Emphasis on Fixed Price Contracts

Posted on 7/22/2011 9:53 AM

We all know about the Obama Administration's emphasis on fixed price contracts.  We've heard this repeated by Dan Gordon and all the executive agency acquisition chiefs.  The government has gone through these exercises before (DOD's Robert McNamara, for example) with very mixed results (some would say very bad results).  In this era of fixed pricing and attempts to negotiate the lowest possible price, we have what some call a perfect storm brewing.  In the heat to get the work, contractors may be tempted to underbid costs and hope to get well with changes.  Yes, that is always the risk, but now it is perhaps more pronounced than ever.

The trend away from best value and toward technically capable, lowest price is part of the equation.  Best value in its worst application may provide too much opportunity for favoritism.  But technically capable, lowest price will almost certainly lead to bidding wars, most experienced acquisition leaders agree.

One of the often overlooked realities is that changes claims are part of the federal acquisition scheme.  Contracts of adhesion (where the government dictates the terms and conditions), and regulations more complex than the tax code, countenance protests and claims as part of the process of making things fair.

My purpose here is to remind you that on April 1, 2002, Angela Styles, Administrator of OFPP (Dan Gordon has that job now), issued a memorandum from the Executive Office of the President to all agency procurement executives which stated:

"The filing of protests, the filing of claims or the use of ADR must not be considered by an agency in either past performance evaluations or source selection decisions."  She specifically said:  "Contractors may not be given 'downgraded' past performance evaluations for availing themselves of their rights by filing protests and claims or for deciding not to use ADR."  (The emphasis is mine.)

The key words are "their rights".  In the federal acquisition scheme, contractors have the right to avail themselves of their remedies.


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