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January 14, 2021 By cs

COFC confirms ‘rule of two’ analysis applies before agency decides to utilize a multiple-award vehicle

The U.S. Court of Federal Claims (COFC) issued a decision on Nov. 30, 2020 that supported the Small Business Administration’s position regarding the Rule of Two analysis requirements for government acquisitions.

The central question surrounding the case was whether the U.S. Army could cancel a Federal Acquisition Regulation (FAR) Part 8 service-disabled veteran-owned small business (SDVOSB) set-aside procurement under the General Services Administration’s Federal Supply Schedule (FSS) and move the requirement to a multiple-award indefinite-delivery, indefinite-quantity (MAIDIQ) contract vehicle that the plaintiff, The Tolliver Group, Inc. (Tolliver), did not hold.

In its protest, Tolliver argued, in part, that the Army’s actions violated the Rule of Two because the agency was required to determine whether two or more small businesses were capable of performing the requirement prior to choosing to put the procurement on the MAIDIQ contract.

The COFC’s decision confirms that the Rule of Two analysis applies before an agency elects to procure a requirement from a multiple-award contract (MAC) vehicle under FAR Part 16.5.

The Rule of Two requires contracting officers to set aside any acquisition over the simplified acquisition threshold for small business participation when there is a reasonable expectation that (1) offers will be obtained from at least two responsible small business concerns and (2) the award will be made at fair market prices.

In Tolliver, the Army argued that a Rule of Two analysis was not required because—according the Small Business Jobs Act, as implemented in 15 U.S.C. § 644(r)—federal agencies have the discretion to issue MACs without first conducting a Rule of Two analysis to determine whether it should be set aside for small businesses.

Keep reading this article at: https://www.jdsupra.com/legalnews/cofc-confirms-rule-of-two-analysis-83418/

Filed Under: Government Contracting News Tagged With: Army, COFC, Court of Federal Claims, FAR, Federal Supply Schedule, FSS, GSA Schedule, IDIQ, MAC, MAIDIQ, multiple award, multiple award contract, rule of two, SBA, SDVOSB, set-aside, simplified acquisition

April 10, 2020 By cs

The challenges facing ‘non-traditional’ contractors

As the Department of Defense (DoD) focuses on reforming its acquisition system to move “at the speed of relevance,” one critical goal is to better recruit and engage with “non-traditional contractors” to deliver the weaponry and services necessary to maintain our technological edge and national security.

The DoD must understand why these firms are not interested in or aware of supplying and supporting new and cutting-edge products and services. What do we now need for the DoD to increase its business partnerships with non-traditional contractors, and thus bring more ideas, entrepreneurial spirit, and new products and services to the defense market sooner to maintain our military edge?

Pressure to Perform

Today’s defense acquisition system is under tremendous pressure to improve performance. Threats to national security change rapidly. As has been the case with many disrupted, former Fortune 500 and brick-and-mortar firms, business and consumer preferences in all forms of services and products continue changing for DoD, upending old economic models.

In this case, the customer is the U.S. citizen and the product is continued, unparalleled national defense. Success historically has depended on a powerful defense industrial base, which has been changed dramatically. The federal government formerly was a very significant contributor to research and development (R&D), including that leading to new weaponry. However, according to a National Science Foundation report, published by the American Association for the Advancement of Science, between 1965 and 2017, government’s share of R&D spending dropped from 65 percent to 22 percent in constant dollars. The DoD therefore is not the same big player it once was in the overall economy.

Adversaries are making rapid progress. This means that America’s best minds, who develop the technology that powers advances across our economy, increasingly must include national defense in their area of responsibility and work. DoD must reset how it conducts acquisition and learn to thrive by tapping into this new “industrial base” to find solutions from non-traditional contractors for providing the capabilities necessary to meet present and future security challenges.

Rules and Barriers

Former Defense Secretary Ashton Carter highlighted this issue in a speech in Silicon Valley, California, in which he indicated that hardware and software being developed could support the DoD. Carter wished to reduce bureaucracy and increase research investment, by using the technical and entrepreneurial brains of this recent American technology success story. While those brains are not as involved in government-funded research as they used to be, partly because government does not invest in research as much as in the past, they are still patriotic. “They feel they too are public servants,” Carter said, “and wish to have somebody in Washington they can connect to.”

What issues surround this challenge, and what progress has been made? One view held by many is that existing acquisition rules and barriers to entry are too high. Government and the DoD acquisition regulations are cumbersome and complicated, discouraging non-traditional firms from competing for business against traditional defense contractors, as well as inside the Beltway think tanks and trade associations. Complicated contracting rules favor those who already understand and are established within the system. Other issues include the perception that the market is not large enough, that the effort isn’t worth the hassle, that firms must give away their intellectual property, that new cost accounting and compliance systems are required, and that government personnel simply don’t understand how industry works.

However, the defense market is increasing in size, which may at some point become more attractive to non-traditional contractors. The 2020 spending bill authorizes $738 billion in military spending, a $22 billion increase over 2019. While defense spending does not match the levels of past years, it is significant. These increases may make the DoD a more attractive, lucrative market for innovative, non-traditional commercial contractors, including those previously wary of federal contracting obligations and risk.

Defining a Non-Traditional Contractor

What exactly is a non-traditional contractor? As defined in statute and in the Defense Federal Acquisition Regulation Supplement (DFARS) 212.001, a “non-traditional defense contractor” is:

an entity that is not currently performing and has not performed any contract or subcontract for DoD that is subject to full coverage under the cost accounting standards … for at least the 1-year period preceding the solicitation of sources by DoD for the procurement (10 United States Code 2302(9)).

n addition, the Federal Acquisition Streamlining Act (FASA) of 1994 intended to lower procurement barriers by giving preference to commercial firms, products, and services, which the DoD includes in the DFARS definition of non-traditional contractors, including the reasons for it:

iii) … contracting officers may treat supplies and services provided by non-traditional defense contractors as commercial items. This permissive authority is intended to enhance defense innovation and investment, enable DoD to acquire items that otherwise might not have been available, and create incentives for non-traditional defense contractors to do business with DoD.

With current increased funding and statutory changes encouraging commercial contracting procedures, there is renewed interest in use of “Other Transaction Authority (OTA),” a contract method seen as a means to get the complicated and restrictive Federal Acquisition Regulation (FAR) out of the way under certain circumstances. OTA creates a “blank slate,” as few statutes and rules apply. The Fiscal Year (FY) 2016 National Defense Authorization Act (NDAA) allowed transitioning of DoD programs from R&D and successful prototype to production by using OTA non-competitively. Contracting risk may increase for individually developed OT mitigating terms and conditions. The FAR conversely prescribes various solicitation provisions and contract clauses to use, depending on the circumstances.

The DoD typically awards OTs to companies directly, or through a consortium, which are then subcontracted to a member company or companies. Recent data indicated that, of $5.8 billion thus obligated, a third ($1.9 billion) went to individual companies and the remaining $3.8 billion went to consortia or consortium management companies. These figures look very small compared with total DoD annual contract obligations of more than $300 billion, but OTA is increasing rapidly. The Government Accountability Office (GAO) Report 20-84 documents OTA use increasing from 248 in FY 2016 to 618 in FY 2018.

However, the evidence is inconclusive thus far whether OTA use is increasing non-traditional contractor participation. OTA spending increased from $845 million to $3.98 billion between 2015 and 2018, with 93 percent of that from the DoD. Growth came from extending DoD’s OTAs and redefining non-traditional contractors, including doubling prototype project ceilings from $250 million to $500 million. Of 148 awards from 2015 to 2017, non-traditionals received 98, but only $7.4 billion of $21 billion in funding. The nonprofit Rand Corporation expressed concerns about OTA results and risks back in 2002, concluding that it was unable to quantify OTA results. Most recent Government Accountability Office data (GAO 20-84) indicates that “companies that typically did not do business with DoD participated to a significant extent on 88 percent of the transactions awarded during this time.”

OTs limit DoD’s ability to access financial records to verify properly stated contractor costs and limited intellectual property rights from projects. In 2017, Defense Innovation Unit Experiential (DIUx, now DIU) awarded 48 prototype contracts, of which two went to production, with no fieldable systems, according to a congressional staff member.

Without data about the use of OTAs and the results as compared to typical FAR-based contracts, there is no assurance that OTAs are working as intended. Are agencies working with truly non-traditional contractors, are innovative products and services being produced, is the government saving money, and are the deals involving the intellectual property rights protecting the appropriate party?

The Trusted Capital Marketplace (TCM) is a new DoD initiative under the current administration with similar goals of enlisting non-traditionals, in response to Executive Order 13629 (signed in 2012), calling for public-private partnerships; and Sect. 1711 of the FY 2018 NDAA, calling for a “Pilot program on strengthening manufacturing in the defense industrial base.”

The SecDef [Secretary of Defense] must carry out a pilot program whose activities include: contracts, grants, or OTAs to support capabilities of small and medium sized firms; purchase goods or equipment for testing; “purchase commitments… including cost sharing with funding from nongovernmental sources”; issuing or guaranteeing loans; and “giving awards to third party entities to support investments in small and medium sized manufacturers working in areas of national security interest, including activities to support debt and equity investments. …

As discussed in an article by Lt Col Mark Massaro, USAF, TCM intends to connect innovative defense and technology companies with trusted investors, helping them find capital and funding to continue research, development, or operations, thus precluding their engaging with “adverse actors.” TCM would aim to bring together innovation sources and investors without incurring adverse foreign influence.

Recently, the Commerce Department added Chinese telecom Huawei Technologies to the “Entity List,” making it harder for Huawei to buy and sell with U.S. companies. Last year’s NDAA banned government Huawei and ZTE product use. Those two firms are among other banned high-profile Chinese companies. TCM might allow non-traditional firms to identify investment sources without worrying about their origins.

However, why is venture capital not already investing in firms that the DoD finds important? Many emerging technologies come from lower-tier subcontractors to major prime contractors. As in large weapon systems contracts, primes normally find components and suppliers to integrate with, matching a trusted source of capital investment, like TCM. Will primes buy up promising firms or not fund emerging technology if ineligible for use on a weapon system, focusing instead on protecting their current programs?

Impediments

Any efforts to attract non-traditionals must also include a reexamination of the FAR itself as an impediment. Are expanded definitions of non-traditionals within commercial contracting and FAR Part 12 enough? The recent Section 809 Panel covered this in their July 2019 Final Report, under “Dynamic Marketplace Framework.”  The panel believes that the DoD’s commercial buying is flawed, starting with its narrow commercial product or service definitions, and recommended replacing those authorities with new ones.

The panel believes that competition improves through documented market research (not currently required), because readily available market products and services exist through existing private-sector tools. The market already sets consumer prices, since they are publicly available for comparison and evaluation. Replacing public advertising, contracting officers (COs) could use market research and competition and waive some requirements for small and non-traditional contractors, which would make it easier to do business with the DoD.

The panel recommended removing some FAR-based government commercial buying clauses, asking instead that Congress clarify which laws apply to commercial prime and subcontracts, therefore reducing the commercial subcontractor burden on DoD prime contracts, as intended by FASA.

The report adds that today’s domestic-origin requirements are not aligned with modern, global supply chains, resulting in increased costs, barriers to entry for some U.S. businesses, and innovation disincentives. Products bought under both the Buy American Act and the Berry Amendment can result in high pricing for DoD. Exempting domestic purchasing preferences for commercial goods could permit innovative products regardless of origin, yet still protect a defense-unique supply base.

Additionally, DoD buying-offices are hard to find, physically and organizationally, making it difficult for potential new suppliers to create customer relationships. A recommended “Market Liaison” would help non-traditional and other suppliers navigate the process and improve accessibility by answering questions and connecting industry to the right officials.

While existing FAR market research guidance is not an impediment, it should go further to create effective DoD-industry communication according to the panel.  Clearer definitions and improved guidance would ensure that DoD employees better understand and use tools to enhance industry coordination in developing market research. A current reluctance to communicate creates an information barrier impeding the use of technological opportunities to expand industry participation. As a result, the DoD lacks knowledge of emerging industry technologies and capabilities.

Finally, the panel believes that many contracting officers are comfortable using FAR Part 15 source-selection procedures, versus Simplified Acquisition Procedures under FAR Part 13, a preference that creates unnecessary complexity. Simplified procedures provide far more flexibility to solicit and contract non-traditionals for the right products and services.

A 2013 University of Maryland report, Non-Traditional Commercial Defense Contractors, authored by the late Jacques S. Gansler (former Under Secretary of Defense for Acquisition, Technology, and Logistics) and scholars William C. Greenwalt, and William Lucyshyn, documented similar barriers to non-traditional participation. One example given was a reliance on cost data for determining price reasonableness, versus commercial pricing. Commercial items are exempt from Cost Accounting Standards and the Truth in Negotiations Act because those firms do not have government-unique accounting compliance systems. The authors also documented various domestic source restrictions, which create a complicated process misaligned with today’s commercial supply chain. A 1996 Logistics Management Institute study stated that such domestic preference mandates are not in the commercial world.

The report also discussed the increase in FAR (and DFARS) Part 12 contract clauses applicable to commercial contracting since FASA. These government-unique regulations cause commercial companies either to expand compliance costs or refuse prime contracts.

Non-traditional commercial contractors have played a significant role in supporting U.S. national security … despite initial successes, commercial acquisition has not become ingrained in the DoD acquisition culture and faces severe pushback on many fronts. …

The report recommended:

  • Combat instances of requirements “gold-plating” … military-unique requirements, standards, and practices. …
  • Re-establish incentives to … use existing authorities to access commercial firms for more than just COTS [commercial off-the-shelf] solutions.
  • Ensure that the DoD rapid acquisition organizations … are maintained and fully utilized as a means to field solutions (especially commercial ones) faster.
  • Identify and implement “best commercial acquisition practices” (by commercial sector and DoD application) … .
  • Encourage the establishment of “non-traditional commercial entities” in private sector firms that are exempt from unique government and DoD rules and oversight.
  • Expand the use of Other Transaction Authority (OTA) agreements … and to access non-traditional commercial subcontractors under a FAR Part 15 contract with a traditional defense prime contractor.
  • Improve market research … to better understand what commercial capabilities are available … .
  • Plan for a path to commerciality for non-traditional contractors when leveraging the commercial market for DoD-unique requirements.
  • Establish a new Section 800 Panel to recommend specific … changes that inhibit the acquisition of commercial items.
  • Periodically benchmark costs of compliance with government and military-unique requirements, laws, regulations, practices, certifications, and standards.

Thus far, DoD has had mixed success in gaining the participation of non-traditional contractors to improve its acquisition outcomes:

  • Increased acquisition funding has not yet created a significant increase in DoD contracting participation by non-traditional contractors, beyond OTA.
  • Statutory encouragement for commercial sources and expanding the commerciality definition to non-traditional contractors has failed to achieve the anticipated success.
  • The TCM initiative is new, so results do not yet exist. Given its limited use of investor financing, a dramatic increase in non-traditional contracting participation is not expected.
  • Increased use of OTA is still small compared to overall DoD contracting obligations, and it remains specialized in nature. Data indicate traditional contractors may realize most financial benefits, nonquantifiable program outcomes, and potentially higher contract risk compared to FAR-based contracts.
  • Cited report recommendations, particularly related to market research, are most meritorious moving forward. As the DoD relies increasingly on commercial products, services, technology and experts, we must learn and engage with industry, particularly non-traditional contractors.
Next Steps

There must be increased proactive DoD engagement and wider communication and understanding of business practices and motivations through improved market research of an expanded view of industry. Current interaction between government and industry is often between the DoD and DoD-unique (traditional) contractors — but not today’s non-traditional, commercial industry. Necessary continuous monitoring of existing and fast-changing industry products and services by defense program and contracting officials is largely limited to government’s traditional contractors. This may leave out those firms developing technology for commercial or non-defense markets. DoD program and contracting officials, from top to bottom, must learn through all available means to continuously and routinely apply strategic and tactically oriented market research practices from industry. Existing commercial contracting authorities and market research tools to meet mission needs must be redisseminated and reemphasized to DoD’s acquisition workforce. We must all learn how to appreciate market research to achieve short-term results, as well as the long-term program acquisition strategies necessary to acquire DoD technological and mission superiority.

Understanding who and where they are and their motivations is crucial to developing requirements and acquisition strategies that will attract participation by non-traditional contractors. Traditional contractors supporting the DoD are far different from those in the commercial sector. Contracting officers today learn about the FAR and contracting principles, policy, and procedures, but little about industry best practices. Only very recently have terms such as “category management” or “supply chain” entered the lexicon of government contracting officers.

It may be simple common sense to realize that, just as most of us in our personal lives generally acquire products and services from firms that did not exist just a few years ago, the DoD acquisition system must expand its sources beyond the same (and ever-decreasing and consolidating) traditional contractors it has come to rely on. This requires a cultural change and reorientation for DoD acquisition professionals. But it also requires giving DoD acquisition professionals the resources, including the time to learn, adjust, and engage with an expanded view of industry in aligning DoD requirements to the best technological war­fighter tools that American industry offers.

The sources of market research relied on today requires reconsideration. For example, the professional associations of government acquisition members are themselves segmented along government and industry sectors, leaving little cross-communication. Attend each of them (as I have done) and you realize that no overlap exists between their members or expertise. The various association communities are oriented along defined niches, for government and its contractors, with other forums designed for commercial firms and their supply chain. Similarly, supply chain managers within industry know very little about and have little interest in how government works. The cultures and eco-systems, from entry-level to chief executive in both industry and government, too often have little understanding of each other’s practices and motivations. To the extent that there is government-industry cross-training or communication, it occurs between government acquisition staff and, typically, prior government staff now working for a traditional contractor. This internal, closed system has limited the view of potential capabilities offered by the wider commercial sector. The DoD must learn how to recruit the many new, commercial firms potentially capable of meeting defense needs.

Statutory and regulatory change may be necessary to optimize the integration of commercial industry, including small business, and open the door to today’s non-traditional contractors. But DoD program and contracting officials must expand their view of national capabilities and proactively engage with industry communities with which they are unfamiliar.

Defense program outcomes will improve, as always, through better market research prior to acquisition planning.  We must increase robust market research to find true commercial, non-traditional providers, and then align government requirements to leverage their developments.  Let’s get started!


The author of this article, which first appeared in the March-April issue of Defense Acquisition magazine, is Michael P. Fischetti, who is a professor of Program Management at the Defense Systems Management College at Defense Acquisition University in Fort Belvoir, Virginia.  The author can be contacted at Michael.Fischetti@dau.edu.

Filed Under: Government Contracting News Tagged With: acquisition, acquisition planning, acquisition workforce, agile, agility, bureaucracy, commercial off-the-shelf, commercial products, commercial purchasing, Cost Accounting Standard, Defense Industrial Base, DFARS, DoD, domestic-origin requirements, FAR, FASA, industrial base, market research, national security, non-traditional contractors, OTA, other transaction authority, R&D, research, research and development, Section 809 Panel, simplified acquisition, small business, source selection, speed of relevance, threats, Trusted Capital Marketplace, Truth in Negotiations Act

April 3, 2020 By cs

Simplified acquisition procedures afford agencies a lot of latitude, GAO decision reminds us

Not being included, or being purposely excluded, may remind some of adolescence, and may remind others of the Federal Acquisition Regulation (FAR) simplified acquisition procedures.

The recent Government Accountability Office (GAO) decision in Phoenix Environmental Design, Inc. (Phoenix), B-418304 (March 2, 2020) deals with facing the latter form of disappointment.

The underlying purchase order in this matter was issued by the Department of the Interior, Fish and Wildlife Service, to address the Southeast Idaho National Wildlife Refuge Complex’s (NWRC’s) urgent need for herbicide.  The Southeast Idaho NWRC’s need was compounded by an unplanned wildfire, which provided soil conditions that would facilitate the elimination of “cheatgrass,” an invasive species in the area. The Southeast Idaho NWRC expressed its need for fifteen gallons of herbicide to the agency on October 10, 2019, stating that it needed the herbicide by October 25 because of concerns that a freezing event would occur and eliminate the efficacy of the herbicide.

To respond to the pressing request, the agency solicited quotations as a small business set-aside pursuant to FAR §§ 13.003 and 13.104, which provide for simplified acquisition procedures in lieu of full and open competition. The agency solicited quotations from three vendors – one was a local vendor and the other two vendors were businesses that had submitted the lowest prices in response to a prior solicitation for herbicides. Phoenix had also submitted a bid for this prior solicitation, though it had quoted the second highest price. While Phoenix had, throughout the years, repeatedly notified the agency that it was interested in all of the agency’s herbicide requirements, the agency did not solicit a quotation from Phoenix.

The formal purchase order was issued to Wilbur-Ellis Co. on October 17 and on October 18 the Southeast Idaho NWRC picked up the herbicide from the vendor’s facilities. On October 22, Phoenix requested that the contracting officer cancel the award, and after being informed that such would not occur, on October 25, Phoenix filed a protest at the agency level. Following the denial of that protest, Phoenix filed the instant protest with the GAO.

Keep reading this article at: https://www.jdsupra.com/legalnews/simplified-acquisition-procedures-93132/

A helpful explanation of what simplified acquisition is appears at: http://contractingacademy.gatech.edu/?p=2851

Filed Under: Government Contracting News Tagged With: FAR, GAO, Interior Dept., protest, SAP, simplified acquisition

January 28, 2020 By cs

The contracting pendulum

Contracting methods have evolved over time, from three-page, performance-based contracts to specification-based contracts hundreds of pages in length, and now appear set to shift back to shorter contracts.
Maj. Don Lee and Sgt. 1st Class Rechelle Collins of the 639th Contracting Team discuss training on blanket purchase agreements conducted recently at Fort Bragg, NC. Knowing when a contracting tool like blanket purchase agreements is a good fit is a key contributor to contracting speed. (Photo by Sgt. 1st Class Terry Ann Lewis, graphic by U.S. Army Acquisition Support Center)

The implementation of statutes, regulations and policies designed to ensure fair and equitable treatment for industry became burdensome and increased the time and complexity of the acquisition process. This resulted in an ineffective procurement process that influenced mission readiness. Since that time, the contracting pendulum has swung to agile, streamlined initiatives.

These initiatives have been spearheaded by several important laws and regulations, including the National Defense Authorization Act (NDAA) for Fiscal Year 2016, which was implemented by the Section 809 Panel, secretary of the Army initiatives and strategic reforms from the Office of the Deputy Assistant Secretary of the Army for Procurement. One streamlining initiative embraced by Stuart A. Hazlett, deputy assistant secretary of the Army for procurement, is “data-driven contracting.” Data-driven contracting will facilitate analytics on raw data that can influence factors such as requirements, money spent, talent management and procurement acquisition lead time.

SIGNIFICANT CONTRACTING CHANGES

Historically, there have been significant regulatory changes that have influenced DoD contracting processes. These regulatory changes are the springboard to many contracting initiatives used today. In 1962, Congress passed Public Law 87-653, the Truth in Negotiations Act. That law specifies that when dealing in a sole-source environment, each procurement-contracting officer must certify cost as accurate, completed and current for all cost and pricing data. The Truth in Negotiations Act has been a cornerstone for ensuring that prices paid by the government are considered “fair and reasonable.”

In 1974, Congress passed legislation to establish the Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget. OFPP provides direction for government-wide procurement policies, regulations and procedures; it also promotes economy, efficiency and effectiveness in the acquisition process. One way in which OFPP provides this direction is through the Federal Acquisition Regulation (FAR).

The FAR, implemented in 1984, provides uniform policies and procedures governing federal government contracts. Accompanied by the Defense Federal Acquisition Regulation Supplement (DFARS), these regulatory policies inundate contracting professionals and industry partners. In 1984, Congress also passed the Competition in Contracting Act. That act requires competition for award of all government contracts. The theory is that more competition for procurements reduces costs and allows more small businesses to win federal government contracts. It also established that if a protest is submitted to the U.S. Government Accountability Office (GAO) before contract award, the awarding of the contract will be suspended until GAO rules on the protest.

In 1994, Congress passed the Federal Acquisition Streamlining Act. That legislation established a preference for the use of commercial products and exempted commercial products from various statutory and regulatory requirements. It raised the ceiling for the use of “simplified purchase procedures” and raised the threshold for issuance synopsis. It exempted the micro-purchase from virtually all statutory requirements, and it required that paper-based contracting systems be replaced with an electronic contracting system within five years.

CONTRACTING REFORM INITIATIVES

Acquisition reform is important and provides a check and a balance between regulatory accountability and agile acquisition. Because of recent reform initiatives, the contracting pendulum has swung from complex to streamlined contracting processes, providing for efficient and rapid acquisition in support of the warfighter.

In 2005, OMB asked the OFPP to identify goods and services the government can purchase more effectively and efficiently through strategic sourcing. Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace. As a result, the U.S. General Services Administration and Department of the Treasury established the Federal Strategic Sourcing Initiative to address government-wide opportunities to strategically source commonly purchased goods and services and eliminate duplication of efforts across agencies. An example of strategic sourcing for the Army is in the procurement of commercial hardware and software purchases under the CHESS (Computer Hardware, Enterprise Software and Solutions) program.

Then, in December 2014, OFPP issued a memorandum that directed agencies to take specific actions to implement category management, an approach based on industry leading practices, to further streamline and manage entire categories of spending across government more like a single enterprise. This approach includes strategic sourcing along with a broader set of strategies, such as developing common standards in practices and contracts, and improving data analysis and information sharing to better leverage the government’s buying power and reduce unnecessary contract duplication.

The NDAA passed in 2016 streamlined the acquisition process and eliminated redundant and duplicative requirements. Section 809 of the NDAA required that the secretary of defense establish a nine-member advisory panel consisting of experts in acquisition and procurement policy. The objective of the panel is to review DOD’s acquisition regulations and provide recommendations for streamlining procurement.

Some of the significant recommendations made by the panel include expanding and clarifying the use of other-transaction authority for production. Other-transaction authority is the term commonly used to refer to DOD’s authority to carry out “certain prototype, research and production projects” other than contracts. Such authority gives DOD the flexibility necessary to adopt and incorporate business practices that reflect commercial industry standards into its award instruments. DOD currently has permanent authority to award other-transaction agreements for research, prototype and production purposes. This kind of agreement allows nontraditional vendors a pathway for doing business with the government and introducing new and innovative ideas. In fiscal year 2019, the Army awarded 854 other-transaction agreements valued at roughly $4.9 billion.

FAR and DFARS contract clauses that are required to “flow down” from prime contractors to subcontractors, especially commercial subcontractors, are excessive and create additional burdens on DOD’s supply chain. In response, the Section 809 panel updated the FAR and DFARS to reduce burdens on DOD’s commercial supply chain, to decrease cost, prevent delays, remove barriers and encourage innovation in the military services.

The panel recommended minimizing the number of government-unique terms in commercial buying. The panel noted that when the Federal Acquisition Streamlining Act was established in 1994, there were only 57 FAR and DFARS clauses applicable to commercial buying. Today there are 165, according to the panel. The proliferation of clauses applicable to commercial buying at the prime contract level directly affects the number of government-unique clauses to subcontractors offering commercial products and services.

The 2018 NDAA amended the Truth in Negotiations Act to increase the threshold for contractors submitting certified cost and pricing data from $750,000 to $2 million. Contracting officers may still require cost or pricing data without certification, as they are tasked with ensuring that the cost or pricing data is fair and reasonable. However, this change is widely embraced by contractors doing business with the government.

Finally, the 2018 NDAA made changes to the bid and protest procedures relative to the Competition in Contracting Act and allows for enhanced post-award debriefing rights for DOD. What that means for DOD acquisitions is that, when a protest is filed, the “five-day period” to file a bid protest to trigger an automatic stay of award does not start until after the government delivers a written response to the offeror. Per the NDAA, a disappointed offeror may submit, “within two business days after receiving a post-award debriefing, additional questions related to the debriefing.” The law requires that “ … [t]he agency shall respond in writing to any additional question … within five business days” and that “the agency shall not consider the debriefing to be concluded until the agency delivers its written responses.”

ARMY CONTRACTING REFORM

The Army awards thousands of contracts yearly to support military forces worldwide. In FY19, the Army awarded 212,094 contract actions estimated at $94.59 billion. This does not include grants, government purchase-card buys, cooperative agreements or other authorized transactions that increased the estimate to $104.89 billion.

In 2017, the secretary of the Army directed initiatives to reform Army contracting, issuing “Army Directive 2017-32 (Acquisition Reform Initiative #6: Streamlining the Contracting Process),” which mandated streamlining practices within Army contracting to reduce the time it takes to develop and award a contract.

In accordance with this reform initiative, the deputy assistant secretary of the Army for procurement (DASA(P)) embarked on extensive reformation initiatives. They include:

1. Developed a centralized policy to standardize contracting policies across the Army.

2. Created policies and procedures that will facilitate the efficient implementation of category management. One policy, currently in coordination, aligns contracting activities to categories. This policy will promote habitual relationships among the contracting centers, category managers and customers. The draft policy stipulates that customers shall only submit their requirement to the designated contracting office. Aligning contracting activities with categories will assist in enforcing standard levels of services, limit standard levels of service end-run actions, and limit contract-action shopping among contracting centers.

3. Of 312 authorities identified in the FAR and DFARS, the Army delegated 159 authorities to a level lower than the assistant secretary of the Army for acquisition, logistics and technology (ASA(ALT)). This increased efficiency and eliminated the requirement to staff packages to ASA(ALT) for signature and approval, thereby saving time, money and resources.

4. Established “reform managers” to lead changes to contracting processes and develop new streamlined procedures, e.g., source selection, pricing cell, etc.

5. DASA(P) is also embracing “data-driven decision-making in contracting.” This type of contracting involves making decisions based on actual raw data derived from the automated contract systems. Data-driven decision-making improves how requirements are communicated between major stakeholders such as financial managers, program managers, requirements activities and industry partners. The bottom line is that everybody wins through increased productivity in procuring goods and services for the warfighter.

CONCLUSION

On Sept. 30, 2019, in a message to the Army force, Secretary of the Army Ryan D. McCarthy said, “We must maintain a sustainable level of readiness to meet current demands while executing an aggressive modernization strategy to ensure the total Army remains the most lethal ground combat force in the world.”

To achieve that end, the contracting pendulum must swing toward less restrictive acquisition policies and procedures.

For more information, go to https://spcs3.kc.army.mil/asaalt/procurement/SitePages/PAMHome.aspx#&panel1-3 

This article was published in the 2020 Winter issue of Army AL&T Magazine.  See: https://www.dvidshub.net/news/357393/contracting-pendulum

Filed Under: Government Contracting News Tagged With: acquisition methods, acquisition reform, acquisition workforce, Army, DFARS, DoD, FAR, innovation, NDAA, OFPP, OMB, procurement reform, simplified acquisition, TINA

November 9, 2018 By AMK

Takeaways from DoD’s proposed changes to certain sourcing restrictions

Pursuant to Sections 817 and 881(b) of the FY 2017 National Defense Authorization Act (NDAA), the Department of Defense (DoD) recently issued a proposed rule to amend certain sourcing restrictions found in DFARS subpart 225.70 and related clauses. 

Specifically the proposed rule would amend the DFARS to:

  • Extend the Berry Amendment’s domestic sourcing restrictions to the acquisition of certain athletic footwear for members of the Armed Forces, when the procurement is valued at or below the simplified acquisition threshold [Section 817], and
  • Recognize that Australia and the United Kingdom of Great Britain and Northern Ireland (the UK) are now members of the National Technology Industrial Base (“NTIB”), thereby permitting the United States to acquire certain items (that are subject to the sourcing restrictions in 10 U.S.C. 2534) if they are manufactured in the UK, Australia, Canada or the United States [Section 881(b)].

Keep reading this article at: https://www.insidegovernmentcontracts.com/2018/10/takeaways-dods-proposed-changes-certain-sourcing-restrictions/

Filed Under: Government Contracting News Tagged With: Berry Amendment, DFARS, DoD, manufacturing, NDAA, simplified acquisition, sourcing

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