SmartContracting Daily Intel for September 6, 2012

In today's news...

The Hill: Top Pentagon, defense industry leaders to hold talks on sequestration

http://bit.ly/P3m0Wl

Washington Post: Senate to hold another hearing on GSA progress after scandal

http://wapo.st/OpDMAq

Reuters: More budget cuts might change Pentagon view on mergers: Northrop

http://reut.rs/OX1N1c

Federal News Radio: Army Contracting Command easing burden on contracting officers

http://bit.ly/Q25RAM

FCW: Analysis: Some long-term contracts put government at a disadvantage

http://bit.ly/OX1ZgS

NextGov: Big Data Could Play a Role in Improving Education

http://bit.ly/Neq1HM

Surviving Sequestration, Part 2: What’s a company to do?

As agencies grapple with the prospect of sequestration, your contract funding could be at risk. What’s a company to do? PSC attempted to answer that question for its members during a panel discussion on Jan. 17.

Here is some of the advice PSC’s own Alan Chvotkin gave to attendees.

Immediate actions:

• Know your existing contracts:
• Contract Type
• Available period of performance
• Revenue options/ceiling amounts
• Option periods remaining/available
• Ensure that your past performance is the best it can be and that your PPIRS and FAPIIS database references are accurate and most favorable.

Short-term actions:

• Engage your customers, but recognize contracting officers and program managers might not have answers until the last minute or the authority to act in all cases.
• Evaluate agency spending on its priority contracts – even if you aren’t on it.

Long-term actions:

• Ensure that your past performance is the best it can be and that the PPIRS and FAPIIS database references are accurate and most favorable.
• Evaluate your existing contracts for flexibility to add new work or new funding opportunities.
• Evaluate future solicitations and potential awards for performance flexibility and for risk.
• Be an aggressive advocate for your performance capabilities and revenue options.

Fixed-Price Contracts Won’t Fix Contracting



Malcolm O'Neill addresses PSC members.



The Obama administration has promoted increased use of fixed-price contracting as a way of shifting risk and generating savings in government contracting. But smart contractors know that fixed-price isn’t the smart choice for all procurements. It appears the Army knows that too.

Malcolm O’Neill, the assistant Army secretary for acquisition, logistics and technology, joined PSC for a Dialogue Series lunch on March 9 and explained why he thinks fixed-price contracting is just as risky to government as the much derided cost-reimbursement style contracting when used inappropriately.

“My experience has been that when [contractors] offer a fixed-price bid, it's 10 percent to 15 percent more than [they] need,” because rather than accept risk contractors pad their bids to avoid it, O’Neill said. Cost-plus-incentive fee contracts, however, encourage contractors to stick to cost and schedule estimates because they will be rewarded for good performance and punished for poor performance, he said.

Additionally, “a fixed-price contract gives license to steal,” if the government needs to change the requirements after the contract is awarded, as it often does. “If I was the contractor I’d come back and say ‘All bets are off, I have a new bid.’ Whereas with cost-type contracts all you do is modify it and say ‘What would it cost to add to this program?’” O’Neill said. “In fixed price it’s a whole different ballgame”

While the arguments for and against using fixed-price contracts may vary, knowing the most appropriate contract type to acquire specific goods and services is smart government contracting.

Revised DoD Business Systems Proposal Still Falls Short

Everyone knows the first rule of business is there are risks to be taken and rewards for taking those risks. But lately, when doing business with the Defense Department and other government agencies, it’s been all risk with little reward. In the government’s appropriate zeal to protect taxpayer dollars, it has forgotten that its business relationships with contractors are two-way streets. One place this is most evident is in the Defense Department’s proposed rule governing when it’s appropriate to withhold payments from contractors because of faulty business systems.

When initially proposed in January 2010, PSC found the rule failed to fully describe the attributes of each of the six business systems that a contractor would need to comply with in order to have an “approved” system. It’s hard to follow your customer’s wishes when the customer won’t define the boundaries and standards. We also found the enforcement and penalties in that proposal were disproportionate to the deficiencies identified and the risk to the government from one or more of those deficiencies. In some cases, Defense agencies would be allowed to withhold payments in situations where government dollars were NOT at risk, and that’s a risky proposition for any business. The customers’ auditors weren’t even required to review and validate fixes and release properly earned funds in a timely manner.

While the proposal was improved significantly with the Dec. 3 revision, it still falls short in several key areas, as PSC and other industry groups spelled out in comments submitted on January 10 by the Council of Defense and Space Industry Associations.

Government Acquisition Professionals See a “Great Divide”

There is a “Great Divide” in government. It runs wide and deep and affects government efficiency and effectiveness.

 

No, I’m not talking about the divide between Democrats and Republicans. I’m talking about the divide in the acquisition community between the operational managers primarily responsible for awarding and managing government contracts and the oversight managers primarily responsible for checking that contract management is effective.

 

Yesterday, PSC and our friends at member-company Grant Thornton released the results of our fifth biennial Acquisition Policy Survey of federal government personnel. We found the following divisions among operational and oversight respondents regarding the effects conflict of interest rules, acquisition workforce development and other procurement reform initiatives on the federal government.