fair and reasonable price | The Contracting Education Academy

April 18, 2016 By AMK

DoD is better defining what lowest price means in contracts

The Defense Department is implementing a major change to the way it awards contracts to companies.

***Better Buying Power (BBP) is based on the principle that continuous improvement is the best approach to improving the performance of the defense acquisition enterprise.***

An April 1, 2016 memo from Claire Grady, DoD’s director of defense procurement and acquisition policy lessens the onus on source selection officials to justify paying more for their requirements than just lowest cost technically acceptable (LPTA). It also adds some transparency to how the department prices its requirements.

The policy change is part of the Better Buying Power acquisition reforms, which stated the LPTA requirements sometimes ended up costing DoD more money in the long run. A 2013 Market Connections and Centurion Research Solutions study found 65 percent of contractors and 43 percent of government workers thought LPTA hurt long term value for short term savings. Some critics said DoD places too much emphasis on LPTA contracts.

DoD now will try to make clearer the worth of delivering a capability above “technically acceptable” or the minimum requirement when awarding contracts.

Keep reading this article at: http://federalnewsradio.com/defense/2016/04/dod-tweaks-lpta-methods-save-money-help-industry/

See the April 1, 2016 memo from Claire Grady, DoD’s Director of Defense Procurement and Acquisition Policy, here: http://www.acq.osd.mil/dpap/policy/policyvault/USA004370-14-DPAP.pdf

April 7, 2016 By AMK

Price reasonableness determinations for FSS supply orders by Army’s Huntsville operation need improvement

The Inspector General (IG) of Department of Defense (DoD) reports that contracting personnel at the U.S. Army Engineering and Support Center, Huntsville (CEHNC) did not adequately document and support their price reasonableness determinations for 25 Federal Supply Schedule (FSS) orders, valued at $10 million.

The IG reviewed a total, non-statistical sample of 33 orders, valued at $13.6 million. The IG’s office determined that CEHNC contracting personnel relied on:

Inadequate independent Government estimates for all 25 orders. This occurred because they relied on the expertise of the preparers of the Independent Government Estimates (IGEs) rather than having the preparers document and support the basis of the estimate as required by the Army Federal Acquisition Regulation Supplement and U.S. Army Corps of Engineers guidance. In addition, while the contracting officers stated that they took training on preparing IGEs, they did not document that they completed that training.
Vendor quotes were eliminated from consideration for technical reasons for 7 of the 25, valued at $3 million, without verifying whether the prices were still valid for comparison purposes. The contracting officer involved in the actions admitted that this was an oversight.
CEHNC contracting personnel relied on price reasonableness determinations that were not approved until after the award of 4, valued at $1.76 million, of the 33 orders. Again, the contracting officer stated that this was an oversight.

Bottom line, the IG determined that CEHNC did not have guidance requiring contracting personnel to approve price reasonableness determinations before awarding orders. As a result, CEHNC’s customers may have paid more than they should have for the supplies purchased.

In its report, the IG recommend that:

Refresher training be conducted, detailing contracting officer’s responsibilities for developing, reviewing, and approving IGE’s;
Completion of such training by contracting personnel be documented;
Guidance be developed and implemented requiring contracting personnel to verify that the prices from quotes eliminated for technical reasons are valid for comparison purposes when making price reasonableness determinations; and
Guidance be developed and implemented requiring contracting personnel to approve price reasonableness determinations before awarding orders.

The IG’s complete report can be viewed at: http://www.dodig.mil/pubs/documents/DODIG-2016-069.pdf

June 24, 2015 By AMK

Pentagon contractor accused of overcharging millions

The federal government has alleged a military contractor overcharged it by at least $44 million for parts, labor and supplies on a multi-billion dollar contract for tens of thousands of trucks ordered by the Army’s acquisitions center based in Warren, MI.

Filing its complaint in U.S. District Court in Detroit, the Justice Department accused BAE Systems, the American subsidiary of a global defense and security contractor based in London, England, of “certifying and submitting false or fraudulent” prices to contracting officials at Michigan’s Army Tactical Command Life Cycle Management Command (TACOM).

“Private companies are entitled to earn an honest profit from procurement contracts with the U.S. government, but they may not knowingly overcharge the military for supplies and materials,” said U.S. Attorney Barbara McQuade in Detroit. “The conduct alleged in this complaint is akin to charging $600 for a hammer.”

Keep reading this article at: http://www.freep.com/story/news/local/2015/06/19/tacom-bae-complaint/28982833/

February 26, 2015 By AMK

GSA Schedules and DoD’s confusing FAR 8.4 deviation

On March 13, 2014, Defense Procurement and Acquisition Policy (DPAP) issued a class deviation to FAR 8.404(d). This deviation directed that ordering activity contracting officers are responsible for making a determination of fair and reasonable pricing when using GSA’s Federal Supply Schedules (FSS). The deviation essentially incorporates complex FAR 15.404-1 price analysis techniques into the streamlined FSS ordering procedures with the vague caveat that the complexity and circumstances of each acquisition should determine the level of detail of the analysis required.

In discussing the rationale for this deviation, DPAP has consistently focused on the variation in pricing across the FSS program. In particular, the example of a $29 stapler listed on an FSS contract has been cited by DPAP as creating a “significant” risk that Department of Defense (DoD) contracting officers will simply order the $29 stapler rather than search for a cheaper stapler on another FSS contract. For those of us of a certain age, the use of this example reminds one of the $600 toilet seat reportedly purchased by the DoD back in the 1980s. Like the toilet seat purchase, however, there is greater context that undercuts the stapler example cited by DPAP.

Keep reading this article at: http://www.federaltimes.com/story/government/acquisition/blog/2015/02/13/gsa-advantage-dpap-far-waldron/23365305/

December 15, 2014 By AMK

Acquisition reform? Who says?

There is a lot of talk about the next generation of reforms and changes to the regimes of government acquisition policies, practices and culture.

But two stark examples emerged almost simultaneously in recent weeks that highlight just how far we have to go to create a federal acquisition system that is effective, efficient, responsive to the needs of customers, and enables access to the full array of capabilities the private sector can offer.

One example speaks directly to continued cultural challenges and the other to the mindset that drives far too much current policy and practice.

Let’s start with the culture. In a Nov. 7 article in Government Executive magazine, Kimberly McCabe, the CEO of ASI Government and Dan Chenok, the head of the IBM Center for the Business of Government, made a strong, thoughtful, and articulate case for thinking about acquisition in a holistic manner with an eye toward the realities of today and a very different future.

Moreover, their article outlined a new framework designed to describe and help measure organizational acquisition capabilities and maturity. And, perhaps most significantly, recognizing that the pressure for real, sustainable change has to come from within, the framework they outlined was largely the work of a group of federal acquisition and technology practitioners—from rising professionals to senior executives—they had convened.

Keep reading this article at: http://washingtontechnology.com/articles/2014/12/05/insights-soloway-acquisition-reform.aspx

The Defense Department is implementing a major change to the way it awards contracts to companies.

The federal government has alleged a military contractor overcharged it by at least $44 million for parts, labor and supplies on a multi-billion dollar contract for tens of thousands of trucks ordered by the Army’s acquisitions center based in Warren, MI.

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