Integrity: Would that it were so simple and straight forward

But, the devil is always in the details.

First, this heart-warming homily, written by an obviously proud Papa.

Integrity in contracting: lessons from a young Princess

In our house of seven children, it seems that almost every day is an “Essay Day.” Last week, when caught in the middle of a lie — about an issue that was not even important —  one of my young Princesses was required to write an essay about INTEGRITY. The Princess did a great job:

Integrity means to be honest when no one is looking. [Paraphrasing C.S. Lewis] If you have integrity you will have more privileges and trust and friends. If you have integrity your friends will trust you because they know you are trustworthy in all things and at all times. . . . If you have integrity, you are honest, trustworthy and you are a good friend to have especially when your friend needs help with an outfit choice.

Ahh, would that it were so simple and straight forward. In the real world of procurement, the notion of Integrity gets wrapped around several axles, only one of which is honesty. It can include duties of loyalty, accountability, transparency and conflict of interest.

Take, for instance, the U.S. Procurement Integrity Act. It consists of four basic obligations:

A ban on disclosing procurement information;
A ban on obtaining procurement information;
A requirement for procurement officers to report employment contacts by or with a competing contractor; and
A 1-year ban for certain personnel on accepting compensation from the contractor.

Indeed, it gets wrapped around multiple issues of the broader topic, ethics. It is also equally applicable to government employees as well as private contractors.

Christopher Yukins is a renowned government contracts professor at The George Washington University Law School. Here is one of his power point presentations, from 2006 to the Interagency Ethics Council.

He first points out examples of the headline-making train wrecks, the obvious failures of procurement integrity. See, the Darleen Druyun/Boeing affair: Long Fall for Pentagon Star and Ex-Boeing CFO Pleads Guilty in Druyun Case; as well as the David Safafrian/Jack Abrhomoff affair: Ex-Aide To Bush Found Guilty; and the scheme that brought down California's former US Rep. Randy "Duke" Cunningham -- Rep. 'Duke' Cunningham Freed After Bribery Sentence.

He goes on to explore some of the moral hazard associated with the evolution of procurement methods from simple competitive bidder to negotiated contracts via the "best value" proposals, and to the "teed up" if not non-competitively bid task orders, where focus is on faster, more efficient contract letting than fair and fostered competition. Mix in an understaffed and decimated government procurement staff, and outsourcing procurement to private actors, and the ground is tilled for seeds of corruptible influences. He notes it has become a worldwide problem, and requires corrective training and sensitivity at all levels of government -- and industry.

As an example of some of the correctional efforts, Canada, in 2014, has adopted a government-wide Integrity Regime, applicable to both government procurement and real estate transactions.

Federal Government Tightens Procurement Integrity Provisions

With very little publicity or warning, on March 3rd, 2014 Public Works and Government Services Canada (PWGSC) announced significant amendments to the Integrity Provisions which are incorporated in all solicitations administered by PWGSC in relation to federal government procurement and real property transactions. The Integrity Provisions impose rigorous certification provisions which, if not complied with, can result in PWGSC deeming a bid to be non-compliant or result in the cancellation of an awarded contract.

 the list of offenses which result in debarment has been expanded;
 in addition to convictions, suppliers must now certify that they (including their affiliates), have not received absolute or conditional discharges in relation to the expanded list of offenses;
 suppliers must now also certify that they (including their affiliates), have not been convicted in other jurisdictions of offenses that have similar elements to the Canadian offenses listed in the Integrity Provisions; and,
 suppliers are required to impose matching integrity commitments on their subcontractors.

Good procurement is the cornerstone of good governance, and both rely on the honesty and goodwill of the government toward the people and of the trust of the people in the government. In that basic message, The Princess nailed it.

Hide and go seek

Procurement award challenges – the disclosure dilemma, by the UK law firm Mayer Brown LLP

Disputes about public procurement contract awards can pose evidentiary problems for both tenderers and contracting authorities. Does the tenderer challenging an award have enough evidence to support its concern that something has gone wrong? If it does not, will its request for more information be rejected as a ‘fishing expedition’?

Does the contracting authority, in turn, stick to the minimum information that it has to give, or, subject to protecting its confidentiality, does it, despite the time and costs involved, try to be helpful and provide more information, at the risk of opening the door to additional requests?

Bristol City Council’s award of a new contract was challenged by the unsuccessful incumbent contractor ["BMLL"] and the new contract award was automatically suspended. The council asked the court to lift the automatic stay. In deciding that there was a serious issue to be tried and rejecting the council’s interlocutory application, the court recognised the council’s dilemma but said that it should not refuse requests for documents relating, say, to the evaluation of the successful tenderer’s bid, or the bid itself, but then, on the application to lift the suspension, provide, for the first time, evidence about the process or the successful bid in support of its case.

The decision had a number of things to say:

Disclosure in procurement disputes is a perennial problem. On the one hand, an unsuccessful tenderer, whose knowledge of the proposed contract will often be detailed (particularly if, as here, he is the incumbent contractor), may feel instinctively that something has gone wrong in the tender evaluation process. But it can be difficult for him to obtain any information to back up that concern, beyond the sometimes scanty material supplied by the contracting authority ("the authority") pursuant to the Regulations. Any application for early disclosure may often be dismissed as a 'fishing' exercise. There is a real risk that, in such circumstances, there is an unlevel playing field, and the unsuccessful tenderer may never obtain the information he requires to mount a claim.

On the other hand, I quite see that the authority may wish to stand on his rights and refuse all requests for early disclosure, in part because of the confidential nature of the information (although that can usually be dealt with by way of a confidentiality ring), in part because of the time-consuming and expensive business of dealing with such requests, and in part because the authority may feel – often with good cause – that the unsuccessful tenderer will never be satisfied with the answers provided, and will always be seeking just one more document.

It is a question of balancing the interests of justice against the background facts of the particular case.

Contracting authorities have to work out, in fairly short order, whether, having provided the unsuccessful tenderer with the statutory minimum information, they are going to retain all other documents relating to the evaluation and the successful tenderer's bid, and let the unsuccessful tenderer take his own course; or whether they are prepared to be helpful and, providing that the confidentiality of the information is protected, offer to provide as much information about the process as they can.

In my view, however, what the authority should not do is to try and have it both ways. It ought not to refuse requests to provide documents relating, say, to the evaluation of the successful tenderer's bid, or the bid itself, but then, on the application to lift the suspension, provide for the first time evidence about the process or the successful bid in support of its case, either that there is no serious issue to be tried, or that he would be prejudiced if the suspension was not lifted. That approach is at least potentially unfair, because it is relying on potentially controversial material which the unsuccessful tenderer has been given no proper opportunity to consider.

I ... conclude that controversial material, and/or material which, because of the absence of prior disclosure, the claimant is simply not in a position to address satisfactorily if it is produced for an interlocutory hearing, should not ordinarily be deployed on an application [to lift the "suspension"/stay], because of the risk of unfairness. I consider that, in this case, the Council has sought a potentially unfair advantage through its attitude to disclosure. There are two reasons for that.

First, their solicitor Ms Nugent purports to give evidence as to how the [preferred] Refuge tender was evaluated (even though she was not involved in this process). She does this by reference to documents which were sought by BMLL but the disclosure of which was refused.

As it happens, BMLL were able to download from the Council's website a document which appeared to be the Council's evaluation of the Refuge bid. The Council have complained that this document has been wrongly obtained by BMLL, but I find the evidence on that unpersuasive. It is much more likely that this document was wrongly downloaded by a Council employee to this particular part of the website, so that it could then be accessed by others, including BMLL. A Council's inability to use its own website facilities properly is hardly unusual.

But now, in order to argue that BMLL do not raise a serious issue, the Council have disclosed a detailed scoring sheet for Refuge that is in a different and fuller form to the one BMLL downloaded from their website in January. As Ms Metters of BMLL says...:

"No explanation was provided as to why it was suddenly felt appropriate to disclose that document where previously it had been withheld. This document has caused us further concern about unequal treatment because it shows that many points of criticism about Refuge's bid were taken out of the feedback that was apparently given to them with their standstill letter, potentially to justify the high scores that were awarded."

I regard it as potentially unfair for the Council to pick and choose what documents they provide and when, as it suits them.

Worse still in my view is the copious evidence in the witness statements of Mr Anderson (a Service manager with the Council) and Ms Nugent, which seeks to extol the virtues of the Refuge tender itself. This is done in order to persuade the court that there would be prejudice to the Council and the service users if the suspension was not lifted and the contract with Refuge was delayed. But it is difficult for BMLL to respond in any detail to such material, when it was not provided when they asked for it. Moreover that problem is compounded here because the evidence consists of a series of assertions based on what it is said is in the Refuge tender, as opposed to the specifics of the tender itself (which has still not been disclosed).

Often, in a suspension/injunction dispute in a procurement case, the contracting authority will accept that there was a serious issue to be tried. But in the ordinary procurement case, where there may be points to be made on both sides, it will often be unproductive for the parties (and a waste of judicial resources) to spend a good deal of time arguing about the merits or otherwise of the underlying claim. The threshold is, after all, a low one: [***] first that, in cases where there are clear issues arising out of individual scores, it will be difficult for the court to conclude that there is no serious issue to be tried; and, second, that this difficulty arises, at least in part, because the relevant documents have yet to be disclosed.

The Court then evaluated the claim to lift the stay/suspension by weighing the relative damages each party might suffer if the stay were sustained or lifted, considering factors described as "the balance of convenience". 

Central to the result was this important element:

"there is a public interest in the avoidance of delay and ... there will be a detriment to that interest if it is necessary to wait a further six weeks .... I do not, however, consider that detriment to be sufficient to outweigh the strong public interest in compliance with the law and the benefits that implementing the scheme in a lawful way may be expected to bring."

There is Guam Supreme Court judicial authority and Public Auditor administrative review authority for the proposition that parties cannot be charged with knowledge of facts unknown to them when they have been withheld by the government. See, Guam Imaging Consultants, Inc. v. GMHA 2004 Guam 15, ¶ 36 (coincidentally also a procurement case involving issues related to the stay and its lifting), and In the Appeal of Town House Dept. Stores (etc.) OPA-PA-08-011.

Guam procurement law also specifically states that procurement records are public information, generally, 5 GCA § 5251 (e.g., 2 GAR § 3114(h) re nondisclosure of proposals/tenders, which in any event would not include the evaluation records). Further, 5 GCA § 5485 provides an expedited judicial action that may be brought by "any member of the public" to obtain withheld "procurement data". The time limit for bringing a judicial review of an administrative protest decision is specifically "tolled" so long as the disclosure action is pending (5 GCA § 5481(a)).

Good governance is rarely sexy

Detroit's Cruise to Nowhere, by Charles Chieppo, a research fellow at the Ash Center of the Harvard Kennedy School. Usual caveat applies: read the original story at the link, because I take liberties in presenting materials, as case studies and other teaching tools.

When the Detroit/Wayne County Port Authority built the $22 million Carl M. Levin facility, named for Michigan's longtime former U.S. senator, the idea was to entice ships from the growing Great Lakes cruise market to dock there. The good news is that dockings are up; the bad news is that they're holding steady at one so far this year after coming in at zero for all of 2014.

U.S. Customs officials refused to staff the terminal so passengers could disembark. According to a Customs spokesperson, "The facility … has not been completed and does not meet the IT and security requirements necessary to properly process cruise vessels and/or cruise passengers. These and other issues were discussed with the Detroit Port Authority over four years ago."

Port Authority Executive Director John Loftus and Port Authority Commissioner Alisha Bell trot out the old warhorse that the facility attracts jobs and visitors. Numerous studies, of course, have documented that projects like these rarely stimulate economic activity on a level that comes anywhere close to justifying their costs.

Bell makes another argument for the project: "It's a beautiful space for weddings and events that enhances our visibility." Weddings, in fact, seem to be the terminal and dock's main business. Continental Services, a catering firm whose founders are big contributors to local officials' election campaigns, holds them there. The company also owns a luxury yacht and offers party cruises from the dock. Lest you think that the fees from weddings and party cruises cover the $22 million facility's costs, all of $140,000 was collected from the company last year.

Even though the terminal and dock isn't a city project, such wasteful spending is particularly hard to stomach in Detroit, where local residents have already endured so much. The city's 2013 bankruptcy declaration, the biggest municipal bankruptcy in American history, has forced retirees to absorb genuinely painful pension cuts. Detroit's population is down to around 700,000 from a high of 1.9 million. So much land has been abandoned that one of the revitalization strategies being pursued is urban farming.

Elective politics rarely attracts small egos, so it's only natural for officials to want to do big things. But good government is rarely sexy. Sometimes it requires resisting the siren song of projects that rely on patently unrealistic economic assumptions.

I like to say, good governance is the corner stone of good community, and good spending through good procurement is the corner stone of good governance.

Take the money and run -- amuck

Billy Mack is a detective down in Texas

You know he knows just exactly what the facts is

He ain't gonna let those two escape justice

He makes his livin' off of the people's taxes

Bobbie Sue, whoa, whoa, she slipped away

Billy Joe caught up to her the very next day

They got the money, hey

You know they got away

-- Take the Money and Run, by Steve Miller Band

GAO Report is a Good Reminder to Bidders on Federal Procurements: Agencies Don’t Always Follow the Rules! by Zachary D. Jones of law firm Stites & Harbison

Congress typically funds federal agencies through annual appropriations. An elementary principle of federal fiscal law is that if an agency’s appropriations are not obligated by the end of the fiscal year in which the appropriation was made, those funds expire and generally become unavailable to the agency. Often, agencies spend their appropriated funds late in the year in an effort to save some “dry powder” early on in case an unforeseen need arises. With Congress always looking for ways to cut spending, agencies do not want to end a fiscal year with unobligated funds. In Washington it is hard for an agency to justify to lawmakers the need for more money if the money Congress appropriated last year—money the members of Congress had to explain to their constituents was needed then—was not used. Accordingly, at the end of each fiscal year agencies resolve this dilemma by finding ways to close the gap between the portion of their appropriation obligated and the portion faced with becoming expired on September 30. This August and September is likely to set a blistering pace of federal contract awards.

In late July, the Government Accountability Office (GAO)—tasked with investigating how the federal government spends taxpayer dollars—released what many are calling a scathing report. The report explains that many federal agencies fail to follow the procurement regulations found in the Federal Acquisition Regulations (FAR). The report is a good reminder for contractors who bid on federal procurements to be watchful of procurements that appear to deviate from the rules. Data suggest not only that these agencies are breaking the rules, but also that protestors who call them on it are increasingly getting some relief.

In GAO report (available online at http://www.gao.gov/products/GAO-15-590), GAO evaluated a sample of procurements made by federal agencies under the Federal Supply Schedule (FSS). The FSS is used by agencies to purchase certain goods and services, typically the type of commercial items one would expect to find on the shelf, and represents a small percentage of overall federal spending (in FY2014 it was $33.1 billion or only about 7% of federal contract dollars). The individual contracts, however, can be substantial. For example, one of the procurements the GAO report examined exceeded $120 million.

In total the GAO looked at 60 procurements made under the FSS. What it found, among other things, is that of those 60 procurements, in only 23 did the procuring agency actually bother to get three or more prices or quotes from contractors—a fairly clear requirement in the FAR. Basically, what the report found was that federal agencies do not appear overly concerned with ensuring competition for the taxpayer’s procurement dollars.

Sometimes, agencies have a valid (or at least excusable) reason for not getting multiple prices or quotes from contractors. One reason is that some items the government purchases are simply not items widely available on the market. In other words, for some procurements there just was not enough contractors who could supply the good or service sought. Unfortunately, as the GAO report makes clear, sometimes the agencies simply issue solicitations which either overly restrict competition or are not offered to enough potential bidders. For example, in one of the procurements studied, an agency specified only a single brand of a commonly used filing system. To make matters worse, the agency then failed to solicit any contractors that sold the specified brand. The result was the agency failed to receive a single response to the solicitation. When it failed to get a response to the solicitation, the agency procured the specified brand under the FSS directly from the manufacturer—with absolutely no competition from anyone. When confronted by the GAO, the agency admitted that many other brands would have met their needs. Essentially, the agency admitted that it failed “to specify its needs and solicit offers in a manner designed to achieve full and open competition, so that all responsible sources are permitted to compete.”

Because bid protests based on unduly restrictive solicitations (like the agency above who specified a single brand when other brands would have met the agency’s needs) must be filed prior to the agency receiving bids, the best explanation for the rising effectiveness of protests is agencies are increasingly likely to agree to expand a solicitation’s competitiveness if a bidder or potential bidder raises a valid concern about the solicitation’s competitiveness prior to bid time. In those instances where the agency takes such corrective action, the bid protest is recorded as effective even though it is not sustained.

The next month and a half will prove telling. In 2013, The National Bureau of Economic Research (NBER), a private, nonpartisan research organization, found that the annual dash to spend our cash—or as they politely put it, agency “year-end spending”—results in a significant drop in the quality of goods procured. One conclusion from all of this data is that as federal agencies rush to obligate their appropriations, there is likely to be a rash of procurements which do not abide by the rules.

As usual, do not rely on this rendition, which is edited and perhaps distorted for my own uses. Make sure you read the whole piece at the link.

The problem with friends in high places

Lockheed Martin pays $4.7 million to settle charges it lobbied for federal contract with federal money

Over five years, starting in 2009, a Lockheed Martin subsidiary — which was being paid by the federal government to run Sandia National Laboratories — lobbied members of Congress and senior Obama administration officials for a seven-year extension of the contract, according to the settlement the Justice Department announced Friday.

The case opened a window on the inner workings of power and influence in Washington. It’s not surprising that a big, politically connected defense contractor would lobby hard to keep a lucrative slice of federal business. But this case went further. Taxpayers, not Lockheed’s corporate lobbying arm in Bethesda, Md., were paying for the influence peddling.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, alleges that Sandia Corp., the Lockheed subsidiary, used federal money to lobby Congress and other federal officials from 2008 and 2012 “to receive a non-competitive extension” of its contract in violation of federal law. ompany executives, who allegedly hired a former New Mexico congresswoman to help them, didn’t just press people with influence to continue a relationship worth $2.4 billion a year to Lockheed, as Energy Department Inspector General Gregory Friedman concluded in an investigation last fall. They also urged that the contract be closed to competition.

Lockheed has contracted with the Energy Department to run Sandia since 1993. The research lab is part of the government’s nuclear weapons complex, with facilities in Albuquerque and Livermore, Calif. Wilson, who left Congress in 2009 after an unsuccessful run for the Senate, has publicly denied that she took part in any lobbying involving the Sandia contract.

To clinch the contract extension, Sandia labs officials hired high-priced consultants — including Heather A. Wilson, the former New Mexico congresswoman, who allegedly was paid $226,000 — to write up a “contract extension strategy.” Among the tactics allegedly suggested by Wilson was “working key influencers” by targeting then-Energy Secretary Steven Chu’s staff, his relatives and friends, and his former colleagues at another federal lab — all with the goal of keeping Lockheed Martin in charge of Albuquerque-based Sandia.

Wilson, who left Congress in 2009 after an unsuccessful run for the Senate, has publicly denied that she took part in any lobbying involving the Sandia contract.

Energy Department Inspector General Gregory Friedman alleged that Sandia hired Wilson’s consulting firm and two unnamed former employees of Energy’s National Nuclear Security Administration, which oversees the nuclear labs. Wilson’s company, Heather Wilson LLC, gave explicit guidance to the Sandia team on how to influence important people in Washington who would decide whether Lockheed’s contract would be renewed, authorities say. “Lockheed Martin should aggressively lobby Congress, but keep a low profile,” she advised, according to meeting notes authorities say were obtained by the inspector general’s investigation.

The inspector general said that Sandia’s push for a long-term no-bid contract extension under the Obama administration was not the lab’s first lobbying attempt at taxpayers’ expense. “Perhaps [Sandia] felt empowered because it had improperly directed Federal funds to similar activities in the past,” investigators wrote last fall.

Heather Clark, spokeswoman for Sandia National Laboratories, said the lab “has agreed to settle with the Department of Justice to put the matter behind us, take action on what we learned and focus on our important national security mission.” She said Sandia executives “believed our actions for a contract extension fell within allowable cost guidelines,” but now realize that they “acted too early and too independently in planning for a possible contract extension.”

The investigation has “clarified” Sandia’s understanding of “our legal obligations on interacting with public officials,” Clark said.

Read more of the story at the link above.

It's no contest

With all the focus on protest, and the slew of aspersions about "frivolous" protests and delays caused by procurememts, consider these two articles popping up on my radar today.

No Protests After $9 Billion Pentagon Contract

When Leidos and its partners, Cerner and Accenture Federal, secured a monster Pentagon health records contract worth up to $9 billion in late July, eyes turned to losing bidders IBM and Computer Sciences Corp., expecting a bid protest.

That hasn’t happened. IBM and CSC – big players in the defense contracting space – would only protest if they felt the financial reward of a win trumped both risk to damaging DOD relations and a prolonged legal battle. “After receiving a debrief from the government and careful consideration, CSC’s Global Health Alliance did not protest the DHMSM award,” said CSC spokesperson Heather Williams. “CSC is a long-standing partner to the Department of Defense and strong supporter of military personnel and their families. As such, we wish the program much success and will move forward focused on the future.”

The Defense Healthcare Management Systems Modernization contract’s based value is $4.3 billion over 10 years, with an 18-year lifecycle valued at up to $9 billion. The contract charges Leidos with building a next-generation health records system that will eventually be responsible for DOD’s 9.6 million beneficiaries, deployed at more than 1,200 DOD sites.

Lot's more at the link above.

Milpitas Sports Center pools to close for nine months of repairs

Milpitas City Council voted Aug. 18 to authorize and execute a more than $1.4-million contract to Glendora, Calif.-based California Commercial Pools Inc. to repair the pools at 1325 E. Calaveras Blvd. The council's vote also authorizes the city's engineer to execute contract change orders for the sports center pool repairs in an amount not to exceed $144,000.

In June, the city council approved the project plans and specifications and authorized the advertisement for construction bid proposals for the Milpitas Sports Center Pool repairs project. The engineer's estimate for the project was $1.5 million. The project was later advertised and three sealed bid proposals were received in July.

Bid pricing ranged from $1.34 million to $2.29 million and no bid protest was filed.

The best defense against protests is planning and flawless execution of the solicitation.

We judge bidders against their record of past performance. We also judge governments, particularly government acquisitions, by the same standards. Nothing puts the light on a truly frivolous protest than one popping up against a backdrop of proper procurements.

Who's your Daddy?

State Auditor: SCC contract award OK, but purchasing rules still unclear

The State Corporation Commission is essentially the state's fourth branch of government, created by the state constitution and not subject to all the same rules as the rest of Virginia state government. It regulates businesses, including utilities.

A 2009 "eFile" contract for technological services with CGI, a major IT company, increased via eight modifications from $2.9 million to $6.9 million. The SCC determined that there was "no outside influence exerted" in the approval of a $28.5 million "Commission 2.0" contract, awarded last year to CGI for a major SCC systems upgrade.

Four former SCC employees specifically said the executive head of the SCC steered contracts to CGI, approved large post-award price increases and rebuffed their concerns over protocol. The latest State audit found no evidence of favoritism in the State Corporation Commission's award of the major technology contract, but repeats a more than 2-year-old suggestion that the commission  "clarify what procurement rules and regulations apply to them as an independent department of government."

SCC spokesman Ken Schrad said "Legal considerations remain that must be addressed because of the constitutional nature of the SCC as an independent department of state government." Schrad pointed to multiple reviews, both internal and from the state auditor, that found no evidence of contract tampering.

It seems to be a repetitive story that the more we take the procurement leg irons off any particular government spenders, the more the paranoia rises that we should put hand cuffs on them. No-bid contracts are the chief vehicle for creating this distrust, which is lodged in basic and simple notions of fair and equitable treatment, accountability and transparency.