Risky business

Is government spending meant to be risky? Is it meant to facilitate "creative destruction"? Or, is it meant to minimize risk to a manageable, even prudent, degree?

Consider the following articles (which I've cut up, rephrased or otherwise hashed to my own end -- so read the article itself at the links for accuracy of its message).

Defense Spending Red Tape Endangers Cybersecurity

The Navy is using Windows XP because complicated spending rules have prevented a better upgrade. [I only quit using XP recently at home because my computer crashed -- and I couldn't buy a new one with it.   It was not a spending rule that prevented me; it was the industry that didn't want me to go there notwithstanding my serenity with what I already had.]

The Navy renewed its contract to operate its computers using Windows XP.  But, the Navy entered into a $9 million contract with Microsoft to continue to provide security patches for it. [What would the cost have been to upgrade its entire computer architecture to, say, Windows 8?]

The government is moving too slowly to fund and acquire the latest technology, which could not only waste taxpayer dollars but also endanger federal cybersecurity. A panel of experts on Monday noted that the conservative procurement practices of the federal government can't keep up with the high-risk culture of tech industry startups, which innovate at a rapid pace and are increasingly a target for acquisition by larger businesses.

Cybersecurity is one area in which agencies appear to have failed to take advantage of private sector innovation. “Products for IT get overlapped by new software within six months,” Erica McCann, director of federal procurement for the Information Technology Alliance for the Public Sector tech trade association, explains. Agencies like the Defense Department use outdated software because procurement rules at the General Services Administration require programs to be on the market for two years to be eligible for government use, she said.

“Selling to the federal government is so arcane that many companies opt out, especially start-ups or newer IT companies that are used to a much faster pace,” James Lewis, a cybersecurity researcher at the Center for Strategic and International Studies, says. “Funding for start-ups runs into problems over who owns the intellectual property. [Intellectual property] is the single biggest asset for most startups and federal rules can put it at risk, making it unattractive to do business with the U.S. government.” Startups have to be particularly patient when working with the government since receiving funding can take months or years, as can the process of meeting government regulations, he says.

“The political system is not good at making long-run investments with uncertain impacts,” Ben Bernanke, former chairman of the Federal Reserve said during the panel discussion. Michael O’Hanlon, a research director at the Brookings Institution think tank, said “the overall system is not fundamentally broken; there are parts of it that are broken, in my mind.” Congress and agencies, however, are working harder than ever to make it easier to buy products from the tech sector, McCann says.

Defense Secretary Ashton Carter has recently tried to attract programmers to work with the government to boost its IT staff instead of taking a higher paying job at a private sector firm. These efforts included opening a full-time DoD outreach office in Silicon Valley, called the Defense Innovation Unit Experimental.

Defense Department's New Definition of "Commercial Item" Will Save Money

The Department of Defense (DoD) is taking a major step in stopping the waste of taxpayer dollars. DoD sent a legislative proposal to Congress to narrow the definition of a "commercial item" to mean goods or services that are actually sold to the general public in "like quantities." This proposal is a huge improvement over the current definition, a broadly worded definition open to abuse because it includes good or services “of a type” that are “offered” for sale or lease.

Why does this matter? Once a good or service is considered “commercial,” the government has little to no information about the relative cost of a good or service, and has little ability to audit the numbers behind the cost that the government is paying. If the new definition becomes law, DoD will no longer have to buy C-17s, C-130Js, or billions of dollars of specialized weapons-related subsystems (see pages 8-10) as commercial items. This should yield savings for taxpayers, as it has in the past. In 2006, for example, the conversion of the C-130J from a commercial item, which caused the repricing of 39 aircraft, resulted in “institutional net savings of $168 [million]” — thank you, Senator John McCain (R-AZ, who was credited with the Air Force’s actions).

Our most recent recommendation to alter the definition of a commercial item came in 2011, when we asked Congress to re-establish the taxpayer-protection checks and balances that have been removed from the contracting system, including requiring contractors to provide cost or pricing data to the government for all contracts except those where the actual goods or services being provided are sold in substantial quantities in the commercial marketplace.

Unfortunately, many government commercial item purchases have been awash in wasteful spending based on the elasticity of the current definition. Items with little or no commercial market availability were easily labeled as commercial, and were purchased on a sole source basis (i.e., non-competitive contracting) with no objections by government acquisition staff or reviews by auditors. The “commercial item” definition was developed by industry and enacted into law in the 1990s (as part of so-called “acquisition reform”) precisely in order to prevent the contracting agencies from obtaining cost or pricing data when adequate price competition—which exists in real commercial markets—does not exist. The law should more accurately have been called the “sole source contracting without cost or pricing data act.”

Not surprisingly, the contracting industry is opposing DoD’s proposal, claiming that competition will suffer as certain companies won’t do business with the federal government because of stricter contracting rules. The benefit of the current definition—for contractors at least—is that it permits sole source without cost or pricing data. This is because once an item or service is labeled as “commercial,” (under an extraordinarily creative definition), the government is legally denied access to certified cost or pricing data which is used to ensure that the items or services being purchased are reasonably priced.

Years ago, a DoD Inspector General (IG) audit report about an $860 million contract for spare parts used on weapon systems found that “higher prices were paid for commercial items” because “there was no competitive commercial market to ensure the reasonableness of prices.” According to the report, the contractor, Hamilton Sundstrand Corporation, “refused to provide [Defense Logistics Agency] contracting officers with ‘uncertified’ cost or pricing data for commercial catalog items, and terminated Government access to the Sundstrand cost history system”; and “guidance on commercial items qualified any item ‘offered for sale … to the general public’ as a commercial item without clearly addressing commercial pricing concerns, particularly when DoD was the primary customer procuring significantly larger quantities than other commercial customers.”

The DoD proposal would put an end to the kinds of disputes highlighted in that report. In fact, DoD’s analysis states:

For example, GAO Report 06-838R dated July 7, 2006, cites “adequate pricing” as one of five key area vulnerabilities of the DoD. In part, the report states that “Also, DoD sometimes uses commercial item procedures to procure items that are misclassified as commercial items and therefore not subject to the forces of a competitive marketplace. While the use of commercial item procedures is an acceptable practice, misclassification of items as commercial can leave DoD vulnerable to accepting prices that are not the best value for the department.”

These amendments of the law would prompt commensurate adjustments of the Federal Acquisition Regulation and ensure that commercial goods and services are acquired by the DoD and other Federal agencies only at fair and reasonable prices consistent with comparable sales actually observed in the competitive marketplace.

Further reading:

GAO: Commercial Item Test Program Beneficial, but Actions Needed to Mitigate Potential Risks

the Coast Guard's Aviation Logistics Center used the test program for 139 of 370 new awards that fell within test program thresholds, whereas its Headquarters Contract Operations used the test program for only 3 of 164 new awards. Coast Guard officials explained that the commercial nature of the parts and services bought by the Aviation Logistics Center lends itself to using the test program, while the headquarters office used existing contracts, which can be another means to fulfill recurring needs for commercial supplies such as information technology services.

DOD: Commercial Item Handbook

DOD: Guidebook for the Acquisition of Services

GSA/DOD: Improving Cybersecurity and Resilience through Acquisition

The cost of not using basic cybersecurity measures would be a significant detriment to contractor and Federal business operations, resulting in reduced system performance and the potential loss of valuable information. It is also recognized that prudent business practices designed to protect an information system are typically a common part of everyday operations. As a result, the benefit of protecting and reducing vulnerabilities to information systems through baseline cybersecurity requirements offers substantial value to contractors and the Government.

The baseline should be expressed in the technical requirements for the acquisition and should include performance measures to ensure the baseline is maintained and risks are identified throughout the lifespan of the product or service acquired. Due to resource constraints and the varying risk profiles of Federal acquisitions, the government should take an incremental, risk-based approach to increasing cybersecurity requirements in its contracts beyond the baseline.

THE Department of Defense Cyber Strategy April 2015

Over the last ten years Internet access increased by over two billion people across the globe. Yet these same qualities of openness and dynamism that led to the Internet’s rapid expansion now provide dangerous state and non-state actors with a means to undermine U.S. interests. We are vulnerable in this wired world.

The Internet was not originally designed with security in mind, but as an open system to allow scientists and researchers to send data to one another quickly. Without strong investments in cybersecurity and cyber defenses, data systems remain open and susceptible to rudimentary and dangerous forms of exploitation and attack.

Governments, companies, and organizations must carefully prioritize the systems and data that they need to protect, assess risks and hazards, and make prudent investments in cybersecurity and cyber defense capabilities to achieve their security goals and objectives. Behind these defense investments, organizations of every kind must build business continuity plans and be ready to operate in a degraded cyber environment where access to networks and data is uncertain. To mitigate risks in cyberspace requires a comprehensive strategy to counter and if necessary withstand disruptive and destructive attacks.

To succeed in its missions the Defense Department must operate in partnership with other Departments and Agencies, international allies and partners, state and local governments, and, most importantly, the private sector.

The Future is Coming Much Faster than we Think, Here’s Why

Samsung Unveils The World's Largest Hard Drive, Boasting 16 TB In A 2.5-Inch Case

This is a pretty significant announcement. Flash memory is generally faster than its disc-spinning counterpart, although it generally doesn't offer the highest amounts of storage. This drive, however, offers much more than the largest conventional drives made by Western Digital or Seagate, which max out at around 10 TB.

So how is Samsung able to make such a large hard drive – its actual capacity clocks in at 15.36 TB? The secret is the company's new 256-GB NAND flash die, which is two times as impressive as the 128 GB NAND dies that were put into commercial use by storage makers last year. Samsung announced the new tech by showing off a server with 48 of these new hard drives at the summit in California. It is able to handle up to 2 million input/output operations each second.

The Flash Storage Revolution Is Here

You’ve likely heard about Samsung’s 16TB hard drive, by far the world’s largest. That is an eye-popping number, a large enough leap forward that it’s difficult to fully process. And the most exciting thing about that 16TB hard drive? It’s just a hint of what’s coming next.  It won’t be long at all, though, before they find their way into personal computers, even laptops. “I would expect in three to five years, for a 2.5-inch 16TB SSD to be in a workstation-class notebook,” says Patrick Moorhead, president and principal analyst of Moor Insights & Strategy.

Moorhead notes that despite our recent migration to the cloud, hard drives of that magnitude would obviate much of the need to borrow some massive, faceless tech company’s digital locker to stash our stuff. That amount of room could enable localized smart home solutions that offer more privacy and security than leaning on the cloud currently does.

Intel and Micron recently announced that they’re working on something quite similar, though they don’t expect to produce consumer devices based on the technology until early next year. Toshiba has dabbled in 3D NAND, with products expected by the end of next year. All of them have the systems in place to produce equally, if not more, impressive drives. Samsung left the starting block first, but that may not matter much in a race that will be measured in years.

The implications of storage breakthroughs like this go beyond data centers and laptops, though. “Memory and storage are the two things that are holding up huge innovations in biotech, in design, and for that matter even artificial intelligence,” Moorhead says. “They’ve become a fundamental building block for moving the industry forward. These big innovations at the top trickle their way down into cars, into phones, over a five to seven year period.”

As exciting as a 16TB SSD may be, it still represents an iterative step, a manufacturing trick that found new ways to stuff the same basic pieces into increasingly smaller spaces.

The potentially much bigger breakthrough? Intel and Micro’s 3D XPoint (pronounced “crosspoint”) technology, which completely rethinks the way we’ve been making memory for years. “I think the design change is more exciting,” says Moorhead. “It’s a radical, different design that nobody has, versus taking your memory to the next node, which is essentially Moore’s Law.”

Rather than rely on transistors to store information, as traditional flash memory does, 3D Xpoint deploys a microscopic mesh of wires, coordinated by something called a “selector” that can be stacked on top of one another.

The result is “non-volatile” storage, meaning it holds onto its data even when the power’s off, that’s 1,000 times faster than NAND flash, and 10 times denser than the volatile DRAM (dynamic random access memory) that PCs use to keep track of temporary data. In other words, it’s a single solution that can handle both memory and storage, and do both better, in most ways, than anything currently available. “Any artificial intelligence or object recognition you want to have on a device works a lot better with XPoint … The more you can put into that really fast memory space, the better your artificial intelligence is going to be,” says Moorhead.

Intel has said not to expect any 3D Xpoint products until next year, but when they appear they’ll be in a position to transform multiple industries, from the esoteric to the squarely consumer-focused.

Intel, Micron develop 3D XPoint as an eventual successor to NAND flash memory

This development comes at a crucial time during these early days of the Internet of Things. 3D XPoint, which can write up to 40 terabytes per day; SSD NAND, which can write up to 40 gigabytes in a day. 

Memory speeds were already proving to be a constraint on processor operations in 2013, when the world generated a total of 4.4 zettabytes, or the equivalent of 1,000,000,000,000,000,000,000 bytes.  By 2020, that annual global data generation rate is expected to climb to 44 zettabytes, an increase by a power of 10. By 2050, when it is expected that 50 billion devices will be outfitted with computing processors for digital services, the amount of data generated every year could skyrocket. , will be much more suited for that atmosphere than

Imagine the impact this will have on robotics (drones), holographics, down range autonomy and basic research and modeling, 3D printing, sending intelligent machines to the stars. And imagine how quickly that will make redundant whatever it is we buy today.  Anything we buy that's based on proprietary hardware or software is likely to be more ball and chain than progress.  Think Motorola.  

Government technology buyers must approach issues prudently, which means not betting the house on any one gambit.  Standardization perhaps should give way to some nodes of autonomous experimentation and incrementalism, however more expensive that may be in the near term. 

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.”

To procure or not to procure: is that the question?

The U.S. Court of Federal Claims is a court of limited jurisdiction. It can hear some contract disputes, but not all contract disputes, for instance. If a case is brought to the court which is beyond its jurisdiction, however juicy the merits and what it may have to say about the merits, it cannot; it must dismiss the case.

Sometimes, though, the comments it makes in doing so are juicy in their own rights.

The case in this post is one of those, even though the juicy remarks may not be reported in this post.  I have presented it chopped, sliced and diced to my own ends, so do not rely on this rendition as an accurate reproduction of the case.  If you want to know what it really says, read the whole case at the link. 

And if you really want to understand the matter better, read the cases cited in this case. There have been many trying to resolve the simple question, "what is procurement?"  (And while at it, I added a word on "is procurement an inherently governmental action?" whilst reading one of the cases cited.)

In short (read the long version at the link), this is a protest about a decision of the government to use software it had developed and came to own, rather than go to the market to allow other software providers a crack at the work.

VFA, INC. v. USA, U.S. Court of Federal Claims No. 14-173C, (October 2014)

The DoD uses a particular software package in making decisions about sustainment, restoration, and modernization of its facilities. VFA owns and markets a similar software product. The Under Secretary of Defense for Acquisition, Technology, and Logistics issued a memorandum to standardize the use of the
program at all of DoD’s military installations.

VFA filed a bid protest in this Court, alleging that the DoD’s standardization decision excludes VFA and others from competing for contracts to provide facilities management software, in violation of the Competition in Contracting
Act, 10 U.S.C. § 2304 (“CICA”). Simply put, VFA contends that the DoD should be conducting competitive procurements for this software product. The Government argues that an internal standardization decision is not a “procurement” for purposes of the Court’s Tucker Act jurisdiction, and consequently VFA is not an interested party who may challenge such a decision.

In a federal agency as large as DoD, it became increasingly apparent that multiple and different facilities condition assessment tools across DoD installations generated inconsistent and incomparable data. A 2012 Senate Report noted that the DoD “does not have a set of standards or metrics that can be used to inform budget decisions and Congress on the minimal annual levels of funding required to recapitalize the physical plant at a rate that matches the design lives of facilities in the [DoD] inventory.” The report further noted, “[b]udget pressures and other priorities can result in funds appropriated for facility sustainment being used to fund other categories of base operating support. This leads to facilities that do not receive minimal levels of annual preventative maintenance, and are not modernized to current standards for safety, security, and technology.” The report concluded that, “[o]ver the long-term, underfunded maintenance on [DoD]’s facilities costs the Department more in eventual repairs and replacement.”

To address the concerns raised by the consultants and Congress, the DoD made a policy decision to standardize its facility condition assessments. As part of this policy, the DoD chose to standardize the software it developed and owns itself, which was widely used in almost all of its installations, and which had received recognition for cost savings.

The Court must determine whether a plaintiff has established subject matter jurisdiction before proceeding to review the merits of the complaint. The jurisdiction of this Court is limited and extends only as far as prescribed by statute. Where subject matter jurisdiction is challenged, the plaintiff must establish the Court’s jurisdiction by a
preponderance of the evidence. If the Court finds that it lacks subject matter jurisdiction, it must dismiss the claim.

Under the Tucker Act, this Court has “jurisdiction to render judgment on an action by an interested party objecting to . . . any alleged violation of statute or regulation in connection with a procurement or proposed procurement.” In this case, VFA has challenged the government’s actions under CICA and the FAR, but the key phrase for Tucker Act jurisdiction is that Plaintiff’s protest must be “in connection with a procurement or a proposed procurement.” Id. Since neither the Tucker Act nor CICA define the term “procurement,” the Federal Circuit has held that the term “procurement” includes “all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.” See Distributed Solutions 539 F.3d at 1345-46.

While many courts have cited Distributed Solutions for the proposition that Tucker Act bid protest jurisdiction is broad, the holding remains limited by the facts of the case. Distributed Solutions involved an attempted circumvention of federal procurement law when the Government sought to acquire software for a joint program between the U.S. Agency for International Development (“USAID”) and the State Department. The Government delegated to a contractor the task of selecting private vendors to provide the software. The Government, along with the designated contractor, issued a Request for Information (“RFI”) which stated that the objective of the government’s effort was to “select and implement acquisition and assistance solutions that meet the unique functional requirements of both [USAID and the Department of State].” The RFI specifically stated that it was “for market research purposes only” and would “not result in a contract award.”

After reviewing the responses to the RFI, the Government told the vendors that it had “decided to pursue alternative courses of action.” But, the contractor then issued its own RFI, and used the responses to select the software vendors it wanted. The Government initiated a type of procurement competition without actually committing to award a contract to the best offeror, thereby circumventing applicable federal procurement laws. [NB. My take: The first RFI was used to develop the government's determination of need, an aspect of "procurement". Then, once that was done, the second RFI was used to narrow the field of competition to select the awardee.] Thus, the Federal Circuit concluded that a procurement existed and that a legally compliant competition was required.

The present case is much different in key respects. Here, the DoD never contemplated or initiated a procurement process. The Government did not issue an RFI, did not receive information from vendors, and did not plan to award any contract. From the DoD’s standpoint, it already possessed the SMS program it wanted to use, and there was no reason to acquire anything. VFA is requesting a competitive procurement in order to sell to the Government something it already possesses.

Plaintiff argues for the application of other standardization decisions where this Court has interpreted the breadth of § 1491 jurisdiction broadly. While these cases involved software standardization decisions by the Government, the Court finds that the similarities end there.

In Savantage, the Department of Homeland Security (“DHS”) conducted a solesource procurement for financial systems application software. DHS decided to standardize its software on the Oracle and SAP systems, signing a “Brand Name Justification” instead of conducting a competition. DHS then issued a solicitation for services to migrate to these systems. Plaintiff challenged the underlying standardization decision to use the software of Oracle and SAP, and this Court accepted jurisdiction of the protest. The Court found that DHS expanded its systems contracts with Oracle and
SAP without any competition for the new work. Specifically, the Court ruled that the “expansion of work fits squarely within the congressional definition of ‘procurement’ because it is an acquisition of additional property or services from Oracle and SAP.” The Court rightly held that acquiring new work from a private vendor is, by definition, a procurement action on the part of the Government.

Similarly, in Google, the Department of Interior “restricted competition exclusively to the Microsoft BPOS-Federal and the Microsoft Desktop and Service Software for messaging and collaboration solutions,” in effect standardizing on a single private vendor’s product instead of conducting a competition.

In all of these software standardization cases, the Government attempted to conduct asole-source procurement without any competition. The existence of a procurement triggered this Court’s jurisdiction.

VFA argues in the alternative that the Court should follow the reasoning of recent “insourcing” cases, positing that the DoD’s use of its own software to the exclusion of VFA and others constitutes “insourcing” and grants this Court jurisdiction. In all of the cited insourcing cases, the DoD was obligated to compare cost efficiency between civilian and contractor personnel under 10 U.S.C. § 129a (“The Secretary of Defense shall establish policies and procedures for determining the most appropriate and cost efficient mix of military, civilian, and contractor personnel to perform the mission of the Department of Defense.”).

Each of the cases involved a required cost comparison, and this fact alone distinguishes them from the present case. The fact that the DoD compared the cost of the private contractor to its own hiring of civilian personnel is a significant step in the procurement process, and one that was never taken in this case. Further, each of these cases required the hiring of civilian personnel, not just the use of existing personnel, and thus involved an acquisition process.

VFA has pointed to no regulation or guideline suggesting the DoD was under an obligation to compare the cost of the SMS to the software products offered in the commercial market. Because it was not so required, the Government did not solicit any commercial pricing proposals, did not issue an RFI, and did not conduct an internal review or comparison of products.

Allowing VFA to bring this case, where no procurement or cost comparison process was mandated or undertaken, would so broadly expand this Court’s jurisdiction as to eliminate any restrictions of the Tucker Act. Under VFA’s theory of
jurisdiction, every time the government chooses not to procure a good or service from a private contractor, and instead creates or develops something on its own, the providers of similar products and services would be able to challenge this decision, asking “why don’t you buy from us instead?” The Court is unwilling to open this “Pandora’s box.”

While reviewing the Distributed Solutions decision, I noted another twist on the question of what actions of a government are "inherently governmental" so as to not be delegatable to a non-government entity. Recall from the VFA decision the descriptions of facts in that case: "The Government delegated to a contractor the task of selecting private vendors to provide the software."

In Distributed Solutions, the Government sought

to dismiss the contractors' complaint for lack of jurisdiction, arguing that the protest was not viable, as the contractors were essentially protesting the award of subcontracts by a contractor with a federal agency, and not an award of a contract by an actual federal agency.

On appeal, the contractors contend that the trial court misinterpreted the basis for their complaint. Contrary to the focus of the trial court's analysis, the contractors are not contesting SRA's award of the subcontracts. Rather, they are contesting the government's decision to task SRA with awarding subcontracts for the purchase of software instead of procuring the software itself through a direct competitive process.

We agree, as the contractors' complaint confirms as much. For example, paragraph 8 of the complaint alleges that the government "improperly delegated an inherently governmental function." As another example, paragraph 52 of the complaint alleges that "[b]y initially soliciting information from prospective bidders, improperly inserting SRA into the procedure to do directly what the [government] could not do—select a vendor without being subject to the federal procurement laws—the [government has] attempted to circumvent the federal procurement laws and foreclose any attempt to challenge their actions."

Distributed Solutions is good authority not only for the broad, but limited, reach of the term "procurement", but also for the proposition that government contracting is an inherently governmental activity which cannot be hived off to the private sector.

Critical national security assets protested. Another day in the office.

Seems like every protest on Guam, and perhaps where you live, is a crisis of some critical government operation, requiring great wringing of hands, headlines and calls for emergency procurement or political interference.

Here are three articles from today's Google News dealing with protests, but no histrionics.

U.S. Army delays decision on General Dynamics vehicle protest

(Reuters) - The U.S. Army said on Monday that it would delay until April 4 making a ruling on a protest filed by General Dynamics Corp about a new competition for armored vehicles.

General Dynamics filed a protest with the Army on Feb. 14, arguing that the Army's rules for a competition to replace nearly 2,900 Vietnam-era M113 infantry carriers were skewed to favor BAE Systems Plc's Bradley Fighting Vehicle. The company is also pressing U.S. lawmakers to intervene in the Army's Armed Multi-purpose Vehicle (AMPV) competition and to mandate that a mixed fleet includes a version of both BAE's Bradleys and General Dynamics' wheeled Stryker vehicles.

Keating said General Dynamics was evaluating its options in case the Army rejected the protest. If that happens, the company would have 10 days to lodge a protest with the congressional Government Accountability Office, which rules on contract disputes. The company could also take its case to federal court.

BAE Systems argues that the Army cannot afford further delays since the existing M113 infantry vehicles are not suited to protect U.S. soldiers against direct fire attacks by today's more powerful rocket-propelled grenades and other threats. Mark Signorelli, vice president and general manager of combat vehicles for BAE, said the Army had been very open and transparent about its requirements for the new vehicles, and had already extended the development program to five years.

"They've been very conscious of and attentive to industry needs," he said, noting that the Army issued its final request for proposal after roughly two years of dialogue with industry representatives.

General Dynamics contends it would not have enough time or data to develop a Bradley-like vehicle on the Army's schedule, and has even suggested a teaming arrangement with BAE - although BAE declined.

Ingalls Protesting US Coast Guard Cutter Contract

Huntington Ingalls Industries (HII) is protesting the US Coast Guard’s Feb. 11 award of design contracts for the Offshore Patrol Cutter (OPC) program, reportedly citing questions about the grading criteria.

The new cutters were originally part of the Deepwater program, a sprawling effort spread over two decades to upgrade and replace most of the Coast Guard’s ships, aircraft and systems. The program, originally ministered by Northrop Grumman — previous owner of HII — and Lockheed Martin, was broken up after Congress demanded more oversight from the service, and the Coast Guard now directly manages its acquisition programs.

“Ingalls Shipbuilding recently received a debriefing of the offshore patrol cutter evaluation and we have decided to protest the Coast Guard’s decision,” said Beci Brenton, a company spokeswoman here. “Ingalls Shipbuilding offered the Coast Guard a strong, fully compliant proposal to provide a very capable, cost-effective offshore patrol cutter design and [we] believe our protest has merit.”

The Coast Guard awarded contracts to three firms — General Dynamics (GD) Bath Iron Works, Bollinger Shipyards and Eastern Shipbuilding — to produce preliminary and contract designs for the OPC, a program that envisions up to 25 ships worth approximately $10.5 billion. Each of the Feb. 11 awards was for about $22 million.

A bevy of shipyards have been vying for the OPC award, one of the biggest new US government surface ship construction efforts envisioned this decade.

HII’s protest was filed with the Government Accountability Office on Feb. 25. Based on the standard 100-day period for the GAO to review the protest and issue a ruling, a decision is expected in early June. Until then, under government rules work under the contract awards is suspended.

Feds deny Pantex contractor's latest bid protest

The Government Accountability Office on Thursday denied a bid protest filed by Nuclear Production Partners LLC that challenged the National Nuclear Security Administration’s decision last year to award a multibillion-dollar contract to Consolidated Nuclear Security LLC to manage and operate Pantex Plant.

Babcock and Wilcox Technical Services Group Inc. established Nuclear Production Partners to pursue a $22 billion-plus contract that includes Pantex and a Tennessee nuclear weapons facility.

“Today’s decision resolves NPP’s protest of the agency’s corrective action taken in response to our earlier decision,” the GAO said in a statement. “GAO concluded that the agency’s corrective action was consistent with the requirements of the Federal Acquisition Regulation and properly limited to address the specific defects in the prior source selection process. In addition, our decision rejected NPP’s various complaints about the substance of the agency’s evaluation and the source selection decision.”

NNSA spokeswoman Keri Fulton said in a written statement that the agency expects to begin transitioning to the new contractor shortly.

“We are glad that GAO dismissed the protest and will begin the contract transition at Y-12 and Pantex as soon as possible. The men and women at each site have done their jobs admirably despite the distractions the contract process brought with it, and we are moving forward with our work to keep the American people safe,” she said.

NNSA has twice awarded the massive contract to Consolidated Nuclear Security, a contractor group headed by Bechtel National, but Nuclear Production Partners has protested the contract award three times.

One theme running through these three articles is the length of time the solicitation, protest and award can take, especially when big money is involved. It seems a lot of time is allowed and even planned for as part of the process. 

I do not believe that the review process is even considered let alone factored into any timeline when a solicitation is commenced on Guam. They usually aren't even planned, just thrown into motion ad hoc.  Hopefully, this will change.

Acquisition malpractice

If we are to consider that procurement staff should be identified as a profession, and certificated as such, then we must accept the concept of "acquisition malpractice". Still, this article is the first I've seen that uses the term (not that I've been around long enough or experienced the field wide enough to have had a significant exposure to the field).

Procurement chief knocks early F-35 production

“Putting the F-35 into production years before the first test flight was acquisition malpractice,” said acting Pentagon procurement chief Frank Kendall, speaking at a Monday event hosted by the Center for Strategic and International Studies in Washington. “It should not have been done.”

Kendall said that the Pentagon had made “optimistic” predictions about the capabilities of design tools, simulations and modeling to build a fighter that would breeze through test flights without problems.

“We didn’t model everything as precisely as we thought,” Kendall said. “Now we’re paying the price for being wrong.”

Transitioning from development to production is traditionally been one of the most difficult challenges for any program.

Kendall said there is a tendency to start production too early, adding that the F-35 is an “extreme example.”

Barry Watts, an analyst at the Center for Strategic and Budgetary Assessments in Washington, D.C., agreed with Kendall’s assessment. But with then-Defense Secretary Robert Gates terminating the F-22 Raptor program, the Pentagon “has put all of its eggs in the JSF basket,” he said.

“My understanding is the amount of concurrency on this program is as great as or greater than any past program,” he said.

Watts, who has been to Lockheed’s Fort Worth, Texas, plant, described long lines of F-35s already being built. The F-35 is an extremely complicated engineering challenge with its many missions and three variants, Watts said.

“Most of those, if they’re going to be operational airplanes eventually, are going to have to go back and have a bunch of changes made to them,” he said. “That drives up cost and delays things.”

Watts said that the Pentagon should have insisted on more flight tests before starting low rate initial production.

Include before and after pictures in procurement photo album

Unfortunately, news headlines, and political knee jerk responses to them, too often frame the perspective of the job of procurement. The blinkered view of procurement (see, e.g., this post) only sees the combative arena of solicitation and award.

There is much more procurement work, more critical work in many ways, that comes before and after the solicitation. The public may not know that, but the procurement managers do, as the following article illustrates.

Acquisition workforce, contract management top CAO priorities

Improving contract management and workforce development and training are the most important areas federal chief acquisition officers and senior procurement executives are focusing on in 2012.

An anonymous email survey of CAOs and SPEs by Federal News Radio found 85 percent of the respondents said they believe a better trained workforce is the best tool to reduce contracts spending and save money.

Many of the priorities survey respondents highlighted closely follow those outlined by the Office of Federal Procurement Policy over the last three years.

Dan Gordon, who just retired from OFPP Dec. 31 and now is associate dean of the George Washington University law school in Washington, said, "we didn't focus enough on what comes before and what comes after [figuring out "who should get the contract]."

The article is full of interesting, and sometimes surprising or provoking, comments elicited by the survey. You would find it an interesting read.

Charting the life cycle of the acquisition of a weapon system

I have occasionally made the simple statement that the life cycle of the procurement process is much broader than typically conceptualized.

Not only is it broader, it is infinitely more complex than I had imagined.

(Click to enlarge; right click to open in new tab/window.)

The picture above is a static chart developed as

"a classroom aid for Defense Acquisition University students. It provides a notional illustration of interfacesamong three major decision support systems used to develop, produce and field a weapon system for national defense. Defense acquisition is a complex process with many more activities than shown here and many concurrent activities that cannot be displayed on a two-dimensional chart. Supporting information is on back of this chart. For more information, see the Defense Acquisition Portal (http://dap.dau.mil)."

The actual chart is active with many live links to other definitions and sources, which simply adds even more complexity to the whole process. You can get an interactive view of the chart, or a hyperlinkded pdf version of it, here.

For people who might say, "procurement is not rocket science", I'd just refer them to this chart. It may not be rocket science, but it is high level management.

Needs assessment in cutting edge technologies

There's an old carpenter's adage that says "measure twice, cut once". That is a good philosophy to guide needs assessment.

Needs assessment is the first step in preparing solicitation specifications. Specifications are what you tell other people you need. If you can't articulate your own needs, you don't have much chance of having anyone actually giving you what you need. You'd better do your measurements at least twice before you go out to bid. Vendors who make the cut may not make what you really require.

That, anyway, was a take-away I got from the following article:

DoD Cybersecurity Spending: Where’s the Beef?

To cash in on the increased spending on cybersecurity, a number of big defense contractors acquired many cybersecurity firms over the last few years.

Now that the defense industry has positioned itself in the cybersecurity market, the US Department of Defense wants to expand its cooperation with cybersecurity contractors to improve defenses for military computers and networks.

Not only are defense contractors positioning themselves for cybersecurity business, but also the Pentagon has indicated it plans to spend a lot more on cybersecurity despite cuts in the overall budget.

n its FY 2012 budget proposal [PDF], the Pentagon said it plans to spend $2.3 billion on cybersecurity capabilities. It said the money would go toward programs like the new US Cyber Command, construction of a Joint Operations Center for Cyber Command at Ft. Meade, Md., $500 million for new related technologies, and funds for training and improved situational awareness.

However, the Air Force said that it would spend $4.6 billion alone in FY 2012 on cybersecurity. In response to this discrepancy, NextGov queried the Pentagon and they came up with a revised figure of $3.2 billion in cybersecurity spending department-wide, including the services. The Pentagon attributed the discrepancy to the Air Force including a broad range of spending not directly related to cybersecurity and information assurance, such as IT infrastructure.

There has (sic) been problems with fuzzy definitions before, particularly between the terms “information assurance”, the more traditional Pentagon phrase, and cybersecurity. Information assurance includes “measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and nonrepudiation,” according to the Defense Acquisition Guidebook (DAC).

By contrast, cybersecurity is a much broader, more amorphous term; it is difficult to find a DoD definition of the term. The Obama administration’s cybersecurity legislation proposal [PDF], submitted to Congress on May 12/11, defines cybersecurity services as “products, goods, or services intended to detect or prevent activity intended to result in unauthorized access to, exfiltration of, manipulation of, or impairment to the integrity, confidentiality, or availability of an information system or information stored on or transiting an information system.” Cybersecurity threat is defined as “any action that may result in unauthorized access to, exfiltration of, manipulation of, or impairment to the integrity, confidentiality, or availability of an information system or information stored on or transiting an information system.”

This confusion about definitions could lead to discrepancies in budget figures as well as problems with the procurement process. “The flaws in the definitions will follow into the procurement cycle and you will end up with the government buying maybe what it doesn’t need,” said Robert Burton, who served as the top career federal procurement official in the White House Office of Federal Procurement Policy during the George W. Bush administration.

“When people can’t even agree about the most basic terminology, you know there is going to be a lot of confusion,” said Noah Shachtman, a nonresident fellow at the Brookings Institution and a contributing editor at Wired magazine. “The chances there aren’t billions of dollars in redundancies are slim to none.”

It appears that the bulk of the Pentagon’s spending on cybersecurity is going to traditional information systems security programs, a total of $1.9 billion. DoD information systems are defined by the DAC as “entire infrastructure, organization, personnel, and components for the collection, storage, processing, maintenance, use, sharing, dissemination, disposition, display, or transmission of information.”

Protecting these systems is the bread and butter of most traditional cybersecurity firms—firms which the big defense contractors are busy buying up. So they should be well positioned to cash in on this spending.

By contrast, DARPA is looking to spend millions on advanced cybersecurity programs.

See also, this GAO report (11-469), Defense Acquisition:

DOD Should Clarify Requirements for Assessing and Documenting Technical-Data Needs:

Because many systems remain in DOD’s inventory for decades, decisions that officials make during the acquisition process to acquire or not acquire rights to technical data can have far-reaching implications for DOD’s ability to sustain the systems and competitively procure parts and services.

Weapon systems are costly to sustain in part because they often incorporate technologically complex subsystems and components and need expensive spare parts and logistics support to meet required readiness levels. According to DOD, at least 70 percent of a weapon system’s life-cycle costs are incurred to operate and support a weapon system after it has been acquired, with the percentage depending on how long a system remains in the inventory.

Congress passed the Weapon System Acquisition Reform Act of 2009, which required in part that the Secretary of Defense is to ensure the acquisition strategy for each major defense-acquisition program includes measures to ensure competition, or the option of competition, in contracts for the program throughout its life cycle.

The Department of Defense (DOD) needs access to technical data related to its weapon systems in order to control costs and maintain flexibility in the acquisition and sustainment of those weapon systems. Technical data—recorded information used to produce, support, maintain, or operate a system1—can enable the government to complete maintenance work in house, as well as to competitively award contracts for the acquisition and sustainment of a weapon system.

A view of Hawaii's "procurement mess" sounds an awful lot like Guam's

I begin this post with the reminder that Guam and Hawaii have adopted the ABA Model Procurement as the framework for their respective procurement regimes. It's also useful remembering that a central purpose of this blog is to point out some almost universal issues of procurement, so none of us take this too personally.

Seriously, yes. Personally, no.

State procurement squanders cash and delays services By Dennis Hollier

One expert with strong views on Hawaii’s procurement mess is Terry Thomason, education chair of the Hawaii Procurement Institute, and an attorney specializing in public contracts at the law firm of Alston Hunt Floyd & Ing.

Thomason divides Hawaii’s procurement troubles into three categories.

There are a few “bad eggs,” he acknowledges, officials like the state’s former chief elections officer who operate in bad faith.

The second kind of procurement problem, and more common, Thomason says, is like the airport official, “kind of a slow thinker – they don’t know how to do it correctly, so they give out periodic payments. But 99 percent of these are honest mistakes.”

However, according to Thomason, the greatest cost to taxpayers is the third category: the state’s piecemeal approach to contracting. "For instance, you will see DOE projects for schools that include individual contracts for roofing, plumbing, painting, etc. Often, these requirements are at the same school or schools in the same area. All of those contracts were competed separately through the entire solicitation process."

What’s more, Hawaii’s slow, incremental approach to procurement may cost the state federal money. The state’s procurement system simply can’t get contracts out the door quickly enough.

There’s no sign, though, that the state is prepared to make changes.

To begin with, the understaffed State Procurement Office (SPO), which should be the center for innovation and reform, has a very narrow definition of procurement.

State procurement officer Aaron Fujioka likes to point out that procurement technically takes place in a very short window, usually 30 to 90 days. Strictly speaking, he says, procurement is simply the process of announcing an invitation for bids or a request for proposals, the steps used to select among bidders, and the rules for identifying winning bids.

For instance, he says, the beginning of the process – writing accurate and unambiguous requests for proposals – is outside the scope of procurement. That’s planning. Likewise, making sure contractors fulfill their obligations in a timely manner is not procurement. That’s project management.

Many experts believe the SPO should take a more expansive view of procurement. State auditor Marion Higa argues that, because of the principles involved – creating a level playing field for contractors and getting good value for the taxpayers’ dollars – procurement should extend down to the departments and agencies writing RFPs.

“He (Fujioka) is correct in that it’s not within his jurisdiction, per se; but as SPO, shouldn’t he also be promoting that the key here is how you spec out your acquisition?”

Others point out that the SPO has not done a good job conveying the importance of procurement laws to state employees.

State Rep. Blake Oshiro (also an attorney at Alston Hunt Floyd & Ing) notes that government officials continually complain that the process is difficult and cumbersome. “You have to wonder if they know what the Procurement Code is supposed to accomplish,” he says. “Fairness, openness, competition. My guess is they don’t.”

The result is widespread contempt for the norms of government procurement.

The irony is that Hawaii’s procurement law, patterned after the American Bar Association’s model code adopted by 27 states, is flexible and more than adequate.

What’s lacking is the leadership to enforce existing rules and develop new approaches. Instead, the state seems to be moving the other way.

Last year, the Legislature passed laws that limit the ability of companies to protest contract awards – a key check on procurement misbehavior.

Perhaps worse, insiders say, the SPO is circulating draft legislation designed to “simplify and streamline” the procurement process by eliminating basic safeguards, like requiring pre-bid conferences and cost analyses.

Yet, at its roots, procurement law is simply about ensuring a fair playing field and getting good value for the taxpayers’ dollar. In fact, as Terry Thomason puts it, “A dynamic procurement system is the very measure of good government.”

Mr Hollier includes in his article Seven Steps to Better Procurement, which he attributes to Danielle Conway. professor of Law at the University of Hawaii, and Director of the Hawaii Procurement Institute. Again, these appear universal.

1. Develop a fulltime, professional procurement staff in all departments: For most staff, state procurement is now an added responsibility to their usual duties.

2. Make salaries of procurement professionals competitive with private industry: You get what you pay for.

3. Recentralize supervision of procurement in the State Procurement Office: Decentralizing, which was meant to expedite the process, resulted in waste and fraud.

4. Remove exemptions from state procurement code: Far from promoting autonomy, granting exemptions from the code to certain agencies exposes them to litigation, waste and fraud.

5. Encourage, rather than discourage, reasonable protests of contract awards: A lively, expeditious protest system is our most effective way to check misconduct and inefficiency in the solicitation process.

6. Educate, educate, educate: And not only about Hawaii procurement laws, but about innovative procurement practices in the federal government and elsewhere. Remain open to novel or mainstream procurement innovations.

7. Invest time and resources in acquisition planning: Up-front planning will make for a smooth process during the formation and administration of a contract.

I might reiterate that Number 6 is what this blog is all about.

I also want to reiterate what I previously posted about the Policy in Favor of Planning, in contradistinction to Mr. Fujioka's blinkered approach -- read it here.
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