The ups and downs of procurement reform: the POGO schtick

The Coalition for Government Procurement  ("POGO")

has long supported common-sense solutions to streamline

 federal procurement processes, modernize procurement policies, and 

utilize commercial practices to the maximum extent practicable. 

Policies and programs that effectively and efficiently 

leverage the commercial marketplace are essential for the delivery of

 best value commercial products, services and solutions 

for federal customers and the American people.

Procurement reform is in the eye of the stakeholder

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

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

As recognized by the recently published first volume of the report of the Section 809 Advisory Panel on Streamlining and Codifying Acquisition (Section 809 Panel),  FASA 

established a definition for the term commercial item, a preference for procuring commercial items, an emphasis on commercial market research, greater reliance of commercial sector business processes, a requirement to use standard commercial terms and conditions to the maximum extent practicable, waiver of many statutes that would otherwise have been applicable to commercial items, and a framework for maintaining a limit on the number of future statutes that may be applied to procurements of commercial items.

However, since FASA was implemented, the number of DoD-related commercial buying provisions and clauses has increased by 188 percent, and the number of commercial clauses that may be flowed down has increased five-fold. In 1995, the FAR and DFARS contained a combined total of 57 government clauses applicable to commercial items. Today there are 165 clauses, with 122 originating in statute, 20 originating in executive orders, and 23 originating in agency-level policies.

In addition, we should consider the testimony on major weapons system acquisition provided in 2013 by Paul Francis of the Government Accountability Office before the House Armed Services Committee.

We should build on existing reforms — not necessarily by revisiting the process itself but by augmenting it by tackling incentives. To do this, we need to look differently at the familiar outcomes of weapon systems acquisition—such as cost growth, schedule delays, large support burdens, and reduced buying power.

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

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

The rules and policies are clear about what to do, but other incentives force compromises. The persistence of undesirable outcomes such as cost growth and schedule delays suggests that these are consequences that participants in the process have been willing to accept.

Before strapping dynamite to the procurement system, we would do well to reflect on the incentives inherent to the system, how they can be rebalanced in light of current policy imperatives, and adjust our buying practices, including our rules, accordingly. To do otherwise, risks perpetuating the cycle of reform and re-regulation that we have seen over the decades.

California procurement database found to be off base

California Audit Report 2016-124, Department of General Services and California Department of Technology

Among the key findings: General Services does not have complete and accurate contracting data, and it did not implement controls to avoid these shortcomings with its contracting data.

The previous contract and procurement database system used through 2015 had severe limitations—we found many key data entry errors, and more than a third of the contracts and amendments we reviewed were missing from the system, including one with eight amendments worth $163 million.

Of the 27 approved noncompetitive requests we reviewed, nine lacked justification for bypassing the competitive bid process and 14 did not demonstrate that the vendor’s prices were reasonable.
Among the highlights of the report:

• General Services and Technology did not provide adequate oversight of the billions of dollars state agencies awarded through noncompetitive contracts from fiscal years 2011–12 through 2015–16.
vices did not ensure that a statewide contract database contained complete and accurate information about the State’s contracts for use by key decision makers.

• Although General Services transitioned to the new Financial Information System for California (FI$Cal) as its statewide contract database, it is unclear if FI$Cal will fully solve the State’s lack of comprehensive contracting data.

• Neither General Services nor Technology has established formal plans to regularly analyze the new FI$Cal data to identify instances of abuse or misuse of statewide noncompetitive procurements.

• General Services and Technology approved noncompetitive requests that lacked adequate justification for bypassing the competitive bid process, such as demonstrating that it conducted market research to substantiate that no competition existed.

• Nine of the 27 noncompetitive requests we reviewed could have been avoided if the agencies had engaged in sufficient planning.

• Although both General Services and Technology have enforcement mechanisms, they rarely employed them, allowing agencies to continue inappropriately using noncompetitive requests.

Billions in no-bid contracts mismanaged, state auditor says, By Adam Ashton (Excerpts; read full report at the link)

It didn’t take long for the cost of a technology contract in California’s unemployment office to increase twelvefold.

Two changes to the contract – added without bidding – swelled the deal to $8 million within a year. Then, the Employment Development Department submitted a request to add another $2 million worth of work to the arrangement without soliciting new bids from other companies.

That project is one of nine that State Auditor Elaine Howle highlighted in a new report released on Tuesday that urges California government to be more cautious in awarding high-value contracts without seeking competitive bids.

The report estimates that the state spent $44 billion on noncompetitive contracts worth $1 million or more between 2011 and 2016, a substantial sum that auditors said underscored the need for better management.

“The sheer magnitude of the value of the state’s noncompetitive contracts during this period emphasizes the importance of ensuring that the state provides adequate oversight of agencies’ contracting practices,” the report says.

State rules allow departments to award contracts without bidding in emergencies and under other special circumstances. But Howle’s auditors found that the state departments in charge of monitoring spending – the Department of General Services and the Department of Technology – have missed opportunities to challenge requests for noncompetitive contracts, failed to ensure that contract databases have accurate information and rarely disciplined other government agencies for misusing noncompetitive contracts.

The audits were based in part on a sampling of 27 noncompetitive contracts that state departments awarded over five years. Nine of them should have gone out to bid, auditors wrote.

Examples included:

▪ A $3 million contract extension that the California High-Speed Rail Authority presented just 17 days before its existing contract was scheduled to expire. High-Speed Rail did not describe why the vendor it chose had unique services that merited a noncompetitive contract.

▪ An $835 million noncompetitive contract amendment in 2013 for the company that manages Medi-Cal dental benefits. It was the seventh amendment to the original contract.

▪ A $75.5 million noncompetitive contract extension at the Department of Motor Vehicles on top of what was a $62.8 million for work on the state’s driver’s license production system.

▪ A fourth amendment to a Cal Fire aviation contract that was worth $27.8 million.

One $163 million contract that was missing from databases highlighted shortcomings in the state’s accounting system. It was the eighth change to a contract from the Department of Developmental Services, and no one entered it in the program the Department of General Services uses to follow spending.

State government is in the midst of a major overhaul of its accounting system with departments gradually adopting a new program called the Financial Information System for California (FI$Cal). When it’s in full use, the Department of General Services and the Department of Technology should be able to follow instantly any contract awarded by a state entity.

Until then, different state departments are using a hybrid system for accounting. Most use the system that FI$Cal is replacing; about a third of them use FI$Cal.

Howle’s office says it’s too early to tell whether FI$Cal will work as intended. “It is unclear if FI$Cal will fully solve the state’s lack of comprehensive contracting data,” auditors wrote.

Read more here: http://www.sacbee.com/news/politics-government/the-state-worker/article157239494.html#storylink=cpy

Own up to those mistakes; don't put lipstick on that pig

Jason Miller is an astute federal procurement journalist with Federal News Radio, with a knack for making arcane and difficult matters interesting and graspable. I don't read him regularly, but when I do I wonder why not. (Not enough time in a day comes to mind.)

Jason wrote the following article, and his respect for action of the protagonist in the unfortunate circumstances of the story is palpable, and deserved. You may just want to click the link to the article and get it from the horse's mouth. Or you can stick around with me and my rendition, and be sorry.

What happened in a nutshell is that the Department of Homeland Security solicited, and then cancelled (after protests began), a solicitation for certain technical services, known as "Flexible Agile Support for the Homeland" ('FLASH'). It was framed as a small business set-aside procurement focused on agile development methodologies. (That's another story; read it, too.)

As Jason explained in a prior article, DHS' Procurement Innovation Lab (PIL) set out to get its arms around one of the problems of federal acquisition — the need to close out low-risk, low-dollar contracts. Too often these contracts are forgotten or under prioritized, and a backlog builds up. At DHS, for example, its backlog grew to more than 350,000, and 92 percent of the contracts had been completed more than a year ago. PIL took an innovation risk and re-engineered the business processes a simplified means for contract closeout. (Look, as I said he can explain better than I, so read that article, too.)

To re-engineer the business processes, DHS first created PIL, a cross-functional team of policy, finance, general counsel, contracting and industry and then had to identify the low-risk contracts. It was all about coordinating, good communications and making sure that all the people that could be involved and are looking at the process to collaboratively understand what to do and all the appropriate steps to do it. PIL completed nine projects and is working on others.

One of the PIL's biggest experiments was FLASH.   As Soraya Correa, the chief procurement officer at DHS, described it, FLASH was meant to take care of "contracts that are typically small dollar value, generally firm fixed price, no activity over the last 12-to-24 months, final goods and services have been delivered so we know they are probably ready for close out. What we are doing is a streamlined approach trying to close them in one fell swoop.”

Correa explained, “Everything we’ve done on FLASH has been very different from what we’ve done in the past. Start with our industry day where our communications were more of a discussion where we provided the ability to do speed teaming or speed dating, but also an opportunity for vendors to meet with government officials and ask questions,” she said. “We also had experts in various business areas like small business, digital services and others so industry could come up to speed on what we were doing in those areas. It was a very interactive day that focused a little more on the business processes around bidding as opposed to focusing on the requirements that would be contained in the solicitation.”

DHS evaluated contractors based on a technical challenge where the bidders had to present to the agency how they would go through an agile development process. Correa said the bidders then had 4-to-6 hours to actually complete and then did a presentation. DHS received 114 proposals.

Now, flash forward a bit to last month when Jason reported "DHS cancels $1.5B contract for agile services".

DHS has been working on the multiple award vehicle for the better part of a year. The goal of FLASH was to give department components access to innovative methods and industry best practices to acquire agile design and development support services. DHS said in the solicitation it was seeking to develop an acquisition contract that includes the concepts from the U.S. Digital Services Playbook such as user-centered design, dev/ops, automated testing and agile. DHS’s Procurement Innovation Lab (PIL) was running FLASH.

But since November when DHS awarded FLASH to 13 companies, it faced an uphill battle to get the contract off the ground. Eight vendors who didn’t make the cut submitted protests to GAO. DHS decided to take corrective action instead of letting GAO decide the protests and reopened bidding.

Then in early March, DHS announced 11 new winners under the FLASH contract, and 12 unsuccessful bidders protested to GAO again.

The decision to cancel FLASH comes as more and more agencies are developing contract vehicles to buy agile services. Along with the DHS, the General Services Administration’s 18F organization also struggled to award and ultimately cancelled the second and third contracts under its agile blanket purchase agreement. 18F awarded 16 vendors a spot in part one of its agile BPA in August 2015.

It’s unclear what comes next for FLASH — whether DHS will try again with a new procurement or give up entirely on a separate contract vehicle for agile services and rely on an existing one like EAGLE II.

So, now for the denouement:

DHS’ internal assessment of its $1.5B agile contract: ‘significant errors and missteps’

If the Homeland Security Department’s decision to cancel its $1.5 billion contract for agile services wasn’t shocking enough, the details of the missteps and problems the agency detailed in its “motion to dismiss” left long-time federal procurement attorneys and vendors with their collective mouths agape.

“DHS has determined that cancellation of the FLASH solicitation, HSHQDC-16-R-00118, is the only viable option to address the many issues that DHS has identified as problems with the requirement and the record,” DHS lawyers wrote to GAO in the document, which Federal News Radio obtained. “The integrity of the procurement process will be served by this cancellation.”

Barbara Kinosky, managing partner with Centre Law and Consulting LLC, said she was “floored” by DHS’s honesty and the level of detail it provided.

“They did everything but name names,” she said. “It is absolutely draconian to cancel the contract at this point. It means it is so flawed that they couldn’t tweak this, or conversely they decided not to let all the protestors on to the vehicle. I suspect the whole methodology was flawed and even if they tweaked the evaluation factors it was still susceptive (sic) to more protests.”

In the motion to dismiss, DHS said the problems with FLASH ranged from the evaluation criteria and adjectival ratings to the price evaluations and best value tradeoffs to lacking the expertise in agile software services to do a proper evaluation.

“DHS has also determined that the evaluation of the offerors may have resulted in unequal treatment of offerors’ weaknesses and risks. This is partially due to the adjectival ratings that were used, but also due to the evaluation process used to evaluate and assess offerors during the technical challenge exercises,” DHS stated in its motion.

“DHS has identified issues in the price evaluation report (PER) and best value tradeoff analysis (BVTA) which do not adequately support its award decisions. The methodology by which the price evaluation team evaluated price realism is not identified in the PER. Nor is it evident in the PER itself what DHS reviewed and evaluated to determine whether prices were reasonable and realistic.”

Christoph Mlinarchik, a government contracts expert and owner of Christoph LLC, a consulting firm, said DHS’s self-assessment of the FLASH procurement resulted in a firm vote of “no confidence” due to a “comedy of errors: poorly executed technical challenge evaluations, sparse price analysis, inadequate tradeoff analysis and more.”

“The most glaring admission by DHS is that critical documents were altered after award, like the technical evaluation report and best value tradeoff analysis. These critical documents were changed after submission to the GAO as part of the official record– a flagrant foul that undermines the bid protest system,” Mlinarchik said. “In summary, DHS rolled over, showed its belly, and provided ample reasons that the FLASH procurement was a total failure.

This does not look good for DHS, but it shows courage in admitting fault and starting from scratch instead of putting lipstick on a pig.”

The decision to cancel FLASH left vendors both relieved and in disbelief. One industry source, who requested anonymity for fear of retaliation from DHS, said it was a painful process from the beginning.

As Soraya Correa, DHS chief procurement officer, said in December in a NextGov article after the initial set of protests delayed FLASH:

“We’ve got to start getting rid of that fear,” Correa said. “We’ve got to start making it OK to sometimes make a mistake, as long as you’re making an intelligent mistake. It’s OK to take a few chances, and you know what? Every now and then, we’re going to stub our toe.”

The FEMA bone is connected to the hip-pocket bone

Report: El Paso County agency did not follow protocol when awarding disaster contracts

Federal regulators frequently find issues with contracts awarded during disasters, and sometimes rescind grants if bidding protocol is not followed, said Marilyn Gally, who helps local governments apply for FEMA aid through the CDHSEM. In Colorado, as elsewhere, audits have found that cities tend to rely on pre-established contracts to handle disaster repairs when the projects should be open to competitive bidding, Gally said. Particularly during the chaos of a disaster, agencies don't record their hiring decisions, which can cost them federal reimbursement money, Gally said.

"The procurement part is probably our biggest ongoing challenge to make sure that applicants are following all of those rules," said Kevin Klein, director of the Colorado Division of Homeland Security and Emergency Management (CDHSEM).

Audits are routine when FEMA allocates disaster recovery funding, DeFelice said. In recent years, Colorado has been subject to a several audits, including one released in June that recommended Boulder County return $2.5 million of FEMA funds that it didn't use for recovery from September 2013 floods.

Two years after the Black Forest fire, potential issues with Mountain View's contracts serve as a good lesson to local agencies applying for federal aid after El Paso County's latest federally recognized disaster - spring flooding. Rains in May and June caused more than $24 million in damage across the county, most of which local officials hope will be eligible for federal reimbursement.

During a Monday information session in Colorado Springs, Gally cautioned a packed room of county agencies to get at least two bids for every contract, even in the heat of an emergency. While skipping a bidding process might sometimes be necessary when safety is a concern, "we don't encourage it," Gally said.

"I'd prefer you just didn't resurface contracts," Gally told the audience.

Mountain View Electric Association oversees power to eight of Colorado's southern and eastern counties, including eastern regions of El Paso County. In 2013, the Black Forest fire destroyed 488 homes and damaged 25 miles of overhead power lines that. During the first year after the fire, the association spent about $7.4 million repairing lines and restoring power to hundreds of neighborhoods in Black Forest, according to the report. About $2.9 million went to removing thousands of dead trees around the lines.

All of the projects were approved by FEMA, an approval which promised to bring reimbursement for 75 percent of the projects' costs, if auditors found no issues with the work.

The need for competitive bidding is typically waived when agencies and cities respond to ongoing disasters, the report said. FEMA can grant exceptions to procurement standards, and the agency has no problem if municipalities skip bidding processes for emergency repairs if there is an existing contract for that scope of work, Gally said. But all other projects - those not deemed essential to saving lives and property or do not have existing scope-of-work contracts - should be subject to competitive, well-documented bidding that also considers minority-run or women's businesses, according to federal regulations.

All of these requirements were violated by Mountain View, the report found.

In the first month following the fire, Mountain View did not use competitive bidding to find a contractor to restore power to 250 homes that had survived the blaze. This was an acceptable time to waive competitive bidding, the federal report said. But when Mountain View hired a contractor to restore power to hundreds of destroyed homes in the year after the fire, it relied on a contractor that handled maintenance work for the company before the fire and did not conduct open bidding. Work to remove 19,367 trees near power lines was subject to competitive bidding, but the process did not take into account minority businesses, the report found.

The report claimed that part of the problem in Colorado stems from the state, which is charged with monitoring the procurement processes and making sure federal requirements are being met. While the state did offer education to agencies applying for FEMA money, it did not follow up with Mountain View to make sure that the awarded contracts would pass federal scrutiny, the report said.

Read the whole article at the link above.

See related: When corners are cut, even for great reasons (e.g., war), the way is opened for fraud

Shhhh... IT is a procurement problem child

A Few Places Where Government Tech Procurement Works

The botched start of HealthCare.gov is just the latest big federal tech system to fail at launch. Information technology research group Standish found that during the last decade, of the large-scale federal IT projects 94 percent have been similarly unsuccessful.

Critics say the real root of government website woes is procurement, or, government's process for buying technology. So we sought out a few places where IT procurement is actually working smoothly.

Philadelphia, like the federal government, had a hard time getting innovative businesses to compete for government tech contracts. "Startups, they may have great ideas and great technology but they're not necessarily built to make it through the procurement process. Those who make it through are those who have experience working through this cumbersome process that can take a lot of time," chief digital officer Mark Headd says.

That favors large, entrenched vendors who often turn in subpar services. As the system is now, it's just not easy for young companies to find or bid on government contracts. And because all governments — federal, state and local — fear wasting taxpayer dollars on bad results — they write layers of regulations and rules around contracting. That's a turnoff for many potential bidders.

But bidding's getting easier in the City of Brotherly Love. Philadelphia leaders decided to put technology at the heart of government, hiring Headd to team up with existing tech talent in the city, and simplify bidding for government projects. To "go where the developers are," Headd created an account for the city on GitHub, a transparent code repository, and posted its open data policy there. "It's good for us, because we're gonna get more bids, it's good for [the outside developers], because it's business they might not otherwise be aware of," Headd says.

"What we've done in Kansas City is to be a little more proactive," the city's head of procurement, Cedric Rowan says. "By being willing to look at the marketplace and willing to interject into our scopes the ability for providers to give some solutions that are maybe a little more than what we're asking for but at least give them the opportunity to be innovative in their solutions back to us."

At the federal level — the Consumer Financial Protection Bureau gets praise for its approach to tech. "We wanted to show how government could work," says Merici Vinton, who served as the agency's digital lead and oversaw the launch of the CFPB's first website, which included projects like a simple complaint submission system and a redesign of mortgage disclosure forms.

Here's what Kansas City, Philadelphia and the CFPB have in common: Encouragement and cover from the top of their departments and cities; openness in sharing requirements behind IT projects from the very beginning of the procurement process; and eagerness to have smart tech people inside their departments, and to bring them together with existing government teams.

"The website and your services that you're providing to the citizens are now your storefront. So those have to be in alignment across the agency," says Vinton.

Michael Slaby — who was one of the people who built President Obama's much-lauded 2008 and 2012 campaign technology says, "the idea that things are stacked against government — the way that we procure, the way we design projects — is all true, but it's all something we have to fix. We should make it simple for technology to empower citizens to get things from their government in a way that's seamless and easy."

You may feel as I do that this article is short on detail, implying more questions than giving answers. Read the comments to it at the link above.

Outsourcing: public service motive vs profit motive?

The following article doesn't provide as many answers, or analysis, as questions and opinion, but the questions are good ones to ponder. It is important because over the last few decades there has been an historic shift from a predominant shift from procurement of things to procurement of services, and the best model for procurement of services is far from conclusive. Read the article at the link; I've only cut and pasted and rearranged parts here.

Why Private Contractors Are Lousy at Public Services

Excluding military personnel, the percentage of all employed people who are U.S. government employees has fallen from 4.3 percent in 1966 to 2 percent today (add in the military, and that would drop from more than 8 percent to about 3 percent). That’s not because the government is a smaller part of the economy. For every federal employee, there are [now] two people working on government contracts.

Private, competitive provision can be considerably more effective than monopoly public provision. In theory, competitive contracting should introduce private sector efficiencies to bloated, public-owned enterprises. Cross-country experience suggests that, on average, performance under private management is a little better than under public management; private provision is associated with bigger networks that lose less power and collect more bills. A look at outsourcing’s track record around the world backs what the [ObamaCare] website’s snafus suggest: Turning over the delivery of government services to private contractors can cause as many problems as when governments provide those services themselves.

The difference, however, is small compared with the efficiency gap between poor and rich countries. The choice can be ugly: Bureaucrats with limited incentive to deliver and sclerotic ability to reform on the one side; weak regulation of private companies that know more about winning a contract than delivering services on the other. Since private and public provision both have weaknesses, surely the worst model is to attempt some mutant hybrid of the two: Private sector providers operating under layers of labyrinthine government regulatory and procurement processes. That, in a nutshell, describes the U.S. health-care system.

Rolling out the (pork?) barrel

As a long time PC user, I forever wonder when the Windows operating system will finally be rolled out. Not to entirely blame the software writers, of course, because the platforms and end-uses are constantly changing but built on that first DOS code. The world of IT is not even planned obsolescence: it is intrinsic obsolescence. 

Yet, our expectations as users are based in now out-dated notions that we can make one production run of a uniform product from assembly line to market to consumer, like flooding the market with Hula-Hoops in time for the 1961 Christmas season sales.  

IT is just not that simple. Beta is now often marketed, but not market ready. As we find out with the roll out of the Affordable Care Act online market scheme.

The problem with IT in general, with my PC as much as with large institutions and new age weaponry, is that we rely on it too much. Given the cost and the proprietary nature of most of the software and hardware, IT "solutions" become mission critical to whatever the mission is.  IT "solutions", as we mostly know them now, hold a monopoly tollbooth on processes that just a generation or two ago were more decentralized, across many desks.

The whole internet, on which most IT solutions are reliant, is designed to spread out the flow, storage and delivery of information, across all platforms and all delivery systems.  But, once that information hits one of those IT monopoly tollbooths, it stops.  

As we look to the limitations of rolling out mass IT solutions, we might consider if our acquisition plans should be modified, to allow more open sourcing cross-platform arrangements that can be farmed out to more competitors, so that if there is a failure at any given point in the web of information delivery, the whole web process does not fail, and we do not pay a monopolist's price at the information tollbooth.

The risk of the mission, and the cost of the monopoly, seem to be unquestioned givens in IT solution acquisitions. Why?

Those are just random thoughts as I read about the political tut-tutting and point scoring surrounding the ACA "Obamacare" online roll-out, such as the following linked articles (please read the article at the link; I have only included bits without context).

Good enough for government work**? The contractors building Obamacare

as head-scratching continues about how a famously web-savvy administration could have flubbed its Internet homework so badly, an examination by the Sunlight Foundation shows the administration turned the task of building its futuristic new health care technology planning and programming over to legacy contractors with deep political pockets. Health and Human Services Department will not release a list of the estimated dozen or more companies tasked with building the site. But Sunlight reviewed contract award information from USASpending.gov and FedBizOpps.gov, and found 47 organizations that won contracts from Health and Human Services or the Treasury Department to manage, support or service the implementation of the Affordable Care Act. Among them were top contractors like Northrop Grumman, Deloitte LLP, SAIC Inc. General Dynamics and Booz Allen Hamilton. All five of those companies provided information technology services to either the Centers for Medicare and Medicaid Services or the Internal Revenue Service, the two agencies tasked with building back components of the health insurance exchanges.

Because the government provides brief, partial descriptions of contracts in USASpending.gov, it is not possible to say which of the contractors with information technology contracts or project management contacts were involved in building the 36 federally run health insurance marketplaces, a responsibility tasked to the Centers for Medicare and Medicaid Services, known by the acronym CMS, or those assigned to develop the federal data hub, which would allow applicants to have their income and family size immediately verified by the Internal Revenue Service. Sunlight's survey does not include awards to contractors that built the 14 state exchanges. For example, Xerox Corp. won a $72 million contract to help build Nevada’s exchange and one for $68 million to do the same in Florida. Not only is Xerox building the online marketplaces for some states, it's also offering insurers the means to “fully take advantage of the nearly 30 million new members that will be shopping for health care on these exchanges.”

Obamacare glitches: Gov't contract for troubled site has swelled; GOP targets Sebelius

The government contract for the company that built the glitch-prone website for Obamacare has ballooned to three times its original cost, and some Republicans are demanding the resignation of the cabinet secretary who oversees it. USA Today, citing technology experts, reported that the site was built using 10-year-old technology and may require constant fixes for the next six months and eventually an overhaul of the whole system. But Gail Wilensky, a former director of Medicare and Medicaid who is now a health care analyst, said that CGI was forced to deal with last-minute design changes ordered by the government, hampering CGI’s ability to test the site. Last June, a GAO report foreshadowed those problems, warning that the website might not be ready to go live, in part because of all the last-minute design changes.

Red Flags? Company behind ObamaCare site has checkered past

While the company behind the dysfunctional HealthCare.gov was virtually unknown to the American public until this month, critics say the Obama administration should have known this multibillion-dollar firm had a checkered history with other government contracts. In projects stretching from Canada to Hawaii, parent company CGI Group and its subsidiaries ran into complaints about its performance.

Meet CGI Federal, the company behind the botched launch of HealthCare.gov

Over the past few weeks, if you've been paying attention at all to the unfolding disaster of people trying and failing to sign up for Obamacare online, one name keeps coming up: CGI Federal, the IT contractor that has orchestrated most of the Healthcare.gov Web site. By most accounts, it's been a complete train wreck, for reasons both technical and bureaucratic. Here's what you need to know about the company at the center of it all.

CGI Federal is a wholly owned subsidiary of the Canadian firm CGI Group. Growing through scores of acquisitions, and providing outsourced IT services to massive companies such as Bell Canada and Quebec's provincial pension plan, CGI's business model depends on embedding itself deeply within an institution. CGI Federal is a relative newbie on the U.S. government IT contracting scene. It bought the U.S. contractor American Management Systems in 2004, but only started ramping up business after 2008, and accelerated in 2010 with the $1.1 billion acquisition of U.S.-based military IT contractor Stanley Inc. That sent its contracting work through the roof.

Back in 2009, the White House's Recovery Board retained CGI Federal to adapt a well-functioning system it had built for the U.S. Environmental Protection Agency into FederalReporting.gov, another very complex, public-facing and high-volume site that would handle all contracts granted under federal stimulus legislation. This one got built in six weeks, for much less money, and won accolades for its flexibility and reliability.

How did CGI land the Healthcare.gov contract? CGI Federal's winning bid stretches back to 2007, when it was one of 16 companies to get certified on a $4 billion "indefinite delivery, indefinite quantity" contract for upgrading Medicare and Medicaid's systems. Government-Wide Acquisition Contracts — GWACs, as they're affectionately known — allow agencies to issue task orders to pre-vetted companies without going through the full procurement process, but also tend to lock out companies that didn't get on the bandwagon originally. According to USASpending.gov, CGI Federal got a total of $678 million for various services under the contract — including the $93.7 million Healthcare.gov job, which CGI Federal won over three other companies in late 2011.

CGI is only the 29th largest federal IT contractor, with about $950 million in contracts in 2012, compared to number one Lockheed Martin's $14.9 billion. They also don't make high-profile weapons systems, but rather the guts of government Web sites that rarely bear their names.

That said, they've learned quickly, and see the U.S. federal government as their area of biggest growth.

CGI Federal landed the Healthcare.gov contract. Here’s how it fights for the ones it loses.

For CGI, the business of handling the low-income housing program started back in 1999, when the Department of Housing and Urban Development -- under pressure to downsize its in-house operations -- started outsourcing the job to public housing authorities around the country. The housing authorities would subcontract with IT providers like CGI Federal, which mopped up more than 25 percent of the $200-300 million or so in fees that came from HUD every year. CGI, the biggest of all the subcontractors, provides the infrastructure and support to route housing subsidies to landlords and monitor for compliance with HUD rules.

The relationship between contractor and subcontractor is very close. At the Assisted Housing Services Corporation of Ohio, California Affordable Housing Initiatives, and North Tampa Housing Development Corporation, many staff actually list themselves on LinkedIn as CGI employees. The Ohio group's state director, for example, identifies himself as a "Manager of Consulting Services in CGI Federal's Healthcare Compliance Group, focused on business process outsourcing for the Department of Housing and Urban Development." The California group's state director calls himself the same thing, adding that he has "quickly adapted staffing strategies to changing industry conditions in order to maintain and improve competitive position," and has experience "analyzing and interpreting Federal policy and managing the impacts on operations." The Columbus Metropolitan Housing Authority executive named as the Ohio group's contract administrator was a CGI director of consulting services until 2011. So while the "instrumentality" set up by the housing authority is a separate legal actor, it effectively functions as a joint venture with CGI.

In 2007 and 2009, however, HUD's inspector general found that contract administrators had been allowed to overbill the program by tens of millions of dollars. In 2011, HUD decided to rebid the contracts, setting a lower standard for the profit margin that recipients would be allowed to take and a cap on the number of units any one contractor could administer. When the new contracts were awarded -- with a savings of about $100 million, or one third over the previous set, -- many of CGI's partners lost out.

Instead of letting the awards stand, the losers complained en masse to the Government Accountability Office, prompting HUD to back off those awards and offer another solicitation. This time around, HUD got rid of the cap on the number of units a subcontractor could administer, but precluded out-of-state entities from landing a Section 8 contracts if there was a qualified local bidder, which cut into CGI's business model -- GAO ruled that the new process was a no-no. HUD decided to ignore the GAO. So the housing authority-affiliated entities appealed again, this time to the Federal Court of Claims. In April, HUD won. But the companies kicked it up yet another notch, to the Federal Court of Appeals, where arguments were held last week.

(Side note: Lydia DePillis, who authored the two prior articles, has become my favored jounalist du jour, with well researched, easily presented and understood writing in this complex and, well, boring, body of work.)

How federal cronies built -- and botched -- Healthcare.gov

It also doesn't help that many of the organizations involved are now distancing themselves from the whole project, which seems wise given the scale of this disaster. Compare that attitude with the pride many of them exhibited before Healthcare.gov went online, which was being trumpeted as a marvel of cutting-edge Web engineering. Now it's shaping up to be more an example of the efficacy of political connectedness.

CGI Federal: The Company Behind HealthCare.gov and the Insuing Blame Game

Contractors Assign Blame, but Admit No Faults of Their Own, in Health Site

Insight: As Obamacare tech woes mounted, contractor payments soared

The work on Healthcare.gov grew out of a contract for open-ended technology services first issued in 2007 with a place-holder value of $1,000. There were 31 bidders. An extension, awarded in September 2011 specifically to build Healthcare.gov, drew four bidders, the documents show, including CGI Federal.

That 2011 extension is called a "delivery order" rather than a contract because it fell under the original 2007 agreement for CGI Federal to provide IT services to the Centers for Medicare & Medicaid Services, the lead Obamacare agency. CGI Federal reported at the time of the extension that it had received $55.7 million for the first year's work to build Healthcare.gov.

CGI's original 2007 contract was of a type called Indefinite Delivery/Indefinite Quantity, federal records show. ID/IQ contracts allow the government "to write a laundry list of things they can order from the contractor," said Sarah Gleich, an attorney and government procurement expert at Gibson, Dunn & Crutcher. "They'll write incredibly broad descriptions of the work, like 'telecom services,' so you can't tell what they're ordering."

The advantage of an ID/IQ contract, said experts, is that it can be expanded almost indefinitely, without the government having to solicit new bids for additional work. Because "there are very strict regulations on sole-source contracts," an Indefinite Delivery/Indefinite Quantity agreement makes it easier for the government to avoid running afoul of those requirements, said Sajeev Malaveetil, a director at the Berkeley Research Group, a procurement consultant.

IT work is particularly suited to imprecise, open-ended contracts. "Agencies know that at some point they'll need IT services or system implementation," Malaveetil said. "ID/IQ contracts can often be for five or 10 years: the agency just keeps issuing delivery task orders, which fall under the base language of the contract."

CGI spokeswoman Linda Odorisio, there were three one-year options, bringing the total potential value of the contract to $93.7 million. By August 2012, spending on the contract was already close to that limit. This year, the bills skyrocketed. The government spent $27.7 million more in April, an additional $58 million in May and, in its latest outlay, $18.2 million in mid-September. According to the government records, that brought the total spending for CGI's work on Healthcare.gov to $196 million. Adding in potential options, the contract is now valued at $292 million.

"Why this went from a ceiling of $93.7 million to $292 million is hard to fathom," said Scott Amey, general counsel at the Project on Government Oversight, a Washington, D.C.-based watchdog group that analyzes government contracting. "Something changed. It suggests they ran into problems and knew last spring that they couldn't do it for $93.7 million. They just blew through the original ceiling. Where was the contract oversight?"

Obamacare website woes: another sign of out-of-control private contractors

Government outsourcing to private contractors has exploded in the past few decades. Taxpayers funnel hundreds of billions of dollars a year into the chosen companies' pockets, about $80bn of which goes to tech companies.

While the stereotype is that government workers are incompetent, time-wasters drooling over their Texas Instruments keyboards as they amass outsized pensions, studies show that keeping government services in house saves money. In fact, contractor billing rates average an astonishing 83% more than what it would cost to do the work in-house. Hiring workers directly also keeps jobs here in the US, while contractors, especially in the IT space, can ship taxpayer-funded work overseas.

The revelation here is that an overdependence on outsourcing isn't just risky in terms of national security, extortionate at wartime, or harmful because it expands the ranks of low-wage workers; it's also messing with our ability to carry out basic government functions at a reasonable cost.

If we're not going to insource work – presumably because anti-government types successfully peddle the useless bureaucrat stereotype – we should at least have a better process for picking contractors that benefit from taxpayer largesse to carry out public projects. It may be hard to believe in light of the Healthcare.gov experience, but there are examples of successful government outsourcing arrangements in IT. One key to their success, a Government Accountability Office study pointed out, is consistent communication with, and monitoring of, contractors. Penalties for cost overruns, failing to deliver by agreed-upon deadlines and other forms of mismanagement would help, too.

**  Good enough for government work?

James F. Nagle writes in his book, History of Government Contracting, that this pejorative term did not mean what you think it means.

In the early days of the US government, the federal government became dissatisfied with the products they were buying and decided to build them itself, and adopted and implemented strict  standards.  As Professor Nagle put it (p 114 of second edition):

"The rigorous inspection standards gave way to a saying still in use today but with vastly different meaning.  The saying was "close enough for government work."  Originally the saying was a boast by contractors to would-be commercial customers, that their products were so well manufactured that the government would accept them even with its known high standards."

Another government contracting feature of the day noted by Prof. Nagle (on the same page) was,

"an implicit understanding with all arms contractors that they had to share their inventions with the national armories on a royalty-free basis if they wished to continue receiving government contracts. This procedure, exemplifying the public service orientation of the Ordnance Department, allowed novel metal and woodworking techniques [i.e., "information technology"] that had originated in private armories to become part of the public domain."

Keeping procedures up to date with law

On Guam, we find many regulations and government contract provisions that are inconsistent with law, most often because the many changes to law that legislatures cannot seem to resist making are not recognized in contracts used by the procuring agencies. The following article is an illustration that this defect in the system is not restricted to Guam.

There are other interesting controversies revealed in the story that are not directly on this point. Read more at the article link.

Report: Afghan militants could get contract funds

The special inspector general for Afghan reconstruction, John F. Sopko, said weaknesses mar procedures that the Defense Department tightened in 2012 to comply with a new federal law aimed at preventing militants from obtaining U.S. contract payments.

Sopko said his new audit detected flaws in a provision that Congress added last year to a defense authorization bill. The provision gave the Defense Department the authority to "restrict, terminate or void" any contracts with individuals or organizations opposing U.S. or coalition forces in Afghanistan. Sopko said his audit found that language in some contracts did not contain the new provision, which is legally necessary to sever any contracts unwittingly given to militants.

Sopko also warned the Pentagon that it needed to develop a standard process for tracking suspect contractors and notifying contracting officials and contractors about suspect contractors and their obligations under the law.

eProcurement does not by itself make things E-OK

A couple of items "courtesy" of Lexicology, these by the lawfirm Burns & Levinson LLP and its lawyers Anatoly M. Darov and Timothy J. Famulare, reporting on actions taken by the Massachusetts Attorney General’s Bid Unit.

[In one] protest involving electronic bidding, the town of Granby used Projectdog, Inc. as its agent for electronic distribution of bid documents for the town’s new library project. BidDocs protested the procurement because Projectdog denied access to the website containing the project plans and specifications by employees of BidDocs and certain other competitors of Projectdog. The Attorney General held that the procurement violated the requirement in G.L. c. 149, §44B(1) that complete plans and specifications be made available to “each person requesting the same.” In a public bidding context, Projectdog was not allowed to determine which persons requesting copies of the bidding documents were eligible to receive them.

It is essential that private third parties who are given an procurement authority or other essential government service duty be subject to the same principles and laws applicable to the government, otherwise the government evades the spirit of the laws intended to regulate those functions. Oftentimes, government is too willing to rid itself of the expense and responsibility to provide the often unfunded mandates given them, and are willing to dump duties at any price -- to the integrity of the law.

Unless closely and critically supervised, which should allow the public the right to protest the actions of the private provider, the outsourced entity can become a bigger menace to the integrity of the system than the overburdened government. The private operator here should never have determined who could bid, and should, in my mind, be barred from providing public service for an abysmal lack of judgment, favoring personal interests over the public interest. If we expect that kind of judgment from our public servants, we should expect superior judgment from those we entrust outside the usual government accountability system.

[in the other protest] Quinn Brothers of Essex, Inc. challenged the validity of the Wakefield Municipal Gas and Light Department’s use of BidDocs Online, Inc. (“BidDocs”) as its electronic bidding agent for a headquarters renovation project. Quinn maintained that it had submitted the lowest Miscellaneous Metals sub-bid, which the Department argued that BidDocs did not receive. Based on BidDocs’ computer log and the fact that Quinn did not receive an email confirming a successful submission, Quinn could not prove that it had submitted the bid electronically. However, Quinn argued that electronic bidding does not conform to statutory requirements that bids be “publicly opened” and read “by the awarding authority.” The Attorney General determined that nothing in G.L. c. 149 prohibits a public entity from delegating to a vendor the authority to open bids. It further determined that BidDocs’ process satisfies the purpose of a “public opening” because the bids are kept secret until they are made viewable to the public online immediately after the close of bidding.

I may not quibble with the result here if there is any evidence that the legislature intended to allow outsourcing of this essential aspect of government contracting. I don't think it should be implied from a mere lack of a negative statement. If the government finds it useful to outsource essentially governmental operations, like determining who does business with the government, it is my personal view that the legislature should determine that, not the executive. For what that's worth.

Scoring integrity

Prefacing the following article by Honolulu Civil Beat, I'd note that Guam is not mentioned in the study by State Integrity org, nor any US Territory, which is a frightful shame. We'd all be interested, and we're all part of the US communal body.

Is the Public Procurement Process in Hawaii Effective?

The state got a B+, or 88 percent score for Procurement. Hawaii tied for 12th place with four other states: Rhode Island, California, Indiana and Tennessee. Iowa came in first while Maryland was last.

Hawaii scored a 100 percents for having laws addressing conflict of interest and competitive bidding. But Hawaii got a 0 percent for not having any prohibitions against sole sourcing or no-bid contracts.

Overall, the State Integrity Investigation ranked Hawaii 10th after Civil Beat reporters researched 330 “Corruption Risk Indicators” across 14 categories of government. (Click here to learn more about the methodology used for the project.)

Bottom line: This is another area in state government where what's written in the law doesn't always match what happens in reality on the ground. Every "in practice" score in this category scored a 50 percent or less.

The rest of the story, in great detail you will have to read, answers, or at least addresses the question, Is the Public Procurement Process Effective? It is full of useful tips for evaluating your own jurisdiction's procurement "integrity". Indeed, the State Integrity website contains a clickable page to look at the 50 states.

The Honolulu Civil Beat says it intends to print a different question each day, and the criteria used to come up with a score for each question. I hope I can remember to follow along. And I hope you follow again as well.

Antidote to impulse shopping

We have all been impulsive shoppers. You are bombarded every day every where to increase your reflexivity to impulsive shopping ads and opportunities. The reflex is so often repeated that it becomes habit. Impulsive shopping is habit forming. And the marketing people with a bunch of stuff to move know that and love you for it.

If there is an opposite word for "impulsive shopping", it is procurement. If you engaged in procurement rather than impulsive shopping, your retirement stash would be a whole lot bigger than it is. And if governments diligently, objectively, fairly, transparently and professionally paid heed, our taxes would go a long way further. And, perhaps even, decrease the rot of influence that corrupts governance, if that's not too much to hope for.

Procurement is a process, not a whim, an antidote to impulse shopping disease.

That is my take-away from reading an excellent skeletal outline of the procurement process. Note that this article discusses US federal procurement, so specifics will vary with jurisdictions. But it illustrates the essential road markers.

The article is actually a blog post by Lindley Ashline, and one of many similar posts shes done: lindleyashline's blog. I've provided the skeleton. Click the link and read her post for the meat.

Note, this article is about the "source selection" process. That is, it is focused on the buying process. One thing impulse buying marketers do is rush you past the antecedent decision making process: do I really need this? What exactly do I need? Given multiple and alternative needs, what priority do I give this with respect to other demands for my money (and time)?

A hallmark of impulsive buying is the untested assumption you have a need, and more to the point, a need for this particular item, right now, above all others. Before you ever even begin to consider the "how" question, engage in a rigorous discussion with yourself about "why" and "what" and "when" questions.

First Year in Contracting: The Procurement Process

1. Determine the Required Resources.
2. Assign a Program Manager and Contracting Officer.
3. Develop an Acquisition Strategy.
4. Develop an Acquisition Plan.
5. Develop a Plan of Action and Milestones.
6. Obtain Approval and Funding.
7. Establish the Source Selection Authority.
8. Develop the Final Statement of Work.
9. Conduct Market Research.
10. Finalize the RFP.
11. Send Out Draft Documents.
12. Conduct Bidders' Conference.
13. Review Requested SOW Changes.
14. Review and Approve Final RFP
15. Release RFP
16. Finalize the Source Selection Plan.
17. Answer Contractor Questions.
18. Finalize Source Selection Approach.
19. Receive Company Proposals and Begin Evaluation.
20. Receive Company Responses to Clarifications and Deficiencies.
21. Evaluate Companies’ Price Proposals.
22. Initiate Audits.
23. Make Competitive Range Determination.
24. Conduct Live Test Demonstrations.
26. Prepare for Discussions with Companies.
27. Call for Best and Final Offers.
28. Negotiate Final Contract.
29. Make Contract Award.
30. Ramp up Contract.
31. Perform Contract.
32. Close out Contract.

Can you cut corners, you ask, or make exceptions?

Sure, unless someone has a gun to your head.

But let me ask, at what point did your last diet fail?

~~~~~~~~~~~~
And now, something new for this blog, and likely not to be repeated. Bound to offend someone, probably someone who hates a bad joke, but others as well, maybe. I was led to this by an odd "search" result on my blog that searched for "procurement act jokes". I tried the search myself, not expecting much there, and found exactly that.

But, in the spirit of the (intended) message this post, I did find the following procurement joke(s) here:

4. Why is it better to have a woman as the buyer? Because a male buyer will pay $2 for a $1 item he needs.

5. Why is it better to have a man as the buyer? Because a female buyer will pay $1 for a $2 item she doesn’t need but is on sale.

Not sexy enough for this shirt

Illinois remains a wasteland: Taxpayers pay high price when governments lose their way

"Procurement is not sexy, but procurement is the heart and soul of corruption," said Emily Miller, policy and government affairs coordinator for the Better Government Association. "That is where it continues to be bred and it lives and thrives."

A February University of Illinois at Chicago study estimated that political corruption costs state taxpayers no less than $500 million a year. Even if it fails to reach the level of criminal misconduct, the not-insignificant added cost of fiscal missteps and Keystone Kops-style oversight – a corrupted process, if you will – are well beyond the means of a state nursing a sizable budget deficit and even larger unpaid obligations.

The day before the inspector general's report on the aviation department's wrong turns on GPS, Illinois' Auditor General torched the Department of Healthcare and Family Services and Executive Ethics Commission over "serious deficiencies" in a process that resulted in the awarding of three state-worker health-insurance contracts worth $7 billion. One result was that it's difficult to know if the state got a good deal on the insurance or not.

Ironically, some of the problems cited stem from confusion over rules, responsibilities and requirements of revamped purchasing laws established to prevent the sort of corruption that thrived during ex-Gov. Rod Blagojevich's administration.

"This was supposed to be the fix, and now all this waste happened after the fact," Miller said.

"It does seem to be verging on incompetence in this case unless they find a direct so-and-so gave money to so-and-so for the contract, which is what we find in the corruption reports, like the Blagojevich contracts," said Dick Simpson, a former Chicago alderman who's now a UIC political science professor and co-author of the school's "Chicago and Illinois, Leading the Pack in Corruption" report last month. "The thing about waste and inefficiency is they're mostly out of sight."

The Office of the Auditor General's 169-page insurance-deal state audit report set off a wave of animated finger-pointing and finger-wagging.

Among the audit's findings: The state agencies signed off on a deal allowed a consulting firm to help review the bids that business relationships with each of the bidders; an original recommendation to award the contract was changed after an agency head met with the governor's office; one insurer scored a contract in 20 counties in which it did not bid and in 24 counties where it had no in-network primary-care physicians. And finally, that all of this should have been flagged before the deals were done.

Procurement controversies -- The Philippines

Among other factors, the emphasis on best value in government contracting, and its high reliance on proven past performance, is driven by bureaucratic survival techniques such as risk aversion and inertia. Too much risk aversion impacts adversely on fostering competition, and creates an atmosphere of perceived if not actual favoritism and "old boy networking", a bad image for any government any where.

Of course, it is not always risk aversion or inertia that leads to old boy networks. The following story poses the possibility of other factors at work, perhaps more pernicious, though that may be debatable if the result is the same in either event.

Corruption in procurement process of firefighting equipment exposed

After failing to get satisfactory answers and actions from both the Bureau of Fire Protection (BFP) and the Department of Interior and Local Government (DILG) officials, Bayan Muna lawmaker Teddy Casiño now wants Congress to investigate what he said as the “dubious termination” of a government contract amounting to P243 million ($5.65 million) for fire fighting equipment allegedly to favor some regular suppliers of the BFP.

“It’s highly irregular for Perez to have delayed the awarding of the contract; and it’s more dubious still for him to have arbitrarily declared a failure of bidding on technical grounds belatedly raised in mere letters to him by two losing bidders who happen to be regular suppliers of the BFP,” he said.

In October 2010, the BFP opened for bidding various fire-fighting gears, namely helmets, coats and trousers, gloves and boots. On February 11, 2011, the BFP informed Kolonwel Trading that it won the bidding, having submitted the lowest calculated bid of P242,806,753.00. This was the first time the company participated and won in a BFP bidding.

Kolonwel Trading was then asked to submit various post-qualification papers. The company complied, but on April 20, 2011, the BFP again asked for additional documents. A month later, an additional request for test results on the quality and safety of their products was made. After submitting the pertinent documents, the Bids and Awards Committee (BAC) of the BFP finally came out with a resolution on October 17, 2011 and signed by DILG secretary
Jesse Robredo awarding the procurement of said Personal Protective Equipment (PPE) to Kolonwel Trading.

Two losing bidders, Panpisco Technologies, Inc. and 911 Alarm, both long-time suppliers of the BFP then wrote Perez, and soon after he withheld the awarding of the contract to Kolonwel Trading. He later on declared a failure of bidding, but this was two months after the BFP BAC issued its resolution in favor of Kolonwel.

According to Casiño, the said suppliers did not avail of the prescribed protest mechanism as prescribed by the Procurement Law (RA 9184) but raised their concerns through mere letters to BFP Officer in Charge Samuel Perez.

That last statement resonates with me. In a still unresolved controversy I have been involved with, the low bidder's award was also delayed during an interim in which the incumbent higher bidder, rather than protesting, after bid opening sent unsubstantiated, "confidential" communications to the procurement officer intending specifically to undermine the low bid's responsiveness to specifications.

Had the matter been duly raised by protest, it could have been shown that, first, the bid specifications did not require that substantiating material be provided with the bid therefore it was not error for the low bid to not provide it, and, second, that the incumbent's claims were unfounded since third party add-ons, to be provided by the low bidder, rectified any alleged shortfalls.

Protestations to the agency and administrative review authority that such unfair and ex-party communications should not be considered went unheeded. In the result, the claims, never properly brought therefore improperly considered, tainted and poisoned the protest.

Procurement procedures or ADR?

Having just recently taken part in a Department of Interior, Office of Insular Affairs conference on Alternate Dispute Resolution in the Insular Areas, and in particular in government contracting, I was attracted to the following story.

The facts are not entirely clear from the article, but don't need to be for the analytical purposes of this blawg. Let's just assume that the jurisdiction in question offered an ADR process in its local courts which could be availed of in lieu of normal litigation. And let's assume that the law firm in the article was seeking to direct the dispute to that arbitration process rather than go through the legal processes otherwise applicable to the dispute.

Now let's look at the article.

http://www.azcentral.com/arizonarepublic/local/articles/2011/05/21/20110521phoenix-law-firm-bills-for-audit.html

Over the past several years, Maricopa County has paid the law firm $3 million to $4 million to counsel the Sheriff's and County Attorney's offices.

Last September, County Manager David Smith alleged that Ogletree may have improperly expanded the scope of assignments, leading to duplication of legal services and billings. He claimed the firm refused to stop working certain cases, excessively subcontracted with attorneys, acted antagonistically and unprofessionally, promised to pay an expert $1,500 a month whether or not the expert provided any legal services, lacked transparency in billings and did not comply with county policies.

The county held up about $1.1 million in payments to Ogletree until a professional auditor could review its billings. County officials said the firm would not turn over the billings, so the county sued.

An attorney representing the law firm of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., had argued that the detailed billing records were protected by attorney-client privilege and asked the judge to order the parties into arbitration or dismiss the case.

A Maricopa County Superior Court judge has ruled that a law firm that represented both the County Attorney's and Sheriff's offices during their battles with county management is required by law to submit its billing records for audit. Judge John Buttrick refused to dismiss the case and ruled that the dispute was not subject to arbitration but rather was subject to the county's procurement rules.

"Did Ogletree perform services outside the scope of their contract?" asked Julie Pace, one of the attorneys for the county.

John Doran, an attorney representing Ogletree, said in a hearing this week that the county was merely trying to obtain information to bolster various investigations into the Sheriff's Office and former County Attorney Andrew Thomas.

"They're deeply involved in this Department of Justice matter, and they would love to force me to open the door," Doran said.

Read more: http://www.azcentral.com/arizonarepublic/local/articles/2011/05/21/20110521phoenix-law-firm-bills-for-audit.html#ixzz1NVX4fD2h

As was examined in the DOI OIA conference, there is a place for ADR in the procurement process, but generally only in post-award contract controversies.

Here, it would appear that the dispute in controversy arises from the scope of the contract, which is a matter examining the solicitation itself, not the performance of the contract properly awarded. If the contract was to provide particular services, the services actually rendered pursuant to the contract would have to be examined, and that inquiry is best handled as a procurement dispute. This is not the usual attorney-client context, it is a principal-contractor context.

Interesting.

Protests: Accountability begins with transparency

A new procurement controversy on Guam involves a procurement protest and an agency attempt to keep the protest from the public eye, as this story in the Pacific Daily News reports:

Protest halts $100M borrowing plan

GEDA issued a press release yesterday afternoon that said a procurement protest had forced the agency to delay the pricing phase of the bond-borrowing.

The protest is challenging GEDA's decision to hire Wells Fargo Corporate Trust Service as the agency's bond trustee, but it's unclear who protested and what the basis of the protest is.

A Pacific Daily News reporter went to the GEDA office to pick up a copy of the protest, but office staff refused to release it.

Deputy Administrator Christina Garcia confirmed that GEDA would not release protest documents or name the protester.

Garcia said procurement policies require this information to stay private.

"We'd like to say more, but we have to respect the procurement process," Garcia said.

So, what does the Guam Procurement Act say about public access to the procurement process?

First, and most fundamentally, there is the bottom line, default requirement, specified as one of the principle purposes and policies of the Act:

"to require public access to all aspects of procurement consistent with the sealed bid procedure and the integrity of the procurement process." (5 GCA § 5001(b)(8).)

The entire procurement law and its regulations are required to be "construed and applied to promote" this fundamental policy. (5 GCA § 5001(a).)

Thus, unless there is an express requirement clearly prohibiting disclosure of protests, the protest should be available to public access.

So, what relevant restrictions do we find? Only one in the procurement law and another one or two in the Sunshine Law (Freedom of Information), and neither of them are on point. Let's first examine the Procurement Act for any prohibition on disclosure of protests.

This solicitation appears (based also on past practice) to be an RFP and not an IFB. It appears from the article that a selection of offeror has already been determined and award has already been made. After award, the accepted offer is supposed to be made public (2 GAR § 3114(h)(1)) as is the entire public record of the solicitation (5 GCA § 5251).

The only express exception is in the case of certain "proprietary data" and "trade secrets" that has been designated by an offeror, prior to negotiations, and independently confirmed by the agency, to be bona fide proprietary data or trade secret:

"If the offeror selected for award has requested in writing the nondisclosure of trade secrets and other proprietary data so identified, the head of the agency conducting the procurement or a designee of such office shall examine the request in the proposal to determine its validity prior to entering negotiations. If the parties do not agree as to the disclosure of data in the contract, the head of the agency conducting the procurement or a designee of such officer shall inform the offeror in writing what portion of the proposal will be disclosed and that, unless the offeror withdraws the proposals or protests under 5 GCA Chapter 5 Article 9 (Legal and Contractual Remedies) of the Guam Procurement Act, the proposal will be so disclosed." (2 GAR § 3114(h)(2).)

Since the "public access" policy must be "consistent with the sealed bid procedure and the integrity of the procurement process", it is also instructive to look to the same trade secret protection offered under competitive sealed bidding.

There, we find a similar regime in place, namely a burden on a party claiming non-disclosure to make that claim in the bid, and a confirmation process by the agency to verify the secrecy of the information. After designated information is confirmed to be non-public, the regulation specifically requires the bids to be opened to public inspections subject only to any continuing prohibition on the confidential data. (2 GAR § 3109(l)(3).) Similarly, information in RFPs, unless confirmed non-public, should be disclosed after award.

But we have so far looked to bid information only. Does the protest process change the character of what is public and what is not? I don't think so.

First, note that there is nothing specific in the law that either mandates public disclosure of the protest, or protects it from public disclosure. In that case, I believe you must "default" to the fundamental policy "to require public access". You should not infer any right in derogation of the express policy, to be construed and applied, to promote public access.

Looking to the regulatory scheme of protests, the consideration and resolution of protests is broadly sketched by requirements of the procurement regulations. (See 2 GAR § 9101, generally.)

The regulations allow an interested party, but pointedly do not prohibit anyone else, to obtain, by written request, "information submitted that bears on the substance of the protest except where information is proprietary, confidential, or otherwise permitted or required to be withheld by law or regulation." (2 GAR § 9101(f).) Again, it should not be inferred that others are denied that right given the express policy of public access.

It provides a similar regime to that noted above requiring designation and confirmation of non-public information: "Persons who wish to keep such information submitted by them confidential should so request by specifically identifying such information within documents submitted, and indicating on the front page of each document that it contains such information." (Id.)

Based on this, there is no prohibition of protest information other than designated and confirmed proprietary data and trade secrets (the only information the procurement law protects). It would certainly seem that letters or other notices of protests would not be protected information, even if other deliberative information might be.

It is also instructive, when asking whether the protest itself should be public or non-public, to look to other review analogues. For instance, under 5 GCA § 5480(a), it is technically feasible to bring a protest straight to the Superior Court rather than an agency. That action would be a civil or writ action, but in either case would be filed with the public files of the court. If court actions are public, what makes the administrative process so special?

Likewise, appeals of protests to OPA are immediately posted on the public website. If the appeal of a protest is public, why would the protest itself be less so?

Finally, we must consider the Sunshine Law. As with the Procurement Law, its starting point is full disclosure: Every person has the right to inspect and take a copy of any public document on Guam, except as otherwise expressly prohibited in aw, and except as provided in § 10108 of this Chapter. ... Any segregable portion of a record shall be available for inspection by any person requesting the record after deletion of the portions that are exempted by law." (5 GCA § 10103(a) and (b).)

The Sunshine Law has provision requiring agencies to specify certain types of information they want to keep private, so the the Legislature can first vet it and approve or disapprove any such designated information. These exceptions are important because the law says "Such approved list shall be used as a guide for determination of non-disclosable records by agency employees". (5 GCA § 10106(b).)

In this case, the agency is GEDA. For GEDA, the Legislature has only allowed these additional exceptions: "For the Guam Economic Development Authority: (i) delinquency reports of loans issued by GEDA; (ii) credit reports on loan applications filed with GEDA." (5 GCA § 10108(r).)

Given that this involves an protest, mention must be made of one other exception in the Sunshine Law, for "pending litigation to which the agency is a party, until the pending litigation has been finally adjudicated or otherwise settled." (5 GCA § 10108.)

The pending litigation exception does not apply because the protest is a simple administrative dispute resolution proceeding. My very old Black's Law Dictionary defines "litigation" to mean "contest in a court of justice", and "a judicial controversy, a suit at law". Litigation is something altogether different from the protest proceeding.

If there is some other exception, I am not aware of it, and would welcome any comment to the contrary. So far as I can tell, if GEDA does indeed desire to respect the procurement process, it will disclose the protest, at the very least.

So what can be done when an agency withholds procurement information arguably intended for public access? There are at least two avenues of redress.

In the Procurement Act, 5 GCA § 5485 allows "any member of the public" to bring a court action to compel production of data wrongfully withheld. The public member is entitled to legal fees, if successful, and if the agency defies the Court, contempt charges may be applied.

The Sunshine Law also allows court action to obtain withheld information, and offers similar remedies. (5 GCA § 10111 and 10112.)


THE STORY CONTINUES ...

I see another article on this story in today's (April 7th) PDN, GEDA board to meet on procurement protest. The article clarifies the posture of the solicitation: it is still pre-award. As my original analysis indicated, I was under the impression the solicitation was at the post-award stage.

The pre-award posture has effect on information that should be withheld, but only insofar as it concerns information submitted in offers and proposals and the Register of Proposals. If the contents of any protest reveal that information, then of course that particular information must not be disclosed because the law very clearly requires nondisclosure of such information prior to award.

The article also said GEDA Director Karl Pangelinan sent PDN an email saying "... There is no law specific enough to address our exact situation, but to protect the integrity of the process, it is prudent for GEDA to interpret the law conservatively and not disclose any information in the record at the pre-award stage."

That statement is a very tempered stance, and not without some merit.

Taking a closer look at the regulation now, with knowledge that this is pre-award, the regulations for RFPs do differ from IFBs in one critical aspect: the bidders names in an IFB are disclosed at bid opening (that is, prior to award) on the Bid Abstract; however, the names of offerors in an RFP, which are kept on a Register of Proposals, are not not disclosed until after award. (2 GAR § 3114(h)(1).)

Still, the decision to indiscriminately withhold all information about the protest simply on the basis that it is in some unexplained way necessary "to protect the integrity of the process" is, I think, a close but debatable subject. The fact that both court protest actions and protest appeal actions are made public weighs, I think, against any absolute precious protection of protests at the agency level.

The demand that public access be available "consistent with ... the integrity of the procurement process" requires examination of what is meant by "the integrity of the procurement process".

To maintain integrity means to uphold all that is right and proper. It does not mean sweeping things that are not right and proper under the rug. Protecting the integrity of the procurement process is not intended to give cover to wrongdoing.

To the extent the protest raises issues in the procurement process that are not right and proper, to me, to be consistent with the integrity of the procurement process, those allegations (redacted for nondisclosable information) should be made public, otherwise you are only impugning the integrity of the procurement process.

Yes, information required to be withheld and agency deliberative matter should be withheld for so long as required. But other information is not so preciously secret. Any statement refusing any disclosure of information in a protest should identify the particular character of the particular information that gives it cover. And it should disclose all other information not specifically protected by nondisclosure law and regulation.

There are penalties for wrongful withholding of information, and there are procedures for redacting and segregating information not intended for public disclosure, so there is no excuse to withhold information without particular justification. A blanket statement that no information can be disclosed because of the integrity of the procurement process is simply a conclusion, one that begs supporting justification.

Time will tell whether information here is properly being withheld. It will be a learning process for all of us.