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2019 NDAA analysis: Enhancing IDIQs and other provisions

Over the past several months, this blog has analyzed several key provisions of the Fiscal Year 2019 National Defense Authorization Act (NDAA) that impact government contractors. This post briefly summarizes a variety of other government contracts-related provisions of the FY 2019 NDAA that we have not yet discussed, including several that reflect a congressional intent to enhance the use of multiple-award, indefinite-delivery/indefinite-quantity (IDIQ) contracts and encourage commercial item contracting, several that concern subcontracting and supply-chain considerations, and assorted other issues.

Awarding IDIQ Contracts Without Considering Price to Increase Order-Level Competition.

Section 876 provides a limited exception to the general requirement in 41 U.S.C. § 3306 that agencies must include cost or price to the government as an evaluation factor in evaluating proposals. The exception applies to task-order contracts (i.e., IDIQ contracts) for services that are priced on the basis of hourly rates. Specifically, agencies need not consider price as an evaluation factor for such contracts if:

  1. the agency will award a base contract to every “qualifying offeror”—meaning a responsible source whose proposal conforms to solicitation requirements, meets all technical requirements, and is otherwise eligible for award; and
  2. the agency will consider cost or price to the government in competitions for individual task orders.

This provision applies to non-defense agencies. Defense agencies had previously been granted a similar exception in the FY 2017 NDAA. See 10 U.S.C. § 2305(a)(3)(C).

Congress’s goal, as evidenced by the title to section 876, is “Increasing Competition at the Task Order Level.” By awarding base IDIQ contracts to all compliant proposals, without discriminating between them based on price, agencies are likely to have more contract-holders available to compete for specific work at the task-order level. Use of this mechanism should reduce an important barrier to entry to many potential competitors—not holding the necessary IDIQ contract to compete for work solicited under task order solicitations—and, by increasing competition, could result in lower pricing and better technical offerings at the task order level.

 

 

Keep reading article at: http://www.mondaq.com/article.asp?articleid=810088

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People are key to securing the defense-industrial supply chain

Infiltrating the defense supply chain is one of the most insidious means by which attackers can compromise our nation’s communications and weapons systems. Successfully targeting a single component of the defense industrial base can cause a ripple effect that can significantly impact everything from data centers to war fighters in theater.

The Department of Defense’s new “Deliver Uncompromised” security initiative is designed to tackle this problem at its root cause: third-party suppliers. In essence, the DoD is requiring its suppliers to bake security into their applications from the beginning of the production process. A “good enough” approach that just clears the bar for minimal security criteria is no longer good enough. Security must be ingrained in the very fabric of the entire production process.

Security starts with people

The process starts with people. They are responsible for ensuring that the solutions that comprise the supply chain work as designed and are inherently secure. They work closely with highly sensitive and proprietary information that is attractive to enterprising hackers. They are the first line of defense.

Unfortunately, those same factors make people the most attractive attack vector. When a malicious actor wants to gain access to a component or system, it’s often easier to just steal someone’s credentials than it is to try and find their way around a firewall. Obtaining a simple password is often enough to gain access to a critical system that can then be compromised, or information that can be exploited.

Keep reading article at: https://www.fifthdomain.com/opinion/2019/05/13/people-are-key-to-securing-the-defense-industrial-supply-chain/

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Can contracts be awarded without pricing?

Since the enactment of the Competition in Contracting Act in 1984, price has been an essential element of every contract awarded by the Federal Government under the Federal Acquisition Regulation, along with technical capability and (more recently) past performance. In addition, before making an award, every contracting officer must determine that the price offered by the winning offeror(s) is “fair and reasonable.” 

Agencies have wide discretion in establishing the value of the factors and subfactors under each of these three elements, and frequently price is identified as the least important of the factors to be evaluated.

But what if the price on a solicitation was not a factor to be evaluated at all? As part of the Professional Services Council’s long-standing acquisition reform advocacy agenda, we supported just such an experiment and it is now in effect for some agencies.

In Section 825 of the Fiscal Year 2017 National Defense Authorization Act (NDAA), Congress provided that, for multiple-award indefinite delivery/indefinite quantity (ID/IQ) contracts, DoD, NASA and Coast Guard buying activities are not required to evaluate cost or price during the evaluation of the formation of the ID/IQ contract, provided other conditions are met. If cost or price is not evaluated at formation, however, cost or price must be an evaluation factor in conjunction with the issuance of any task or delivery order under such awarded contract. The Professional Services Council strongly supported that legislative proposal.

What all of these ID/IQ solicitations and resulting contracts have in common is that there is actually no work associated with the formation of the base contract. All of the actual work is solicited under task or delivery orders issued once the base contract is in place.  As such, we argued that agencies were creating irrelevant price evaluation factors in order to comply with the then-existing statutory requirement to evaluate price at contract formation, and agencies were not making true comparative evaluations of offerors’ pricing since there was no factual basis for doing so. And it didn’t matter whether the ID/IQ contract provided for fixed prices, labor hour pricing, or hybrid pricing.

Keep reading article at: https://www.pscouncil.org/a/Content/2019/Can_Contracts_Be_Awarded_Without_Pricing.aspx

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Senate Armed Services Subcommittee on Cybersecurity holds hearing to discuss responsibilities of the industrial base

On March 26, 2019, the Senate Armed Services’ Subcommittee on Cybersecurity held a hearing to receive testimony assessing how the Department of Defense’s (DoD) cybersecurity policies and regulations have affected the Defense Industrial Base (DIB).

To gain a better understanding of the DIB’s cybersecurity concerns, the Subcommittee invited William LaPlante, Senior Vice President and General Manager of MITRE’s National Security Sector; John Luddy, Vice President For National Security Policy at the Aerospace Industries Association; Christopher Peters, Chief Executive Officer of the Lucrum Group; and Michael MacKay, the Chief Technology Officer of Progeny Systems Corporation.

In their opening remarks, the Chairman of the Subcommittee, Senator Mike Rounds (R-SD), and Ranking Member, Senator Joe Manchin (D-WV), acknowledged industry concerns about the DoD’s lack of clarity and disparate implementation of cybersecurity regulations, such as guidance relating to DFARS 252.204-7012 (DFARS Cyber Rule or Rule) and National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171.

Senator Rounds stated that he “expects [DoD] to come up with measured policies to make improvements in [cybersecurity]” and he “hope[s] DoD takes seriously the concerns of the DIB.”  He further noted that DoD “cannot simply apply increasingly stringent cybersecurity requirements on its contractors” and that “doing so without subsidy or assistance is unlikely to particularly improve cybersecurity [for] the DIB” and would likely drive the most innovative small businesses out of the supply chain.  Senator Rounds called for putting a program in place to ensure the best possible protections for contractors regardless of size and referred to the “Achilles heel” of this issue as the desire to use a large number of small contractors while still needing to protect sensitive government information.  Later in the hearing, Senator Manchin expressed great concern over the cyber incidents experienced by DoD contractors and urged the witnesses to “tell [the Subcommittee] what you need . . . [the Subcommittee] is here to fix it and you’re here to tell us what’s broken.”

Keep reading this article at: https://www.insidegovernmentcontracts.com/2019/03/senate-armed-services-subcommittee-on-cybersecurity-holds-hearing-to-discuss-the-responsibilities-of-the-defense-industrial-base/

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DoD seeking comment on how ‘undefinitized contract actions’ are definitized

In the National Defense Authorization Acts for 2017 and 2018, Congress required the Department of Defense (DoD) to implement certain reforms for issuing and definitizing Undefinitized Contract Actions (UCAs). 

After a long delay, DoD has issued a proposed rule and requested comments from industry.

UCAs are meant to be used when the Government has urgent needs that do not leave enough time for the parties to agree on all the terms, conditions, and pricing of a formal contract.  In those circumstances, the parties can agree to a general framework that allows work to begin and payments to be made on a modified cost-reimbursement basis under a UCA, and the parties agree to definitize the contract in the near future – aspirationally, no later than 180 days after the UCA award date, or before 50 percent of the work is complete, whichever is earlier.  (See: DFARS 217.7404-3)

The Defense Federal Acquisition Regulation Supplement (DFARS) currently allows the contracting officer to extend that date to 180 days after the date on which the contractor submits a “qualifying proposal” for definitization.  In practice, as the GAO repeatedly has highlighted and as Congress has noted, poor acquisition planning has led to the unnecessary use of UCAs, and UCAs often are not definitized within the 180-day time set by regulation.

One particularly inequitable result of the delayed definitization of UCAs is its effect on profit.  Because UCAs are cost-type agreements with the contractor bearing minimal cost risk, the DFARS provides guidance for acceptable profit rates when “a substantial portion of the required performance” is completed before definitization.  If a contractor completes a large proportion of the work before the contract is belatedly definitized, an agency often will insist on a profit rate that is materially lower than it would have been if the agency had promptly definitized the contract.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=787536

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