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Blog - Archive for December 2011


Posted on Wednesday, December 28, 2011 4:18:17 PM

Key provisions of the FY12 Defense Authorization Bill include allowability of costs for contractor employee compensation, improvements to the past performance databases, limitations on expenditures for contractor services, extension of the task and delivery order protest limitation, improvements in the training of the federal acquisition workforce, a five year extension of the mentor protégé program, the addition of acquisition functions to the definition of critical functions and reauthorization of the SBIR and STTR programs.

·         Contractor compensation. The coverage of allowable costs now includes all contractor employees. Certain scientists and engineers can be exempted. The bill retains the current formula for determining the compensation costs.
·         Past performance databases. DOD must develop away to be sure timely, accurate and complete information on contractor performance is included in the databases used for making source selection decisions. Contractors must be afforded up to 14 days to provide comments before the information is posted and they may submit information any time.
·         Cap on DOD spending for contract services. Spending for FY12 and FY13 is limited to the budget request for 2010. Funding for staff augmentation contracts and contracts for functions closely associated with inherently government functions must be reduced by 10 percent. DOD is directed to adopt a negotiation objective that holds contractor labor and overhead rates at 2010 levels.
·         Task and delivery order protests. GAO can hear civilian agency protests of task and delivery orders under limited circumstances.   The limited circumstances: you cannot protest unless the ground for protesting is that the order increases the scope, period, or maximum value of the contract under which the order is issued; or, the protest is on an order in excess of $10M. The same rule applies to DOD task and delivery orders.
·         Acquisition workforce improvements. The legislation fosters and promotes acquisition workforce training.
·         Mentor-Protégé Program. Extended five years.
·         Transferring work in-house. The legislation adds “acquisition workforce functions” and “critical functions” to the current functions DOD should consider for insourcing.
·         SBIR and STTR reauthorized. These programs are extended for 6 years.
This is only a brief synopsis of a few provisions of the legislation.  If you have any questions, we will be happy to answer them for you.

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Posted on Saturday, December 24, 2011 6:39:53 PM

Lawrence Lessig's Republic, Lost, Hachette Book Group, 2011, is a must read.  "Government is an embarrassment.  It has lost the capacity to make the most essential decisions.  And slowly it begins to dawn upon us: a ship that can't be steered is a ship that will sink."

We as a nation have a dependency on the corruption of money in our political process.  Dependency like the alcoholic's.  "We have a gaggle of good souls who have become dependent in a way that weakens the democracy and we have a nation of good souls who see that dependency and assume the worst.  The first flaw bends policy.  The second flaw weakens the public's trust.  The two together condemn the republic, unless we find a way to reform at least one."

Our Republic has been hijacked by a system run by money.  Brtbes are no longer (for the most part) paid to people in Congress who keep safes for cash in their offices.  Lobbyists control what happens in Congress.  One way or the other, the need for money drives Congress.  Up to 70% of a congressperson's time is spent on fund raising.  Gifts are exchanged.  Whether you are on the left or the right, you never will get your agenda considered unless you pay for it.  "What both sides miss is that the machine we've evolved systematically thwarts the objective of each side . . . ."  Change on the left is stopped by private interests and change on the right gets stopped because change might weaken the fund-raising machine.  We, the people, are no longer in control.

Obama promised to change the system.  Instead, he has joined in.  Most Americans believe Congress is corrupt.  Not in the old fashioned way.  In a different way where contributions buy results.  Only 11% of us have confidence in Congress.  What more do we need to declare the institution bankrupt?  This "corruption confirms the irrelevancy of democracy."  We busy ourselves with our lives and we learn not to waste our time because we know Congress is not interested in us.

Like most worthy undertakings, the solutions are simple but difficult.  In its simplest form, the solution is singular:  make the funders of Congressional elections the people.  Yes, you and me.  Three states have done this with success in their local elections.  Lessig lays out 4 strategies to change the system of electing our representatives.  His favorite, in Chapter 20, has a better than 10% chance of working.  (We'll address it in another blog.)  The others, much less.  It's easy to read this book as doomsday.  But Lessig argues for hope.  "Hopelessness is precisely the reason that citizens must fight."

Postscript:  While we're musing about fixing things in Washington, D.C., here are a couple of suggestions. 

First, pass the Fair Elections Now Act that almost made it through the House in 2010.  "That bill would have allowed candidates to opt into a system that limited contributions to $100 per citizen, matched, after the candidate qualified, four to one by the government," Lessig notes.

Second, pass a Debt Reduction Surcharge on every taxpayer's gross income.  No games, just a flat surcharge on everyone, graduated from .001 at the lower income levels to .01 at the upper end.  Mandatory.  No exceptions.  An annual "tithe", with the collection applied to existing government debt.  Voluntary for those with incomes under $50,000.  For those souls who have signed the no tax pledge, belly up.  This is not a tax, it's an annual surcharge to help stop the bleeding.

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Posted on Friday, December 23, 2011 11:39:08 AM

Yesterday, Dave Grover, Pete White, Gail Young, Jen Wiley and I, (as members of the Prince William Chamber of Commerce Government Contracting Council) met with Dan Gordon on the eve of his departure as Administrator of the President's Office of Procurement Policy (OFPP).  We expressed our concern about the disconnect between policy and practice regarding OFPP's myth-busting memorandum on communications between industry and government contracting officials. We gave him some examples of how sometimes, even often, contracting officers are reluctant to engage in open discussions with industry representatives. 

We spoke of how debriefings often are minimal efforts to explain the reasons for source selection.  Dan responded by saying contracting officials should not be seeking the minimum level of communication. He said they should strive for the maximum level of disclosure and discussion.

We did not have time to go into other issues such as misuse of fixed priced contracts and best value procurements which are actually awarded on the basis of technical leveling and award to contractors which have underbid and can't perform.

We asked that Dan pass on to his successor (with whom we also plan to meet) our concerns and suggestions for improvement.  He agreed and also offered his continued involvement in his new post at the George Washington University Law School.  We expect to continue the dialogue with Dan as well.

We proposed that OFPP issue a "Best Practices" Guide for contracting officers which includes specific directions on communications with contractors and proper use of contract types and source selection methods.  We also suggested that OFPP issue a memorandum to procurement agencies requiring a training module for instruction of contracting officials designed to educate them on the "Best Practices" in the Guide. 

We also enlisted his aid in setting up opportunities for dialogues between industry and government contracting representives.  Dan agreed that by doing this, money could saved to the great benefit of the taxpayers.  He expressed some pride in the success of  his "Front Line Forum" during which he would communicate directly with contracting personnel in the field.  Dan assured us his successor would continue to carry through with all the initatives he has started.

We are losing the best Administrator we have had, in our opinion.  However, we are very optimistic that his successor and the entire OFPP staff are dedicated to continuing Dan's leadership and immense contributions to our acquisition community.



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Posted on Wednesday, December 21, 2011 3:02:20 PM

We've written about Dan Gordon's myth-busting memorandum and its emphasis on the need to communicate.  Specifically, we've picked up on his admonition to contracting officers to conduct oral debriefings with open communications.  As we've noted, he believes, as we do, that more communication leads to less protesting.  Well, as we have said over and over again, contracting officers are either ignorant of Dan's advice or they are just plain resisting it.  In fact, written debriefings seem to be on the rise, which means there is less communication than ever before.

Written debriefings are the scourge of the procurement landscape.  They are terse, carefully written, probably reviewed by lawyers, and they only reveal the basic information required by FAR 15.506.  Take a good look at FAR 15.506 (d).  "At a minimum, the debriefing information shall include . . . ."  At a minimum, debriefings absolutely must include a list of six (6) items.  The last one requires "reasonable responses to relevant questions" about the procurement.  Now I ask you, how in the name of everything sacred, can a written debriefing satisfy this requirement?  It seems to us the whole section contemplates a dialogue.

Dan says, and we agree, that the regulations do not need to be rewritten to require communication between contracting officers and industry personnel.  The rules are in place.  So what is needed is not more rule-making.  We probably need another "best practices" guide from OFPP directed at contracting officers and adopted by senior acquisition officials.  These senior officials then need to push down the best practices guide and supervise its implementation all the way down to the ground level.  We also believe these officials need to authorize and order a training module for DAU and FAI that requires instruction on the best practices guide.

We believe more communication will lead to better results all the way around at every level.  We would testify once more that with regard to debriefings in particular, we know that failure to communicate leads to more protests than when communications are free and open.  If the contracting officer won't disclose the reasons for the award, a protester's lawyer can see the whole file in a protest.  But on the broader view, in these times of the urgent need for innovation, risk assessment, industry survival and budget constraints, we believe we should be talking more, not less.  One of the benefits will be saving taxpayer dollars.



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Posted on Wednesday, December 21, 2011 1:59:39 PM

We've been asked the following hypothetical question:  if a business is realizing $30M in revenue for a logistics contract, does that business qualify as small if it bids on a professional services contract with a lower revenue threshold NAICS code (say $7M)?  In other words, can a business exclude revenue derived from a separate NAICS code category?  The answer is NO, it's total revenue, period.  Total revenue for all business.  (See 13 C.F.R. 104, and following sections, for the rules in black and white.)

If you have $30M in business and the NAICS code for the procurment you are bidding on has a $7M threshold, you are ineligible for award.  You are not a small business as defined for that procurement.  Your remedy is to protest the NAICS code designation.  The remedy for all other bidders is to protest your size status.  And, if you knowlingly certify yourself as small, you may be guilty of a crime and go to jail.

While we are on the subject, small business size protests are fairly commonplace these days.  If you are an interested party, you can protest another bidder's size.  If you did not submit a bid or if you are disqualified from receiving award, you have no standing to protest.  If you submitted a non responsive bid or if you are otherwise ineligible to receive the award for other reasons, you have no standing.  You have five (5) days in which to protest from the earliest date on which you receive notice of the identity of the prospective awardee on a negotiated procurement.  Timely protests suspend contract award until the SBA makes a size determination or ten (10) business days have passed since the SBA received the protest.  If you win the protest, the award is overturned since the bidder is ineligible to receive it.

A size protest is sent to the contracting officer, who sends it to the SBA.  As with any other protest, success lies in a complete statement of hard facts with reference to applicable legal authorities.  Nonspecific protests will be summarily dismissed.  Fortunately, the SBA Area Office will conduct an intensive investigation.  That office will place what many consider to be an onerous burden on the alleged inelgible bidder to substantiate its small business status.

We represent small businesses in prosecuting and defending size protests and appeals.  And, we do so at a fixed fee.

IMPORTANT NOTE:  This blog addresses the narrow issue of whether total revenue can be divided up by NAICS code for the purpose of qualifying under a lower threshold.  It does NOT address any other issues involving how to calculate total revenue, of which there are several.  We will address these other issues in subsequent discussions.


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Posted on Sunday, December 18, 2011 1:37:38 PM

Recently, a small business appealed the decision of the Small Business Administration (SBA) Area Office that it was economically dependent upon its largest customer, was thereby affiliated with the large business and was therefore ineligible for award of a contract set aside for small businesses.   The Area Office relied on a prior decision which concluded "that when one firm relies on a second firm for 70% or more of its revenue, the first firm is economically dependent upon the second firm." 

The pertinent regulation defines affiliates to include situations where one controls or has the power to control the other and it does not matter whether that control is exercised provided the power to control exists.  SBA precedent holds that even in the absence of other ties between the companies, the dependence by one firm on another for the large majority if its revenue is sufficient to uphold a finding of affiliation between the firms.  However, there must be a longstanding relationship between the firms; economic dependence cannot be assumed from one contract of short duration.

In analyzing affiliation, the litmus test is whether one concern has the power to control another.  It's the power to control that counts.  It does not matter whether control is exercised.  In the recent size appeal of TPG Consulting, LLC, the SBA's Office of Hearings and Appeals (OHA) concluded that the record supported the conclusion that TPG was economically dependent upon Toyota as its main souce of revenue and that Toyota could therefore control TPG. 

The lesson from the decision is that economic dependence, which can kill small business status, may be found in the context of a vendor/customer relationship.  Also, if the 70% total revenue threshold is exceeded in only one of the prior three years, it is sufficient to disqualify a small business under the affiliation rule.  TPG argued it was not heavily dependent upon Toyota for its revenues.  Nevertheless, any percentage greater than 70% equates to economic dependence as a matter of law.

Once heavy economic dependence is shown, OHA has not found the presumption of affiliation has been rebutted.

One of the more interesting aspects of the TPG case is the OHA really did not go into an analysis of the ability to control.  It was enough that dependency created the possibility of control.  We would like to have seen a discussion of just how and why this seemingly unrebuttable presumption justifies such a severe penalty to a small business.

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Posted on Tuesday, December 13, 2011 9:54:14 PM

Government officials may meet one on one with potential offerors provided no vendor receives preferential treatment.  Moreover, even after the solicitation is issued, FAR Part 15 encourages exchanges of information with interested parties up until the time for receipt of proposals.  There is no requirement that all possible offerors be involved and one on one meetings are permitted.  The only warning is that any information shared in a meeting that could directly affect proposal preparation must be shared with all potential vendors.  That's the law.  And we have paraphrased from Dan Gordon's myth busting memorandum.

Restricting communications during debriefings (to say nothing of doing them by email) will not prevent a protest.  Protests are rare and rarely successful.  Contracting officers should concentrate on conducting meaningful and constructive communications during the course of the procurement.  If they do so, issues that could cause protests can be eliminated.  Again, this is straight from Dan Gordon's myth busting memorandum.  Frankly, in our experience, failure to conduct a thorough, face to face, meaningful debriefing causes more protests.  Hiding behind a few choice platitudes in an email often leads to protests just to find out the information which could have been divulged at the debriefing.

Finally, FAR 15.506(d) says "at a minimum, the debriefing information shall include" six, count them, 6, items of information.   At a minimum.  And look at that list:  the complete evalutation of the offeror's proposal, the overall evaluated price and technical rating of the successful offeror and the debriefed offeror, the overall ranking of all offerors, a summary of the rationale for award and reasonable responses to relevant questions about whether the agency followed the evaluation criteria in the solicitation and the applicable regulations.

Always ask for a debriefing.  Cite the regulation.  FAR Part 15 applies in one shape or another to nearly every procurement.  Dan Gordon's memorandum applies to all acquisitions and is based on a sound analysis of the regulations.  In your request for the debriefing, cite FAR 15.506(d) and quote the list of items on the mandatory agenda.

It's time everyone paid attention to Dan's message on the government's duty to communicate.



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Posted on Friday, December 9, 2011 4:33:56 PM

Recently, GAO denied a protest brought by three travel agencies in which the protesters argued the restrictions on submitting claims for faulty estimates of work on a solicitation for a requirements type contract unduly restricted competition and imposed undue risks on small businesses. The solicitation said travel fees would be fixed priced and would not be adjusted if actual quantities of transactions varied from the estimated quantities. “Out of scope” changes would be recognized, whatever that means in this context.

GAO denied the protest largely based on the agency’s showing that the historical data on ordering was fully disclosed to all bidders and it showed some consistency in ordering. The risk level was acceptable to the folks in the GAO ivory tower.
The important point about the protest decision is that the bidders (we use bidders generically to also cover offerors) are well advised to protest solicitation issues in a timely fashion which is before the time for submission of offers. Often the solicitation contains ambiguities. If they are apparent on the face of the solicitation (bidders are not required to ferret out hidden ambiguities), they should be raised with the agency and if necessary protested to GAO. If the solicitation inhibits or restricts competition or creates undue risks, the time to raise the issue is before submission of offers. 
Recently, we’ve written about a particular blight on the procurement landscape: the tendency to solicit indefinite quantity work on fixed priced basis. It is an effort by the government to use time and materials as required and yet disguise the uncertainty by asking for fixed prices on what appears to be the maximum amount (not stated as such). This bait to fixed prices is then switched to what amounts to  time and materials. Bait and switch. 
We’ve heard too many stories of companies bidding fixed prices only to be told they will not be paid the fixed prices because all of the work really is not needed or it is going in house. The time to raise the problem is before you bid. If you have any doubt about the meaning of the language in the solicitation, you should immediately raise the issue with the contracting officer. If you are not satisfied with the response, protest to GAO.

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Posted on Wednesday, December 7, 2011 11:40:08 AM

Get in step, contracting officers.  Your acquisition leaders are speaking out and you are not listening.  Listen to what one of industry's brightest and best has to say.  Stan Soloway, President/CEO of the Professional Services Council recently has spoken about 3 disconnects roiling the government market.  One of them is very dear to our hearts.

Stan speaks of the continuing disconnect between the acquisition leadership and the front line, the "misalignment", as he calls it.  We say contracting officers are not listening to their leaders.  Contracting officers almost uniformly are resistant to or ignorant of Dan Gordon's myth busters campaign to foster better and more consistent communications between government and industry.  Who has really paid any attention to Dan's Memorandum, undoubtedly passed down by our community's leaders?

Then there is the tendency of contracting officers, despite leadership guidance to the contrary, to use fixed priced contracts even when it is wrong to do so.  Even worse, the contracting officers then treat them as if they were cost reimbursement or time and materials contracts anyway, penalizing contractors in the process.  On top of that, the tendency to go technically equal, low price as if it is the only way to go in the present economic environment, is foolhardy.  When will contractors step up and protest the improper use of this everything is a commodity approach?

We must say that for all its faults (potential for abuse is the main one), best value best suits buying complex items and services.  The use of low price is often very risky.  The use of technically equal, low price leads to dumbing down the technical requirements and underbidding which in turn leads to terminations for default (the underqualified, improvident bidder can't perform).

So this is a call to contracting officers to listen to the government leadership.  If you have any sense of responsibility at all, you will practice what they preach.

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Posted on Saturday, December 3, 2011 12:15:44 PM

You may be familiar with the Equal Access to Justice Act.  It is specifically designed to help small businesses.  Actually, its more descriptive name would be the Almost Equal Access to Justice Act.  Here is why.

The Act says the "prevailing party" may recover its fees and expense in an action against the United States unless the position of the United States was substantially justified or special circumstances make an award unjust.  The applicant must be elgible for an award based on its net worth ($2M for individuals and $7M for companies).  The applicant is the prevailing party if it succeeds on any significant issue in litigation which achieves some of the benefit it sought in bringing the action in the first place.  Once the applicant crosses that threshold, the amount of recovery may be reduced depending on the degree of success.

Fees and expenses under the Act may be denied totally if the position of the United States was "substantially justified".  The tribunal deciding the application must make a judgment call whether the government's position throughout the dispute had a reasonable basis in both law and fact.  The determination is made on a case by case basis.  Thus, since the decision is based on subjective judgment, it really is another test of what is seen by the eyes of the beholder.

Finally, under the Act, a $125 per hour cap applies to attorneys' fees unless the applicant can show an increase in the cost of living or a special factor, such as where the limited availability of qualified attorneys for the proceeding involved justifies a higher fee.  Good luck with that one.  Special factors are very rarely applied and one tribunal recently applied the cost of living formulas to arrive at a whopping $155 per hour.  (The $125 rate was set in 1996).  How many experienced lawyers charge $155 per hour?

The Act needs to be amended to remove the "substantially justified" takeaway and the hourly rate needs to be increased.  Pure and simple.  Either that or it should be renamed, perhaps, the Almost Equal Access to Justice Act.

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Posted on Thursday, December 1, 2011 1:30:18 PM

Lately, we have run across a number of cases where the government has issued delivery orders on indefinite delivery contracts at fixed prices or straight fixed priced contracts based on labor hour calculations only to refuse to pay the fixed price.  The "menu" agreement says the delivery orders will be fixed priced.  They are issued at fixed prices, even for the labor hour portion of the delivery order, but the government only pays for the number of hours actually used.  In straight fixed priced contracts, the government simply refuses to pay the full fixed price if it decides not to use all the labor hours.

Do you really have a fixed priced contract?  Yes, you do.  What is going on is this.  The government is supposed to move away from time and materials to fixed priced work.  But, the government contract administrators are used to paying only hours actually worked and they also have a mandate to save money.  So, what do they do?  They issue a firm fixed priced delivery order or straight firm fixed priced contract with projection of hours at a fixed price.  If the delivery order or contract line item actually is stated in fixed price terms, the contractor is able to recover the fixed price even if the total hours are not used.  This may be "counter-intuitive" to quote one expert, but the law is the law.

This issue is far from resolved, however.  There are cases pending now before judicial tribunals to answer this question once and for all.  However, in the meantime, examine the terms and conditions of your basic agreement or contract line items and the precise language on pricing.  If the contract says the delivery orders or contract line items are to be fixed priced and the order or line item displays the pricing, even for labor hours, in terms of fixed prices, you can recover the total.  You are obliged to have the personnel available for the total.  You have the risk of having them at the ready under threat of termination for default.  You are entitled, one way or the other, to be compensated for accepting that risk.  You can recover the fixed price for the entire amount as breach of contract damages or you can submit a constructive termination for convenience settlement proposal for the costs of having your personnel at the ready.

And do not forget your consulting fees for putting together your claim or termination for convenience settlement proposal and negotiating the settlement all are recoverable under FAR from the government.

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