contracts were poorly designed and poorly written right out of the gate. The networks have at least kept the lid on what is a poorly designed and poorly managed child welfare system," Sinnott said. "The system of care contracts are neither the problem or the solution. They have functioned under bad public policy and bad public leadership."

In 2012, the state Department of Children, Youth and Families signed three-year contracts with the two providers. The networks assign children under state care to residential and congregate care and subcontract with shelters and other service providers — and have consistently overspent their budgets. There are currently 3,095 children in DCYF care, a number that has grown over three years. (Sinnott pointed to a 30-percent increase over three years in the number of reports of abuse and neglect.) The contracts were set to expire June 30. After months of negotiations, they have been extended, but only for six months.

The fact that the DCYF appeared poised to make changes is not unexpected. In July, Governor Raimondo promised that the "dysfunctional" agency would be overhauled amid a litany of problems, including millions freely spent on contracts with no performance management, and state payment and procurement procedures that had been skirted.

The large network contracts are not the only DCYF agreements headed for change. McDonald said the agency has allowed some contracts for "redundant" services to expire, and other contracts have been reduced. "There were examples where we bought the same service two or three times, and we never used any of those vendors so there was no point in extending," McDonald said, referencing an issue highlighted in an audit of the DCYF this summer.

Suing in tort based on facts arising from procurement dispute

DFS: "We Have a Very Direct Beef With Lotte"
DFS and Lotte Duty Free were back in court today over a dispute on a lucrative concession contract to operate duty free shops at the AB Won Pat International Airport.

DFS, the previous concessionaire, is continuing to challenge the awarding of the contract while Lotte maintains they never did anything improper.

It’s been well over two years since the issue surfaced. The concession contract at the Guam Airport was up for procurement in early 2013. DFS and Lotte Duty Free submitted bids, along with two others, and Lotte, being the lowest bidder at the time, got the deal.

But DFS challenged the decision on allegations that the Guam International Airport Authority and Lotte Duty Free were in collusion. After filing a lawsuit and taking the case through the judicial system as well as the Office of Public Accountability, the case landed back in the Superior Court’s hands.

A total of 20 charges were filed, but 19 of the 20 were dismissed. The remaining charge that still stands has to do with TORT claims or civil claims caused by wrongful acts that resulted in serious loss or economic harm.

Attorney for Lotte Duty Free, Cesar Cabot says Lotte has already filed motions for dismissal of the TORT claims because he believes it to be improper and illegal. What DFS is saying is that this was a corrupted procurement process and that’s very different," Patrick Civille, legal counsel for DFS GUam, answered back.
READER ALERT:  The following article and case,  Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., 234 Cal. App. 4th 748 (2015), has been reversed by the California Supreme Court in this post, above.

Second-lowest bidder for public contracts may sue lowest bidder who paid less than prevailing wages
Public agencies have little, if any, discretion when awarding public contracts because they are required to award the contract to the lowest bidder, subject to certain minimum qualifications. These limitations are designed to protect the public and its financial interests, not the bidders.

Losing bidders typically can contest the award only by challenging the bid itself via bid protest, or the bidding process.

A California Appellate Court recently held that second-lowest bidders on public contracts may sue the successful lowest bidder for intentional interference of prospective economic advantage when the lowest bidder won the contract only because it paid its workers less than the wages required by law.

In Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., 234 Cal. App. 4th 748 (2015), plaintiffs alleged they would have been awarded public contracts worth almost $15 million if defendant had not decreased its costs by illegally underpaying its workers.

Assuming the facts to be true, the court found that plaintiffs’ allegations were sufficient to create a cause of action against the winning bidder who paid less than prevailing wage. Consequentially, contractors who fail to pay the prevailing wage may now be liable under tort law in addition to prevailing wage laws.
The court’s holding is limited to losing bidders who can show that they were the actual and lawful lowest bidders.

ROY ALLAN SLURRY SEAL, INC. v. AMERICAN ASPHALT SOUTH, INC., 234 Cal. App. 4th 748 (2015) [Note: The following is excerpted and/or paraphrased without full context, order or citations. Read the original for accuracy and for all the other issues and information omitted here.]
May the second place bidder on a public works contract state a cause of action for intentional interference with prospective economic advantage against the winning bidder if the winner was only able to obtain lowest bidder status by illegally paying its workers less than the prevailing wage? We hold that the answer is yes if the plaintiff alleges it was the second lowest bidder and therefore would have otherwise been awarded the contract, because that fact gives rise to a relationship with the public agency that made plaintiff's award of the contract reasonably probable.

Allan and Martin jointly sued American in those five counties for intentional interference with prospective economic advantage and other torts, alleging that American had only been able to submit the lowest bid by paying its workers less than the statutorily required prevailing wage. (Lab. Code, §§ 1770, 1771 [contractors on public works projects must pay the prevailing wage, as determined by the Department of Industrial Relations].) Allan and Martin alleged that each was the second lowest bidder, as to, respectively, 17 and 6 of the contracts and would have been awarded those contracts as the lowest bidder had American's bid included labor costs based on the prevailing wage. Plaintiffs contend that their bid submissions created the required economic relationship for the intentional interference with economic advantage tort.

The tort of intentional interference with prospective economic advantage (intentional interference) provides a remedy to those "who suffer[] the loss of an advantageous relationship" due to the actions of "a malicious interloper." "[T]he mere fact that a prospective economic relationship has not attained the dignity of a legally enforceable agreement does not permit third parties to interfere with performance." The tort is considerably more inclusive than actions for interference with contract, and therefore does not depend on the existence of a valid contract.

In order to state a cause of action for this tort, a plaintiff must allege five elements. [To win, proof is required.]

First, the existence of an economic relationship with some third party that makes it reasonably probable the plaintiff will gain some future economic benefit. This protects the expectation that the relationship will eventually produce the desired benefit, not the speculative expectation that a potentially beneficial relationship will arise.

Second, the defendant must have knowledge of the plaintiff's economic relationship.

Third, the defendant must have engaged in wrongful acts designed to disrupt the plaintiff's relationship. This requires allegations that the defendant engaged in an independently unlawful act separate and apart from the acts of interference and that the defendant either intended to interfere or acted with the knowledge that interference was certain or substantially certain to occur. However, and it is enough that the defendant was aware its actions would frustrate the legitimate expectations of a specific, albeit unnamed, party.

Fourth, the plaintiffs' economic relationship was actually disrupted.

Fifth, the plaintiffs suffered economic harm that was proximately caused by the defendant's interference.

The competitive bidding laws for public works contracts are designed to protect the public, not bidders. Therefore while public agencies are generally expected to accept the bid of the lowest responsible bidder, they still have discretion to reject all bids or accept one of multiple bids that have tied as the lowest.

Based on appellate decisions applying this principle in various contexts, which we discuss post, American contends that losing bidders are barred from suing their successful competitors for intentional interference because there was no existing relationship with which to interfere and no reasonable probability that any contract would ever have been awarded.

In Swinerton & Walberg Co. v. City of Inglewood-L.A. County Civic Center Authority (1974) 40 Cal.App.3d 98, 101 [114 Cal.Rptr. 834] (Swinerton), the plaintiff was allowed to state a cause of action for promissory estoppel against the winning bidder for conspiring with the agency to award it the contract.

The California Supreme Court, in Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1157 [131 Cal.Rptr.2d 29, 63 P.3d 937] (Korea Supply), considered the pleading requirements of an intentional interference cause of action brought by the agent of the losing bidder on a contract to supply military radar equipment to the government of South Korea. The agent alleged that the winning bidder obtained the contract by providing bribes and sexual favors to key Korean officials, in violation of the federal Foreign Corrupt Practices Act of 1977. (15 U.S.C. § 78dd-2.)
The agent alleged that its principal's product was superior and its bid was significantly lower than the defendant's bid, that but for the defendant's misconduct its principal would have been awarded the contract, and that as a result the agent lost the commission it would have otherwise obtained.
Korea Supply stands for the proposition that specific intent to disrupt a plaintiff's business expectancy is not an element of the intentional interference tort; however, essential to Korea Supply's proximate cause discussion is the notion that the defendant intentionally interfered with the losing bidder's viable contractual expectancy.

Implicit in this this argument is the allegation that the various public entities were required to award the contract to the lowest responsible bidder and that plaintiffs satisfied all the requirements necessary to qualify for those contracts, and that but for the alleged misconduct it was plaintiffs who in fact submitted the true and lawful lowest bids.

The bidder-versus-public agency decisions are based on the principle that the public contracting laws are designed to protect the public. While that policy makes sense in order to protect taxpayers from damage awards against a public agency on top of the contract price that went to the successful bidder, its application in this context is far from clear. This action seeks damages from only the winning bidder and therefore does not call for protection of the public. And while taxpayers gain some financial benefit by contracting with businesses that pay less than the statutorily required prevailing wage, American does not contend, and we believe no court would hold, that such an advantage is worthy of judicial protection.

As Korea Supply suggests, a bidder on a government contract who submits a superior bid and loses out only because a competitor manipulated the bid selection process through illegal conduct has been the victim of actionable intentional interference. This is consistent with the notion that the true lowest bidder may bring a mandate action to compel the public agency to reverse its previous decision improperly awarding a contract. Absent some enforceable right, such mandate actions would not be possible.

We conclude that an actionable economic expectancy arises once the public agency awards a contract to an unlawful bidder, thereby signaling that the contract would have gone to the second lowest qualifying bidder. We see no reason to cut off any legal effect from the winning bidder's misconduct simply because it precedes the completion of the bidding process. Assuming that the timing had some legal significance, the defendant's wrongful conduct persists throughout the bidding process, well past the time when it is wrongly awarded the public works contract. In short, by continuing its unlawful conduct after wrongly winning the contract, the defendant interferes with an expectancy that would have otherwise materialized.

In any event, we limit our holding to losing bidders who can show they were the actual and lawful lowest bidders on a public works project.
The takeaway, for me anyway, is that the tort of interference with prospective economic advantage is not leverage to set aside a procurement award; it is really not a "protest" case cognizable under procurement statutes at all.   It is a plain vanilla tort claim against a person alleged to have caused economic harm to the plaintiff.

Unlike procurement standing however, where "remote" parties, such as agents and subcontractors are denied the right to protest, this tort does recognize that tort claimants need not be directly affected if their damages are merely proximate. 

In short, though this case applies a procurement-like concept of next-in-line-for-award limitation on use of the tort by another bidder, it does provide a means of redress in damages for an aggrieved "true" low responsible bidder that is not available under procurement statutes.

It will be interesting to see if this gets appealed to the Supreme Court, and in any event how far this decision will be carried.




Friday, October 2, 2015

Steve Kelman opens the floor for discussion of contract administration

As I have previously pointed out (e.g., here and here and at the tag "contract administration"), procurement is not just the solicitation phase. It fits a tractor/trailer analogy, where the solicitation phase simply gets the thing rolling, but the contract administration stage is what carries the load. Having one or the other, or a good tractor but rickety trailer, will not get the job done.

Steve Kelman blogs on the FCW website, which primarily focuses on IT procurement, but not exclusively; many of the principles discussed on the site have application more broadly. Concluding the article below, he writes:
I suspect the government's expertise in areas relevant to contract management varies widely; my intuition is that DOD weapons systems offices have relatively more expertise, as do those in GSA managing construction contracts, while in IT the picture is very mixed at best.

However, I am more and more feeling that we really need to get a discussion going in this important area. So with this blog I am announcing that I plan to stick with this issue, unless and until somebody persuades me my concerns are mistaken. And I would really like to ask blog readers, particularly those on the frontlines of the system who actually have to deal with mods and with judging contractor deliverables, to submit comments for publication in the blog's Reader Comments section with your views of the issue I am raising.
What an excellent idea, and I encourage my reader to do likewise, by joining his discussion via the link to his article presented below.  (Usual caveats, about how I tend to slice and dice articles presented, apply.)

To contract better, does government need more in-house experts?
For any major contract, contract modifications, known colloquially as "change orders" or "mods" are a way of life, and a staple of contract management. For longer-term contracts, the modified contract often ends up bearing only a small relationship to what originally was signed.

And the content of those modifications has a huge influence on a contract's success. For example, does the mod water down the original terms of the contract due to the contractor contending performance was impossible? How is the modification priced? (There is a widespread view, captured in the phrase "buy in and get well," that aggressive pricing during source selection is often counteracted by generously priced mods.)

A key competency of government procurement contracting officials should be proficiency in evaluating the product or service the contractor submits -- since problems in that area can often lead to major modifications. The procurement system's general bias toward the front end of the process -- source selection and (to an extent) acquisition strategy -- at the expense of back-end contract management, ties into the cultural predisposition to emphasize getting funds "out the door," compared to paying attention to what happens afterwards.

Recently many industrial companies have started buying major subsystems, or even finished manufactured products (especially IT hardware) from contractors. An IT hardware company buying subsystems, or a financial services company buying IT services, would never think of entrusting management of the relationship with their vendors to employees who were not subject-matter experts on what was being bought.

It is my impression that very little attention in writing or training about procurement is devoted to managing contract mods. What little there is, I would guess, centers on the bureaucratic and legal procedures for mods presented in Part 43 of the Federal Acquisition Regulation. And unlike, say Part 15 on source selection, Part 43 provides no specifics for how government folks should make decisions about the change order requests that contractors submit.

If government is going to do a good job contracting, it needs to move enough work in-house so that agency employees can develop sufficient subject-matter expertise. How could an IT hardware firm dealing with contract manufacturers designing and producing major subsystems get a good deal if their own in-house folks didn't have the knowledge to make good judgments about whether production delays were justified or not, whether specs needed to be loosened, or whether prices proposed by the vendor for changes the customer wanted were reasonable?

Yet my strong suspicion is that government officials dealing with contractors frequently lack these kinds of expertise. If true, it's a recipe for disaster. Successfully managing change orders (and evaluating the quality of contractor deliverables) may require some in-house "doer" work to get government folks sufficiently expert to manage.

I could be wrong and please correct me if I err, as I would love to know I'm mistaken on this.
It will be interesting to see how this unfolds.