GAO: USDA improperly awarded $141 million sole source contract

The U.S. Department of Agriculture improperly awarded a $141 million sole source contract in exchange for the contractor’s agreement to withdraw a GAO bid protest.

According to a recent GAO bid protest decision, the award violated the Competition in Contracting Act, which does not permit an agency to award a sole source contract in exchange for a contractor’s promise to terminate litigation against the agency.

The GAO’s decision in Coulson Aviation (USA), Inc., et al., B-409356.2 et al.(Mar. 31, 2014) involved the USDA’s procurement of next generation (“NextGen”) large airtanker services for wildland firefighting support.  The Air Force initially issued a solicitation for the NextGen airtanker services in 2011.  After corrective action taken in response to a GAO bid protest, the USDA awarded NextGen contracts to four companies.  Neptune Aviation Services, Inc., which had initially been identified as an awardee before the protest, was not awarded a NextGen contract.

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Bidders ‘stunned’ by sudden cancellation of federal contract

The invitation was to bid on a massive, high-stakes contract, estimated to be as high as $5 billion. Dozens of companies went for it, working for months to polish their proposals, then waiting for more than a year to see if they had won.

But instead of granting awards that would be part of the federal government’s largest training and human resources contract, the Office of Personnel Management issued a terse notice earlier this month that weighed in at five words: “This solicitation is hereby cancelled.”

The risk of losing is inherent in the business of federal contracting, but the sudden cancellation of such a high-profile contract with no explanation struck many as an unnecessarily secretive and bad way of doing business. The head of the Professional Services Council, an industry group representing more than 370 companies, fired off a letter saying many companies were “stunned” at the cancellation and the way it was handled.

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The poster child for doing procurement the wrong way

Lockheed Martin Corp.’s F-35 Joint Strike Fighter isn’t going anywhere. But members of the House Armed Forces Committee don’t have to be happy about it.

That was the message from ranking member U.S. Rep. Adam Smith, D-Wash., and U.S. Rep. Randy Forbes, R-Va., during a panel discussion Wednesday at the Bloomberg Government’s Defense Transformation conference.

“I hate to say this without laughing, but it’s better than it was,” said Smith. “The F-35 is the poster child for doing procurement the wrong way, but to the extent possible, they’ve cleaned up. It will replace 90 percent of fighter aircraft. It’s going forward. There’s no scenario where we’d scrap it at this point.”

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Acquisition planning is focus of March 3rd course

Want to learn about the Government’s policies and procedures for planning an acquisition?  How does the Government deal with required and preferred sources of supplies and services?  What must be done to ensure competition?

To answer these questions and many, many more, The Contracting Education Academy at Georgia Tech is presenting a one-week course beginning March 3, 2014, entitled CON 090-2: Contract Planning in the FAR.

By attending this course, students will learn all the types of contracts that may be used in acquisitions, special contracting techniques, the impact of socioeconomic programs, the use of special contract terms and conditions, the implications of contractor qualifications, and proper advertisement procedures.

The course provides vital instruction for Government contracting personnel as well as important insights for contractors.

CON 090-2 is the second of four modules from CON 090 – Federal Acquisition Regulation (FAR) Fundamentals.  The Contracting Education Academy at Georgia Tech offers CON 090 in four, one-week classes.  Each module stands on its own, allowing students multiple opportunities throughout the year to complete the entire CON 090 course without the challenge of being away from work or home for an entire month.

The course consists of limited lecture, and is heavily exercise-based.  Students should be prepared to dedicate about an hour each evening for reading.

The Contracting Education Academy at Georgia Tech is an approved equivalency training provider to the Defense Acquisition University (DAU) and provides continuing education training to Acquisition and Government Contracting professionals as well as to business professionals working for government contractors or pursuing opportunities in the federal contracting arena.

Defense Department not comfortable if major contractors look to merge

The Defense Department remains skeptical of mergers involving its major contractors, a Pentagon official said on Wednesday, amid industry expectations that defense deal-making could revive this year.

Elana Broitman, whose office at the Defense Department reviews deals that involve national security issues, told an investor conference that “there are far fewer of the large firms, so we’re in a more constrained environment.

“Even though we’re seeing a budget downturn which has corresponded to consolidation in the past, we’d be less comfortable now because of that smaller number,” said Broitman, the acting deputy assistant secretary of defense for manufacturing and industrial base policy.

Defense M&A activity ground to a near halt in recent years amid uncertainty about future U.S. military spending that has kept sellers on edge and buyers more apt to invest in share buybacks and dividend payouts than acquisitions.

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Jordan exits OFPP knowing progress toward buying smarter is real

Joe Jordan, the outgoing administrator of the Office of Federal Procurement Policy (OFPP), said agencies have only scratched the surface of the administration’s campaign to buy smarter.

Jordan, whose last day at OFPP was Friday, January 17, 2014, said savings from strategic sourcing are up, there’s more competition among vendors than in previous years, and he expects overall federal procurement spending to go down once again when the final fiscal 2013 numbers come in next month.

“You’ve seen the largest two-year decrease in contract spending in history. The President has long said we need to reign in contract spending, and I’ve said we have to buy smarter,” Jordan said in an exclusive interview with Federal News Radio. “I think you see some clear evidence we’ve been able to do that, and not just because the topline went down. A lot of that is due to smarter buying techniques and some of that is due to budgetary issues.”

He pointed to several areas, including a larger number of agencies buying more strategically, cutting management support service contracts, increasing contracts to small businesses and ensuring there is real competition for procurements.

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VA’s use of reverse-auction contracts comes under attack

The use of so-called reverse auctions to lower contracting costs at the Veterans Affairs Department and General Services Administration came under tough scrutiny on Wednesday at a House joint committee hearing.

Rather than saving money, critics said, the tool drives out competition, favors a single auction company and risks a lowering of quality in the work if applied to complex projects such as construction.

Reverse auctions are a contracting process used by the government since the late 1990s to promote competition by having the agency buyer solicit bids from multiple sellers, in contrast to a standard auction where a seller solicits bids from multiple buyers. GSA in July launched a new reverse auction initiative aimed at the purchasing of supplies, or commodities, more than complex services.

But both a recently concluded two-year House investigation and a just-released Government Accountability Office report faulted the technique, noting that more than one-third of fiscal 2012 reverse auctions had no interactive bidding, and agencies paid $3.9 million in fees for those auctions. In March 2012, Veterans Affairs temporarily suspended the tool’s use so it could study the claimed savings for purchases of information technology products, medical equipment and supplies.

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LPTA contracts gaining favor among agencies, but give vendors less incentive to innovate, study says

Lowest price technically acceptable procurements have been gaining favor  among agencies, but that gives vendors less incentive to be innovative if the  approach costs more, an Oct. 24 Market Connections and Centurion Research study says.

Under LPTA, agencies focus more on price than on past performance as long as  the vendor meets minimal job requirements. So if a vendor comes to an agency  with a unique solution that costs more than a competitor who comes with a more  basic solution, the agency is more likely to choose the cheaper solution as long  as it meets the minimum requirements.

The practice has been utilized by the Defense Department through its Better  Buying Initiative, the study says, but has proliferated through other agencies  as well.

The study showed that of the $27 billion in procurements it analyzed, the  Veterans Affairs Department was the biggest user of LPTA outside of the DoD.

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GAO critical of how DoD estimates insourcing cost

The way the Defense Department estimates the cost of insourcing contractor  positions to government employees has come under new criticism from the  Government Accountability Office.

Whether government employees or private contractors ultimately cost the  government less has long been a subject of debate, and past attempts to settle  the matter have faced scrutiny  for flaws in their methods and assumptions.

According to a GAO report dated Sept. 25, the  department’s instructions say to estimate the cost of overhead for insourced  employees by using a standard rate of 12 percent of labor costs. But the GAO and  the department’s office of inspector general have both said that rate has no  sound basis.

Until officials can determine a more meaningful rate to estimate overhead costs,  “savings expected from public-private competitions will be imprecise and  competition decisions could continue to be controversial,” the report says.

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Recent criminal antitrust risks for government contractors

The business of government contracting is a high-risk, high-reward activity. Many contractors, large and small, relish the opportunity to profit while also directly providing critically needed products and services to the government.

That opportunity, however, comes with a risk many would-be government contractors may be unaware of: the increasing presence and aggressiveness of the U.S. Department of Justice (DOJ) in prosecuting bid-rigging, collusion, and price-fixing cases in this area. These criminal cases often result in jail time for the executives of these companies.

This article will focus on the Sherman Act (15 U.S.C. §1), specifically the criminal antitrust considerations that government contractors face. The Sherman Act prohibits competitors from agreeing to fix prices or rig bids. A violation of the Sherman Act is a felony and may be punishable by a fine of up to $100 million and/or ten years in jail.

The implications of the Sherman Act are critical for government contractors to understand because of the unique aspects of their business. Also, these characteristics of the business of contracting with the government make the antitrust analysis more complex. This article will focus on recent cases in this area and the ramifications for contractors. The article will conclude with some practical tips for antitrust and government contract counsel.

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