OFPP | The Contracting Education Academy

March 2, 2011 By AMK

Bidders bite back

High above the Potomac and Anacostia rivers in Southeast Washington, construction crews have begun the largest federal construction job since the Pentagon, transforming St. Elizabeths Hospital into the new consolidated campus of the Homeland Security Department. The $3.4 billion project encompasses 4.5 million square feet and eventually will house 22 government agencies.

But the project hit a snag in October 2010 when four losing bidders for a $2.6 billion information technology contract filed protests with the Government Accountability Office. They challenged the selection of Northrop Grumman Corp. to run a massive data network at the site and argued their own bids were unfairly evaluated. Recognizing that mistakes might have been made, the General Services Administration opted to cancel the contract and begin anew.

Northrop Grumman has since filed its own protest of GSA’s decision, further delaying issuance of a new solicitation.

Such is the new reality in federal procurement. Key contracts – whether it’s $500 million to create an IT infrastructure for the Transportation Security Agency, or $40 billion for a fleet of Air Force aerial refueling tankers – can grind to a halt because of a bid protest. Until the past decade, Ralph White, who heads the bid protest division at GAO, would stop and take notice when contracts protested reached nine figures. “I considered it a big deal,” White says. “Now a $100 million contract is a fairly routine thing. We did not used to see that, and certainly not at this level.”

Protest filings are on the rise at GAO, reaching a 15-year high in fiscal 2010. Some analysts note few protests are ultimately sustained, and many are dismissed in a matter of weeks. But the delays come at a cost to the government, contractors and the taxpayer. “At the end of the day, it really slows down the process of getting hardware and services to the warfighter,” says Daniel Beck, spokesman for the Chicago-based Boeing Co.

More Protests

GAO bid protests, in some form or another, have been part of federal procurement for nearly a century (the first protest was filed in 1926). But it was not until passage of the 1984 Competition in Contracting Act that the practice became formally structured and regulated by Congress. Companies that believe they were not treated fairly during source selection also can challenge the decision with the U.S. Court of Federal Claims, or directly with the contracting agency, though GAO overwhelmingly is the preferred option.

During the 1980s and early ’90s, contractors filed an average of nearly 3,000 protests per year – an astounding figure given the relatively low number of government contract actions at the time. Surprisingly, the rise in protests during the past decade pales in comparison to the sharp increase in contract spending. For example, between fiscal 2001 and 2008, procurement actions increased almost 600 percent and their value rose more than 100 percent, according to the Congressional Research Service. But the number of protests filed during that period went up only 37 percent, indicating that despite popular perception, the proportion of contracts that were protested actually shrank.

“Each year, our contracting agencies take hundreds of thousands of contract actions that could be protested, but more than 99 percent of them don’t get protested,” says Daniel Gordon, administrator of the Office of Federal Procurement Policy and the Obama administration’s top acquisition official. As the government continues to slow its acquisition spending, Gordon expects protest figures to decline as well.

But recent data suggest otherwise. During the past three years, GAO protest filings have skyrocketed 39 percent, reaching 2,220 in fiscal 2010, the highest point since 1995. There are several explanations for the increase, most notably the agency’s expanded jurisdiction to task-and-delivery order protests of more than $10 million. In 2010, 189 task order contracts were protested. In 2008, Congress also authorized contractors to protest TSA acquisitions and public-private competition decisions made under circular A-76.

Analysts also see the influx of lucrative, multiyear, indefinite delivery-indefinite quantity contracts – which have the potential to lock a contractor out of agency work for up to 10 years – as a contributing factor. “Larger companies, which were historically more reluctant to file protests because of customer relations concerns, are a little less reluctant,” says Thomas C. Papson, a partner at McKenna Long & Aldridge in Washington. “It’s almost a circle. As you see your competitors filing protest after protest, it almost legitimizes it from that standpoint.”

While protest filings are on the rise, the percentage of cases GAO sustained has remained flat at roughly 20 percent. Most cases never get to that point as contractors find other ways to settle disputes in their favor. Agencies often will eliminate the middleman and renegotiate directly with the contractor.

The 2010 effectiveness rate – based on a contractor receiving “some form of relief from the agency,” frequently the reopening of the contract – was 42 percent, according to GAO data. “Protests give agencies and their counsels an opportunity to have a sanity effect on what they have just done,” Papson says. “It allows them to go back, take a fresh look with the benefit of the protest issues put on the table and correct the mistakes.”

The parties also can agree to use alternative dispute resolution, an increasingly popular “outcome prediction” process in which GAO attorneys inform the parties early in the process about how they will likely rule if forced to draft a decision. The technique typically leads to protests being resolved without further GAO intervention.

The high rate of agency interventions in bid protests could signal that contracting officers are making too many mistakes in following the terms of the solicitation. “The ones that get pulled back without a decision usually have some really basic mistakes in them,” White says. “You can’t say that you will evaluate [a proposal] one way and then evaluate it another way.”

Abusing the System?

A GAO protest generally triggers an automatic stay of the contract award or performance while the protest is pending, though the agency is allowed to move forward under urgent and compelling circumstances. GAO has up to 100 days to issue a decision, a deadline it has never missed.

But critics suggest companies have abused the process either by looking to extend the life of an existing contract by a few months, or by grasping at straws in an effort to uncover some minor error that could lead to a reversal. “We feel protests are being used as a standard business practice, and that disturbs us,” Beck says. “We feel that protests are appropriate if there is strong evidence of a problem in the acquisition process but we don’t think it’s appropriate as a post-award strategy for those contractors that were defeated by bids that were simply deemed superior in a fair and open process.”

James E. Cuff, executive vice president of business development, strategy, and mergers and acquisitions at SAIC in McLean, Va., suggests some protests are little more than fishing expeditions. By filing a protest, a company can gain access to far more information than it would typically be entitled to during a post-award debriefing. “It would be healthier for industry, and clearly healthier for the customer, if protests were an extraordinary event,” Cuff says. He’d recommend a system in which “people can’t protest simply because they don’t like the answer and they are hoping to find some flaw, even if they don’t know of any flaw, when they file the protest.”

SAIC and Boeing have reputations for filing fewer bid protests than do other large contractors. “We treat protests like extraordinary events,” Cuff says. “We set a high bar when protesting. There must be a significant mistake in the process.”

Boeing, however, was responsible for arguably the most significant protest in recent memory: its successful challenge in 2008 of the Air Force’s aerial refueling tanker contract awarded to EADS North America and Northrop Grumman. “It’s a costly exercise to go through for us,” Beck says. “We also need to be thinking about our relationship with our military and government customers. But with the tanker, we felt there was strong ground for a protest, and GAO validated our concerns.” The Air Force has yet to issue a new contract for the tankers.

Pentagon contracts are particularly vulnerable to bid protests. From fiscal 2001 to 2008, Defense Department protests increased 39 percent, the Congressional Research Service notes. “Protests are extremely detrimental to the warfighter and the taxpayer,” wrote then-acting Undersecretary of Defense for Acquisition, Technology and Logistics John Young Jr. in an August 2007 memo. “These protest actions consume vast amounts of time for acquisition, legal and requirements team members; delay program initiation and the delivery of capability; strain relations with our industry partners and stakeholders; and create misperceptions among American citizens.”

But Gordon suggests its focus on transparency and timeliness makes the U.S. protest system a model for other nations. “I don’t think that protests affect agencies’ ability to rapidly award contracts, except for the few dozen each year where GAO finds the agency violated procurement law,” he says. “And in these cases, it’s important for us to stop and get things right.”

Tip of the Iceberg

With contract spending expected to decline in the coming years, particularly at Defense, and the larger economy still in slow recovery, some analysts believe the incentives for filing protests will only grow stronger. “Companies are concerned about being locked out of the market and may think it makes more sense to protest,” says Rich Rector, chairman of the government contracts practice and partner at the Washington law firm DLA Piper. “With the decline in spending, these are tough economic times, and they are getting tighter in the government space. It could drive people not to be as sanguine when they lose a contract.”

It’s unclear, however, what, if anything, can be done to stem the tide. Some industry officials want to see a financial penalty levied on losing protesters as a disincentive to filing frivolous challenges. While the topic has been batted around at Defense, the plan does not yet appear to have the administration’s support. Some have speculated that fining protesters could deter many firms, including small businesses, from filing legitimate protests.

Others argue that protests will decline only if the government provides additional resources and training to an overburdened and overworked acquisition workforce. “We need to ensure that competition is done right the first time so that the kind of obvious errors you see in some major procurements get made less frequently,” Papson says. “Some mistakes leave you shaking your head and asking how they missed that. The answer may be that they are inadequately staffed, or they were under pressure to get it done in an unreasonable amount of time.”

Some agencies, however, might be going overboard to protect against protests. Too often, contracting officers issue awards based on initial proposals without conducting further dialogue with bidders for fear that discussions are a “protest-rich area,” Gordon says. The result, he says, is the government might be missing out on better or less expensive proposals. In recent months, OFPP has begun meeting with contracting officers in an attempt to “myth bust” the idea that talking with vendors will lead to protests.

“We need to talk with vendors early and often in our acquisitions,” Gordon says. “And not talking with them to avoid protests only hurts the government, particularly when more communication could help the agency better figure out what it needs and how to buy it.”

While the bid protest system is undeniably imperfect, most agree it’s one of the success stories of the American federal procurement structure. GAO works through its cases rapidly and judiciously, often with little complaint from industry. All the while, the bid protest staff at GAO has remained static at roughly 30 employees for the past decade. “What you get is a lot more transparency, integrity, or accountability than in other places,” White says. “It’s a system I would hate to walk away from and think about what it would mean to provide no opportunity for a redress when people think that something was unfair.”

— by Robert Brodsky – Government Executive – February 1, 2011

February 28, 2011 By AMK

Federal contract spending slowdown just beginning, OMB official says

There are about 50 percent fewer federal contract specialists today than there were in 2001 because for the past 15 years the government has failed to invest adequately in the federal acquisition workforce and its training, a senior official at the Office of Management and Budget told a meeting of contractors and government officials.

However, “we’re not in a situation where we face a nonfunctioning system,” Dan Gordon, director of OMB’s Office of Federal Procurement Policy, Thursday told members of the Association for Federal Information Resources Management. “On the contrary, our acquisition system works pretty well. People sometimes forget that.”

In an address titled “Mythbusting 101: How Government-Industry Collaboration Enhances Contracting,” Gordon laid out three priorities.

“Our No. 1 priority is strengthening the acquisition workforce,” he said, adding that recently there have been hiring increases in the Defense Department and civilian agencies “of between 7 percent and 10 percent.”

Gordon said his No. 2 priority is to strengthen fiscal responsibility because between 2001 and 2008 federal procurement spending more than doubled to over $500 billion spent annually on goods and services, which is an unsustainable path, he said.

“That has stopped. In fiscal 2010, the federal government spent less on goods and services through contracts than it did in 2009. And I cannot imagine that that trend is going to be reversed any time soon,” he said. “We simply cannot afford to increase our spending on contracts. We don’t have the money. You see it with DOD, you see it with civilian agencies. The picture is very similar across the federal government.”

“Putting that tsunami of spending” in the hands of a depleted workforce that wasn’t getting the needed investment in training “was a recipe for problems, and we’ve had a good number of problems,” Gordon said.

Among other problems, he cited the government’s too great reliance on cost reimbursement, sole-source and time-and-materials contracts.

But there are times when those types of contracts do make sense, Gordon said, urging the need for flexibility in contracting.

“Fiscal responsibility means spending less to the extent that we’re able to, and it means buying smarter whenever we can,” he said.

As an example, he said there are increasing opportunities for strategic sourcing on IT contracts.

Gordon said his No. 3 priority is to rebalance in the relationship between the government and the contractor communities, citing current issues within the federal acquisition workforce.

He derided what he called the many myths that continue to hamper better contracting, such as a false belief among many contracting officials that they should avoid contact with contractors for fear they will precipitate protests or jeopardize proprietary information.

“Partly because of that wave of demand for contracts hitting an unprepared and understaffed acquisition workforce, there have been too many situations where we’ve contracted out unthinkingly, including functions that need to be reserved for federal employees,” he said.

“There have been situations, including in contract shops themselves, but also in IT offices and in mission offices, where there is no federal employee that has oversight of what is going on,” Gordon continued.

“There are not enough federal employees so [that] the federal employees maintain control. That is an unbalanced, unhealthy situation,” he said.

Federal employees need to oversee federal contractors, he said, and that means there must be an adequate number of trained contracting officers “so that the federal employees maintain control of the federal agencies’ missions and operations.”

Acknowledging the federal government’s need for contractors, Gordon said, “But contractors support us in the federal government, which means that we have to be in charge.”

— by David Hubler – Washington Technology – Feb. 18, 2011

February 22, 2011 By AMK

Jenkins to be FAI director

Donna Jenkins will be the next official director of the Federal Acquisition Institute.

Jenkins has been the acting director of FAI since last Aug. 23. She expects to get the new title Feb. 27.

The institute, which is under the auspices of General Services Administration, works to develop the federal acquisition workforce by providing training for civilian agencies’ employees.

Senators have pushed for reforms in the FAI. In 2010, the Senate passed Sen. Susan Collins’ (R-Maine) legislation to strengthen the institute with more authorities over the acquisition workforce training fund, as well as clearing up ambiguities about whom FAI reports to.

The legislation would also have put the choice of who would lead FAI into the hands of the administrator of the Office of Federal Procurement Policy and move the director of the institute to the Office of Management and Budget’s procurement policy office. However, the House never considered the bill, and such a bill has not been introduced in the current Congress.

— by Matthew Weigelt – Federal Computer Week – Feb. 18, 2011 at 1:25 PM

February 19, 2011 By AMK

OFPP zeroes in on acquisition workforce

With much of the focus on contracting reform aimed at communication between government and industry, some government officials want to make sure front-line contracting feds aren’t overlooked.

Dan Gordon, administrator of the Office of Federal Procurement Policy (OFPP), said the acquisition workforce isn’t equipped to manage the large number of government contracts. His office wants to change that.

“Our number one priority is strengthening the acquisition workforce,” Gordon said Thursday at a government-industry forum sponsored by AFFIRM in Washington.

Gordon said over the past 15 years the government has been on an unsustainable path of increased contracting and a flat acquisition workforce.

“Putting that tsunami of spending onto an acquisition workforce that had shrunk and wasn’t getting the investment and training was a recipe for problems, and we’ve had a good number of problems,” Gordon said.

The Office of Management and Budget announced Feb. 3 the first year-over-year decline in contract spending since 1997. Gordon said that trend is positive, but on its own won’t be enough to solve the problem with the acquisition workforce.

Last year the president’s budget proposal requested more than $150 million to invest in the acquisition workforce. This year’s request is slightly smaller at around $140 million.

Gordon said despite general support from the Hill, he isn’t optimistic either request will be met.

However, Gordon said agencies can help the existing acquisition workforce by improving internal communication. He said poor communication within agencies leads to significant problems with contract design.

“We have our IT shops that are often focused on sophisticated IT solutions,” Gordon said. “We have the program shops – the people who actually need what the contract is for – who may not be explaining to the IT people what they need properly. We have a contract shop that doesn’t define requirements. They just listen to make sure they’ve got requirements that make sense in terms of ‘will this be a competitive situation’, but contract people can’t define requirements. They need input from the program people and the IT people to do that.”

Gordon also said he wants to increase training for the acquisition workforce. One of OMB’s goals in scaling back contract spending was to reduce the number of high risk contracts such as time-and-materials and labor-hours contracts.

But Gordon said selecting the appropriate type of contract isn’t always simple. Even though fixed-price contracts are considered the safe type of deals, cost-reimbursement agreements make more sense.

“We’re not telling agencies to go fixed-price no matter what,” Gordon said. “Sometimes is just a matter of looking. Have we come far enough that we can define our requirements and switch to fixed price? Then we should. But we shouldn’t switch to fixed price without thinking.”

Gordon said insufficient contract management personnel also is a significant challenge. He said agencies have increased the number of 1102 series positions between 7 – 12 percent but he wants to see even more hiring — especially of contracting officer’s technical representatives (COTRs).

He said when agencies don’t have a COTR, they end up contracting out project oversight instead of doing it themselves.

“Of course we need contractors, but contractors support us in the federal government, which means that we have to be in charge,” Gordon said. “There are too many situations where there is no federal employee that has oversight of what’s going on, or there aren’t enough federal employees so that they maintain control. That is an unbalanced, unhealthy situation.”

But Gordon emphasized the important role of contractors and encouraged agencies to increase dialog with vendors. OMB and OFPP recently launched a mythbusting campaign to educate the federal workforce about rules around contracting.

Gordon said existing Federal Acquisition Regulations (FAR) allows for broad communications but agencies don’t understand the rules. He said he wants to create an environment in which acquisition officers are comfortable sharing information with industry in order to improve contracts.

“Share information,” Gordon said. “We benefit from that information being shared. We’re not doing it as a favor to industry — we’re doing it to make the procurement system work better. Refusing to share information is foolish, counterproductive, and causes the government to lose.”

Gordon said he conducts monthly calls with senior procurement executives to listen to challenges they face and ideas they have about the educational campaign.

Next month, OFPP will hold a working group of federal acquisition professionals to help design an online community of practice.

February 4, 2011 By AMK

OMB calls for better communication with vendors to bust contracting myths

The Office of Management and Budget (OMB) issued a lengthy memorandum on Feb. 2, 2011 outlining 10 myths commonly-believed by businesses about government contracting. The myths were compiled as a result of outreach sessions held by the Office of Federal Procurement Policy (OFPP) with industry representatives, acquisition professionals, agency procurement attorneys, and others to identify and address core misconceptions about communication between the government and industry during the pre-award acquisition process.

OMB pointed out that it wishes to address these misconceptions as a part of a “myth-busters” educational campaign, one of the key tenets of the OMB’s 25-Point Implementation Plan to Reform Federal IT Management.

OMB is calling for all agencies to develop “vendor communications plans” to provide for “clear, consistent direction to their workforce and industry partners about how to engage with industry prior to the award of contracts.”

OFPP is to work with the Federal Acquisition Institute (FAI), the Defense Acquisition University (DAU), and agency training practitioners to conduct an awareness campaign to eliminate unnecessary barriers to engagement.

Further, OFPP is pledging to work with federal agencies to identify best practices, training opportunities, samples of guidance, and other information that may be helpful in developing these communication plans. Suggested elements of the communications plans are:

1. Statement of agency commitment to: a) Communicate early, frequently, and constructively with industry; b) Include small businesses and subgroups of small businesses in communications with industry; c) Include vendors that the agency has not worked with in the past; d) Identify, in the agency’s published procurement forecast, which procurements are likely to involve opportunity for additional communication with industry; and e) Protect non-public information including vendors’ confidential information and the agency’s source selection information.

2. Identification of senior agency and bureau (if applicable) official responsible for promoting vendor engagement;

3. Brief description of efforts undertaken or planned to reduce barriers and promote engagement;

4. Criteria for identifying which acquisitions must include vendor input in the pre-award phase and the extent of the required engagement as a condition of approval by the agency’s investment review board (or similar body). At a minimum, acquisition plans for high-risk, large-dollar, and complex programs, such as those for major IT systems and for re-competitions that need to attract new entrants to ensure adequate competition, should include a comprehensive vendor engagement strategy that:

includes at least one industry day or a pre-solicitation or pre-proposal conference; and
allows for a reasonable amount of one-on-one engagement; and
allows time for discussions, as needed and in accordance with FAR Part 15, during the proposal evaluation process; or
requires a written justification as to why those steps are unnecessary.

5. Publication of engagement events to include industry days, small business outreach sessions, pre-solicitation conferences, RFP question and answer sessions, etc. These shall be posted and updated regularly using the existing “special notices” function on www.fedbizopps.gov and on other sites as identified by the agency.

6. Brief description of roles and responsibilities of the: a) Contracting Officer; b) Program Manager; c) COR/COTR; d) General Counsel; e) Ethics Officers; f) OSDBU; and g) Other Officials.

7. Training and awareness efforts for employees and contractors.

8. Links to existing policies.

9. Plans to follow-up with employees and industry representatives within 6 months of posting the vendor engagement plan, to further refine and improve communication, (e.g., post-award surveys of the contracting officers, program managers, and offerors for large, complex procurements, focus group meetings for general feedback).

A recap of the “Top 10 Contracting Myths” compiled by OMB appears below:

Misconception #1 – “We can’t meet one-on-one with a potential offeror.”

Fact – Government officials can generally meet one-on-one with potential offerors as long as no vendor receives preferential treatment.

Misconception #2 – “Since communication with contractors is like communication with registered lobbyists, and since contact with lobbyists must be disclosed, additional communication with contractors will involve a substantial additional disclosure burden, so we should avoid these meetings.”

Fact – Disclosure is required only in certain circumstances, such as for meetings with registered lobbyists. Many contractors do not fall into this category, and even when disclosure is required, it is normally a minimal burden that should not prevent a useful meeting from taking place.

Misconception #3 – “A protest is something to be avoided at all costs – even if it means the government limits conversations with industry.”

Fact – Restricting communication won’t prevent a protest, and limiting communication might actually increase the chance of a protest – in addition to depriving the government of potentially useful information.

Misconception #4 – “Conducting discussions/negotiations after receipt of proposals will add too much time to the schedule.”

Fact –Whether discussions should be conducted is a key decision for contracting officers to make. Avoiding discussions solely because of schedule concerns may be counter-productive, and may cause delays and other problems during contract performance.

Misconception #5 – “If the government meets with vendors, that may cause them to submit an unsolicited proposal and that will delay the procurement process.”

Fact – Submission of an unsolicited proposal should not affect the schedule. Generally, the unsolicited proposal process is separate from the process for a known agency requirement that can be acquired using competitive methods.

Misconception #6 – “When the government awards a task or delivery order using the Federal Supply Schedules, debriefing the offerors isn’t required so it shouldn’t be done.”

Fact – Providing feedback is important, both for offerors and the government, so agencies should generally provide feedback whenever possible.

Misconception #7 – “Industry days and similar events attended by multiple vendors are of low value to industry and the government because industry won’t provide useful information in front of competitors, and the government doesn’t release new information.”

Fact – Well-organized industry days, as well as pre-solicitation and pre-proposal conferences, are valuable opportunities for the government and for potential vendors – both prime contractors and subcontractors, many of whom are small businesses.

Misconception #8 – “The program manager already talked to industry to develop the technical requirements, so the contracting officer doesn’t need to do anything else before issuing the RFP.”

Fact – The technical requirements are only part of the acquisition; getting feedback on terms and conditions, pricing structure, performance metrics, evaluation criteria, and contract administration matters will improve the award and implementation process.

Misconception #9 – “Giving industry only a few days to respond to an RFP is OK since the government has been talking to industry about this procurement for over a year.”

Fact – Providing only short response times may result in the government receiving fewer proposals and the ones received may not be as well-developed – which can lead to a flawed contract. This approach signals that the government isn’t really interested in competition.

Misconception #10 – “Getting broad participation by many different vendors is too difficult; we’re better off dealing with the established companies we know.”

Fact – The government loses when we limit ourselves to the companies we already work with. Instead, we need to look for opportunities to increase competition and ensure that all vendors, including small businesses, get fair consideration.

— compiled and published by The Contracting Education Academy at Georgia Tech, Feb. 3, 2011.

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