How to avoid a contract protest
April 3, 2012 by cs
Are protests destined to become just one more milestone in the federal procurement process? Recent evidence might suggest so. Notably, the protested award to Lockheed Martin for the U.S. Antarctic Research program in the South Pole and the Hawker Beechcraft protest of the award of the new light attack aircraft trainer are recent examples.
In addition, market experts predict that as defense budgets decline, companies fighting over fewer dollars will launch more protests when losing procurements that can lock them out of programs or agencies for a decade.
If protests are to become the norm for competing in major programs, then it’s to everyone’s advantage to find ways to reduce the number of protests and awards that are overturned. When companies file protests, everyone loses. The procuring agency loses because procurement time lines get stretched out. Bidders lose because the cost of participating in federal procurements goes up. Even the apparent winner incurs additional costs to defend the award, and the losing bidders incur additional costs to file the protest.
Capture and proposal managers can take some precautions that may help minimize the likelihood that their procurement will be protested or award overturned. To learn first-hand what you can do, I reached out to three attorneys with practices in federal procurement protests to see what they suggest. Here’s what I learned.
According to Dave Nadler, a partner at Dickstein Shapiro LLP in Washington D.C., protests can begin when the government releases a defective request for proposals. “Review the RFP with an eye to unclear, ambiguous, unduly restrictive text, especially text specifying a brand name or written around someone else’s product. It is better to seek clarification and use the Q&A process to make sure the solicitation is clear and that your interpretation is reasonable than to file a protest,” he said.
If you are unclear about the interpretation of proposal instructions (typically Section L) or the evaluation criteria (typically Section M), then the evaluation team will probably be confused too. If the RFP is deficient, and you choose to protest the RFP, then you must file your protest before your proposal is submitted, otherwise the Government Accountability Office will rule that your protest is untimely and will summarily dismiss it, Nadler said.
As a proposal writer, there is nothing more frustrating than working with a poorly written RFP. If you have one of these, let me know and I’ll present your argument to the agency pro bono for the good of our industry. We will all benefit from well-written RFPs.
As you write your proposal, there are other pitfalls to avoid. Shlomo Katz, counsel at Brown Rudnick LLP, reinforces that you must follow the requirement of the RFP precisely. “If the RFP requires certain documentation (e.g., resumes) or certain credentials (e.g., a Ph.D.), and you don’t provide what was required, and the agency selects you anyway, that may be grounds for a successful protest. Similarly, if you make technical claims back them up with data, especially if you are claiming your widget is twice as good, twice as fast, twice as durable, etc. Ditto if you claim you can deliver in half the time of your competitors. Explain your technical approach in sufficient detail to justify that you are the best (if that’s what the evaluation criteria call for),” said Katz.
You can also have protests related to your proposed costs. According to Katz, “If your cost/price is significantly higher than your competition, make sure you explain the value proposition, and if your cost/price is significantly lower than your competition, make sure you explain why it is realistic. I had a protest where the agency selected the offeror whose cost was way below the government estimate, and GAO threw out the award because the proposal did not prove its own cost realism.”
There are also some legal gotchas, according to Carol L. O’Riordan, partner in the O’Riordan Bethel Law Firm, LLP. “Ensure that everyone on the team has current and required licensing, credentials, and past performance in place because it is more than embarrassing if a subcontractor’s employee is put forth as key personnel, but his required license is outdated or lapsed,” O’Riordan said. “If the procurement uses GSA schedule vehicles, make sure the team’s vehicles include the required services. Watch out for organizational conflicts of interest. Starting with all known information regarding the procurement and evaluation, make sure you understand to what extent everyone on the proposed team checked and confirmed that each has no affiliation or involvement with those identified on the other side or other procurements where conflicts may exist.”
As a final thought, some protests can be brought to the procuring agency for review, rather than going directly to GAO. This may be more advantageous, but be mindful that there are certainly timeliness rules that apply to whichever protest venue you choose.
About the Author: Bob Lohfeld is the chief executive officer of the Lohfeld Consulting Group. Published by Washington Technology, Mar. 22, 2012 at http://washingtontechnology.com/articles/2012/03/12/insights-lohfeld.aspx?s=wtdaily_230312.
New suppliers to U.S. government fall 14 percent
March 20, 2012 by cs
The number of new suppliers to the U.S. government fell 14 percent last year even as the Obama administration sought to increase competition in contracting.
Contract awards in the year that ended Sept. 30 went to about 29,800 companies that hadn’t done business with the government in seven years, compared with 34,800 in fiscal 2010, according to procurement data.
The decline may be partly due to businesses avoiding the federal market because agencies are cutting budgets. Without new competition, taxpayers might end up with higher costs, said Dan Gordon, who stepped down in December as President Obama’s top procurement official.
“The result is that the government gets less competition than it wants, it may get higher prices than it wants, and you risk having government procurement be completely an insider’s game,” said Gordon, associate dean for government procurement law at George Washington University Law School.
New contractors won $10.9 billion in orders in fiscal 2011, a 17 percent drop from $13.1 billion the prior year. First-time small businesses experienced a steeper decline, tumbling 34 percent to $3.64 billion from $5.5 billion in the same period.
Smaller firms, defined as having fewer than 500 employees or less than $7 million in average annual sales, may be more likely to bypass the government market because of diminishing opportunities, said Michael Golden, who formerly led the Government Accountability Office’s procurement law unit.
“When you see bigger companies closing plants in anticipation of a shrinking budget, what is a new company supposed to do?” said Golden, a Washington-based partner for the law firm Pepper Hamilton.
Working with the government presents challenges for small businesses not accustomed to the process, said Jake Ross, a retired Navy captain and partner at Maritime Security Strategies in Tampa, Fla. His company, a service-disabled veteran-owned firm, last year won its first federal contract, a $29 million deal to build a patrol boat for the Navy.
“I kick myself every day,” Ross said in an interview. “You think you’ve crossed one challenge and, by golly, you’ve got a new one the next day. The rules and regulations for government contractors do create significant barriers.”
The Office of Management and Budget looks at federal procurement data to gauge how it’s doing on competition and new entrants, said Moira Mack, a spokeswoman for the agency.
“We are committed to getting the highest quality products, for the lowest possible prices for America’s taxpayers, from an innovative and diverse set of contractors,” she said in an e-mail.
Bloomberg’s estimates on first-time vendors are based on an analysis of federal procurement data that looked at companies with new Dun & Bradstreet identification numbers that also hadn’t received awards in the previous seven years. The totals include contracts won by company and by joint ventures.
—by Danielle Ivory, Washington Post, published Mar. 11, 2012. Paul Murphy in Washington contributed to this report. This appears at http://www.washingtonpost.com/business/economy/new-suppliers-to-us-government-fall-14-percent/2012/03/08.
Signs of friction in contractor-government relations
March 1, 2012 by cs
Contractor relationships with federal auditors and contracting officers
deteriorated somewhat during the past year as government agencies scaled back
programs in an effort to reduce the budget deficit, according to a recent
survey.
A separate study released Thursday found that large companies were securing a
high percentage of federal contracts set aside for small businesses. In the 17th Annual Government Contractor Industry Survey released Monday by Grant Thornton LLP, contractor relationships with auditors were rated
either fair or poor by 19 percent of surveyed companies, up from 11 percent the
previous year. Relationships with contracting officers were rated fair or poor
by 10 percent of respondents, double the previous year’s total.
Only 22 percent of respondents said the government resolved contract disputes
efficiently, a drop from previous surveys.
Revenue from government contracts during the past year grew for 50 percent of
the companies, was flat for 21 percent and declined for 29 percent, the survey
found. “The fact that the highest percentage of companies experienced revenue
growth continues a long-term trend reported in previous surveys, indicating that
government contractors are far less vulnerable than commercial companies to
recessions or slow growth in the overall economy,” Grant Thornton analysts
said.
“However, the 29 percent of companies experiencing revenue reductions is the
highest percentage reported in several surveys, indicating that government
efforts to reduce deficits are adversely impacting government contractor
revenue.”
The survey went out to an unspecified number of companies, in 24 states, that
depend primarily on federal contracts; most of them are for-profit and
two-thirds provide services to the Defense Department. Forty-six percent are
small businesses.
The survey also found that profits improved slightly from the previous year.
The biggest cost factor within these firms was executive compensation, and
survey analysts said they disagreed with the methods the Defense Contract Audit
Agency uses in determining whether to allow such costs.
“While government contracting has never been a model of efficiency, it is our
view that the decline in efficiency and business relationships during the past
few years can be traced directly to changes in DCAA policy adopted after
[Government Accountability Office] reports were issued in July 2008 and
September 2009,” they wrote.
“Unfortunately, the GAO criticized the DCAA for having a management and
agency culture that focused on a production-oriented mission, emphasizing the
need for timeliness in supporting the needs of contracting officers in the
procurement process,” the survey said.
Regarding the average time for contractors to collect accounts receivable
from the government, results showed the period was less than 30 days for 21
percent of survey participants, while 60 percent reported receivables were
collected within 30 to 60 days. The remaining 19 percent reported waiting more
than 60 days.
The average win rate on proposals submitted in a competitive environment was
30 percent.
On the topic of revenue by type of contract, the companies said, on average,
45 percent of revenue was from cost-reimbursable contracts and 35 percent was
from time-and-materials contracts. The remaining 20 percent was from firm
fixed-price contracts.
When asked how often they were required to perform out-of-scope work without
a contract modification, 81 percent said frequently or occasionally. Only 16
percent said they refused such requests.
A separate contracting study by the Petaluma, Calif.-based American Small Business
League found that of the top 100 companies receiving federal small business
contracts, 72 were large companies that “significantly exceed” the Small
Business Administration’s small business size standards; only 24 were
“legitimate small business,” the league said.
The large companies — among them Lockheed Martin Corp., Rolls-Royce, Boeing
Co., General Dynamics and Blue Cross Blue Shield — accounted for $16 billion of
the $21 billion total for the top 100, the study found.
http://www.govexec.com/contracting/2012/02/signs-friction-contractor-government-relations/41283
SBA’s loan system troubles could complicate reorganization
February 15, 2012 by cs
The Small Business Administration is behind schedule on five of six planned improvements to its Loan Management and Accounting Systems and costs for the overall project have risen about 20 percent since 2010 to $28 million, a recent Government Accountability Office report said.
That’s a common story with federal information technology acquisitions, which often run behind schedule and over budget. President Obama’s planned consolidation of SBA with several other business and trade agencies inside the Commerce Department could throw another cog in the wheels.
Major government reorganizations have a mixed track record of success, but one common feature, experts told Nextgov, is while the reorganization is in process, uncertainty rises.
“Often the [reorganization] process takes a lengthy period of time and during that period it’s difficult to deal with real issues and challenges in the agencies,” said Alan Balutis, a former chief information officer at the Commerce Department and now a director at Cisco’s Internet Business Solutions Group.
“It’s almost like you bifurcate staff and resources,” Balutis said. “One group works on the reorganization and integration and another group goes along doing their daily business and waiting for the day when someone pulls the switch and everything changes.”
During that transition period problems that already exist with a project or system can “linger and fester,” he said, because employees managing the project are unsure where the system will fit in the new organizational structure. Often those staffers also are unsure where they’ll fit in the new structure and, as a result, hesitant to make major decisions, he said.
“They’re working under uncertainty about ‘Where am I going to end up? Who am I going to be working for? How is this going to affect my grade and responsibilities?’ ” Balutis said. “And all of that is a distraction when you’re trying to carry on your regular duties.”
That’s not to say all acquisitions and projects will fare equally poorly during a bureaucratic transition.
“If you have [information technology] systems that are more enterprisewide, that support an agency function like, say, supply chain management or finance, those are likely to be more affected by reorganization,” said Raj Sharma, president of the Federal Acquisition Innovation and Reform Institute and author of a report on IT acquisition reform.
“If you’re looking at a mission-specific system, something that supports a critical program but we know it won’t be affected by reorganization, then there’s a higher degree of certainty,” Sharma said.
Programs also are less likely to fall into reorganizational paralysis if they’re being closely monitored by government leaders or the public, Sharma said.
That may bode well for SBA as Obama and Republican House leaders have spoken at length about the importance of small businesses to an economic recovery.
GAO’s review of SBA’s loan system was performed from February 2011 through January 2012, almost entirely before Obama announced his reorganization plan, Jan. 13. That plan will require congressional approval to be enacted, which may be tough to come by. It also involved elevating SBA to a Cabinet-level agency while the transition is in process.
A GAO spokesman declined to comment Thursday on how the proposed reorganization would affect problems with SBA’s Loan Management System saying it was beyond the scope of what the agency had looked at.
In its report, GAO criticized SBA officials for failing to validate that certain technical requirements had been met and for not identifying potential risks or taking steps to mitigate them. The agency also didn’t identify skills gaps on the project teams and didn’t get firm baselines from all contractors for how long the projects would take, GAO said.
“These weaknesses in basic management practices make it less likely that SBA will be able to complete the projects within the time, budget and scope parameters originally planned,” GAO said.
While Balutis is skeptical that major problems will be solved during the proposed SBA-Commerce reorganization, he supports the reorganization itself, which he said has been discussed for years in different forms. If done right, he said, the reorganization could save money and create useful cooperation between SBA and some units of Commerce that do similar work, such as the Minority Business Development Agency.
Balutis is cautiously optimistic that the reorganization can win congressional approval.
“There certainly hasn’t been much the White House and the Republican-controlled House has been able to agree upon over this last year and a half and probably the range of issues on which they agree is only going to narrow as we roll up to the election in November,” he said. “On the other hand, this does seem to strike the right chord. One thing a number of people agree on today is that we ought to rationalize the government. We ought to make it smaller and tighter to achieve savings. And that was a major premise of the White House announcement.”
2012 may be the year of the government audit
January 2, 2012 by cs
Government contractors beware: 2012 may be the year of the government audit.
Financial scrutiny of contractors is expected to rise as the government expands its auditing workforce and the contracting pie shrinks. Agencies are
coming under greater congressional scrutiny, and public pressure is mounting to ensure the taxpayer is getting the best deal.
One indicator came in a Nov.15 directive from Office of Management and Budget Director Jacob J. Lew, who ordered federal agencies to put more resources and emphasis into their suspension and disbarment programs.
Lew referenced a recent Government Accountability Office study which, he said, found that “more than half of the 10 agencies it [GAO] reviewed lacked the characteristics common among active and effective suspension and debarment programs: dedicated staff resources, well-developed internal guidance and processes for referring cases to officials for action.”
Government contractors have always faced an abundance of potential audits. The Defense Contract Audit Agency alone conducts several dozen
different types of audits, including: pre-award reviews; incurred cost examinations; purchasing system reviews; billing system reviews; disclosure statement reviews; and provisional rate reviews.
Moreover, the number of rules and procedures to follow is mind-numbing. The Federal Acquisition Regulation, which is comprised of more than 1,700 pages of rules and regulations, is just one set of federal regulations pertaining to government contracts.
While no two audits are the same, government auditors are likely to place a greater emphasis on internal controls during 2012.
They will review your stated policies and procedures to determine the strength of your control environment, then typically make a random selection of
transactions (for example, vendor invoices, employee time cards, travel vouchers) and scrutinize supporting documentation.
The auditors are looking to determine if the contractor’s policies and procedures were followed, approvals documented and internal controls enforced.
In addition, there are now many prospective government contracts that will be awarded only after rigorous assessments of the adequacy of the contractor’s
business systems and internal controls. Contractors now will simply pass or fail, rather than possibly passing with certain deficiencies. All deficiencies must be addressed successfully before the contractor’s system is deemed adequate, and the contract awarded.
Many companies now are being proactive, seeking a third party to make an initial assessment as to whether their systems can meet Defense Contract Audit
Agency requirements before being notified of a pending agency review. Such a review prior to bidding on a contract can provide the confidence to bid for all
types of government contracts without business system constraints.
By implementing corrective measures that might be identified during the review, contractors can improve overall operations while staying ahead of the
competition and helping ensure they will not be behind the DCAA eight ball.
Having the black mark of a failed government audit is a difficult position from which to recover, and amounts to a “scarlet A” in the world of government
contracting. But the moniker can be avoided with prudent planning and taking proactive measures to shore up your systems in advance.
As we go into 2012 and face whatever budgetary cuts the government may implement, positioning your company to take advantage of every opportunity is
more important than ever.
– Commentary by Michael Tinsley, founder and chief executive of NeoSystems, for The Washington Post – Dec. 25, 2011 at http://www.washingtonpost.com/business/capitalbusiness/a-new-year-of-heightened-scrutiny-for-government-contractors/2011/12/14/gIQAq7IUHP_story.html
Veterans business group sues VA for refusal to set aside contracts
December 12, 2011 by cs
In the latest turn of the screw in an ongoing battle between the Department of Veterans Affairs and members of the small business community, a non-profit association sued the agency and its secretary for alleged failure to comply with existing laws that require veteran-owned small businesses to receive priority in all contract awards.
Service Disabled Veteran Owned Small Business Network Inc. in Pleasanton, Calif., filed a Dec. 6 complaint on behalf of its members in a California district court, claiming that the VA violated the 2006 Veterans, Benefits, Health Care and Information Technology Act and the Veterans First Contracting Program, both of which mandate that the agency set aside contract opportunities for veteran-owned small businesses when at least two such businesses are qualified to meet the requirements.
The complaint pointed to the VA’s refusal to comply with recommendations made by the Government Accountability Office in an Oct. 11 protest decision, which stated that the agency violated the law when it failed to set aside two contract solicitations for service-disabled, veteran-owned small businesses. The watchdog agency recommended that the veterans agency cancel and reissue the solicitations as set-aside contracts, a move the VA opted to ignore — claiming the requirement did not apply to acquisitions made under the General Service Administration’s contract schedules.
“The president of the association has been leading a grass roots movement to challenge the VA’s application of the Veterans First program for over a year,” said Timothy Power, the attorney representing the association, in an email to Washington Business Journal. His firm, Power Law Office in Sonoma, Calif., provides legal services to small business contractors. “Recently she has been raising money to support the filing of a suit in California to enjoin the VA from ignoring the program.”
The lawsuit comes one week after two House subcommittees held a hearing on the topic, questioning VA officials about the decision to ignore the GAO recommendation.
– by Jill R. Aitoro, Senior Staff Reporter, Washington Business Journal, Dcc. 7, 2011 at http://www.bizjournals.com/washington/blog/fedbiz_daily/2011/12/california-association-sues-va-for.html.
House subpoenas four agencies for small-business noncompliance
October 26, 2011 by cs
Four federal agencies were issued subpoenas by the House Small Business Committee on Oct. 20 for not complying with the Small Business Act’s procurement policies, according to a committee staffer.
The departments of Justice, Agriculture, Treasury and State were summoned to appear before the the Small Business subcommittee on contracting and workforce on Nov. 1 to testify why they are in noncompliance.
At issue is the “structure” of these agencies’ Small and Disadvantaged Business Utilization Offices (OSDBU) and “the fact that they are not reporting to the agency head or deputy head,” wrote Darrell Jordon, house committee spokesman, in an e-mail to Washington Technology.
OSDBUs were conceived in 1978 with the purpose of having federal agencies set aside contracts for small and disadvantaged businesses. The Small Business Act also has requirements that agencies report their procurement activities with small and disadvantaged businesses.
Justice, Agriculture, Treasury and State were warned of their missteps and given a chance to remedy the situation after a June Government Accountability Office small business contracting report found seven agencies not in compliance.
Following that report, letters to agencies were sent by subcommittee Chairman Mick Mulvaney (R-SC). As a result, the Interior Department and Social Security Administration are now in compliance, and a third, the Commerce Department, was pardoned due to an administrative issue.
In September, agencies were reminded of their noncompliance by memo and a hearing was held on Sept. 15 by the subcommittee to examine the GAO report and the economic impact of noncompliance.
As part of the subpoena procedure, the four agencies must produce a number of documents, including paperwork relating to their small business procurement programs, attainment of small business goals or challenges to decisions not to restrict competition to small business between Jan. 20, 2009, and Sept. 30, 2011.
About the Author: Alysha Sideman is an online content producer with 1105 Government Information Group. Published by Washington Technology – Oct. 21, 2011 at http://washingtontechnology.com/articles/2011/10/21/small-biz-committee-subpoenas.aspx