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Monday, December 3, 2018

Money, influence and manure

Ending pay to play in D.C.
Despite the sensational scandal that roiled D.C. politics in 2014, resulting in convictions of officials and lobbyists, government contractors continue to be among the largest single source of campaign contributions for the mayor and council members, sometimes amounting to more than a quarter of those officials’ campaign budgets.

The District has a problem. Powerful moneyed interests have long used campaign donations as a tool to dominate government contracting, damaging the public’s confidence in government and often wasting taxpayer dollars and causing legitimate businesses to opt out of government service.

It is not that we don’t know how to address the pay-to-play problem. The policy solution is right at our fingertips: ban campaign contributions from those seeking government contracts to those responsible for awarding the contracts. The issue is whether we have the political will.

We are starting to see wealthy businesses that are dreaming of winning lucrative government contracts from the District bare their teeth in opposition to a sweeping campaign finance reform bill sponsored by D.C. Council member Charles Allen (D-Ward 6). The measure was quietly and unanimously approved by the Judiciary and Public Safety Committee a few weeks ago. But now that it is front and center on the council’s agenda, the fight begins.

The clean-government legislation, tediously titled the Campaign Finance Reform Amendment Act, is anything but boring. It would prohibit lobbyists bundling numerous contributions from others into one large campaign contribution on behalf of the lobbyist to an officeholder. It would tighten the coordination rules between candidates and so-called independent expenditure committees so a candidate’s family member or former staffer could not suddenly set up a second committee to raise and spend unlimited funds for that candidate. And it would strengthen the muscle of the campaign finance enforcement agency by buffering its independence from the mayor and council.

Most of all — and this is the real kicker — it would prohibit those seeking large government contracts from making campaign contributions to those responsible for awarding the contracts. This is known as “pay-to-play” legislation, in that businesses would no longer be expected to pay to take part in the competition for lucrative government contracts — in fact, they would be prohibited from doing so.

Pay-to-play legislation is not a radical idea; it is tried-and-true policy already on the books in 15 states, the federal government and the Securities and Exchange Commission, as well as dozens of localities around the nation — including Philadelphia and New York. There is a lengthy case record of actual and perceived corruption when government contractors are allowed to hand over a wad of money as a campaign donation to those who award the contracts. As a result, the courts — even courts hostile to campaign finance restrictions — routinely uphold the constitutionality of pay-to-play laws.

Allen’s pay-to-play bill borrows from many of the best practices of other pay-to-play laws. Businesses that seek government contracts of $250,000 or more would be barred from making campaign contributions to those responsible for awarding the contracts from the date of solicitation of the contract through one year after termination of the contract. The contractor subject to the ban is defined not just as the business itself but also its principals — including owners and senior executives. This would capture the scandalous pay-to-play abuses of convicted contractor Jeffrey Thompson, who doled out money from his own pocket and emerged as the District’s largest single government contractor.

Whoever is responsible for awarding the government contract — the mayor, attorney general and/or council, including candidates for these offices — would be prohibited from receiving contributions from contractors. For the council, the ban on campaign contributions even applies to those seeking tax exemptions or real estate development projects valued at $250,000 or more that originate with the council, as well as any contract of $1 million or more originating in the mayor’s office that requires council approval.
The more money is spread to acquire influence and favor, the more it smells, like manure.

Thursday, July 12, 2018

He spoke proocurement reform, but got bespoke procurement

It looked good on paper, and, of course, after the horse had bolted:
Watchdog groups are calling on the Legislature to pass, and for Governor Cuomo to sign, comprehensive “clean contracting” legislation
In 2016, an investigation into a sprawling alleged pay-to-play scheme connected to the Governor Cuomo’s Buffalo Billion economic development program resulted in charges against nine men, including a former top aide to Cuomo, Joe Percoco, and the former president of SUNY Polytechnic Institute, Alain Kaloyeros, a close government partner of Cuomo’s, on bid-rigging, bribery, and other charges.

The organizations -- including Reinvent Albany, New York Public Interest Group, Citizens Union, League of Women Voters, Fiscal Policy Institute, Common Cause, and Citizens Budget Commission -- are also urging state leaders to reduce the potential for conflicts of interest by exploring options to limit campaign contributions from anyone seeking a state contract. Nineteen states and New York City -- but not the state -- already have these anti-pay-to-play laws in place.

“The moment of truth has arrived. State and federal prosecutors say $800 million in state economic development contracts were rigged, but so far, the Legislature and governor have yet to act,” said John Kaehny, executive director of Reinvent Albany, standing in the state Capitol. “It’s time they pass common sense legislation that includes independent oversight over state contracts, uniform contracting rules, and transparency that will prevent corruption and abuse before it happens.”
• Governor Cuomo Announces 35th Proposal of the 2017 State of the State: Restoring the Integrity and Accountability of State Government Through Comprehensive Ethics Reform
The comprehensive package of reforms includes:

Advancing a constitutional amendment limiting outside income and creating a full-time legislature;
Advancing a constitutional amendment imposing term limits for elected officials;
Requiring members of the Legislature to obtain an advisory opinion before earning outside income;
Advancing legislation to close the “LLC Loophole;”
Instituting Public Financing and enacting a number of other campaign finance reforms;
Subjecting local elected officials to financial disclosure requirements;
Promoting Increased Transparency Through Comprehensive Reforms to the State Freedom of Information Law;
Expanding the State Inspector General's authority to SUNY and CUNY not-for-profits;
Creating new Inspectors General for the Port Authority and the State Education Department; and
Ensuring greater oversight of the state's procurement process.
Statement from Governor Andrew M. Cuomo on Proposed Ethics Reforms Scandal seldom begins with evil, but with temptation, and temptation usually begins with a lack of watchfulness. I will create and appoint separate Inspector Generals for both SUNY and CUNY. They will be charged with identifying and investigating conflicts of interest, fraud, corruption and abuse. They will review contracts and hiring for both improper and illegal actions. They will look for personal benefit to any executive or legislative employee or improper actions with a third party. They will review all campuses and all affiliated entities. The IGs will have the authority to bring any report of improper conduct directly to law enforcement.

I will also appoint a Chief Procurement Officer for the Executive branch. That person will be charged with reviewing all state contracts, with an eye towards eliminating any wrongdoing, conflicts of interest or collusion. And just so there is no confusion, I do mean all contracts. Any contract or agreement that entails the disbursement of state funds will be subject to review. Any question of collusion, political benefit or personal connections will be thoroughly examined. The Chief Procurement Officer will have investigative and prosecutorial experience, and will be authorized to refer problematic issues directly to law enforcement for further action.
Alas, "Procurement reform became a hot-button issue following the arrest of several Cuomo allies on bid-rigging charges."

The rig was up, but not that many dominoes seemed to fall.

N.Y. developer pleads guilty ahead of 'Buffalo Billion' corruption trial
Kevin Schuler, formerly an executive at Buffalo-based LPCiminelli, admitted on Friday to wire fraud and conspiracy charges before U.S. District Judge Valerie Caproni in Manhattan, less than a month before a scheduled trial. Schuler said he was involved in a bid-rigging scheme that allowed his company to win a lucrative contract as part of “Buffalo Billion,” a signature economic development project of New York Governor Andrew Cuomo to revitalize the region around Buffalo, New York.
And then: Architect of Cuomo’s Buffalo Billion Project Is Convicted in Bid-Rigging Scheme
Alain E. Kaloyeros, a principal architect of Gov. Andrew M. Cuomo’s signature economic development initiative, was convicted on Thursday in a bid-rigging scheme that steered hundreds of millions of dollars in state contracts to favored companies in Buffalo and Syracuse. Dr. Kaloyeros, 62, was found guilty of wire fraud and conspiracy in the fourth week of a federal trial in Manhattan that invited harsh scrutiny of Mr. Cuomo’s ambitious plan to revitalize upstate and western New York, known as the Buffalo Billion. Dr. Kaloyeros, the former president of SUNY Polytechnic Institute, had been credited with helping to create a high-tech industry in the capital region, which led Mr. Cuomo, a Democrat, to place him in charge of the Buffalo Billion project. The governor had praised Dr. Kaloyeros as a genius and “New York’s secret weapon.” Soon, the money began to flow to Buffalo; waterfront parks, gleaming modern factories and a cluster of medical and technology facilities were built.

Mr. Cuomo, who has not been accused by prosecutors of any wrongdoing, said after the verdict that he had “no tolerance for those who seek to defraud the system to advance their own personal interests. Anyone who has committed such an egregious act should be punished to the full extent of the law.”

But at the trial, the prosecution presented evidence that Dr. Kaloyeros and Todd R. Howe, a former lobbyist with ties to Mr. Cuomo, conspired to defraud Fort Schuyler Management Corporation, a nonprofit real estate arm of SUNY Polytechnic, by steering lucrative contracts to two firms whose executives were significant donors to Mr. Cuomo’s campaign. As part of the scheme, Dr. Kaloyeros and Mr. Howe tailored requests for proposals, or RFPs, to fit the specific qualifications possessed by the two companies — LPCiminelli, a Buffalo construction management firm, and COR Development, a Syracuse-area firm — and ensure that they be chosen by Fort Schuyler for the projects. LPCiminelli, for example, received a contract to build what became a $750 million solar-panel plant on the banks of the Buffalo River, while COR received contracts worth more than $100 million for other projects. Both firms were clients of Mr. Howe’s.

Michael C. Miller, a lawyer for Dr. Kaloyeros, said after the verdict that his client would appeal. “Alain Kaloyeros is innocent,” Mr. Miller said. “He did not rig bids. Not a penny was lost. Not a bribe was paid. He did the best job that he could for the State of New York and for Fort Schuyler, and we’re just utterly disappointed with the outcome of this case.”

Government watchdog groups said that the verdict, like dozens of previous cases touching on corruption in the state capital, was the result of a lack of strong ethics laws and enforcement.
Jury convicts Ciminelli, Kaloyeros in Buffalo Billion bid-rigging scheme
The jury obviously agreed with the government's key witness, former LPCiminelli vice president Kevin Schuler, who took a plea deal and testified against his former boss early in the trial. Prosecutors dropped their charges against former LPCiminelli executive Michael Laipple.

Schuler spelled out for the jury how he, Ciminelli and Kaloyeros conspired to make sure that LPCiminelli emerged as the winning bidder by designing the request for proposals, or RFP, to favor Ciminelli's company. "We had significant influence over the project, influence over the RFP and influence over the process that was going to select a winner," Schuler told the jury.

Most notably, potential bidders were told in 2013 that they had to have 50 years' worth of construction experience in the Buffalo area in order to qualify for the project. That prompted Schuler to show the jury a shirt, produced in 2011 celebrating LPCiminelli's 50th anniversary. "I think someone put this in to help us ... and I'd never seen a requirement like that," Schuler testified. State officials later shrank the requirement to 15 years of Buffalo experience, saying that the 50-year provision was a typographical error.
Of course, it's another election season, when procurement reform is a can to be kicked through a political goal post.  When procurement reformation is the lipstick slapped on political deformation.

As Governor Cuomo himself said in his Statement quoted above, "Democrats, Republicans, Conservatives, Liberals, Independents – no party or group is immune."

Monday, May 14, 2018

Reigning in the cozy relationships

The following article is interesting for the revelation of a statewide undeveloped procurement system that is finally seeing the light. It heralds new procurement reforms in the State of Arizona, "massive changes to how public schools will be allowed to hire builders for large construction projects, as well as harsh new penalties for malfeasance that occurs during the selection process". 

The things discussed in this article were mostly already dealt with long ago under Guam's procurement laws, taken from the ABA Model Procurement Code.

I only make reference to parts of this for its procurement lessons, so you should read the full article at the link.

Arizona upends school procurement laws in effort to cool cozy relationships with builders
Some in the construction industry, which was not consulted on the changes and fears a return to a system that prioritizes cost above outcomes, say the changes are a legislative overreaction to scandals that have roiled the Scottsdale Unified School District since late 2017.

The most significant change involves how construction companies will be selected. Beginning July 2019, instead of using a process that allows districts to subjectively score and select a construction manager to manage the entire project, builders will be selected based solely on who promises the lowest cost.
Comment: The new system can provide a lot of the accommodations allowed by the old one by use of the "multi-step" competitive sealed bid procurement method. It has been used extensively in recent times (some say too much so), which is known as the LPTA (Lowest Price, Technically Acceptable) source selection method. It involves two phases, the first of which is to assess the offers of the bidders to determine which qualify, followed by opening of sealed price bids. The first phase allows discussion to enable "potentially acceptable" bidders submit an acceptable bid.
Other provisions aim to prevent undue influence over the procurement process by restricting who gets to be part of the selection process and banning gifts given by contractors to district officials. Gifts from contractors to district procurement officials will be prohibited. “It was all aimed at trying to address corruption in financial management and procurement practices,” said House Speaker J.D. Mesnard, R-Chandler.
Comment: Guam law's ethics provisions prohibit the giving of gifts, gratuities and even "favors", deminimus benefits that may not even benefit a person but the organization. It is meant to stem paying to play relationships.
•Contracts will be awarded based on lowest price from a qualified bidder
•No contractor or subcontractor providing services to a district will be allowed to serve on a procurement selection committee
•Procurement officials will be prohibited from receiving a benefit to create a procurement specification in a particular way, such as to benefit a single company
•School districts must keep records that prove construction vendors are properly licensed.
The competitive sealed bid method is the preferred source selection model. Conflicts such as this are prohibited by ethics rules, and rules preventing non-government who consult in the preparation of specifications from being allowed to bid or have an interest in the bid. Procurement officials are required to keep extensive records related to procurements, which are public documents.
The Guam Supreme Court just published today a decision that held a solicitation had to be cancelled for failure to keep a the required record, thereby impeding a proper review of the conduct of the solicitation. Teleguam Holdings LLC v. Guam, 2018 Guam 5.
Charter schools will be exempt from the new rules.
Not on Guam, where the bulk of their money comes from public funds. Guam professes its purposes and policies of procurement to include to provide for increased public confidence in the procedures followed in public procurement; to ensure the fair and equitable treatment of all persons who deal with the procurement system; to provide increased economy in territorial activities and to maximize to the fullest extent practicable the purchasing value of public funds of the Territory; to foster effective broad-based competition within the free enterprise system; and, to provide safeguards for the maintenance of a procurement system of quality and integrity.

Tuesday, May 8, 2018

Look-see called for in not a good look government contract

The first thing you need to know, if you don't already, about this article is that it involves an Australian political party whose very name is a deceit. The "Liberal" Party is actually notoriously conservative. Oh, and it currently controls the Federal Government.

'Not a good look': Calls for transparency after Liberal Party donor wins Pacific cable contract
The Federal Government has been called on to publicly explain its decision to award a multi-million-dollar contract to a company that has previously donated tens of thousands of dollars to the Liberal Party.

Telecommunications company Vocus was last year awarded a $2.8 million contract to carry out a three-month scoping study on the planned undersea high-speed internet cable for Papua New Guinea and Solomon Islands. Vocus donated $44,000 to the Liberal Party of Australia in 2013, and a further $50,000 in 2016.

The Department of Foreign Affairs and Trade (DFAT) awarded the scoping study contract through a limited tender, a process where only one or more potential suppliers are approached to apply.

Marc Purcell, the chief executive of the Australian Council for International Development, told the ABC's Pacific Beat program the combination of the donations and the limited tender were "not a good look". "The Government does have the ability under the Commonwealth Procurement Guidelines to have a limited tender," he said. "While it has that power, the issue is the lack of transparency and what I think will raise eyebrows in Canberra is the fact that the preferred provider Vocus is a donor to the Coalition."

The company said the political donations were made by its former board and management team.

DFAT said Vocus was awarded the scoping study contract on account of its "extensive, recent experience with similar infrastructure projects", and that the company was "assessed as being best placed to explore potential cable solutions".

Australia made an offer to help with the Pacific cable project last year after the Solomon Islands signed a deal with Chinese communications giant Huawei. That deal unnerved security experts concerned about China's growing influence in the region, and the prospect of a Chinese company gaining access to Australia's internet infrastructure.

Thursday, March 29, 2018

Three strikes and these protests were out

Note to the wise and those who want to be: Read this decision in its full glory at the link. The rendition below is incomplete, perhaps inaccurate, and simply intended as an exposure to procurement problems for students of procurement; not to decide any particular controversy.

Matter of: AeroSage, LLC; SageCare, Inc., B-415267.13; B-415267.14, March 19, 2018
AeroSage LLC, of Tampa, Florida, and SageCare, Inc., also of Tampa, Florida, each a service-disabled veteran-owned small business (SDVOSB), protest various aspects of the structure and award of a request for proposals. Prior to filing the instant protests, the protesters each had a pending protest of the same procurement at issue here. In those protests, the protesters presented their grounds as “a protest of the Agency’s improprieties in negotiations and evaluation of protestor’s offers, improper contract terms, quantities, and technical requirements in violation of interagency fuel regulations, and procurement integrity violation prejudicing protestor and limiting ability to obtain certificates of analysis (COA) or best price for the government. The protesters filed the joint protests at issue here challenging DLA’s decision to continue with contract performance. The protesters also contested various aspects of the structure of the RFP and the agency’s evaluations and awards.

After reviewing the joint protests, the GAO attorney assigned to the protest instructed the protesters to indicate whether the February 9 joint protest raised new protests issues or whether the protest grounds were duplicative of those raised in the pending protests. The protesters summarized the new protest issues (i.e., those not previously raised in the pending protests) as allegations of: (1) improper pre-award and post-award notice; (2) violations of Defense Logistics Acquisition Directive (DLAD) 33.104; (3) improprieties with the override of the stay imposed by CICA; (4) problems with award and evaluation, including award made after override of the CICA stay and awards made based on allegedly flawed underlying specifications; (5) general errors in the solicitation (such as unspecified but “erroneous requirements which have just come to light”); (6) flaws in certain specifications in the solicitation, such a failure to follow the “Veterans Benefit Act”; (7) problems with the solicitation’s certification requirement; (8) failing to provide the protester with copies of certain documents; and (9) a faulty solicitation structure such that awards might decrease SDVOSB participation. In addition, the protesters provided the following statement regarding their protest grounds: “We do not know what awards were made, when, and why awards were made. Any awards that we might know about were improper and/or have been changed without notice.”

Although the protesters raise a multitude of protest grounds, each ground is dismissable under one or more of the three dismissal bases described below.

Untimely Protest Grounds

The protesters challenge various aspects of the solicitation and award, for example, the fact that awards were allegedly made on the basis of “erroneous [solicitation] requirements which have just come to light.” These challenges are untimely. These protests were filed several months after the proposal due date. Thus, to the extent that the protest grounds here, such as issues (4) and (5) above, challenge any aspect of the solicitation, they are untimely and are dismissed. (“Protests based upon alleged improprieties in a solicitation . . . shall be filed prior to bid opening or the time set for receipt of initial proposals.”). Similarly, protest grounds challenging any specific award are also untimely. In this regard, our Bid Protest Regulations provide that all protests other than challenges to a solicitation must be filed within 10 days after the basis of protest is known or should have been known.

Competition in Contracting Act (CICA)

Next, the protesters allege that the agency improperly failed to stay performance of the contract notwithstanding the protest, as required by CICA. In this regard, the protesters argue that “[t]here is no reasonable justification that these awards are urgent or compelling given they are currently available for performance by other proper acquisition vehicles.” The agency contends that “[t]his issue falls outside of GAO’s bid protest function and should be dismissed.” The protesters chose not to rebut this argument.

Under CICA, a contracting agency is required to suspend contract performance if it receives notice of a protest from our Office within 10 calendar days of the date of contract award. However, an agency’s failure to adhere to the stay requirement is not a valid basis of protest. (“GAO does not administer the requirements to stay award or suspend contract performance under CICA”.) To the extent that the protests challenge the agency’s decision to continue with performance, whether under CICA or any other statute, regulation, or guidance, those allegations are dismissed.
[NOTE TO THOSE OPERATING UNDER ABA MPC automatic stay provisions: The federal system operates differently. Do not try this at home.]
Failure to State a Valid Basis of Protest

The protesters also challenge the agency’s decision to make various awards. However, in summarizing their protest grounds, the protesters also advised our Office as follows: “We do not know what awards were made, when, and why awards were made. Any awards that we might know about were improper and/or have been changed without notice.” Our Bid Protest Regulations state that protesters must “[s]et forth a detailed statement of the legal and factual grounds of protest” and require a protester to “clearly state legally sufficient grounds of protest.” 4 C.F.R §§ 21.1(c)(4), (f). The regulations also provide for dismissal of protests that fail to satisfy either of these requirements. The statement above denies knowledge of basic, important facts relevant to the protest grounds and calls into question the existence of a factual predicate for any award-related protest ground. The statement shows that the protesters lack sufficient factual basis for their protests and the protest grounds contesting the basis of award are thus dismissed.

Similarly, the protesters raised several arguments related to lack of notice, such as “[a]wards made with [i]mproper, incorrect, and not provided pre-award and post-award notice and awards improperly changed without notice.” In all instances alleging a problem with notice, the protesters fail to state a sufficient legal basis for these protest grounds or a complete factual predicate. Thus, the protest grounds related to notice are similarly dismissed
You're out.

The ups and downs of procurement reform: the POGO schtick

has long supported common-sense solutions to streamline
 federal procurement processes, modernize procurement policies, and 
utilize commercial practices to the maximum extent practicable. 
Policies and programs that effectively and efficiently 
leverage the commercial marketplace are essential for the delivery of
 best value commercial products, services and solutions 
for federal customers and the American people.

Procurement reform is in the eye of the stakeholder

These days, it appears that increasingly the dialogue regarding the condition of the federal acquisition systems has soured, as a seemingly ever-growing inventory of the deficiencies and shortcomings has overtaken the conversation. Indeed, more and more we are told that the procurement process is in crisis, that it is unable to sustain access to innovative technologies, and that it is an obsolete relic of a bygone era.

The inherent reaction to this narrative is the call for the implementation of new reforms — i.e. policies, statutes, and regulations — to completely overhaul the procurement process. Before embracing this conclusion, however, we should reflect upon both the historical context of the procurement process and the lessons we have learned over time. In particular, it is important to understand how Congress, with the enactment of the Federal Acquisition Streamlining Act (FASA) in 1994, has already reformed the procurement system.

As recognized by the recently published first volume of the report of the Section 809 Advisory Panel on Streamlining and Codifying Acquisition (Section 809 Panel),  FASA 
established a definition for the term commercial item, a preference for procuring commercial items, an emphasis on commercial market research, greater reliance of commercial sector business processes, a requirement to use standard commercial terms and conditions to the maximum extent practicable, waiver of many statutes that would otherwise have been applicable to commercial items, and a framework for maintaining a limit on the number of future statutes that may be applied to procurements of commercial items.

However, since FASA was implemented, the number of DoD-related commercial buying provisions and clauses has increased by 188 percent, and the number of commercial clauses that may be flowed down has increased five-fold. In 1995, the FAR and DFARS contained a combined total of 57 government clauses applicable to commercial items. Today there are 165 clauses, with 122 originating in statute, 20 originating in executive orders, and 23 originating in agency-level policies.
In addition, we should consider the testimony on major weapons system acquisition provided in 2013 by Paul Francis of the Government Accountability Office before the House Armed Services Committee.
We should build on existing reforms — not necessarily by revisiting the process itself but by augmenting it by tackling incentives. To do this, we need to look differently at the familiar outcomes of weapon systems acquisition—such as cost growth, schedule delays, large support burdens, and reduced buying power.

Some of these undesirable outcomes … occur not because they are inadvertent but because they are encouraged by the incentive structure.

I do not think it is sufficient to define the problem as an objective process that is broken. Rather, it is more accurate to view the problem as a sophisticated process whose consistent results are indicative of its being in equilibrium.

The rules and policies are clear about what to do, but other incentives force compromises. The persistence of undesirable outcomes such as cost growth and schedule delays suggests that these are consequences that participants in the process have been willing to accept.
Before strapping dynamite to the procurement system, we would do well to reflect on the incentives inherent to the system, how they can be rebalanced in light of current policy imperatives, and adjust our buying practices, including our rules, accordingly. To do otherwise, risks perpetuating the cycle of reform and re-regulation that we have seen over the decades.

Wednesday, March 28, 2018

Oops -- My mistake

This article comes from Athol, Maine, and is a perfect textbook hypothetical procurement quiz question, played out in real life. It involves a bid error, and seeks to find a way to deal with it. The facts of mistake are always at the core of a problem such as this. But the clarity of the law would help its resolution.

I've set out the whole article as presented, but for our purposes, let's just pretend it is a test question. How would you analyze the problem and solution?

State AG’s office denies Kenefick bid protest
The attorney general has denied a protest by Kenefick Corp., which submitted the low bid to the town for the Queen Lake Dam rehabilitation project. Bids were opened Jan. 31, and the hearing was held March 9.

Kenefick’s bid of $268,150 was the lowest of the 11 bids received, but the town rejected it because the document was not properly filled out. Kenefick argued that the $60,435 error on the form was obvious and should have been corrected by the town.

On the form, Kenefick wrote the total bid price was $268,150. There was a unit price schedule attached to the form. Bidders were asked to provide a unit price for approximately 20 items. The bidders were expected to multiply each unit price by the estimated quantity to derive a total bid amount. Bidders were further instructed to write the extended price for each item in words.

Instead of listing the extended price for each item in words, Kenefick expressed its unit prices in words. The total of the amounts in written words equaled $207,715, which conflicted with the total bid price of $268,150. The town said it made Kenefick’s bid obscure, mandating the rejection.

In the town’s rules relating to bids, in case of a discrepancy between words and figures, the amount expressed in words governs.

Kenefick was notified that its bid read as $207,715. Project Engineer David Lenart told the selectmen this week that, “Kenefick was told to take the bid for the lower amount, or withdraw it. He filed a protest.”

Kenefick maintained the error was obvious, and the town should have corrected it.

The town argued that Kenefick’s bid was obscure because of its $60,435 discrepancy, and also that Kenefick is not a responsible bidder, because it does not have experience with three dam projects, which was called for by the bid specifications.

The company’s lack of experience was also a concern, the town said. Lenart said, “Kenefick could only come up with two projects, which were not comparable” to the scope of the work needed on the Queen Lake project.

State Assistant Attorney General Deborah A. Anderson wrote that the town was under no obligation to correct Kenefick’s bid price, noting if a bidder’s error makes the price or scope of work ambiguous, the bid must be rejected. She further stated the town did not abuse its discretion by failing to correct Kenefick’s error.

Anderson ruled, “I find that Kenefick’s error was an obvious one, even though Kenefick’s bid price could be read as either $207,715 or $268,150. The town had the discretion to correct this error, but it chose not to do so. This was not an arbitrary decision.’

Anderson said as protestor, Kenefick did not meet its burden to prove that its rejection was arbitrary. She said the town was rightfully concerned about allowing Kenefick to choose which bid price was the correct price, thus giving Kenefick ”two bites of the apple.” Also, she said the town followed its own rule. For those reasons the protest was denied.

The second-lowest bidder, R. Bates & Sons, who bid $270,540, made similar, though fewer, errors on the bid forms. He was informed of the same issue.

Selectmen signed two documents prepared by the town’s attorney, officially rejecting the Kenefick and Bates bids. Selectmen then voted to award the bid to the third lowest bidder, Edward Page Corp., which came in at $319,069 ($50,919 higher than the Kenefick bid).

Chairman Thomas Brouillet and John Telepciak signed the contract saying Page “did everything right, and has good experience.”

The project involves the demolition of the dam’s existing spillway and outlet conduit, and construction of a new concrete spillway and gate structure, outlet gates, trash racks, low level outlet pipe, riprap slope protection, gravel crest and landscaping.

Representing the town at the Boston hearing were Thomas McEnaney (town counsel) who filed a response to Kenefick’s protest, and David Lenart, the project engineer.

Work on the dam will begin after Labor Day.
So, what happened here? Kenefick presented a bid with itemized unit prices. In accordance with bid requirements, Kenfeck's bid amount was provided for each itemized line item, but was spelled out in word form. The total amount of all bids was then provided, in Arabic numerals.

Setting aside the question of Kenefick's responsibility for the moment, because the article makes it look like its bid was rejected on grounds of responsiveness, not responsibility, its bid was rejected because the bid "was obscure because of its $60,435 discrepancy" between the total bid price and the mathematical total of the itemized prices. Kenefick argued it was an obvious mistake, but the State Assistant Attorney General held that the town was under no obligation to correct the bid, on the ground that, if a bidder's error makes the price ambiguous, the bid must be rejected. She said the town did not abuse its discretion by failing to correct Kenefick's error.

That may well be the applicable law in Athol, which evidently has a rule that, "in case of a discrepancy between words and figures, the amount expressed in words governs." But this blog is about the ABA Model Procurement Code, and more particularly the Guam procurement law, which follows the ABA MPC, and there is no such law in that context. Remember, we are treating this article as a hypothetical factual situation for our analysis purposes.

MPC § 3-202(6) states that "correction ... of inadvertently erroneous bids before or after award ... shall be permitted in accordance with regulations. This is the same language in Guam law, 5 GCA § 5211(f).

The pertinent ABA MPC regulation is in R3-202.11 ("Mistakes in Bids"), in particular R3-202.11.4(b)("Mistakes where intended correct bid is evident"), which states, "if the mistake and the intended correct bid is clearly evident on the face of the bid document, the bid shall be corrected to the intended correct bid and may not be withdrawn. Examples of mistakes that may be clearly evident on the face of the bid document are ... errors in extending unit prices, ... and arithmetical errors." 

It might be the case that the town did not consider this to be a "clearly evident" mistake. But the AAG was certain it was a clearly evident mistake: "I find that Kenefick’s error was an obvious one...."

The AAG also said "the town was rightfully concerned about allowing Kenefick to choose which bid price was the correct price, thus giving Kenefick 'two bites of the apple'.” Again, I do not question the AAG's statement of applicable Maine law. But the "two bite at the apple" old saw is irrelevant in the MPC regulation, which says such a mistaken bid "shall be corrected ... and may not be withdrawn.

Moreover, there is another element here. Both bites of Kenefick's bid were the lowest prices bid. "Kenefick’s bid price could be read as either $207,715 or $268,150." The next lowest bid, at $270,540, was higher than both of those bids, if we assume, for argument, they were intended to be two separate bids. Even if the totaled low bid written in words,$207,715, the total bid expressed in Arabic numerals, $268,150, remained the low bid. For some reason, “Kenefick was told to take the bid for the lower amount, or withdraw it. He filed a protest."

I hope that there was a stronger reason to reject the bid because of issues of responsibility, though there is not much in this article that would help an analysis of that issue. This bid was rejected before it was evaluated from all appearances, even though it was the lowest bid. It was reported only that "Kenefick is not a responsible bidder, because it does not have experience with three dam projects, which was called for by the bid specifications." 

In the ABA MPC regulations (R3-401.10), it is not necessary to actually have all the experience at the time of bid if it can be obtained (R3-401.03) after bid evaluation, for instance by subcontractors or other professionals available for hire. This regulation requires a separate inquiry to determine responsibility after bid opening, so long as the low bidder's responsibility is determined to the satisfaction of the procurement officer before award (R3-401.04). There was evidently here no finding that Kenefick was nonresponsible (see, R3-401.05), merely "a concern".

And what did the town get from this? The obligation to pay $50,000 more for the next available bid, about 20% more than Kenefick's stated total bid.

It might be asked, why is the ABA MPC so lenient on allowing low bidders to correct bids? It would seem, unless the low bidder has determined to be nonresponsible, that government should be allowed the opportunity to take a low bid, notwithstanding technical mistakes in it that do not prejudice the competitive standing of other bidders. Here, correction of the bid, even to the higher amount, would not improve the competitive position of any of the other bidders.  

It is one of the foundation purposes and policies of the MPC, and Guam's procurement law, "to maximize to the fullest extent practicable the purchasing value of public funds". (MPC § 1-101(2)(f); 5 GCA § 5001(b)(5).)  It is mandated that the procurement law is to be construed and applied to promote its purposes and policies.  (MPC § 1-101(1); 5 GCA § 5001(a).)


Tuesday, March 27, 2018

Is Section 809 Panel playing for change that we don't need?

This is the second of two articles addressing the perennial changes that accompany all procurement regimes.  The first is the immediately prior post. The same rules and caveats about reading the original article apply here.


When it comes to bid protests, Section 809 panel should follow data
The Section 809 Panel, whose members were appointed by DoD and represent experts across the government contracting field, derives its name from the section in the 2016 National Defense Authorization (NDAA) that created the panel. Among the panel’s mandates is to streamline the acquisition process while protecting “the best interests of the Department of Defense.”

It is no secret that the Section 809 Panel also is looking at the bid protest system as part of its mandate. And it is also no secret that DoD takes a dim view of the current bid protest system. It is not a stretch to believe that, in DoD’s view, significant changes to protests would be in its “best interest.” That would be a mistake.

Bid protests provide a meaningful “check and balance” to help ensure the government consistently acts both in its best interests and in accordance with applicable procurement regulations. This is important to maintain the perception (and reality) that the federal contracting marketplace is characterized by open, robust competition. Without some third-party mechanism to review whether procurements are conducted reasonably and in accordance with federal procurement law, nontraditional federal contractors or established government contractors without established track records at particular agencies could come to view the federal marketplace as a de facto oligarchy of a few companies favored by specific agencies.

The promise of contractor-financed government oversight via the protest process gives companies comfort (especially when utilizing enormous and scarce resources) that their bids will be evaluated fairly and in accordance with the guidelines set forth by the agency in the solicitation. Without such a system, companies the government relies on will turn their backs on this marketplace to everyone’s detriment.

Those looking to change the system argue that protests are prolific, disruptive, and unnecessarily slow procurements. These arguments, however, have largely been debunked with the recent release of the most comprehensive study of the protest system in a generation by the RAND Corporation (through its National Defense Research Institute).

Among other things, the RAND Report found that protests are not at all prevalent when viewed against the backdrop of overall DoD procurement activity. The report found just 0.3 percent of DoD contract actions were protested, and most GAO protests are resolved in just over a month–hardly indicative of a system that causes governmentwide disruption. To make these conclusions, RAND studied 21,186 contract actions at GAO (average of 2,354 per year) and 475 cases filed at the Court of Federal Claims (average of 53 per year).

With respect to GAO, the data set (which runs from fiscal 2008 through fiscal 2016) showed that, while protests had increased, the effectiveness rate of protests (which is approximately 45 percent) remained steady throughout that time leading RAND to conclude that protesters were largely filing protests that had merit. The RAND study also found that 50 percent of protest actions at GAO are resolved within 30 days, and fully 70 percent of cases are resolved within 60 days.

Based on this data, RAND cautioned policy makers from tinkering substantively with GAO’s and COFC’s current bid protest jurisdiction, timelines and procedures.

RAND recommended against shortening GAO’s process to under the current 100 days, based on the data showing the vast majority of cases are resolved much sooner and that GAO reasonably needs additional time for more complex cases. RAND also recommended against reducing GAO’s task order jurisdiction, noting that those protests are more successful, on average, than non-task order protests.

The RAND report did make some recommendations for reform, which were closely aligned with the evidence it painstakingly collected and analyzed. For one, nearly 10 percent of protests at GAO are for procurements valued under $100,000. A streamlined protest process would benefit the quick adjudication of these protests (such, as RAND noted, a small claims-type procedure or mandatory ADR at GAO).

Second, RAND found that small businesses file more than 50 percent of protests though they account for 15-to-20 percent of contract dollars. While this may be because the average contract awarded to small businesses is smaller than large businesses, small businesses may benefit to a dedicated enhanced debriefing process and outside counsel or help from the SBA because protests where outside counsel is present and the underlying source selection record is reviewed lead to better outcomes for protesters with a higher success rate. Counsel are also bound by their ethical obligations to only file non-frivolous pleadings.

The current bid protest system plays an irreplaceable role in enhancing confidence in the integrity of federal procurement, which fosters a more robust marketplace with more participants offering greater innovation to federal agencies. The data in the RAND report shows that current jurisdiction and timelines result in effective, non-frivolous use of the bid protest mechanism by disappointed offerors without undue disruption or delay. While larger procurements are more susceptible to protest, these big dollar procurements are exactly what tax payers and policy makers should want to be the focus of the bid protest system.

Like with everything else, the Section 809 Panel’s recommendations with respect to the bid protest system should be based in fact. Thankfully, with the RAND report, the panel has those facts close at hand.
See previous post related to this topic, here.

For the times, they are a'changing -- or are they?

Here is the first of a couple of intriguing and thought-provoking current articles, each from very good sources (or so I've observed), considering aspects of the current "changes" in federal government acquisition. The second will be in the next post (see here). 

Remember, I take indecent liberty with articles advanced here, to provide context to students of local government procurement, and Guam's in particular. Thus, I slice and dice, omit great swaths of critical data, paraphrase, rearrange, and perhaps tilt to one side or the other, the original information in these articles. It is imperative that you read the articles in their original form and the authors' intent, and not rely on my iteration of them.



“Other Transaction Authorities” might seem like a risky new acquisition method, but it’s been around longer than the Federal Acquisition Regulation.
Before there was a Federal Acquisition Regulation regime describing the many procurement laws adopted at the federal level in the last three decades plus, there were “other transaction authorities,” also known by the shorthand OTAs or OTs. This contracting method, outside the usual federal process, is not widely used and even less understood. But that’s beginning to change. “Even though it’s been around for a fairly lengthy period of time, it’s just not been used very much. So, people are afraid of it because they haven’t seen how it’s worked,” Douglas Maughan, director of the Homeland Security Department's Science and Technology Directorate’s Cyber Security Division, told Nextgov.

It comes across as new and scary but is potentially a game-changing acquisition model and it is catching fire across government. After all, it has no structure, no built in roadmaps, accountability or paper trails. But, it doesn’t have to be scary and is not really all that new, if you are a big believer in getting to the future by going back before the dawn of modern procurement rules-based practices. It has roots going back to the 1950's, long before the FAR and the Competition in Contracting Act. Three decades later that same language came to be used to grant the Defense Department similar authorities. “Under these authorities, agencies may develop agreements that are not required to follow a standard format or include terms and conditions that are typically required when using traditional mechanisms,” according to a Government Accountability Office definition. In other words, OTAs rely more on principles than rules.

By 1994, that authority had been broadened beyond research to include prototyping and then updated again in 2017 to enable contracts to move into production after successful prototypes. Over that time, several departments have been granted other transaction authorities, including Defense, Energy, Health and Human Services, Homeland Security and Transportation. Under these departments, five component agencies have also been given explicit OT authority: the Federal Aviation Administration, Transportation Security Administration, National Institutes of Health, Domestic Nuclear Detection Office and Advanced Research Projects Agency-Energy, or ARPA-E.

Homeland Security’s Science and Technology Directorate awarded its first OT contract for cybersecurity in February 2016 after launching its Silicon Valley Innovation program. While the primary focus for OTs is on research and development, not all agencies are using them for that express purpose. For instance, TSA and NASA use them for other services, such as airport security, education and outreach, according to GAO.

The reluctance to use OTs is based on “fear of giving people a lot of discretion,” said Nash, the procurement law expert. “If you’re in a government agency and you’ve got an inspector general and you’ve got congressional oversight … there’s a tendency to be pretty cautious about how you do business.”

That said, “It’s the same oversight you have over any other transaction where you’re giving a company money,” Nash said. “The problem is, if you have a lot of discretion, you take away a lot of the rules, but you still have basic ethics problems. If you gave an OT to your father without telling anybody else about it, you’d have the same ethical violation you’d have with a contract or a grant.”

The other major roadblock is the fear of funding projects that don't pan out, Nash said. “People have a hard time understanding that when you fund research, over half the time you’re funding failure,” Nash said. “You do not get 100 percent payout from research; and you shouldn’t expect it.” If you were to see a 100 percent success rate in funding research, that would just mean you weren't looking far enough into the future. “There’s nothing wrong with failure,” Nash said.

Homeland Security’s Maughan agreed. “We have a lot of successes we can talk about with return on investment, but even the failures” have some return, he said. He cited a program to downsize a Defense Department radar system to fit on smaller drones used by U.S. Customs and Border Protection. The company awarded a contract ultimately failed to produce a working prototype, but everyone involved still consider it a successful venture. The company was able to get funding to move their research forward and CBP learned what is feasible for the size of drones they use. “They were still really happy about being part of the program,” Maughan said. “We helped them move the technology down the roadmap toward a smaller device and that will help them in some of their DOD missions.”

“I think there’s still some return on investment," Maughan added. "Our investment was less than $400,000 with them, so I think it falls into the category of: If you’re going to fail, fail quickly."

Had the office used a traditional contracting method for this project, it likely would have taken six to 12 months just to make an award, let alone discover that the idea would not work. Under the Science and Technology Directorate's OT authority, the time from application to award can be as short as 60 to 90 days.

Broadening OTs beyond research seems to increase their use accordingly. GAO reports that while most agencies do fewer than 75 OT transactions a year, TSA and NASA conducted 640 and 3,220, respectively, in 2014 alone.

Many in government have been reluctant to use their OT authorities precisely because of the lack of regulations governing their use. Since the contracts exist outside of the Federal Acquisition Regulation, they can be written with far less stringent requirements. But that also means there are fewer protections along the way to avoid a catastrophic contracting failure—one that could land a government official in front of a congressional committee.

“Even though it’s not FAR-based, we still have to do procurement documentation, we have to do a source-selection plan that says what are the criteria by which we’re going to evaluate proposals. For the most part, it’s the same as a traditional FAR-based contract, it’s just that the vehicle you’re using is not a FAR-based vehicle,” Maughan said. Despite appearances, “It’s not the wild, wild west,” Maughan added. “You still have to make sure the government is making the decisions on what gets awarded. Even still, we have a contracting officer—who’s called an ‘other transaction authority officer’—so you’re still doing the same kinds of things with the contracting folks as part of the team.”

The company was able to get funding to move their research forward and CBP learned what is feasible for the size of drones they use. “They were still really happy about being part of the program,” Maughan said. “We helped them move the technology down the roadmap toward a smaller device and that will help them in some of their DOD missions.”

“I think there’s still some return on investment," he added. "Our investment was less than $400,000 with them, so I think it falls into the category of: If you’re going to fail, fail quickly."

Had the office used a traditional contracting method for this project, it likely would have taken six to 12 months just to make an award, let alone discover that the idea would not work. Under the Science and Technology Directorate's OT authority, the time from application to award can be as short as 60 to 90 days.

“It’s not a solution for every case,” Maughan said. “It’s not the answer for all things,” he added. “If you’re trying to get startups with new innovation, then an OT might be good for you as an organization. There’s a little bit of risk working with a startup company—if you’re really just looking for a solutions provider and you’re not willing to take some risk, then an OT might not be for you.”

Nash agreed and offered some advice to agencies interested in getting in on OTs. “Let’s say you find a company out there that’s never done business with the government and that has some fascinating technology. You go to them and you say, ‘How could we sponsor you to do this? And we’ll give you all the money.’ Well, they may say, ‘The only way we’ll deal with you is this, this, this and this,’” Nash said. “We’re talking about intellectual property issues; we’re talking about accounting issues. And a normal contracting office might be pretty darn uncomfortable when they hear that because that’s not their norm.”

“You’ve got accounting problems. You want to make sure the company spends the money for what you gave them the money,” which can be particularly difficult, as one advantage of an OT contract is the company does not have to abide by government accounting standards. “But you need to make sure they have some systems.

“You need to worry about intellectual property—who’s going to have rights to it. And that would mean that if they said, ‘We’ll only do it if you take zero rights,’ that would be a problem. You might do it but you certainly would know that that’s a flashpoint that you would worry about. And then, of course, you’ve got to worry about audit rights because the government always wants to be able to audit and the contractor might not want to be audited.
Additional reading for this subject: Acquisition Disruption - Innovative Concepts in Government Contracting
Excerpt:  "This term is not defined by statute or regulation; it is best defined by what it is not. An OTA is not a procurement contract, grant, or cooperative agreement. It is a different type of agreement with the government – one that is not subject to the strict regulatory regimes that characterize other types of contracting." 

In my mind, adherence to principles is absolutely necessary for a successful procurement regime, but principles are not, in themselves, sufficient, any more than rules alone are.  See, The ethics of paper work.

Monday, March 19, 2018

Procurement Controversy du jour - Australian government 'consultants'

Experts flag lack of accountability in procurement contracts
Current contract arrangements often prevent consultants from being held accountable for the advice they give to government while ambiguous reporting makes it difficult to determine the value for money of outsourced work. That’s according to the Melbourne School of Government, which has told a parliamentary committee into government procurement contract arrangements that the commercial-in-confidence privileges often attached to consultants’ work has given rise to concerns about accountability and transparency.

“This is different to advice provided by, for instance, a government department, which forms part of the public record,” the school says in its submission to the inquiry.

Last week Government News reported on calls for the Department of Finance to carry out a detailed investigation into whether there is “systematic flouting” of the procurement rules, given the high use of government contracts below $80,000, which are not required to be put to market. The Melbourne School of Government said the way in which value for money is reported by Commonwealth agencies is not specified under procurement contracts and often remains unclear. “This means it is not possible to understand the ways in which value-for-money was assessed for specific consultant engagements, and the extent to which a particular engagement did, in fact, deliver that value.”

The school also pointed out the lack of formal accreditation for becoming a consultant or professional body ensuring practitioners meet basic professional or ethical standards.

“This means that there are no generally accepted rules regarding who can legitimately call themselves a consultant,” it said.

The school also highlighted that more than two-thirds of the public service’s consulting work is completed by five organisations, four of these being the Big Four accounting firms. “It would be helpful to understand why exactly this is.”

Dean of engagement at Griffith Business School, Professor Anne Tiernan, who has been involved in several projects examining public service capability, said successive “reforms” had eroded institutional memory and capacity for long-term thinking.

KPMG, which earned $620 million in government contracts from 2012 to 2017 according to the national auditor, argued it was unrealistic to expect public service to possess in-house the myriad technical skills needed to meet rising demands. Departments and agencies required specialist skills including data and analytics, artificial intelligence and business and technology transformation, it said.

While only the primary organisation in a contract is currently reported, the consultancy argued that the reporting of subcontractors would provide an increased level of transparency, particularly for smaller enterprises working as part of a consortium. KPMG also proposed that AusTender should provide information on other companies and consultants that unsuccessfully tendered for a contract, and not just the winner, to provide “an additional level of transparency” to the procurement process.
Read more at the link.

Sunday, March 18, 2018

Putting brakes on a mule. Whoa, Mule!!

US military says robotic pack mules are too noisy to use (2015)
The US military has reportedly shelved development of its robotic pack mule — the Boston Dynamics-built Legged Squad Support System or LS3. According to a report from Military.com, there are no "future experiments or upgrades planned" for the mechanical beast of burden, with the program in need of new contracts or support from senior military figures before it can be resurrected. And the reason for this parting of ways? LS3 was apparently too noisy to make a good soldier. Over the course of its development, LS3 was given updates to make it more autonomous, able to automatically follow humans and even respond to basic voice commands like "follow," "sit," and "stay." But, it seems it never really became all that quiet. In videos of the barrel-chested robot in action during military trials last summer, it sounds as loud as a sit-on lawnmower — definitely not the sort of companion you'd want bumbling alongside you on a nighttime patrol.

Army on Accelerated Path to Buy as Many as 5,700 Robotic Mules (2/9/2018)
Requirements for robotic mules go back at least to 2001 when the now canceled Future Combat Systems was conceived.An autonomous multifunctional utility logistics and equipment vehicle survived the FCS cancelation and was transferred to the follow-on Brigade Combat Team Modernization program, but that effort was eventually scrapped as well. Since then, development of robotic mules continued, with four of the vehicles reaching Afghanistan in 2012 for a battlefield assessment. The Lockheed Martin-built squad mission support system was deployed there for about five months. When the Army put out a call for robotic mules to take part in a vendor solution assessment in September and October, seven robot manufacturers were able to bring technically mature, off-the-shelf robotic mules.

After more than a decade of experimenting with robotic mules designed to take the load off overburdened foot soldiers, the service is on an accelerated path to field up to 5,700 squad multi-purpose equipment transport robotic vehicles in a winner-takes-all competition that may wrap up as early as 2019. Over the course of its development, LS3 was given updates to make it more autonomous, able to automatically follow humans and even respond to basic voice commands like "follow," "sit," and "stay." But, it seems it never really became all that quiet. In videos of the barrel-chested robot in action during military trials last summer, it sounds as loud as a sit-on lawnmower — definitely not the sort of companion you'd want bumbling alongside you on a nighttime patrol.

The program is using an “other transaction authority” contracting vehicle to rapidly transition the technology from experiments to a program of record. OTAs are normally used to bring in nontraditional contractors to make prototypes. The Army is in the middle of selecting a contractor after bringing in seven vendors with eight different vehicles in 2017 to perform operational tests. “That is significantly faster than we have been able to do previous efforts,” Maj. Gen. John George, director for force development, Army G-8, told reporters. “That is the beauty of the new OTA process. If you have a competition though OTA, you can go to procurement and turn it into a program of record,” George said. A typical program of this kind would take upwards of 10 years, he said. “The Army wants to go faster. It wants and needs to go faster,” he added.

But this is a “good news story,” he said. “We are doing that because we have learned to hack our own system” and by using the revised other transaction authority rules. “What has changed is that the transition mechanism provided in 10 USC 2371b (h), added by the 2016 NDAA, provides a greatly simplified way of transitioning the contracting. The follow-on production effort after a successful prototype OT can be executed as a production OT or awarded as a non-competitive procurement contract,” according to Richard Dunn, founder and consultant with the Strategic Institute for Innovation in Government Contracting.
Army Revamps Strategy to Acquire Robotic Mules (3/24/2017)
The Army intends to buy 20 robotic mules from manufacturers and send them out with brigades for a year-long operational test and evaluation, the service’s program manager in charge of unmanned ground systems said March 23. Bryan McVeigh, project manager for force protection, said a recent Army Requirements Oversight Council looking at the squad multipurpose equipment transport (SMET) vehicle put the breaks on the program, which was heading for fielding in the early 2020s. The council said, “Wait a minute guys, You’re laying out a standard program of record. This is taking too long. This is way too much testing. We’re not even sure this is what we want,” McVeigh said. Chief of Staff of the Army Gen. Mark Milley instructed the PEO to go back and look at the things that really matter and get rid of the rest, McVeigh said.

Earlier in the conference, a senior service official said the proposed prices they had seen for SMETs had given officials “sticker shock.” “I’m not telling you what to bid on your price. But I am telling what we think it should cost,” McVeigh said. The vehicle after it reaches its assembly point will then have to switch over to an unmanned mode. “How do I pull what seems to be mutually exclusive design characteristics together?” McVeigh asked. That will be a tough problem for the manufacturers, he acknowledged.

The Army wants two basic configurations: one similar to the vehicles that have been tested and another that will have a seat and steering wheel so it can be optionally manned, he said. The reason for the optionally manned version is one of logistics. “How do I get from an airport to an assembly area? That kind of leads me to an optionally manned solution. There are not enough prime movers to tow all the systems that are supposed to be issued to the brigade,” he said.PEO force protection will proceed with an SMET rodeo as early as August, McVeigh said at the National Defense Industrial Association’s Robotic Capabilities conference in Springfield, Virginia. How is it going to be operated? Will it use a cord, a joystick or follow soldiers using breadcrumbs? Can it be towed at 20, 30 or 50 miles per hour without flipping over? The more capability the robot makers offer, the higher the score on their evaluation, he said.

A request for information will be published “shortly,” he said. “I need your feedback to make sure what I have in mind is executable. This is absolutely critical.” He needs to know how long it will take to get a prototype built. As for delivering the models by August: “I need you to tell me if I’m on drugs,” he said. Companies participating will be reimbursed for their expenses.

There are four possible scenarios, McVeigh said. The first is that one of the manufacturers “hits it out of the park” and gives the Army exactly what it wants. He has the authority to then go into limited production with a traditional acquisition contract. Another scenario is that a couple of the models do well, but are not quite right. There would be new requirements written, some changes, and then a down-select to one vendor. The third outcome is: “Thank you all for playing. Pick up your trophies on the way out. We learned that what we were asking for isn’t in the art of the doable.” The Army would return to an engineering, manufacturing and development phase and open up the contract again. The fourth option simply is that the Army decides it doesn’t need this capability, he said.
A note to newbies to this blog: I almost always slice and dice articles, leave out critical material, paraphrase, and add comment for purposes of turning real life situations into teachable procurement examples. Do not rely on my renditions to know the full story, or intent, of the article -- read the original at the link(s) provided.

Wednesday, February 21, 2018

Procurement Controversy du Jour: Malta

Investigation finds ‘flagrant breach’ of rules in €469,000 PBS car lease deal
The Public Broadcasting Services board and CEO John Bundy, a political appointee, locked horns over Bundy’s profligate spending, with the car leasing contract – which totals at least €469,000 when including VAT – becoming the subject of an internal inquiry by auditors RSM.

In late September, the PBS’s board of directors unanimously passed a motion of no confidence, after directors accused Bundy of showing a “lack of awareness of what the relationship should be between CEO and the board of directors.” They accused Bundy of taking arbitrary decisions, which were presented to the board as a fait accompli, and the directors were faced with threats of legal action against them personally and the company.” The investigation’s decision will vindicate a decision by the PBS board of directors to sack John Bundy, a veteran television presenter appointed to the PBS job in 2016 without a public call for appointment.

Bundy had only raised the issue once at board level on 18 January, when he sought advice on replacing PBS’s ageing car fleet. But the contract itself was never green-lit by the board.

Suspiciously, the person actually responsible for procurement at PBS, corporate services manager Edmund Tabone, was completely side-lined and left in the dark about the deal. Instead, it was left up to Mario Micallef, the manager for advertising sales, to gather the quotations.

Although MaltaToday reported a total of 14 different contracts signed for a car lease, the contracts investigation dealt with 13 cars, all leased for a total of eight years, varying from the cheapest for €230 monthly (plus VAT), to the highest being €600 (plus VAT), which was meant to be Bundy’s car.

One of the more curious aspects of the deal was that – according to board minutes seen by MaltaToday – one of the cars was for the exclusive use of Natalino Fenech, the former PBS head of news, who in 2013 stepped down from his position after Labour’s election. According to the directors’ minutes, Fenech was “still on PBS’ payroll with all perks and allowances”, despite his secondment to the University of Malta as a lecturer.

An investigation by the Department of Contracts has found a “flagrant breach” of procurement rules when the Public Broadcasting Services – on former CEO John Bundy’s watch – took out a €398,000 car leasing contract for eight years. “There are sufficient grounds to determine that procurement regulations have been blatantly breached and that such breaches irremediably vitiated the award of this procurement process. Consequently, it is being decided that, given the breaches are of a serious nature, the contracts awarded in terms of these class for quotations are terminated with immediate effect.”

The new investigation confirms previous reports by MaltaToday that PBS ignored clear rules to issue a public call for tenders, and instead obtained quotations from leasing suppliers. But it has now emerged that meetings were held with the prospective supplier, Burmarrad Commercials, before the company submitted its ‘winning’ quotation. “It is clear that the conduct by [PBS] seems, a prima facie, to have been focused to advantage the award of the quotations to Burmarrad Commercials. This is in flagrant breach of the procurement regulations.”

It was only after a meeting with Burmarrad Commercials’ representatives at PBS, that the company’s final quotation was actually submitted. In an email, the representative later told PBS employees: “…It was a great pleasure meeting you this morning. As discussed please find attached the revised quotations for the leasing of a fleet of vehicles for PBS.” Contracts Department director-general Anthony Cachia said the email and the fact the company had submitted its winning quotation after the meeting, meant Burmarrad Commercials was “an accomplice” in PBS’s breach of rules.

“This by its very essence breaches the principle of equal treatment and transparency. Apart from the fact that it is very unorthodox that quotations are subject to discussions, especially if such discussions took place with one of the potential suppliers, such conduct is clearly in breach of the fundamental principle which should underlie each procurement process.”

There was an additional breach: the €398,000 contract was artificially split into 13 individual contracts, each representing the cars being leased – one of which was for John Bundy.

Sunday, February 18, 2018

An army of one can get government contract

FEMA Contract Called for 30 Million Meals for Puerto Ricans. 50,000 Were Delivered.
For this huge task, FEMA tapped Tiffany Brown, an Atlanta entrepreneur with no experience in large-scale disaster relief and at least five canceled government contracts in her past. FEMA awarded her $156 million for the job, and Ms. Brown, who is the sole owner and employee of her company, Tribute Contracting LLC, set out to find some help.

Ms. Brown, who is adept at navigating the federal contracting system, hired a wedding caterer in Atlanta with a staff of 11 to freeze-dry wild mushrooms and rice, chicken and rice, and vegetable soup. She found a nonprofit in Texas that had shipped food aid overseas and domestically, including to a Houston food bank after Hurricane Harvey.

By the time 18.5 million meals were due, Tribute had delivered only 50,000. And FEMA inspectors discovered a problem: The food had been packaged separately from the pouches used to heat them. FEMA’s solicitation required “self-heating meals.” “Do not ship another meal. Your contract is terminated,” Carolyn Ward, the FEMA contracting officer who handled Tribute’s agreement, wrote to Ms. Brown in an email dated Oct. 19 that Ms. Brown provided to The New York Times. “This is a logistical nightmare.”

Ms. Brown described herself in an interview as a government contractor — “almost like a broker,” she said — who does not keep employees or specialize in any field but is able to procure subcontracted work as needed, and get a cut of the money along the way. She claims a fashion line and has several self-published books, and describes herself on Twitter as “A Diva, Mogul, Author, Idealist with scars to prove it.”

After Tribute’s failure to provide the meals became clear, FEMA formally terminated the contract for cause, citing Tribute’s late delivery of approved meals. Ms. Brown is disputing the termination. On Dec. 22, she filed an appeal, arguing that the real reason FEMA canceled her contract was because the meals were packed separately from the heating pouches, not because of their late delivery. Ms. Brown claims the agency did not specify that the meals and heaters had to be together.

Tribute has been awarded dozens of government contracts since 2013, including one in 2015 for $1.2 million in mattresses for the Defense Logistics Agency, which supports military combat troops, federal spending databases show. Tribute delivered the mattresses, according to the agency. The databases offer only a fragmented picture of federal contracts. The government has also canceled Tribute contracts on at least five occasions.

Four cancellations involved the Federal Prison System, which found that Tribute failed to deliver meat, bakery, cereal and other food products to various correctional institutions. A fifth termination involved the Government Publishing Office, which terminated a contract for 3,000 tote bags after Tribute failed to print the Marine Corps logo on both sides of the bags.

An investigation by the office’s inspector general found that Tribute “altered and submitted a false shipping document and subcontracted the predominant production function on two contracts without proper authorization,” according to a 2015 report submitted to Congress. The report did not name Tribute, but a Government Publishing Office spokesman confirmed that it was the Georgia company mentioned in the document. The office awarded Tribute 14 contracts totaling more than $80,000 from 2014-15, and the company “routinely delivered late,” the report said.

As a result of the botched tote-bag job, the Government Publishing Office prohibited the award of any contracts over $35,000 to Tribute until January 2019. But that exclusion applied only to that office, not to any other federal agency.

Tribute has had three indefinite contracts with FEMA for hygiene kits since 2013, but none of them have been activated.

Asked about the cancellations, Ms. Brown offered explanations for each case, including that she had supplier trouble with the prison meals. She could have fought the Government Publishing Office on the tote bags contract, she said, but could not afford to at the time.

The bid protest could slow down the Pentagon’s cloud acquisition effort.
A $7 million sole-source cloud support contract awarded by the Defense Department to a company with one employee in January has come under bid protest.

Interoperability Clearinghouse filed the protest with the Government Accountability Office on Feb. 5, and contends the Defense Department failed to conduct a reasonable responsibility determination of Eagle Harbor Solutions LLC’s capabilities and resources. Eagle Harbor Solutions is an Alaska Native-owned 8(a) small disadvantaged business that federal contracting database records indicate has an annual revenue of $91,005, a single employee and few past government contracts.

The protest also alleges a conflict of interest due to Eagle Harbor Solutions being a subsidiary of Koniag Government Services and its parent company, Koniag Inc., which provides cloud services to the Defense Department through the Army’s ACCENT contract. A $7 million sole-source cloud support contract awarded by the Defense Department to a company with one employee in January has come under bid protest.

Interoperability Clearinghouse filed the protest with the Government Accountability Office on Feb. 5, and contends the Defense Department failed to conduct a reasonable responsibility determination of Eagle Harbor Solutions LLC’s capabilities and resources. Eagle Harbor Solutions is an Alaska Native-owned 8(a) small disadvantaged business that federal contracting database records indicate has an annual revenue of $91,005, a single employee and few past government contracts.

The protest also alleges a conflict of interest due to Eagle Harbor Solutions being a subsidiary of Koniag Government Services and its parent company, Koniag Inc., which provides cloud services to the Defense Department through the Army’s ACCENT contract.

The Defense Department previously said the contract “is for program office support services,” and that Eagle Harbor Solutions “is serving in a support capacity only by providing a small team of highly skilled individuals.” In a press release, Eagle Harbor Solutions said it would provide the Defense Department “a full range of infrastructure engineering, software engineering, acquisition, strategic communications, business operations, cost estimation, and budgetary expertise.”

The Defense Department previously said the contract “is for program office support services,” and that Eagle Harbor Solutions “is serving in a support capacity only by providing a small team of highly skilled individuals.” In a press release, Eagle Harbor Solutions said it would provide the Defense Department “a full range of infrastructure engineering, software engineering, acquisition, strategic communications, business operations, cost estimation, and budgetary expertise.”
How can these contracts possibly be justified? Bid contracts are awarded (or meant to be) to the lowest priced responsive bid of a responsible bidder. A bidder who offers a product or service conforming materially to all solicitation requirements can, with a low bid, be considered to have presented a responsive bid.

But that is only half the story. The bidder must also be responsible.  Responsibility and responsive are not at all the same thing.  They are often, wrongly, conflated.  See, Responsivebility.

How can a small shop win a contract for a complex job?

Responsibility is a matter of judgment, involving the weighed consideration of several factors, which the ABA Model Procurement Code calls "Standards of Responsibility". A bidder's responsibility is to be determined before award, and is most often not considered until after bids are opened.

The standards include, a satisfactory record of performance. That is only useful if governments keep such records and share them amongst its various arms. The record can include non-government contract, particularly important for new entrants to the field of competition. Similarly a satisfactory record of integrity is a factor.

And this is where it gets a bit non-intuitive to the uninitiated. Although a bidder is required to have "available the appropriate financial, material, equipment, facility, and personnel resources and expertise" to indicate its capability to meet all contractual requirements, it is also deemed responsible if the bidder has "the ability to obtain them". There are some organizations who have become very adept at understanding a new opportunity and marshaling the stuff necessary to perform the job. These bidders can also win a government contract.

Another example of such a case is provided by the Hawaiian case, BROWNING-FERRIS INDUSTRIES OF HAWAll, INC. It was an administrative hearing before the Department of Commerce and Consumer Affairs of the State of Hawaii. It involved an award to provide rubbish collection services at the Honolulu airport. It did not have trucks, containers, personnel, drivers, collection facility or practically anything else, but did show, to the satisfaction of the Procurement Officer, that it had the ability to obtain all of it. 

Note that, in the Eagle Harbor situation, there was an additional element: whether the bidder was a bona fide, qualified Alaska Native-owned 8(a) small disadvantaged business, or whether it was a front for its much larger owner, which provided the resources it lacked.


Wednesday, January 3, 2018

Protest must be timely and protestor must show prejudice, and a footnote about issue of contract dispute vs solicitation dispute

The following is from a protest decision of the GAO. This protest involved two protests from two protestors in the same solicitation. One protest illustrates by example when a protest is not "timely". The other illustrates a protestor's lack of prejudice, and thereby standing to protest.

Bear in mind my proclivity to re-work the original articles, leave out critical citations, paraphrase and so on, so read the original decision at the link if you need to rely on it.

Matter of: AeroSage, LLC; SageCare, Inc., File: B-415607; B-415607.2; B-415607.3, January 3, 2018 AeroSage, LLC, and SageCare, Inc., protest the award of a contract to Tayrona Oil, Inc., issued by the Defense Logistics Agency (DLA), for 5,000 gallons of fuel to the Milwaukee Veterans Administration Medical Center (MVAMC).

The protesters primarily allege that DLA unreasonably modified the purchase request's delivery schedule without issuing an amendment. We dismiss SageCare's protest and deny AeroSage's protest.

MVAMC placed a purchase request with DLA for 5,000 gallons of fuel for delivery. The request (1) represented that the procurement was being conducted as a small business set-aside, (2) confirmed that delivery was for 5,000 gallons of fuel on Friday, October 13, (3) requested quotations by no later than 11:30 a.m. on Thursday, October 12, and (4) provided that award would be made on a lowest-priced, technically-acceptable basis. DLA timely received quotations from the three firms that it had solicited, Tayrona, AeroSage, and SageCare. Tayrona submitted the lowest-priced quotation of $2.3487 per gallon.

The contracting specialist represents that he notified Tayrona via telephone on the morning of October 12 that its quotation was selected for award. Shortly after contacting the awardee, however, the contracting specialist represents that he was contacted via telephone by an official with the Department of Veterans Affairs indicating that the delivery had to be rescheduled for Tuesday, October 17. The contracting specialist contacted Tayrona via telephone to confirm whether the company would agree to the revised delivery schedule at the same awarded price, and the awardee confirmed.

Following that telephone conversation, the contracting specialist then emailed Tayrona to confirm that DLA was going to award the order to Tayrona and indicated that the delivery date was now Tuesday, October 17. The contracting specialist then emailed AeroSage and SageCare respectively to indicate that neither firm submitted the lowest-priced, technically acceptable quotation. Those emails also indicated that the delivery date was now Tuesday, October 17.

AeroSage's protest:

Following receipt of the notice, AeroSage filed an agency-level protest with DLA on October 12. The primary protest allegation raised by AeroSage was that [t]he contracting officer solicited the RFQ for requirement delivery for Oct[ober] 13, 2017, but awarded the purchase order for delivery four days later, October 17, 2017 thus prejudicing the protester by changing the date, and thereby creating pricing uncertainty on the new delivery date. On Monday, October 23, AeroSage filed the instant protest with our Office.

AeroSage's protest decision:

AeroSage argues that the agency unreasonably changed the solicitation's delivery schedule without amending the solicitation and allowing all offerors to compete against the new schedule. The protester contends that "[a] four day change in a solicitation time can both dramatically impact price/availability and the risks quoters are able to accept to provide best prices to [the] government." "AeroSage was prejudiced in this solicitation with a significant change in the solicitation prior to award."

We have generally recognized that when the government changes its requirements prior to award, it must notify all offerors of the changed requirements and to afford them an opportunity to respond to the revised requirements. Moreover, a contract's period of performance is generally considered to be a material solicitation requirement.

Our Office will not sustain a protest, however, unless the protester demonstrates a reasonable possibility of prejudice, that is, unless the protester demonstrates that, but for the agency's actions, it would have had a substantial chance of receiving the award. Here, the protester has offered no evidence that it was in fact prejudiced by the agency's failure to amend the delivery schedule by four days through the issuance of an amendment. The protester has not asserted that, let alone substantiated how, it would have reduced its unit pricing by an amount that would have overcome the awardee's price advantage. AeroSage's unsupported speculation that the change in delivery schedule could have impacted its proposed price is insufficient to establish competitive prejudice.

There is another teachable moment in footnote 6: The Government argued that the change in delivery schedule was a matter of contract administration, and thus not a proper subject for a protest dispute. As discussed above, however, the change occurred after proposals were submitted and evaluated, but before the contract award was formally made on October 13. Therefore, we do not find that the schedule change can reasonably be considered as a matter of contract administration, and therefore would be proper subject matter for a protest, if only the protestor had standing.

AeroSage's protest is denied.

SageCare's protest:

On November 22, SageCare filed a request to intervene in AeroSage's protest. On the same day, our Office denied the request to intervene on the basis that SageCare was a disappointed offeror, not the awardee of the protested contract.[3] We further explained that "[t]o the extent that SageCare, a disappointed offeror, believes that there were errors in the procurement, SageCare must file its own protest subject to our Bid Protest Regulations." SageCare subsequently filed its protest on November 24.

DLA moved to dismiss SageCare's November 24 protest as untimely because it was filed more than 10 days after the protester's owner and president had actual knowledge that SageCare had not been selected for award and of the change to the delivery schedule. Our Bid Protest Regulations contain strict rules for the timely submission of protests. Under these rules, a protest based on other than alleged improprieties in a solicitation must be filed no later than 10 calendar days after the protester knew, or should have known, of the basis for protest, whichever is earlier.

SageCare's protest decision:

SageCare seems to measure the timeliness of its protest from when SageCare's president received the awardee's price information through the agency report submitted in response to AeroSage's protest. DLA's October 12 notice to SageCare's president, however, clearly indicated that the protester's quotation was not the lowest-priced, technically-acceptable quotation, and that delivery was moved to Tuesday, October 17. Thus, the protester was aware of the material facts relevant to its asserted protest ground related to the modification of the delivery schedule as of October 12. Its November 24 protest, filed more than 40 days later, is untimely, and therefore the protest is dismissed.

SageCare's protest is dismissed.