NDAA | The Contracting Education Academy

April 26, 2019 By AMK

What the 809 Panel didn’t quite get right

The Section 809 panel offers an important new idea on how the defense acquisition system could be improved to provide the Pentagon greater access to innovative new technologies that are rapidly developed in the private sector.

But the panel fumbled its recommendations with a contradictory and incoherent legislative approach that would hurt more than it helps. That should not undermine the significance of the panel’s underlying idea: a new focus on the source of funding for commercial items instead of the marketplace in which they are sold. This could encourage companies to develop defense-unique products at their own expense. Today, many are driven away when they are forced to accept regulated pricing and burdensome, government-unique contract terms and conditions.

Successes and Failures

We had high hopes when we helped to write the commercial buying acquisition reforms in the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996. These reforms broadened the definition of commercial items, established a commercial item preference, and authorized waivers to government-unique requirements and contract clauses for the purchase of commercial solutions.

As a result, the government went from 476 contracts under simplified commercial item procedures in 1996 to nearly 13 million contracts worth almost $75 billion in 2011. As our colleague Jon Etherton has explained, this enabled the U.S. government to catch up with the information technology revolution that had swept the private sector in the 1990s and likely saved the Department of Defense (DOD) billions of dollars by avoiding unnecessary research and development and the extended acquisition lead times associated with government-unique products.

Keep reading this article at: https://breakingdefense.com/2019/04/what-the-809-panel-didnt-quite-get-right-greenwalt-levine/

April 24, 2019 By AMK

2019 NDAA analysis: A harder look at major defense acquisitions

This is the sixth blog post in a series analyzing the 2019 National Defense Authorization Act (NDAA) as signed into law on Aug. 13, 2018. Stay tuned for more blog posts covering additional topics in the near future from Holland & Knight’s Government Contracts Team.

With the 2019 NDAA, Congress has put teeth behind recommendations stemming from an independent study on sustainment planning in the Defense acquisition process. Reflecting congressional concern with the sustainment and total life-cycle costs of major defense acquisition programs, Section 844 of the 2017 NDAA had required the Secretary of Defense, through an agreement with an independent entity, to conduct a review of the extent to which sustainment matters are considered in decisions related to the requirements, research and development, acquisition, cost estimating, and programming and budgeting processes for major defense acquisition programs.

The 2019 NDAA directs the Secretary of Defense to “commence implementation of each recommendation submitted” as part of this independent assessment, or provide Congress with a “specific justification” for the delayed implementation or non-implementation of a recommendation. Where the Defense Secretary is opting not to implement one of these recommendations, he or she must provide “a summary of the alternative actions the Secretary plans to take to address the purposes underlying the recommendation.”

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=795216

April 8, 2019 By cs

OIG seeks voluntary refund despite contractor’s adherence to TINA requirements

DoD’s Office of Inspector General (OIG) for the Department of Defense (DoD) has recommended that a contractor be requested to provide a refund based on “excessive profits.”

On February 25, 2019, the Office of Inspector General (OIG) for the Department of Defense (DoD) issued an audit report analyzing the prices of spare aviation parts purchased by the Defense Logistics Agency (DLA) and the Army from TransDigm Group, Inc.

The audit was conducted in response to letters from certain Members of Congress, who had inquired whether the spare parts were sold at fair and reasonable prices and in compliance with the Truthful Cost or Pricing Data Act (formerly known as the Truth in Negotiations Act or TINA).

The OIG’s audit confirmed that both TransDigm and the responsible DoD contracting officers fully complied with the Act and related regulations governing the price negotiations, but the OIG nonetheless concluded that the contractor earned excess profit on the majority of parts sold. In a highly unusual move, the OIG recommended that DoD request a “voluntary refund” from TransDigm of its allegedly “excessive” profits, and the OIG also recommended a number of changes to statutory, regulatory, and administrative policies governing the provision of cost or pricing data.

The OIG’s Findings

At the request of U.S. Representatives Ro Khanna and Tim Ryan and Senator Elizabeth Warren, the OIG reviewed the price reasonableness of 47 spare aircraft parts DoD procured from TransDigm between January 2015 and January 2017. Using uncertified cost or pricing data that it collected during the audit, the OIG calculated the apparent profit realized by the contractor on the sale of each part, and concluded that the contractor realized “unreasonable” profits (defined as profits of greater than 15% in the report) on all but one of the parts. (The OIG arrived at the 15 percent profit percentage, in part, by looking at maximum profit percentages allowed in the FAR for three different types of contracts, none of which were fixed price.) The OIG applied this finding to a broader sampling of contracts held by TransDigm, and concluded that the contractor had earned $16.1 million in “excess profit” (i.e., profit over 15 percent) for the parts at issue.

The OIG concluded that a number of factors contributed to these supposedly “excessive” profits.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2019/03/when-compliance-is-not-enough-oig-seeks-voluntary-refund-despite-contractors-adherence-to-tina-requirements/

March 12, 2019 By cs

2019 NDAA analysis: Commercial item contracting

The 2019 NDAA contains several provisions reforming commercial item contracting.

As discussed below, these changes include: 1) revision of the definition of commercial items for purposes of federal acquisition statutes; 2) limitations on the applicability to U.S. Department of Defense (DoD) commercial contracts of certain provisions of law; 3) modifications to procurement through commercial e-commerce portals; and 4) review of federal acquisition regulations on commercial products, commercial services, and commercially available off-the-shelf items.

**The “Contracting Cone” shows the full spectrum of available FAR and non-FAR contract strategies.**

Several federal acquisition statutes and regulations exist that impact commercial item contracting. The two most prominent examples are the Federal Acquisition Streamlining Act (FASA) and Part 12 of the Federal Acquisition Regulation (FAR). Before Congress passed FASA in 1994, many contractors did not conduct business with the U.S. government due to demanding terms and conditions and additional costs or risks associated with government specifications. FAR Part 12 establishes a mandatory preference for the U.S. government to purchase products and services available in the commercial marketplace using commercial terms and conditions. From time to time, Congress revises these statutes and regulations in response to shifts in policy considerations and market conditions.

The 2019 NDAA works again to reform commercial item contracting. These revisions are important for government contractors operating in the commercial item contracting space to know.

Keep reading this article at: https://www.jdsupra.com/legalnews/2019-ndaa-analysis-commercial-item-15566/

January 17, 2019 By cs

DoD’s long-awaited LPTA regulations expected in 4th quarter of FY19

For a number of years now, Lowest Price Technically Acceptable (LPTA) source-selection procedures have come under fire for overuse and misuse at the same time budget constraints make LPTA methods more enticing to some cash-strapped agencies.

In an LPTA procurement, the Government evaluates proposals for mere technical acceptability under the solicitation’s stated evaluation criteria. Of the technically acceptable proposals received from eligible offerors, the Government then awards the contract to the lowest-price proposal, without considering any additional value that more expensive proposals may provide. In an LPTA acquisition, it does not matter that the second least expensive proposal may have three times more technical merit than the lowest-price technically acceptable proposal. Even if that technically superior proposal is only a dime more expensive, the Government is required to make the award to the acceptable proposal that is ten cents cheaper.

Some of you may remember that, way back in 2016, Congress passed the National Defense Authorization Act (NDAA) for 2017, requiring the Department of Defense (DoD) to revise the Defense Federal Acquisition Regulation Supplement (DFARS) within 120 days to require DoD contracting officers to ensure six criteria are satisfied before issuing a solicitation on an LPTA basis.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=767110