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Blog - Archive for September 2011

JUDGE BUSH OVERTURNS BEST VALUE AWARD

Posted on Wednesday, September 28, 2011 12:51:41 PM

We have written about best value awards and protests pointing with particularilty to FAR 15.308 in "Anatomy of a Successful Bid Protest".  Yesterday, Judge Bush of the Court of Federal Claims (COFC) overturned a best value contract award, permanently enjoined the award and ordered the government to cancel or amend the solicitation.  The ruling was based on a violation of FAR 15.308.  The agency failed to conduct a proper best value analysis and to document the decision.

In the words of Judge Bush:

"The source selection decision statement here is nothing more than the unsupported adoption of the SSEB report, along with a conclusory assertion that the intervenor's proposal represents the best value to the government.  The court has held that the SSEB failed to perform a proper best-value tradeoff analysis.  The court further holds that the SSA's adoption of the flawed SSEB recommendation does not show that the SSA conducted a comparative assessment of proposals, in this case a best-value determination, as required by the RFP.  Furthermore, the documentation requirements of FAR 15.308 were not satisfied by the SSA in this procurement.  In so holding, the court has essentially set forth the core of its ruling in this case, i.e., that the source selection decision in this procurement, as manifested in the SSEB report and the SSA's award decision, was fatally flawed and cannot stand."

Well said, Judge Bush.  The best value decision must:

  1. Be independently made by the SSA;
  2. Show analysis of the recommendations of the SSEB;
  3. Demonstrate a careful, in depth best-value tradeoff analysis; and
  4. Be thoroughly documented in accordance with FAR 15.308.

And, the SSEB also must perform and document a best-value analysis.

As we have pointed out before, to find out just how the government arrived at its best value decision, you must seek assistance from someone outside your firm authorized to view the source selection documents under a protective order.  We represent clients in such cases before GAO and the COFC.  Contact us if you have a best value award issue or pass this along to someone you know who may be interested.

bill@spriggsconsultingservices.com

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THE GOVERNMENT CONTRACTOR DEFENSE TO TORT CLAIMS

Posted on Friday, September 23, 2011 5:24:23 PM

What is a tort? It’s a personal injury or property damage inflicted negligently or intentionally. If someone rear ends your car, he has committed a tort. Government contractors can be sued for the alleged torts they commit. The U.S. Government, however, as a sovereign, is immune unless one of the exceptions in the Federal Tort Claims Act applies. The Supreme Court has extended this sovereign immunity in certain cases to the government’s contractors.

Which certain cases? If a government contractor is following government directions it can share the government’s immunity. Although the doctrine originally was applied to products, it now extends to services as well. We were instrumental in conceiving the concept in the l980’s, creating the principles from the long standing 1918 Supreme Court ruling that the government guarantees the contractor’s performance if it follows the government specifications. When we first applied the doctrine in the asbestos litigation, the plaintiffs' attorneys called it the Nuremburg defense.
We have continued to assert the government contractor defense in many tort claims against government contractors. Most recently, we were successful in asserting the defense in a Katrina damage cleanup case. The debris remover, which was following government orders, removed the claimant’s home from a public right of way (the hurricane had moved the house) and the home owner sued. The court dismissed the case based on our argument that the contractor was merely following government directions and therefore shared the government’s immunity. End of case.
And that is what happens. The case goes away on a motion to dismiss. If you are a government contractor, do you even know about this doctrine and more importantly, has your insurance carrier ever heard of it? 
What brings all this to mind is a recent ruling in Virginia by the United States Court of Appeals for the Fourth Circuit which has dismissed a suit against CACI International, Incorporated by Iraqi citizens detained at Abu Ghraib prison, near Baghdad, and allegedly tortured. Although this was a preemption of state law case, the federal law involved was the Supreme Court’s opinion in the 1988 Boyle v. United Technologies Corp. case (the seminal government contractor defense opinion).  CACI was relieved of liability based on the government contractor defense.
So if a third party makes a claim against you as a government contractor, carefully consider whether you may be able to avail yourself of the so called government contractor defense.
bill@spriggsconsultingservices.com
www.spriggsconsultingservices.com
 

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WELCOME BACK, FIXED PRICE INCENTIVE (FPI) CONTRACTS

Posted on Wednesday, September 21, 2011 3:01:00 PM

Secretary of Defense Robert S. McNamara thought they were the cat's meow.  He ordered the military services to use incentive contracts instead of cost plus fixed fee contracts in 1962.  They are complicated.  Perhaps that is why they fell into disuse starting in the 1980's.  But they are back.  DOD has directed again that the military services use FPI firm target contracts instead of cost reimbursement contracts when it makes sense to do so.

This type of contracting is not for the faint of heart or brain.  The FPI firm target contract is the most complex of all contracts in FAR Part 16.  Contract managers and administrators need to know all they can about how the incentives operate.

Fortunately, there is a must read document on the subject which is still a great resource:  Ralph Nash's Government Contracts Monograph on "Incentive Contracting".  The paper can be downloaded free of charge from the Social Science Research Network at http://ssrn.com/abstract=1928629

In simple, general terms, FPI contracts predetermine profit based on certain variables.  The parties can tie profit to cost or to a combination of cost, delivery and technical performance.  Profit becomes a mathematical formula which depends upon how things turn out in performance of the contract.  The parties predetermine the formula upon which profit is based thereby objectively forecasting the ultimate profit position for the contractor.

The Monograph goes into considerable detail on how to negotiate and administer the geometry of the incentive structure.  Chapter 2 is an absolute must read.  Anyone who studies it carefully will be a master of the subject.

Welcome back, FPI contracting.  But follow Ralph's advice carefully.  These contracts only work if you work out the proper formulas.

A simple example:  Target cost $100, target profit $10, ceiling price $120, sharing 50/50.  If costs come in at $80, the contractor gets another $10 or a total of $20 profit (still within ceiling price).  If costs are $120, contractor share of overrun is $10 so contractor gets no profit.

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OFPP’S POLICY LETTER ON INSOURCING (and where to go if you have a complaint about its implementation)

Posted on Monday, September 12, 2011 4:29:59 PM

OFPP’s policy letter on inherently governmental, closely associated with inherently governmental and critical functions, issued September 12, 2011, complements The Federal Activities Inventory Reform Act (FAIR) and contemplates changes to FAR Subpart 7.5 which currently covers inherently governmental functions. The letter raises significant issues of concern to the services industry and to small businesses, in particular.

 
The Policy Letter expands the definition of inherently governmental functions and adds two new categories of functions (which contractors can perform) to be reviewed carefully by agency management: 1) closely associated with inherently governmental functions; and 2) critical functions. Many examples are provided. The problem with adding layers of definitions and providing examples which are not exclusive is that the definitions increase the chances that they will be more confusing and the listing of examples actually will drive work in house.
 
Work closely associated with inherently governmental functions and critical functions may be contracted out. But agencies are to scrutinize these functions carefully and if the work is outsourced, they must exercise careful management to assure proper control and to prevent the work from drifting into what really is inherently governmental. Moreover, although the work in the two additional categories may be performed by contractors, it also may be performed by federal employees. Essentially, then, there is a longer list of functions which may stay in house.
 
The letter says “OFPP does not anticipate a widespread shift away from contractors as a result of the requirements in the policy letter.” But this whole policy, including FAIR, is a response to criticism that the federal government relies too much on contractor services. Although it is not OFPP’s stated intention to do so, the inevitable conclusion is that work will be taken away from contractors and have it performed by federal employees. It already is happening. For example, all contract management type work, as we have defined it in these blogs, is now being treated as inherently governmental.
 
There is one bright spot in the letter for small businesses. When prioritizing what out sourced work should be reviewed for potential insourcing, agencies are encouraged to place a lower priority on reviewing work performed by small businesses (assuming the work is not inherently governmental) and “where continued contractor performance does not put the agency at risk of losing control”. If work under scrutiny remains out sourced, the rule of two is to be strictly enforced. That is, if there are two or more responsible small businesses or subsets of small businesses capable of performing the work at a fair market price, the work must be set aside for them.
 
WHERE CAN YOU GO TO COMPLAIN ABOUT THE IMPLEMENTATION OF THIS POLICY AND THE RESULTING DECISION TO INSOURCE?
 
We have briefed this question extensively in our webinar “How to Deal with Insourcing” available by contacting us at jen@spriggsconsultingservices.com. In summary, GAO will not get involved unless there is a solicitation on the street (A-76 type) or canceled to take work back in house. However, there is precedent at the Court of Federal Claims for hearing cases involving decisions to insource work. In a case called Santa Barbara Applied Research, Judge Firestone held this year that the court had jurisdiction and the plaintiff had standing to challenge the agency’s insourcing decision.

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THE BUILT IN BIAS OF BEST VALUE

Posted on Thursday, September 8, 2011 6:37:15 PM

We’ve heard complaints that best value awards often appear biased. The good news is most, if not all, of these awards are fairly made. The bad news is, any bias is built in. Best value is designed to be a subjective judgment in the end, if not all the way through the evaluation process.

 Let’s dispose of  personal bias once and for all. Public officials are presumed to be acting in good faith, without bias or prejudice. That’s the law. It takes “ irrefragable proof” to prove otherwise. In other words, it practically takes a confession of wrongdoing.  But legally permissible bias is permitted by regulation.
 
Best value is discussed throughout FAR Part 15. FAR Subpart 15.1 describes the best value continuum and the tradeoff process. “This process permits tradeoffs” and the “perceived benefits” are dead giveaways about the subjective nature of best value awards. When you talk of continuums, tradeoffs and perceptions, you are in the land of the eye of the subjective beholder. 
 
Even the evaluation process itself is subjective. See FAR 15.305 which describes and prescribes an “assessment” of the contractor’s ability to perform successfully. And, that’s not the only time the word assessment is used. Then there is FAR 15.308 which clearly states the source selection authority’s (SSA) decision is based on a “comparative assessment”. The award decision is a “business judgment” involving “tradeoffs”.
 
We’ve been concerned for years that the best value approach, although perfectly designed for the way you and I do business, is not well suited for public contracting based on strict rules and regulations. We have been concerned that best value in the public contracting context provides too much room for mischief (bias). If we had our way, all procurements would be FAR 15.101-2 lowest price technically acceptable which is almost totally objective and leaves hardly any room for bias.
 
But best value is here to stay and we must, for the time being, acknowledge its built in open invitation to bias. The only way to police such a system is to scrutinize the SSA’s decision empirically, analytically and thoroughly for any signs or signals of possible personal bias. For, although best value is subjective, personal bias is not countenanced if discovered. 
 

bill@spriggsconsultingservices.com

www.spriggsconsultingservices.com

 

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ANATOMY OF A SUCCESSFUL BID PROTEST

Posted on Thursday, September 8, 2011 2:20:53 PM

We have often said, “Do not protest unless the government violates a statute or regulation.” We mean it. Bid protests are rarely, very rarely, successful without showing a statutory or regulatory violation. So let’s take a look at the skeleton and circulatory system of a successful bid protest.

 
GAO says, it is fundamental that contractors should be advised of the basis on which their proposals will be evaluated. The Competition in Contracting Act (CICA) requires that contracting agencies state all evaluation factors and their relative importance in all solicitations. FAR also requires it. GAO will sustain a protest where contractors are misled as to how they will be evaluated. Likewise, GAO has consistently and often said contractors must be treated equally in the evaluation process. That is, the stated evaluation factors must be applied equally to all contractors.
 
There are 4 regulations in FAR Part 15 which the government must strictly follow.
 
1.       FAR 15.304. This is the regulation stating the award decision must be based on the evaluation factors and significant sub factors set forth in the solicitation. Any deviation or unequal treatment among contractors is illegal.
2.       FAR 15.305. This is a companion to 15.304 which makes it abundantly clear how contractors are to be evaluated. Any deviation from this regulation is illegal.
3.       FAR 15.306. This section sets forth the rules on discussions (negotiations) with contractors. Once the decision is made to discuss (negotiate) proposals, the contracting agency must negotiate with all contractors within the competitive range and provide each contractor the opportunity to revise its proposal when discussions are concluded. It is illegal to favor one contractor over another, reveal one contractor’s solution to another contractor or reveals one contractor’s price or references to another contractor.
4.       FAR 15.308. The source selection decision must be based on the independent judgment of the source selection authority (SSA) and it must be thoroughly documented to include the rationale for any business judgments and tradeoffs made or relief on by the SSA. 
 
Frankly, as we’ve said before, if your complaint is bias or prejudice, we advise you not to protest. The protest system is set up to assure strict compliance with the rules. The system asks you to complain if the rules are violated. But do not just be a sore loser.
 
Finally, you must prove your case. How do you do it? You must see the complete agency administrative record. How do you get to see it? You must hire an outside consultant to help with the protest. You will not be allowed to see the complete agency file, but your consultant will be given access under a protective order. There is just no way around it. In order to see the complete file, you must retain outside help.

bill@spriggsconsultingservices.com

www.spriggsconsultingservices.com

 

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POST AWARD PROTEST TIMELINESS RULES

Posted on Wednesday, September 7, 2011 3:23:55 PM

The first rule is not to protest unless the government has violated an acquisition regulation. The most common violation is the government’s failure to follow the announced evaluation factors.

 The second rule is to move fast.
 
After you find out you lost the award, you must request a debriefing, in writing, within 3 calendar days. If the last day falls on a weekend or holiday, the deadline is the next business day and this is true of all the calendar day calculation rules. (Insist that the government adhere strictly to the requirements of FAR 15.506.) You then have 10 calendar days after the debriefing to file a protest at GAO. If you don’t ask for a debriefing, you have 10 calendar days after notification of award to protest to GAO.
 
When the government receives notice of a protest from GAO (be sure GAO promptly provides this notice), within 10 calendar days after award or within 5 days after a debriefing, whichever is later, the contracting officer must immediately suspend performance on the awarded contract. Notice the rule here is 10 days after award, not 10 days after you receive notice of the award. This is another reason to request the debriefing to allow time for imposition of the automatic suspension of performance pending GAO’s decision on the protest. Note also the rule is 5 days after debriefing for suspension of performance.
 
If you miss these deadlines, you are out of luck in protesting at GAO. However, if you act with reasonable promptness, you can still protest at the Court of Federal Claims (COFC). In fact, you can get a second bite at the apple at the COFC even if you lose at GAO. The COFC has disagreed with GAO on several occasions.
 
Suspension of performance can be overridden by the head of the contracting activity, on a non-delegable basis if urgent and compelling circumstances that significantly affect the interests of the government will not permit waiting for the GAO decision or contract performance is in the best interests of the government. The resumption of contract performance, however, can be challenged in the COFC in an action testing the propriety of the decision to override the suspension of performance. In a good number of these cases, the COFC has disagreed with the government.
 
If your grounds for protest involve the propriety of language in the solicitation, you already are too late. Those protests much be sent to GAO before the time for submission of bids.
 
YOU DON’T HAVE TO REMEMBER ALL OF THIS. JUST HEED THIS WARNING THAT THESE TIME LIMITS ARE STRICTLY ENFORCED AND YOU MUST MOVE QUICKLY IF YOU THINK YOU MAY WANT TO PROTEST.       

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WHY YOU NEED A CONTRACT MANAGER

Posted on Friday, September 2, 2011 3:18:11 PM

Let’s say you are a small to medium sized company with government contracts and subcontracts.   You recognize you are in the most highly regulated industry in the world. You also know the regulations are more voluminous and complicated than the U. S. Tax Code. You understand there are profound differences between government work and your work in the commercial world. But you also have become familiar with how solid your accounts receivable have become and you have seen the positive impact government work has on your cash flow. Finally, things seem to be going well so what could possibly be missing?

                                                                          
What is missing? Who is your contract manager? What is a contract manager? Why do you need a contract manager? Every government contract and subcontract firm needs at least one contract manager. Here’s why.
 
What a Contract Manager Does. Here’s a list:
 
1.       Knows the statutes, regulations and case law thoroughly and in depth;
2.       Knows, writes and speaks the English language clearly and concisely;
3.       Reviews solicitation documents for clarity and legal sufficiency;
4.       Assures proposals are well written and meet solicitation and regulation requirements;
5.       Handles discussions, clarifications and negotiations of proposals;
6.       Handles debriefings and protests;
7.       Monitors performance and assures compliance with all contract terms and conditions and regulation requirements;
8.       Handles all contract interpretation issues and questions about regulations;
9.       Investigates, identifies, analyzes and solves all contractual performance issues;
10.   Keeps a daily diary of contract performance and communications with the contracting officer;
11.   Handles all requests for equitable adjustment, claims, terminations and disputes;
12.   Handles all communications with the contracting officer;
13.   Prepares, reviews and signs all contractual documents;
14.   Reads all publications relating to acquisition news and keeps current on all statutes, regulations and case law; and
15.   Handles contract closeout.
 
This list is not all inclusive.
 
So, why do you need a Contract Manager? Ask your friends at Lockheed Martin. Ask any member of the National Contract Management Association. Or, just ask yourself whether you are really good at doing the things on the list yourself or if you really have anyone else who is performing those duties. If not, you need a contract manager. You can’t do business with the government without one.
 
 
For more information contact bill@spriggsconsultingservices.com
 
Visit our website: www.spriggsconsultingservices.com

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