When Commercial Off the Shelf became a Cockup Off the Cuff

The Project On Government Oversight (POGO, as it is called) has an interesting, and somewhat disturbing, report out. This post will only go into parts of it. The whole report is well worth the read. Read it at the link below.

The Pentagon relies on the obscure Defense Contract Management Agency (DCMA) to negotiate and administer $5 trillion contracts across the Defense Department as an average of $455 million In taxpayer dollars are paid out each day to contractors. DCMA undertook to modernize its procedures and processes and contracted professionals to design and build a system. The result was a software system created to help review, implement, and track defense contracts a, a project, called the Integrated Workload Management System.

The project appears to have been a colossal cockup. But that, and the investigation it appears to have instigated, is not what this post is focused on. For that story, you must read the POGO report at the link above. The bouncing ball that traces this post is a golf ball that seems never made it onto the fairway; it was in the weeds from the gitgo. This is a tale of “Do as I say, not as I do”.

Pentagon’s Contracting Gurus Mismanaged Their Own Contracts

 In 2011, the agency got the ball rolling with a contract paying a company called Apprio to conduct a study on what a “Model Contract Management Office” would look like and to “identify relevant technology” it would use. The next year, Apprio’s contract was expanded to envision a replacement for the Electronic Document Workflow system.

Things started going south for the software project in mid-2013, when Apprio won a contract worth more than $3 million to begin testing and developing software as the replacement system. But because the agency had previously hired Apprio to help lay out the requirements for this work, under federal acquisition regulations the company was ineligible for contracts implementing its prior recommendations. Regulations specifically prohibit this so that a contractor is not tempted to misrepresent the needs of the agency in order to sell more of its own products or services. The “organizational conflict of interest violation” raised “serious concern over contracting practices and processes within DCMA.”

Because the contract involved spending more than $1 million on a system the Defense Department uses to manage its resources, then-Director of Information Technology Haynes needed approval from the Pentagon’s deputy chief management official. The official rejected Haynes’ initial request, citing missing documentation and other flaws, and asked him to resubmit it. Despite not having the Pentagon’s approval, the contract was awarded to Apprio. But during testing over the next several months, Apprio’s software “failed to properly integrate” with the agency’s other systems.

The agency turned to another company, Discover Technologies, to develop a software solution. It appears that the documents provided to the Services Acquisition Review Board to get approval for the contract were misleading. The documents, submitted just two days before the end of the fiscal year, listed the upcoming year’s projected expenses as $960,000. There was no mention of the estimates that the contract would likely cost up to $40.5 million over its lifetime. Evidently, the Pentagon had not approved the funds necessary to cover that much larger estimate. In the event, the board received and approved the contract on September 28, 2013, and reapproved it each year through 2017.

Additionally, the board failed to conduct a formal review of the Discover Technologies contract before approving it. It didn’t seem to know what the contract was intended to deliver. Personnel consistently did not understand what was being communicated by Haynes and others in the IT department, and therefore either stopped asking questions or failed to ask any at all. In the absence of any questions or objections, approvals were essentially rubber stamps, with the board approving 95 percent of IT submissions on first attempt.

If it had done a thorough review of the Discover Technologies contract before approving it, the review board might have caught numerous problems. For example, the agency used the wrong type of contract: a “Blanket Purchase Agreement,” which is intended for recurring needs for straightforward supplies or services, not the type of complex software modifications Discover Technologies would be performing. The agency mischaracterized the software as a “commercial off-the-shelf” product, which requires less oversight, despite the fact that those involved knew it required a significant amount of coding and development work. The contract’s requirements were also vague, with some overlapping with work already assigned to Apprio. In many cases, task orders within the contract were missing key components, such as statements of work and standards by which to measure performance, and the document detailing the work requirements didn’t include a list of specific objectives.

On the last day of the fiscal year, two days after the review board approved the Discover Technologies contract, the Pentagon approved spending about $6.3 million on the software project over the next year. Hours later, the agency awarded the contract. It appears there was “pressure in contracting to get contracts awarded at year end,” leaving insufficient time to plan and properly craft the project’s requirements. In summary, some of the project’s most significant problems stemmed from the structure and administration of the contract. The lack of clear objectives in the contract directly impacted performance, and the lack of planning and strategic vision led to money being wasted through duplicative work and cost overruns.

Worse, the government did not provide any oversight focused of the project. There were “essentially two budget offices with a separate one in IT, and there was no oversight of the IT budget personnel by the [agency] budget office. This meant the agency’s own budget office didn’t know the agency was spending more money than it was authorized to. In a similar vein, Pentagon budget officials didn’t adequately keep track of the numbers or talk to each other, so one office kept giving away more money than the other had authorized.

The project had become a runaway train until the agency director put a halt to things and requested both an Inspector General audit and an independent investigation into the suspected Antideficiency Act violations. By then, the agency had spent around $45 million on the project, not including government labor costs.

In 2009, the congressionally created Commission on Wartime Contracting wrote, “DCMA is not aggressive in motivating contractors to improve business systems,” which it described as “the first line of defense against waste, fraud, and abuse.” The agency’s “conservative approach results in little, if any, motivation for contractors to improve their business systems, and ultimately has a direct impact on the warfighting mission.” In 2011, the Government Accountability Office attributed many of the agency’s struggles to “a seriously eroded workforce” stretched thin by the surging number and value of contracts in prior years due in part to the wars in Iraq and Afghanistan; a decentralization initiative that led to inconsistent guidance and practices across the agency that one official called a “free for all”; and the challenges posed by defense contractors’ increasing reliance on subcontractors.

While the agency has in many cases not been zealous enough in protecting taxpayer interests, the shortcomings are not across the board, and parts of the agency have at times seemed more willing to hold contractors accountable. The agency’s hard-hitting findings that Lockheed Martin had used a significantly flawed business system for the F-35 program, and the Pentagon’s subsequent willingness in 2012 and 2013 to withhold some payments from the company, is one example. Last year, it did the same with helicopter manufacturer and major defense contractor Sikorsky.

But the extent to which the agency was failing to properly manage contracts for even its own internal systems is coming into focus this year with the April Inspector General report and the documents POGO obtained.

As mentioned above, this post presents only part of the story, the mistakes made. There is another story in the article about the investigation(s) and information obtained by POGO regarding the project and loosely related others. Here, I focus on what went wrong. The rest of the story focuses on the investigation and remedies. And that's the main point of the procurement system.

While we're here, let me put in a plug for the Project On Government Oversight. Our procurement system requires the essential efforts of the private sector to police government spending in real time. POGO is one of those many sentinels along the watchtowers we rely on to keep the game clean, as best we can.

The lowest what?

Bid awards are meant to go to the lowest responsive bid from a responsible bidder, right?

Lowest what?

Too often, the assumption, therefore the focus, is on price: the sticker price. Lowest price wins, right?

But from the phrase "sticker price", we also get the phrase "sticker shock".

Sticker shock is what County Officials are coming to terms with as they near completion of a new 22-story Superior Courts building in downtown San Diego, California. Here's the story from the San Diego Union Tribune:

COSTLY ADD-ON AT NEW COURTHOUSE

The new building downtown county courthouse, designed with 71 courtrooms, will consolidate operations at the 1960s-era downtown criminal courthouse on Broadway, Family Court on Cedar Street and the Madge Bradley Building on Ash Street. The 110 deputies and community services officers working at those three locations will be transferred to the new courthouse.

It will cost an extra $3.3 million a year in staffing to resolve security risks caused by the design of the $555 million downtown county courthouse set to open this summer, county officials say.

They point, in part, to a cost-cutting decision not to build a $25 million tunnel under Union Street that would have allowed deputies to escort inmates directly from the Central Jail to the new Superior Courts building.

“This design difference imposes a measurable and higher level of security costs,” said a 2016 report by Sheriff Bill Gore and Helen Robbins-Meyer, the county’s chief administrative officer.

The San Diego County Sheriff’s Department provides deputies and community services officers as security at the region’s courthouses. The department said it needed 33 more positions on top of the 110 originally planned in order to safely move prisoners in and out of the new 22-story building, and to respond to any courtroom emergencies.

The tunnel from Central Jail to the new courthouse was part of the original construction plan, and Keim said the sheriff continues working with state and local leaders to get it built.

Without the tunnel, the plan is to bus jail inmates two blocks to a controlled entryway at the courthouse called a sally-port. Gore says the buses require extra supervision, as do extra holding cells added to the courthouse design.

Gore’s report, submitted to the state Department of Finance, said the new courthouse’s high-rise configuration “significantly affects the ability of deputies to respond to security issues, dangerous incidents or emergencies.”

He noted that a 2015 study showed an average of 16 such incidents per week at the current courthouse.

There will be up to four criminal trial courtrooms on each of 11 floors in the new building. The sheriff wants roving deputies available to run up or down stairwells to assist courtroom bailiffs in any emergencies. Using an elevator might actually be slower if deputies on multiple floors stop it to get on board, the report says.

Other “rovers” would keep an eye on large public spaces, including the lobby and food court. More deputies also are needed to run the five weapons-screening stations at the entrance.

Two felony arraignment courtrooms pose added concerns: They are on the first floor near the exit doors. That proximity, the sheriff’s report says, “presents an increased security risk for a successful escape of in-custody prisoners charged with serious felony crimes.”

The sheriff has asked the state to cover the $3.3 million estimated annual cost of hiring 30 more deputies and community service officers, and three sergeants.

San Diego County spokesman Michael Workman said, “We need $3 million. If that doesn’t happen, we’ll have to determine what to do. It would probably have to come out of (the sheriff’s) budget.”

So, to save the upfront price to construct the tunnel by $25 million in fixed today's dollars, the taxpayers (of either the State of the County) will have to shell out over $3 million a year in servicing expenses, which tend to escalate over time -- for the lifetime of the complex.

Such a deal to get a lower bid price! In just eight years that $25 Million up front price will look a bargain, but the court will be doing 8 years to life (cycle).

This is an example of contemplating bid prices on sticker prices. That is not the model used, however, in the ABA Model Procurement Code, nor the Guam procurement law and regulations, which are founded on the ABA Model Code.

Whatever the colloquial use of "lowest price" may describe the Model law and regulation require a more holistic analysis. It requires "bids will be evaluated to determine which bidder offers the lowest cost". Moreover, "Only objectively measurable criteria which are set forth in the Invitation for Bids shall be applied in determining the lowest bidder. Examples of such criteria include, but are not limited to, transportation cost, and ownership or life cycle cost formulas." (See, Guam regulation 2 GAR 3109(n)(4))

Nobody likes sticker shock. In a $555 million procurement, that is a rookie mistake.

Centralized Procurement: Theory vs Practice

In theory, theories work.  In practice, they often do not.  Whether practice does or does not comport with theory is often dependent on the vision the theorists have and convey vs the commitment and practices the practitioners decide to use to implement the theory. "'Tis many a slip twixt cup and lip", as they say.

The following is yet another example of a good idea gone wrong because it was gleefully exaggerated and politically oversold. Implementation requires good management, but so does planning. If you plan for the unreasonable, no amount of good management will get you to the final vision.

Cabinet Office did not get departmental buy-in for shared procurement plans, says spending watchdog

The UK government’s attempts to reform central buying through the Crown Commercial Service (CCS) was launched in April 2014, bringing in staff from the Government Procurement Service, with a mandate to buy common goods and services directly rather than simply creating frameworks for departments to use.

But a new report by the National Audit Office ("NAO") says the Cabinet Office was too reliant on this mandate, and “severely underestimated the difficulty of implementing joint buying across government”.

Cabinet Office underestimated difficulty of procurement reform, say auditors

In theory, central buying should achieve very large savings, the NAO said. But it was not clear what spending should be centralised. It said the Cabinet Office relied on a Cabinet committee mandate to get departments to transition services quickly, and did not consider how it would manage them once services were transitioned.

Overall, the CCS has not achieved its ambitions, which the NAO believes were not realistic. The Cabinet Office’s plan to create the service “wrongly estimated both the activities and the amount of goods and services that were appropriate to be bought centrally.” Auditors recommended that the Cabinet Office should reiterate the mandate for CCS in central government, and set clear expectations for those departments yet to transfer their buying of common goods and services to CCS.

Auditor general Amyas Morse said that without a sound overarching business case or a detailed implementation plan, it is not surprising that the Crown Commercial Service rapidly ran into difficulties. “It is particularly disappointing that the Cabinet Office has not tracked net costs and benefits,” he added. “Because of this, it is not possible to show that CCS has achieved more than departments would otherwise have achieved by buying common goods and services themselves.”

CCS centralised buying in the public sector isn’t working yet, but worth pursuing

Something’s not working somewhere. CCS was set up in 2014 with an objective of saving £3.3 billion in procurement spend by 2018. For the 2015/2016 period, it’s claimed that £521 million of savings can be attributed to CCS. Some £12.8 billion of spending by central government and public sector organisations uses CCS frameworks for the deals.

But the NAO concludes that it’s impossible to tell whether those would have occurred anyway without transferring buying responsibilities to CCS. In addition, these claimed savings were calculated on a different basis and are not directly comparable to the planned net benefits of £3.3 billion over four years. Most damning of all the criticisms is the one that states that to date CCS hasn’t actually done the job it was supposed to do.

The NAO goes on to suggest that a significant problem for CCS was lack of consistency of data and no common understanding of what can and can’t be centralised:

[CCS] did not have consistent information on what departments spend and there is no agreement with departments about what should be centralised and what should be bought locally. The Cabinet Office’s estimates of the common goods and services suitable for centralisation have varied from £8 billion to £15 billion. For example, all departments buy information technology, but many of these contracts are strategically important to the department and hard to specify centrally.

With all that in mind, it’s hardly surprising that the NAO report notes that “from the start there was a rapid erosion in departments’ confidence in CCS” and that by 2015 the programme was “widely acknowledged to be in difficulty”.

Leaping to the defence of the Cabinet Office, John Manzoni, chief executive of the Civil Service, says:

The Cabinet Office will always set ambitious targets for the work we do right in the heart of government. CCS has made huge strides in recent months, and we expect to see more and more savings as the changes we make take hold across departments. From the centre we will increase skills and bring in the talent needed to make sure every penny of taxpayers’ money is used to its absolute maximum.

That’s a pretty standard reaction to criticism from ‘Sir Humphrey’, coupled with a a mile-high statement of direction from the centre, but it doesn’t address the problems at hand.

CCS’s current management does not consider [CCS original] plan to have been achievable as it thinks the plan wrongly estimated the amount of common goods and services appropriate for centralisation, and the buying services which should be undertaken centrally. CCS’s current management also believe the original plan did not adequately define the activities that customers would still need to carry out.

For all its criticism, the NAO admits that the “strategic argument for joint buying remains strong” and that the right structures and management is now being put in place. Since launch in 2014, only four of the original 11 board and senior management team at CCS have stayed in site. But the second half of this year has seen CCS bring on board four senior managers with “significant operational experience”.

[The author of this article, Stuart Lauchlan, offers his take:] Any kind of significant reform in government is going to take time, dedication and a willingness to challenge the status quo. Making bold policy declarations isn’t enough in its own right. One of my favourite phrases here is that of the political will meets the administrative won’t. That demands strong and coherent leadership from the centre and that’s something that undermined CCS in its early days.

My take: When even the best laid plans of mice and men oft go awry, sketches of plans and lofty marketing almost always certainly will.

Mastering "master contracts"

Park board 'could have done things differently,' Budig says

The Cincinnati Park Board has been using existing city contracts intended for routine maintenance to do major projects for “as much as a decade,” Park Board Chairman Otto Budig said in an interview on Thursday.

Such “master agreements” have become a point of contention after City Manager Harry Black and Patrick Duhaney, the city’s chief procurement officer, revealed on Tuesday that the parks department had not done a fresh round of competitive bidding when it built Smale Riverfront Park and instead funneled most the work to vendors with the already-existing contracts. Those contracts are rebid periodically, Budig noted. [The periodicity was not mentioned in the article.]

That practice, Black and Duhaney said, potentially put the city at financial risk because the contractors did not have the performance bonds required in the city’s code. It has since been halted, they wrote. Asked whether the practice extends back through the past several city administrations, Budig said, “There’s no question about that. The park board had been working successfully in dealing with these projects that had come up from time to time.”

“The board was informed, as this project moved along, the various aspects that were being completed. I don’t think any of us had questioned whether the staff had taken this to the bidding floor or whether it was a continuation of a process that had taken place for some time.” “If we were to follow that (bidding) process to its conclusion, with the inevitable pauses that occur in the city framework … we would have ended up with a mudhole for the All-Star Game,” he said.

Park board members did not know that the Smale work was being procured using the master agreements, said Budig. “It was not necessarily an error of commission but an error of omission,” Budig said. [An error is an error; negligent actions have the same effect as negligent omissions. This is disingenuous.]

And in a related article: Park director’s fate up to board following allegations

All but $519,118 of at least $15 million in construction work on the park was done by using existing city contracts with firms that were intended for ongoing routine maintenance and repair of city buildings, according to Chief Procurement Officer Patrick Duhaney’s memo. The contracts are known as “master agreements.”

“[T]hey were not structured for or put in place for new construction or renovation work of the scale and scope of the SMR Park project,” Duhaney wrote. “[T]he city is inadequately protected with respect to the performance bonds in place for Smale Riverfront Park." The 12 contracts used to build the park came with about $1.7 million in performance bonds when at least $15 million in work was done, leaving a little more than $13 million in work unprotected by bonds.

On the parks’ website a statement attributed to the Cincinnati Park Board maintained the park board “followed city purchasing regulations by using existing competitively bid master agreements previously awarded by the city. “The board did extensively use city ‘master agreements,’ which are periodically awarded by the city for a range of construction, repair and maintenance services, to build parts of SPR (Smale Riverfront Park)," the statement says. “[T]hese contractors had previously been vetted and approved by the city as being the most advantageous and the best price for their services.”

Mayor John Cranley blamed the situation on the previous city manager, Milton Dohoney. “There was a culture of using these master service agreements,” Cranley said. “We don’t know the extent to which all of the other departments have done this. Clearly, it was wrong. We put an end to it in the middle of last year.”

Cranley added that he believed the park board members were "shocked" to find out about the department’s practices. "I’m confident they did not know,” Cranley said.

Here on Guam, an analogous form of "master agreement" has been revealed.

FestPac faces financial challenges less than 70 days away

With less than 70 days until the start of the Festival of Pacific Arts, the amount of community donations for the cultural event is about $1.7 million short of projections. Nathan Denight, FestPac committee chairman, said the event is short of the expected funding. A budget from 2013 showed the event would get $2 million in donations, but it currently has about $300,000 — $1.7 million short, he said. Sen. Tina Muna Barnes, D-Mangilao, the committee’s finance chairwoman, said the government of Guam has committed $5 million to the event through various legislative bills.

Rose Ramsey, the festival’s director, said the priority for funding would be for the main FestPac area of Paseo and the schools housing delegates. Monica Guzman, Council on the Arts and Humanities Agency chairwoman, which is overseeing the programming of the event, asked Ramsey to release funding in a timely matter. “Well, it took you weeks to submit your budget,” Ramsey responded. Guzman said price quotations have been submitted, but the amount of time the approval process takes for the release of funds is too long. “I don’t know what to do. We need the money,” she said.

And one lawmaker is concerned that festival organizers have been awarding large contracts for services without going through a procurement process. Sen. Rory Respicio, D-Agana Heights, brought up concerns over the contract with Adztech, the event’s coordinator, and whether or not local procurement law is being followed. “This is taxpayers’ money,” he said. “It’s like you found a way to circumvent the procurement law,” he said.

Denight said the Office of the Attorney General approved the request for proposals for the contract with Adztech and went through the procurement process with CAHA so it shouldn’t be an issue. However, the committee said, it would talk to Adelup’s legal counsel or the AG’s office on the issue to get an opinion.

FestPac faces another hitch

According to the Adelup officials, during their meeting with the OAG, the attorney general stated that her office had reviewed the events manager procurement and contract and approved both. “She also stated that the contract allows for the private contractor to procure needed goods and services without going through additional government procurement,” a statement from Adelup said. But yesterday, the AG said the contract approved by her office was limited to the $800,000 that was negotiated with the event manager.

The AG also stressed that procurement beyond this limitation could not be conducted through the contract with the events manager.

A.G. Reccomends That GVB Handle Millions in FESTPAC Procurement

Last week the A.G. told the FESTPAC committee and the Department of Chamorro Affairs that they could not funnel some $4.2 million dollars in tourist attraction funds through a company that won the bid to be the FESTPAC event coordinator because that company's contract was only for $800 thousand dollars.

The FESTPAC money was given to the Department of Chamorro Affairs who awarded the $800 thousand dollar event coordinator contract to Adztech. The problem is they need to spend some $4.2 million dollars for FESTPAC. But GVB's board will have to meet to decide whether or not they will handle these funds. "So tomorrow is our board meeting. So I’ll bring up the OPA and the A.G.'s suggestion that these funds come back to GVB," said FESTPAC Committee Chairman Nate Denight.

It's not yet certain if GVB will take on this responsibility however as they turned the funds over to the Department of Chamorro Affairs at the recommendation of their auditors Deloitte and Touche. If the money does go back to GVB Denight says they will likely use their existing event coordinators RIMS and Tropical Productions.

It looks like Mr. Denight has been taking taking a page from the Cincinnati Park Board's playbook if he intends to use existing contracts to bolt on to them the FestPac project, or the events management contract.

There are many issues involved here, chiefly, making changes to a contract and solicitation beyond the scope of the contract and the field of competition. One Guam Superior case, for instance, disallowed an extension of an existing contract on the ground that "the change results from side stepping the purpose and protection of the bidding process". (L.P. Ganacias Enterprises, Inc., dba Radiocom vs. GIAA and Guam Cell Communications, CV 1787-00.)

I have not looked deeply into this, but there is another issue that seems in need of resolution. The FestPac contract for the events manager was made through the auspices of the Department of Chamorro Affairs, whose purposes and powers are set out in its enabling statute, 5 GCA Chapter 87. 

Although promoting FestPac seems fairly enough to fall with the limited purposes of the DCA (5 GCA § 87103), it does not clearly appear that the powers assigned to DCA (5 GCA § 87104) include the power to acquire services.

Among its laundry list of powers, the acquisition powers given to DCA include the specific powers: to acquire real property (§ 87104(f)); to acquire any property of historical or cultural importance (§ 87104(g)); to construct, equip, operate and maintain buildings and equipment (§ 87104(l); to acquire any tangible personal property (§ 87104(t)); and finally, to acquire any intangible personal property (§ 87104(u)). In short, DCA is given express authority to acquire supplies and construction.

But procurement under Guam's law has a broader scope. Procurement law is also intended to apply to the expenditure of government funds via a contract for the acquisition of services. (5 GCA §§ 5004(b) and 5030(o))  And, there is no express power given to DCA to acquire services in its enabling statute. It has the power to "employee persons to provide professional, clerical and technical assistance", subject to the civil service law (§ 87104(j)), but no express power to contract to acquire such services from non-employees.

It does not appear that DCA had the authority necessary to procure the events manager in the first place.  And if it simply delegates its power to spend FestPac funds to GVB, or anyone else, the power of delegation is limited to transferring only such power as the person delegating possesses. DCA cannot create the procurement power to acquire services by delegation.  And, it appears at first blush that GVB does not have the express power to acquire services, either.  (12 GCA § 9105.)

But, so what, right? Maybe, but consider the ENFORCEMENT OF PROPER GOVERNMENT SPENDING Act, 5 GCA Chapt 7.

Any officer, agent, contractor, or employee of the Executive Branch of the government of Guam who is charged with ... the spending of money belonging to the territory of Guam, including the Governor and Lt. Governor of Guam, stands in a fiduciary relationship to the people of Guam in regard to the management of public money. (§ 7102)

Any taxpayer who is a resident of Guam shall have standing to sue the government of Guam and any officer, agent, contractor, or employee of the Executive Branch of the government of Guam for the purpose of enjoining any officer, agent, contractor, or employee of the Executive Branch of the government of Guam from expending money without proper appropriation, without proper authority, illegally, or contrary to law, and to obtain a personal judgment in the courts of Guam against such officers, agents, contractors, or employees of the government of Guam and in favor of the Government of Guam for the return to the Government of Guam of any money which has been expended without proper appropriation, without proper authority, illegally, or contrary to law. (§ 7103)

The masters of spending government funds through acquisition contracts need to first master the laws of procurement.

California no-bid health contracts not healthy for competition, either

Following on from the same theme in the immediately prior post is this item from California.

California’s health exchange bent own rules in awarding big contracts

A new audit slams Covered California, the agency tasked with enrolling state residents in Obamacare, for not following rules when awarding lucrative contracts without a competitive-bidding process.

Covered California officials did not dispute the audit but said they have adopted new contracting policies and have improved staff training on the subject.

Without competition between prospective firms, the health insurance exchange couldn’t be assured its contractors were the most qualified – or cost-effective – auditors said.

Read more at the link.

The State Auditor's cover letter summarizes:

Covered California’s contracting practices must be improved to ensure the integrity of the process it uses to award sole-source contracts.

We reviewed the justifications for 20 of Covered California’s sole-source contracts and another 20 applicable amendments to those contracts, for a total of 40 justifications. The policy adopted by Covered California’s board of directors (board) and in place during our review stated that sole-source contracts should be justified in writing. In our review, we found that nine of the 40 justifications were insufficient according to Covered California’s board‑adopted policy. For example, Covered California did not sufficiently justify the use of a noncompetitive procurement method to award a contract for marketing and outreach services totaling nearly $134 million.

In addition, we question the validity of an additional three justifications because, even though Covered California asserts either timeliness or unique expertise as a basis for using the noncompetitive procurement process, available documentation indicates that either Covered California had sufficient time to use a competitive procurement process or the vendor was not unique.

Finally, although the California Healthcare Eligibility, Enrollment, and Retention System (CalHEERS) is functional, its rapid design, development, and implementation have resulted in some risks to system maintainability.

Adequate planning and competition are essential principles for an effective procurement system.

Taking the cash stream out of streamlining

DCYF likely to bring some services back in-house as part of an overhaul

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

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

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

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

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

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

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

A counterproductive way to deal with emergency no-bid acquisitions

New board approves millions in no-bid contracts (Read full story at the link)

The revamped Personal Services Contract Review Board is part of a contracting reform bill the state Legislature passed this year after much debate, with the Senate watering down sweeping House proposals.

It appears the Legislature, in its wrangling over contract reform, may have inadvertently given agencies a potential out on competitive bidding.

Numerous agencies requesting approval of contracts and exemptions from bidding quoted the new law that allows exemption if “utilization of a competitive bid procurement would have been counterproductive to the business of the agency.” Now agencies appear to be using it as their reasoning for not competitively bidding contracts.

The legislation was driven by a Mississippi Department of Corrections bribery and kickback scandal. Former state Corrections Commissioner Chris Epps ran one of the largest and longest-running criminal conspiracies in state history. He took about two million in bribes over eight years in exchange for steering hundreds of millions of dollars in prison contracts to a former lawmaker co-conspirator.

The contracts subject to Epps’ malfeasance had been approved by the state Personal Services Contract Review Board. After the prisons bribery scandal, state leaders — and a task force created by Gov. Phil Bryant to recommend reform — criticized agencies’ use of “emergency contracts,” exempt from bidding, for goods and services that did not appear to be emergencies.

The reform legislation revamped the board to include citizen members appointed by the governor and lieutenant governor. The board, holding its second monthly meeting Tuesday, has only four members because Lt. Gov. Tate Reeves has not filled his appointments. The directors of the State Personnel Board and Department of Finance and Administration also serve on the board.

On Tuesday, the PSCRB questioned numerous “emergency” contracts approved by agencies, including two recently inked by MDOC worth more than $60 million combined. MDOC entered into an $11.6 million emergency contract with Valley Services for feeding inmates and a $48.8 million one with Centurion of Mississippi for medical services for inmates. Both are for a year.

New board member Bill Moran of Tupelo questioned why feeding inmates and providing medical care were deemed emergencies and the contracts not put out for bid. “Why can’t you at least take the time to get RFPs?” Moran said. “This is $60 million, and nobody’s put a pencil to it. Have you not had time to do that?”

Stanley Brooks, MDOC director of prison agriculture enterprises, said the agency did attempt to get quotes but ran into problems with the previous PSCRB and the contracts were running out, so feeding and caring for inmates became an emergency. At the board’s direction, Brooks said MDOC would try to quickly get RFPs from vendors — within a couple of months — and can back out of the emergency contracts with a month’s notice.

Moran also questioned several emergency contracts worth more than $200,000 from the state Oil and Gas Board — extensions to previous emergency contracts — for companies to plug and abandon oil and gas wells. “How is it an emergency when these wells have been sitting there for years?” Moran said.


House Accountability, Efficiency and Transparency Chairman Jerry Turner, who authored the House reform bill, said this is the result of the Senate stripping out much of the House plan before it passed the bill. Turner said the new board has the authority to establish tougher rules and regulations on bidding and emergency contracts and to force state agencies to seek best prices. He said he hopes it will. “But if they can’t, we can go back in the Legislature and put new language in there,” Turner said. “We are not going to sit by and watch all those problems we’ve had still be allowed because of misinterpretation of the language.”

I might note, Guam procurement law (5 GCA § 5030(x)) defines "emergency" as:

"a condition posing an imminent threat to public health, welfare, or safety which could not have been foreseen through the use of reasonable and prudent management procedures, and which cannot be addressed by other procurement methods of source selection."

Focus on market research and planning to understand and get what is needed

City hires firm to help rethink its procurement approach

New York City has hired a firm called Citymart in its effort to make its procurement processes more flexible and better able to accommodate new technologies and smaller vendors. The contract entails a plan for five challenges until June 2017, working within existing procurement rules to use different platforms, Merritt said. The goal is greater participation by more diverse vendors, and earlier in the process — especially to find solutions or providers the city might not have known about otherwise.

“When [people] look at a procurement, they think that the actual RFP is sort of the beginning of the process — and in some ways, by that point in time, a lot of the work has already happened," he explained. "So the early stage is really working with agencies to identify the tough problems, the problems where they don't know the solution that's out there."

"Our goal isn’t to turn every single procurement into a call for innovations. Rather, it is to identify the areas that we think perhaps a traditional RFP might not be the best way to really work in partnership with agencies to really flesh out those problems," he said. "And when we put out a solicitation, our partners in the private sector, non-profit sector, academic sector can really understand what is the issue that government is trying to solve, and what are their ideas and proposals for addressing it."

Procurement controversies --Sheepish in New Zealand, Policing training in Nigeria

Saudi tender process reeks of SkyCity approach

"The $6m contract for the Saudi sheep farm was awarded to Brownrigg Agriculture - long-time business associates and now partners of the Saudi businessman Hmood Al-Khalaf. This is separate to the $4 million cash payment to the Al Khalaf Group.

"During the contracting process Brownrigg Agriculture was paid to provide advice on the so-called business case and was paid by MFAT to travel to Saudi Arabia as part of a team to develop it. The planned second phase of the competitive contracting process was then cancelled and Brownrigg Agriculture was awarded the contract.

"This directly contravenes Rule 21 of the Government Rules of Sourcing that states: ‘an agency should not purchase procurement advice from a supplier that has a commercial interest in the contract opportunity, because to do so would prejudice fair competition’.

Saudi sheep deal 'broke Govt's own rules'

The controversial Saudi sheep deal contravened the Government's own procurement rules for fair competition when the contract was given to a company that was paid to provide advice on the business case, Labour says.

Brownrigg, as the lead provider of sheep, was previously revealed to have been responsible for nearly 200 of the ewes sent to Saudi Arabia coming from Awassi NZ's Hawke's Bay farm. Parker said Brownrigg Agriculture was paid by the Ministry of Foreign Affairs and Trade to provide advice on the business case and was paid to travel to Saudi Arabia as part of a team to develop it.

The competitive contracting process was then cancelled and Brownrigg was awarded the $6m contract for the sheep farm.

McCully on Tuesday said the Government was "comfortable with the process that was followed in relation to the Agrihub.

Staff Training Contract: Police Commission Circumvented The Rules-BPP

According to a letter by the Bureau of public procurement (BPP) to the chairman of the police service commission (PSC), Mr Okiro, deliberate attempts were made by the commission to circumvent the process of approval of the training programme. The BPP said that the PSC adopted restrictive tender method and invited only three firms to organise the training for its workers in violation of procurement rules and regulations. It further stated that the PSC method of requesting and obtaining proposals from the shortlisted firms for the procurement, without the explicit approval of the BPP, violated Section 40(i) of the Public Procurement Act 2007.

“The commission considered that due to the limited time frame available to which to utilize the funds till the elections, it became impracticable to embark on a Competitive Bidding exercise. The bureau opines that this delay might have been deliberate, given that the Nigerian General elections is an every four years event which permits more than ample time to plan, prepare and perform all procurement procedures associated with the elections. “Therefore the Commission’s assertion that it was impracticable to embark on Competitive Bidding due to the insufficient time before the 2015 elections’ indicates a dilatory conduct on the part of the procuring entity.”

The BPP also picked holes over the non-disclosure of the source of funds for the training, affirming that the quoted figures by the commission were inconsistent with what the contractors demanded. “The provision of N53 million for consultancy fee for the Abuja training programme is rather excessive, as similar training programmes recently certified by the bureau show that Consultancy fees were charged within 10 – 15 per cent of the training cost.

Read the full stories at the links.

"Same old story ... failure to follow the rules"

Too many people blame the rules. They'd rather do without them. This is (another) story of how that works out for you.  Not surprisingly, this comes from Texas.

State auditors find problems with Land Office contracts

The Texas General Land Office had a conflict of interest when hiring the firm Grant Thornton LLP for oil and gas royalty audits. The July 2015 report said the land office’s former director of financial subsidiary operations had a “personal and professional association with her former supervisor,” who now works as a subcontractor to Grant Thornton. The land office employee served as a liaison between the two offices.

State Auditor Terry Keel’s office launched its audit in December 2014 after the three contracts were procured. The land office agreed with the state’s recommendations, which called for a cost analysis, a needs assessment and addressing any conflicts of interests prior to each procurement.

State procurement requirements call for agencies to disclose conflicts of interests during contract planning but the office failed to do so. [Some go further: disclosure only works when someone somewhere cares and pays attention. Some jurisdictions require recusal, and some fewer add bite to the requirement.]

Tom “Smitty” Smith of the group Public Citizen said, “It is the same old story of allegations of conflict of interest and failure to follow the rules for contracting.”

The state also found that the land office did not compare the cost of hiring full-time employees to conduct oil and gas royalty audits with the cost of contracting Grant Thornton LLP. According to the report, the office could have hired four employees to complete four audits for $426,813, but the Grant Thornton contract totaled more than $1 million.

A separate contract with IDEA Integration Corporation for information technology services was also not planned and monitored correctly, the audit found. The state’s Quality Assurance Team, which monitors major information resources projects for agencies, was not involved with the $1.9 million contract. Normally, if contract expenditures exceed $1 million it must be reviewed by the group.

In addition, the office assigned contract managers that had not obtained contract management training that is required by law.

This is not the first time state contracting practices have been under scrutiny, but Gov. Greg Abbott recently signed approved legislation that will strengthen state contracting regulations. The approval came after it was discovered that the Health and Human Services Commission handed a $110 million contract to Austin technology company 21CT. “It just goes to show you can’t trust the state agencies to do it without an outside agency to supervise their work,” Smith said. “This is the same story here — agency after agency failing to follow basic contracting provisions.”

Audit Finds "Significant Weaknesses" in GLO Contracting

The General Land Office’s contracting procedures are riddled with “significant weaknesses” that threaten the agency’s ability to ensure it is wisely spending its dollars, State Auditor John Keel said in a report made public Tuesday. “Due to significant weaknesses in its processes,” the audit said, the General Land Office “did not always plan, procure, form, and monitor” the contracts according to state rules and the agency’s own policies.

The GLO has a wide range of duties, including managing the rights to millions of acres of state-owned minerals, protecting the state’s coastline, handling billions of dollars for disaster recovery, preserving the Alamo and administering loans and other benefits to veterans.

For the nearly $2 million Grant Thornton contract, signed in 2013 and renewed in 2014, the auditor identified “significant deficiencies,” such as failing to study whether it needed to hire the firm in the first place. “The Office did not assess the need to hire Grant Thornton to provide supplemental staffing for the Office’s existing minerals audit department,” the report said. The agency researched rates at other firms, but only after it decided to hire Grant Thornton.

The agency initially told the state auditor that it removed the employee from the Grant Thornton contract, but it downplayed her involvement in brokering the contract. The auditor, however, concluded that the employee “had a significant role in the procurement,” including attending a relevant meeting, preparing a proposal for staffing mineral audits with Grant Thornton personnel and helping approve contracts with the company in 2013 and 2014.

The audit found other problems with the information technology contract with IDEA Integration Corporation. In that case, the report said, the GLO prepared an incomplete “statement of work,” and underestimated the roughly $1.9 million cost. The agency initially pegged the cost at about $93,000. While planning the deal, the agency "did not include key information, such as project time lines and applicable Texas Administrative Code information technology requirements," the report said.

Because of that error, the auditor said, agency staff did not complete disclosure forms designed to ward off nepotism, as required for contracts over $1 million.

In contrast, this:

UK: How To Guard Against Bribery And Corruption In The Tender Process

Any company caught paying bribes faces the prospect of a criminal conviction, an unlimited fine and terrible publicity. A further consequence for those supplying the public sector, is a discretionary ban from bidding for government contracts across the EU if the company is convicted of the offence of failing to prevent bribery under section seven of the Bribery Act 2010. The ban would be mandatory if one of the directors (or any person who has powers of representation, decision or control of the company) is involved and is convicted of bribing another person or a foreign public official under sections one or six of the Act. The stakes are high so it is important to have policies to prevent bribes being paid on your behalf.

For example taking a procurement manager for an expensive day out shortly before they decide on a tender. This could be unlawful if the intention was to influence their decision to favour your bid for reasons other than the relative merits of your tender. Timing is everything. The closer in time the hospitality is to a contract award the greater the likelihood that there will be an inference of impropriety.

What is required is a culture in which bribery is not tolerated at any level.

In a procurement setting you must understand the rules and stick to them.

Honolulu rail behind schedule and over budget -- because of protest?

Rail contract award protest creates delays

The Honolulu Authority for Rapid Transportation’s plan to save money on the over-budget rail project is leading to even longer delays. HART initially wanted separate contracts to build each of the first nine rail stations on Oahu. But plans were scrapped last year when the bids came in much higher than expected. So to save money, HART combined the jobs. Companies bid on a contract covering multiple rail stations along Farrington Highway.

But there was a bid protest by the second lowest bidder. HART denied the contractor’s protest and the bidder filed an appeal. The bad news is we’ve already lost a month of time when we wanted to award and now we’re going to lose another month and a half.

But, that’s not the only delay.

KHON2 looked at the monthly report by the Federal Transit Administration consultant who’s overseeing rail, and learned the contract for part of the first segment, West Oahu/Farrington Highway, is four months behind. Part of the second segment, the Kamehameha Highway guideway, is seven months behind, and then there’s the previously mentioned delay for the three Farrington Highway stations. “Unfortunately, these three stations are really critical to keep us on schedule.

HART must also come up with a new financial plan. Taxes collected for rail are well below expectations. While the tax revenue for rail was about $9 million above projections for this past quarter, and even though HART has collected nearly $1.47 billion in local revenue, overall funding is still $30 million below projections.

So officials will need to address the shortfall and come up with alternate funding in an updated plan.

A failure of market (pricing) research and planning is obvious. The protest is only a side show that someone is holding up to hide behind. Happens all the time.

Bridge contracts vs Planning principle

This post involves a GAO decision involving, on one hand, the planning principle, and on the other the concept, replete with moral hazard, of a "bridge contract". Since Guam will soon be debating the adoption of bridge contracting as a method of source selection, I thought this is an instructive case study.

The planning principle is a core principle of American procurement philosophy, and likely other robust regimes. In the federal sphere, the Federal Acquisition Regulations ("FAR") devote SubPart 7 to it. The main theme of this policy is: 
     Agencies shall perform acquisition planning and conduct market research for all acquisitions in order to promote and provide for—

(1) Acquisition of commercial items to the extent practicable;
(2) Full and open competition to the extent practicable;
(3) Selection of appropriate contract type; and,
(4) Appropriate consideration of the use of pre-existing contracts, including interagency and intra-agency contracts, to fulfill the requirement, before awarding new contracts.

The importance of (2), "full and open competition", is underscored by FAR Subpart 6.301(c): "Contracting without providing for full and open competition shall not be justified on the basis of — (1) A lack of advance planning by the requiring activity...."

The importance of (2), "full and open competition", in this case runs up against the "to the extent practicable" qualifier when the contract awarded is based on the Section 8(a) Small Business rules.

This particular case seems to be concerned primarily with the interplay of (2) and (4), in circumstances involving the granting of a bridge contract. Here, it is worth pointing out that a bridge contract is, or should be, an absolute last resort, tailored to the particular circumstances, because it is awarded without competition, a pillar principle of procurement. It is the feature of no competition which saturates bridge contracts with moral hazard.

In should be noted that the ABA Model Procurement Code, which forms the basis for most of Guam's procurement law, has broadly similar principles and purposes. Though not as fully formed as the FAR version, the ABA version as reflected in Guam law provides "All procurements of supplies and services shall, where possible, be made sufficiently in advance of need for delivery or performance to promote maximum competition and good management of resources." (5 GCA § 5010.)

In Guam law, the emphasis on and primacy of planning is emphasized by the limitations placed on "emergency procurement" of supplies ("goods and supplies" per the literal statute, but "goods" is not a defined term in the procurement law, but "supply" is defined as somewhat analogous to the term "goods" under the UCC). Notwithstanding the gubernatorial power to declare emergencies for whatever cause or effect, the procurement law proscribes contracting for supplies and services in an "emergency" unless the "emergency" is not man-made: "Emergency means a condition posing an imminent threat ... which could not have been foreseen through the use of reasonable and prudent management procedures...." (5 GCA § 5030(x).)

And so, to the chase, but note: This case also involved the particular requirements of the Small Business Set Aside preference scheme (Section 8(a)), which impinged on the outcome of the decision, the details of which I skim over (read the whole decision at the link):


Matter of: eAlliant, LLC: B-407332.4; B-407332.7, December 23, 2014

eAlliant, LLC, of San Diego, California, protests the award of a sole-source bridge contract (No. N65236-15-C-1003), for a period of 1 month, followed by up to five 1‑month options, to Systems Integration and Management, Inc. (SIM), of Arlington, Virginia.

The Navy currently fulfills its requirement for service desk operations through a contract for business operations administrative support services (BOASS) at its New Orleans office. SIM is the incumbent contractor; the incumbent contract was due to expire on September 30, 2014.

The Navy began the acquisition process for the follow-on contract in October 2011. On December 9, 2011, the Navy issued a request for proposals. Following the receipt of proposals, award was made to eAlliant on September 7, 2012.

TRESCOS Joint Venture, which was an offeror and whose team included SIM, filed a protest in our Office on September 14 challenging the award. The agency advised our Office that it would take corrective action, and we dismissed the protest. The Navy again made award to eAlliant on January 25, 2013. On January 29, TRESCOS filed a protest in our Office challenging this second award. On March 15, the Navy decided to take corrective action, and our Office subsequently dismissed the protest.

The Navy issued an amendment to the RFP on May 17, 2013, conducted discussions, and on June 17 received revised technical and cost proposals. On July 29, 2014, the agency again made award to eAlliant. Based on information the agency identified during debriefings, the agency concluded that corrective action was required to address concerns regarding the cost realism evaluation. On August 1, TRESCOS filed another protest with our Office. Also on August 1, the agency took corrective action by terminating eAlliant’s award. Our Office subsequently dismissed TRESCOS’s protest.

Following the termination of the award to eAlliant, the Navy decided it would reevaluate offerors’ technical and cost proposals. Based on the projected award date for the contract of October 3, and the need for adequate time to transition to the new contractor, the agency concluded that an unacceptable break in service could not be avoided without awarding a bridge contract to ensure continuity of the critical services. Based on the limited time remaining prior to the expiration of the incumbent contract, the agency concluded that SIM was the only viable source capable of maintaining continuity of services, given its experience and large qualified workforce.

The Navy’s J&A (a written determination of justification and approval for the non-competitive award of a bridge contract) approved the sole-source award of a 1-month bridge contract, with five 1-month options, to SIM for the following reasons: (1) SIM currently is performing the same work under the incumbent contract; (2) the incumbent contract was due to expire on September 30, 2014; (3) several rounds of protests and corrective actions had delayed the award of the follow-on contract causing difficult acquisition planning; (4) a transition period would be required for any contractor who would be awarded the follow-on contract; (5) SIM possessed the required workforce in place in New Orleans capable of meeting the requirement without a transition; and (5) an interruption in service was unacceptable due to the critical nature of the agency’s functions being supported by the services.

eAlliant contends that the sole-source award of a bridge contract to SIM was improper for the following reasons: (1) the J&A improperly excluded eAlliant from consideration for the bridge contract; (2) the need for a sole-source contract was caused by the agency’s lack of advance planning....

CICA (the federal Competition in Contracting Act) requires that agencies solicit offers from as many potential sources as is practicable when using the unusual and compelling urgency exception to limit competition. As our Office has held, an agency nonetheless may limit a procurement to the only firm it reasonably believes can properly perform the work in the time available.

Noncompetitive procedures may not properly be used where the agency created the urgent need through a lack of advance planning. While an agency may not justify a noncompetitive award on the basis of urgency where the agency’s requirements have become urgent as a result of a lack of advance planning, such planning need not be entirely error-free or successful. Our review of an agency’s decision to conduct a noncompetitive procurement focuses on the adequacy of the rationale and conclusions set forth in the J&A; where the J&A sets forth a reasonable justification for the agency’s actions, we will not object to the award.

To the extent eAlliant argues that the Navy failed to meet its obligation to solicit offers from as many potential sources as practicable in seeking to enter into a sole-source 8(a) bridge contract, we find that there was no obligation for the agency to do so. The section 8(a) program has both competitive and noncompetitive components, depending on the dollar value of the requirement. Generally, where the acquisition value exceeds $4 million, a section 8(a) contract must be competed among section 8(a) firms; section 8(a) acquisitions with values less than $4 million, such as the one initially sought by the Navy for the bridge contract, may be awarded on a noncompetitive basis. Because of the broad discretion afforded a contracting officer to award a noncompetitive contract under section 8(a) of the Small Business Act, our review of actions related to noncompetitive acquisitions under the 8(a) program is generally limited to determining whether government officials have violated regulations or engaged in fraud or bad faith.

We therefore see no merit in eAlliant’s argument that the Navy’s attempt to enter into a sole-source 8(a) contract was improper, given the authority of agencies to do so on a noncompetitive basis. In any event, the protester conflates the process for award of a sole-source 8(a) contract and the requirements for awarding a sole-source contract under CICA’s urgent and compelling exception to full and open competition. Whereas FAR § 6.302-2(c)(2) requires agencies to solicit offers from as many potential sources as is practicable, the 8(a) sole-source provisions do not have such a requirement.

Next, to the extent eAlliant argues that after the Navy abandoned its attempt to award a bridge contract to an 8(a) firm on a noncompetitive basis, the agency failed to meet its obligation to solicit offers from as many potential sources as is practicable in awarding the 1-month sole-source bridge contract to SIM, we disagree. As discussed above, while an agency must solicit as many offerors as practicable when seeking to award a sole-source contract under the urgent and compelling exception to full and open competition, the agency may limit a procurement to the only firm it reasonably believes can properly perform the work in the time available.

Here, the Navy concluded by August 22, 2014, that its needs for the bridge contract could not be met through the 8(a) program within the timeframe needed to avoid a disruption in services. The agency therefore concluded that it needed to execute a 1-month sole-source bridge contract under the urgent and compelling exception to full and open competition. The agency executed a J&A which stated that SIM was the only firm capable of meeting the agency’s need to ensure continuity of service after the expiration of the incumbent contract on September 30.

Assuming, as the agency states, that the transition to a new contractor would require up to three weeks, and the agency’s abandoned pursuit of a sole-source 8(a) contract on August 21, the record shows that the agency would have had approximately two and a half weeks to issue a solicitation for the bridge contract, receive and evaluate proposals, and make an award. Although the protester argues, generally, that there was enough time to accomplish these tasks, we do not think that the protester demonstrates that the agency unreasonably concluded that there was not enough time to conduct a competition, and ensure a timely transition that would avoid an interruption of services. On this record, we find that the Navy reasonably concluded that SIM was the only firm that could meet the agency’s requirement to ensure uninterrupted services.

Next, eAlliant argues that the Navy’s need to award a 1-month sole-source bridge contract on an urgent and compelling basis was the result of the agency’s failure to conduct adequate advance planning. In this regard, eAlliant argues that the Navy improperly delayed making an award for its underlying requirement until July 2014. As discussed above, however, the record reflects that the agency began its acquisition for the follow-on requirement in December 2011, more than 2 years prior to the expiration of the incumbent contract on September 30, 2014. The agency made awards on September 7, 2012, and January 25, 2013, each of which was followed by protests and corrective action.

The Navy again attempted to award the on-going contract for these services on July 29, 2014, which left two months for transition--which, the agency stated, was “more than sufficient time” for transition. The Navy contends that the urgency that justified the award of the disputed bridge contract to SIM arose from the protest that followed the award to eAlliant on July 29, 2014, rather than the history of the procurement prior to that award. We agree with the agency. As our Office has held, an immediate need for services that arises as a result of an agency’s implementation of corrective action in response to a protest does not constitute a lack of advance planning.

Next, eAlliant argues that the Navy could have conducted a competition for the bridge contract following its corrective action on August 1, and the failure to do so demonstrates a lack of advance planning. In this regard, the protester cites the agency’s acknowledgement that there was “more than sufficient time” for transition to a new contractor at the time of the July 29, 2014, award. eAlliant contends, therefore, that the agency should have also had enough time to conduct both the transition as well as a competition for the bridge contract. We disagree with the protester.

The Navy first attempted to bridge its needs with a short-term sole-source 8(a) award. As also discussed above, the agency’s decision to pursue a sole-source 8(a) contract was a matter within the agency’s discretion. Although this attempt was not successful, our Office has recognized that such efforts do not need to be error-free, nor do they need to be successful. In light of the agency’s unsuccessful attempt to enter into an 8(a) contract, and the time lost to that effort, we think the agency reasonably concluded that an noncompetitive 1-month sole-source bridge contract was required.

Recycling the procurement cycle

The following link is to an interesting story for our times. Technological and other changes are happening so fast these days that by the time the ink on a blue print to satisfy a perceived need is dry, the end product is obsolete. It is upending the procurement cycle, and solving the problem is as critical as acquisition needs.

As usual here, I cut, rearrange, paraphrase, leave stuff out, and otherwise play fast and loose with the cited article to make or illustrate a point; so read the original at the link.

Wary of Procurement Mishaps, Air Force Takes Cautious Steps

The Pentagon’s budget proposal for 2016 will help replenish the Air Force fleet but new aircraft designs are years or decades away. the Air Force is hitting the pause button on several programs, including a next-generation fighter, a new trainer airplane and a ground surveillance jet. Officials said they are being cautious about committing to new designs at a time when technology is advancing far more rapidly than the military’s procurement decision cycle.

They also are resistant to make big wagers on unproven technology during a period of great uncertainty about future threats.

As national security threats become more complex and the challenges too unpredictable, a different approach to developing future weapon systems is needed, said Air Force Lt. Gen. James M. "Mike" Holmes, deputy chief of staff for strategic plans and requirements.

That means a departure from the predictable cycle of replacing an airplane with another airplane. “We’re trying to not jump straight to the idea that we’re going to build a sixth-generation fighter,” Holmes said during a roundtable with reporters at the Pentagon.

For the Air Force, the question is how to ensure “air superiority” in the future, and a new-and-improved stealth fighter might no longer be the answer, he said. “We’re trying to get a feel for what is the requirement for air superiority in the future and look at all the domains and not just jump into another air platform.”

Under the traditional process, the Air Force would conduct an “analysis of alternatives,” or a market study and years later choose an airplane design and begin development. The service wants to do business differently, said Holmes. “We just don’t want to jump straight to the AOA on the next airplane before we’ve looked across the range of ways of doing air superiority in the future. That includes cyber, space systems, ground and maritime. Not just jump straight to an air solution.”

The procurement system was designed for a more foreseeable world, he explained. “With 20-year development programs, by the time you design it and set requirements, by the time you field it, you have to think about what comes next.”

Another concern is how to get ahead of the fast-moving innovation train. Other countries have studied U.S. weaponry and how they are employed, and are now making systems to neutralize U.S. advantages, Holmes said. This is happening “faster than was anticipated,” he added. “The gap between our capability and the capability of potential adversaries is decreasing, and it’s decreasing at an accelerated rate.”

While it is “prudent to think about what comes next,” Holmes said, the military has to avoid the traps of traditional thinking. The tendency is to build a “little bit better F-35 or even a leap ahead F-35 or F-22” rather than “think about the right approach to solve problems.”

Chief of Naval Operations Adm. Jonathan Greenert shares that view. In a presentation at an Office of Naval Research conference last week, he observed that advanced stealth fighters are not a silver bullet. Holmes said the CNO makes a valid point. “Our analysis says that with modern integrated air defense systems, stealth is necessary but may not be sufficient.”

The military has to be prepared to fight “air against air, air against ground, ground against air,” Holmes said. “You could see an application of swarming autonomous [vehicles] to go target surface-to-air defenses.” But, if so, he added, “Is it worth the cost to pay for autonomy for something that’s going to blow itself up when it hits a target? There are a lot of things we need to learn.”

The Air Force is reluctant to move forward with some modernization programs until is has more certainty about the state of technology. Companies like Boeing, Northrop Grumman and Textron are working on clean-sheet concepts, and forced the Air Force to question whether it should buy off-the-shelf or gamble on a new design.

Officials are once again scrubbing the T-X requirements and are making it a test case for a new procurement reform initiative called “bending the cost curve.” T-X is years behind schedule but the Air Force is comfortable with the delay because it is allowing program officials to better understand the technology offered in the open market and to capitalize on private investment, Holmes said. The Air Force also is reevaluating the T-X acquisition rules so that proposed aircraft that exceed the baseline requirements without adding cost can get credit in the competition.

The Air Force in this case benefits from putting off contract awards and letting market forces work in its favor. “We think that keeping multiple teams in competition” helps the Air Force, said Holmes. “Having airplanes that are flying puts pressure on developmental airplanes, and having developmental planes puts pressure on airplanes that are flying.”

Doubts about earlier acquisition plans also prompted the Air Force to delay a competition to build a ground surveillance aircraft to replace the aging JSTARS, or joint surveillance target attack radar system. Companies like Boeing, Bombardier and Gulfstream are expected to propose JSTARS concepts built in smaller, commercial airframes that they claim will save the government money both in the procurement and lifecycle support of the aircraft.

Officials for some time had begun to question whether the JSTARS’ intricate sensor suites and electronics could be squeezed into smaller airframes. The Air Force decided to delay the program in order to further investigate the issue. The question is “what’s possible and what’s not,” Holmes said. “When [Air Force officials] looked at the strategy we had built for acquisition, they thought it was risky. The integration challenge may have been understated by some of the proposals. We want to keep the competition longer, it drives the price down.”

The problem with school books

Every year for every class since modern education began, students need books, and typically they are provided by the schools. But it seems to come as a surprise to many of the schools.  

Every year.

Guam schools have notoriously been poor managers of text book requirements for decades.  But it is not being singled out. Consider the following:

Sierra Leone: Procurement Irregularities Uncovered At Education Ministry

According to the 2013 Auditor General's report, the Ministry of Education, Science and Technology failed to follow procurement rules in the year under review, thus violating the National Public Procurement Authority Act 2004.

The report states that the ministry adopted a restricted bidding method approved by the National Public Procurement Authority (NPPA) for no objection on the basis of urgency of time.

It also notes that it took more than six months from the inception of the process to the award and signing of the contract agreement for the supply of foods, while it took more than eight months from the commencement of the process to the signing of the contract agreements for the supply of text books and teaching and learning materials.

Thus, the report concludes that it stands to reason that ministry officials had sufficient time to have followed the required procurement processes.

Sound familiar?

Emergency procurement: the last refuge of the sole source scandal

Pearson Lands Common-Core Contract in Mississippi After Testing Standoff

Mississippi officials have approved an "emergency procurement" contract with Pearson to administer common-core tests for the coming academic year—a step taken after a state board questioned the legality of the business arrangement and refused to sign off on it.

The one-year deal, which state officials said is worth $8.3 million, comes on the heels of the state's personal service contract review board telling the state department of education that it would reject a proposed, sole-source, four-year agreement because it believed competing proposals should have been sought from other vendors.

"To be approved as a sole source and awarded without competition, the service must be available from only a single supplier," said Deanne Mosley, executive director of the Mississippi state personnel board, which supports the contract review board, in a statement. "The company selected by New Mexico officials is not the only company which can provide these services."

Because of the board's stance, department of education officials say they had little choice but to approve the one-year contract to ensure that a portion of the state's schools, scheduled to give tests in December, could do so. The other options would have been to put forward competitive sealed bids or proposals, the agency said.

The board's decision angered department officials, who released a timeline of what they described as a lengthy and persistent effort to win approval of the contract.

The dispute in Mississippi has ties to a broader fight over a PARCC contract out of the state of New Mexico, a fracas that Education Week has been following closely.

In April, New Mexico officials approved a contract for PARCC test administration with Pearson, the only bidder on the project. A rival vendor, the American Institutes for Research, protested the bidding process, arguing that it improperly favored Pearson by bundling testing work that company was already providing PARCC with future duties administering the exam. AIR later sued in state court to stop the deal. After its appeal was rejected this summer by New Mexico's state procurement office, the AIR scaled back its legal fight. It is now suing to try to limit the scope of the contract to one year, and to have the remainder of the deal, which it says could last either four or eight years, re-bid.

Why does a deal hatched in New Mexico matter in Mississippi? The New Mexico contract establishes a price agreement with Pearson, which other PARCC states, including Mississippi can latch onto, if they want.

(The overall financial stakes of that Pearson vs. AIR fight could be massive in scale: In court documents, the AIR has said that if other PARCC states procure services for testing through the New Mexico deal, the contract could be worth $1 billion.)

Mississippi department of education officials, in statements, have argued that they have followed the proper process, over a period of several months, in seeking a sole-source contract with Pearson.

In their timeline describing those efforts, department officials said things were rolling along until they began meeting resistance from the contract review board.

Last month, when Mississippi's contract-review board told the department of education that the Pearson contract would not be heard by the board until September, the agency reacted with alarm—fearing the delay would jeopardize tests slated to be given to about 16,000 students in Mississippi schools later this year.

Mosley, in a statement, said that the contract-review board, after evaluating the New Mexico deal, became convinced it did not meet the legal standards of her state. Department officials had not shown that Pearson was the only company that could carry out the testing job, said Mosley, whose office declined further comment to Education Week.

"[I]t could not be approved as a legal and proper expenditure of taxpayer funds as it did not follow Mississippi procurement laws," Mosley said. "The New Mexico officials who selected this vendor to receive the contract did not take that into account and did not follow Mississippi laws in place to protect Mississippi taxpayers."

The department of education, however, disagrees.

A foundational principle of procurement is competition. As the Guam procurement law says (5 GCA § 5001(b)(6)), following ABA Model Procurement Code guidance, the state should "foster" competition. The first rule of Guam law is that the principles of procurement should be construed and applied to give effect to the laws. (§ 5001(a).) Thus, given a choice of 2 ways to assess a situation, the way the that gives effect to competition should be preferred to the way that does not. Giving away a contract by sole source when there is any question of availability of competition violates this first law.

Furthermore, Guam law understands that "emergency" is not a failure of planning, as does Federal law. Under Guam law, "emergency" is defined a "a condition posing an imminent threat to public health, welfare, or safety which could not have been foreseen through the use of reasonable and prudent management procedures...." (§ 5030(x).) Further, the emergency method of source selection requires "emergency procurements shall be made with such competition as is practicable under the circumstances" and limits the scope of the acquisition to "an amount of goods or supplies [not] greater than the amount of such goods and supplies which is necessary to meet an emergency for the thirty (30) day period immediately following the procurement". (§ 5215)

At the federal level, use of sole source, described under the general description as "Other Than Full and Open Competition" (see FAR SubPart 6.3), requires particular scrutiny and written justification. In particular, Subpart 6.301(c)(1), says "Contracting without providing for full and open competition shall not be justified on the basis of— (1) A lack of advance planning by the requiring activity...." Also see Part 7 for a description of planning principles and rules aimed to promote competition and Part 10, which requires market research to, among other goals, "Determine if sources capable of satisfying the agency’s requirements exist" (Subpart 10.001(a)(3)(i)).

None of that seems to have bothered the decision makers in the instances reported above.

Avoiding sole source scandals is such an easy step. Don't use it: just do the planning and market research, put a competitive method of source selection out, actually foster competition, and see what you get.

Oh, and provide incentive to do so.  Guam has an "ENFORCEMENT OF PROPER GOVERNMENT SPENDING" Act.   Under the act, any taxpayer has standing to bring action against any government officer or employee, including the governor, to recover for the government purse, any funds expended "without proper appropriation, without proper authority, illegally, or contrary to law."  (§ 7103.)

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

New Pentagon Procurement Rules Seek to Create Culture of Innovation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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