Georgia Tech Procurement Assistance Center

DoD proposes new rule on performance-based contract payments

By

According to a report by the Federal News Network, the Department of Defense (“DoD”) is proposing a new rule which would change how it pays some defense contractors.  DoD is looking to require, whenever practicable, that fixed price contracts be paid out through performance-based contractual payments.  Performance-based payments are a method of contract financing where payments are made on the basis of the contractor’s achievement of objective, quantifiably measurable events, results, or accomplishments that are defined and valued in the contract prior to performance.  Some within the government consider it a preferred method of contracting and claim that it reduces the government’s oversight and compliance costs.  It also may have benefits for contractors, as it should help cash flow, reduce the cost of oversight and compliance, and allow the contractor to focus on technical and schedule progress.  Comments on the proposed rule are due by July 1.

Read the new rule at the Federal Register.

Draft solicitation for Pentagon’s multibillion enterprise solutions contract released

By

The Pentagon took the next step in bidding out its Defense Enterprise Office Solutions contract Friday, Feb. 1st, releasing a draft request for quotations for an enterprise cloud service offering likely worth several billion dollars.

The draft solicitation indicates DEOS will be a single-award firm-fixed-price blanket purchase agreement, with a 5-year base period with two 2-year options and a 1-year option—a potential 10-year total period of performance.

Keep reading this article at: https://www.nextgov.com/it-modernization/2019/02/draft-solicitation-multibillion-deos-contract-released/154595/

Price realism evaluation: Only if solicitation says so

By

An agency awarding a fixed-price contract can only evaluate offerors’ proposals for price realism–that is, determine whether offerors’ proposed pricing is so low as to be unrealistic–if the solicitation calls for a price realism evaluation.

In a recent bid protest decision, the GAO confirmed that when a fixed-price solicitation does not advise offerors that a price realism evaluation will be conducted, the agency is not permitted to reject an offeror’s proposal because of unrealistically low pricing.

The GAO’s decision in ERIMAX, Inc., B-410682 (Jan. 22, 2015) involved a NOAA RFQ seeking the establishment of a BPA for acquisition and grant management services.  The RFQ called for vendors to submit fully-burdened hourly labor rates for labor categories provided by the agency.  Once labor rates were entered, the agency’s spreadsheet would automatically calculate total prices using the rates provided by the vendors.  The RFQ stated that proposed prices would be evaluated to determine whether they were fair and reasonable.

Keep reading this article at: http://smallgovcon.com/gaobidprotests/price-realism-evaluation-only-if-solicitation-says-so/

 

Navy drops $2.5 billion in contracts to update shipboard networks

By

The Navy has awarded five companies eight-year contracts valued at $2.5 billion to install standardized shipboard networks.

The Space and Naval Warfare Systems Command tapped BAE Systems Technology Solutions & Services, General Dynamics C4 Systems, Global Technical Systems, Northrop Grumman Systems Corp. and Serco, Inc. for the indefinite-delivery, indefinite-quantity, firm-fixed-price, cost-plus-fixed-fee contracts for the Navy’s Consolidated Afloat Networks and Enterprise Services.

The CANES program is intended to equip every ship in the fleet with a standards-based network.

Keep reading this article at: http://www.nextgov.com/defense/2014/08/navy-drops-25-billion-contracts-update-shipboard-networks/92006

LPTA contracts stifle innovations, contracting officials say

By

Lowest Price, Technically Acceptable (LPTA) contracts might save the government some money, but they deter innovation, a panel of government contracting officials said Monday (May 19, 2014).

“I don’t know a senior leader in government that thinks LPTA is the best,” said Tiffany Hixson, regional commissioner for the General Services Administration. “Contracting and innovation is about risk management.”

But with shrinking budgets, agencies are looking to lower their costs and LPTA contracts do just that, said Robert Coen, acting director of the National Institutes of Health Information Technology Acquisition and Assessment Center.

“There’s way too much LPTA going on,” Coen said at the May 19 ACT-IAC Management of Change Conference. “LPTA should be used for commodity buys, not innovations.”

Keep reading this article at: http://www.fiercegovernment.com/story/lpta-contracts-stifle-innovations-contracting-officials-say/2014-05-20

Nondisclosure of higher profit on fixed price contract does not violate False Claims Act

By

Last week, a U.S. District Court judge in Florida held that a government contractor working under a fixed-price contract is not liable under the federal False Claims Act (“FCA”) for higher than expected profits and “failing to notify the Government that the work could be performed less expensively and charged at a lower price” than the contract price.   U.S. ex rel. Prime v. Post, Buckley, Schuh & Jernigan, Inc., and Parsons Corporation, No. 10-cv-1950 (M.D. Fl. Aug. 23, 2013).

The nature of the contract was critical to the outcome of the case. In U.S. ex rel. Prime, two contractors, Post, Buckley, Schuh & Jernigan, Inc. (“PBS&J”) and Parsons, formed a joint venture for the project (the “JV”). The JV entered into a fixed price indefinite delivery/indefinite quantity contract with the Government, under which fixed price task orders would be placed. Prices on the individual task orders were lump-sum, determined in accordance with the agreed-upon labor rates multiplied by the number of days required to complete the work, and included a profit component. The labor rates and lump-sum task order prices were a product of lengthy negotiations between the JV and Government representatives. During those negotiations, which were transcribed, the Government noted the potential for the JV to increase its profit margin by injecting greater efficiency into its performance.

Keep reading this post at http://www.mckennalong.com/publications-advisories-3378.html.

Contractors find that doing business with government is increasingly risky

By

Federal contracting is increasingly becoming a high risk business, according to an industry survey scheduled to be released later this month.

The survey from consultant Grant Thornton shows nearly 40 percent of federal contractors achieved lower revenues this year compared to last year while 35 percent made greater revenue, Grant Thornton Principal Lewis Crenshaw said.

In 2011, by comparison, half of government contractors reported increased revenues and about 30 percent reported a decrease, Crenshaw said during a Dec. 14, 2012 event hosted by the Association for Federal Information Resources Management. The consultant plans to release its 18th annual government contractor industry survey later this month.

Keep reading this article at: http://www.nextgov.com/cio-briefing/2012/12/federal-contracting-increasingly-risky/60190/?oref=nextgov_today_nl.

Are contractors at risk of a flame out?

By

Retired Vice Adm. Lewis Crenshaw Jr. is a former Navy aviator so you have to forgive his aviation analogy, but in presenting accounting firm Grant Thornton’s annual contractor survey he made a convincing case that many companies in the market are dangerously close to stalling out.

On the surface, some of the numbers look good: 50 percent of the respondents said revenues were up. But that is down from last year’s survey that showed 55 percent reported growth.

Also troubling, is that 29 percent reported a decrease in revenue, compared to 22 percent last year.

Companies also reported profit margins in keeping with previous surveys, but the profits aren’t coming from revenue growth, Crenshaw said, but from controlling costs.

The aviation analogy for Crenshaw, now the national practice leader for Grant Thornton’s aerospace and defense market sector, is that you can only slow your airplane down for so long before it stalls and then you crash and burn.

“Next year’s numbers should be very interesting to look at,” he said.

Another warning sign is the assets to liability ratio, where 60 percent of companies reported a ratio of two or less.

“You’re not in good shape with that and it supports my stall analogy,” he said.

Grant Thornton’s annual survey asks companies about a variety of financial and business factors, including financial statistics, compensation, business strategies and contracting issues such as delays and terminations and issues dealing with government customers.

The accounting and consulting firm uses the survey to present a benchmark of the market and as a platform for discussing trends in the market.

Some of the highlights of its findings include the fact that firm-fixed-price contracts have not grown in use, according to the respondents and remains at about 20 percent of contracts.

“Despite the rhetoric it hasn’t changed year-to-year,” Crenshaw said.

Companies reported that the use of task order contracts rose by 50 percent and that less than 45 percent of revenue came from these contracts.

Another interesting finding was that 81 percent of the companies reported that they were asked to do out-of-scope work on contracts and 84 percent of those did the work. Surprisingly, only 25 percent filed for adjustments to their contracts.

“Out-of-scope work might become a bigger issue if more contracts go to firm-fixed price,” Crenshaw said.

About the Author: Nick Wakeman is the editor-in-chief of Washington Technology.  This article was published on Mar. 7, 2012 at http://washingtontechnology.com/articles/2012/03/07/grant-thornton-contractor-trends.aspx?s=wtdaily_090312.

Should contractors fear sequestration?

By

If sequestration of federal funds kicks in, agencies will face making deep cuts to programs and that pain will flow down to contractors, experts say.

A sequestration causes automatic, indiscriminate, across-the-board budget cuts. The failure of the so-called supercommittee to find $1.2 trillion dollars in savings over a decade triggered the cuts. They’re set to take effect Jan. 2, 2013.

As a result, contractors too “are hostages in a showdown between the president and Congress over fundamental decisions on taxing and spending,” said John Cooney, former general counsel at the Office of Management and Budget and now a partner at the Venable law firm.

He spoke Jan. 17 at a panel discussion hosted by the Professional Services Council that looked at sequestration in detail. Cooney broke down the possible routes federal officials may take to deal with the cuts.

Cooney expects agencies to:

  • Try to avoid terminating contracts. Instead, officials will reduce the amount of money obligated under their contracts.
  • Become less willing to extend contracts into their option years.
  • Obligate money for one fiscal year at a time on task order and services contracts.
  • Possibly use the prospect of the sequester’s cuts to renegotiate contracts.

He also said agency officials will more often decide to not award new contracts.

“This will be a common agency practice in year one of a sequester. Procurements that can be put off will be put off,” he said during the discussion.

With available money, agency officials will maximize contracts that meet their agency’s core duties, said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, who spoke on the panel as well.

Meanwhile he expects agencies to look for more flexibility to avoid hard-and-fast commitments, such as fixed-price contracts and minimum revenue guarantees. And on the other hand, officials may use more time-and-materials contracts, which are based on labor hours and materials.

However, Chvotkin said there are some policy constraints as the Obama administration has railed against this type of contract, which places a lot of risk on the government.

IDIQs and the General Services Administration’s Multiple Award Schedules program may become more attractive to agencies. They allow for more negotiations at the task order level, he said.

Cooney had several suggestions for companies in light of what may happen. Advocate for the importance of a program and stay in close contact with a contracting officer. Realize though that the officer may not know the fate of a program until very late in the process.

Businesses should also emphasize what they can do for the agency, including the options the company is willing to agree to that may even decrease its revenue, Chvotkin said.

He recommended checking the Past Performance Information Retrieval System (PPIRS) and the Federal Awardee Performance and Integrity Information System (FAPIIS). The information needs to be correct, and it should reflect as favorably as possible on the company’s performance.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Federal Computer Week. This article appeared Jan. 19, 2012 at http://washingtontechnology.com/articles/2012/01/18/sequestration-effects-contracts.aspx?s=wtdaily_200112.

New NASA priorities open billions in new opportunities

By

NASA might be cutting $1 billion from its space operations budget but a new study claims there are billions in opportunities in science and technology areas.

“As NASA shifts priorities for human spaceflight from shuttle operations to human exploration capabilities and commercial spaceflight, the budget will be redirected to a range of technology development programs,” said Steve Bochinger, president of Euroconsult North America.

The firm and its partner Omnis Inc. have released a new study, NASA Spending Outlook: Trends to 2016, which analyzes NASA’s budget.

As space operations shrink, the science budget will be redistributed among NASA centers, Bochinger said.

Among the findings:

  • The Science Mission Directorate saw an 11 percent bump in 2011 and will have a $5 billion through 2016. Goddard Space Flight Center and Langley Research Center will benefit because of the work on Earth science projects.
  • The Exploration Systems Mission Directorate will hold steady at about $3.9 billion but funds will shift away from human exploration activities.
  • The new Space Technology Directorate will get $1 billion a year from 2012 to 2016. Langley, Glenn and Ames research centers will benefit because of their work on new technologies for exploration and robotic spaceflight.
  • NASA is restructuring the Aeronautics Research Mission Directorate to focus on fundamental aeronautics and development of technologies for the Next Generation Air Transportation System.

The study also predicts that NASA’s business practices will have to change with a shift from cost-plus contracting to more fixed-price contracting.

About the Author: Nick Wakeman is the editor of Washington Technology. Article appeared June 8, 2011 at http://washingtontechnology.com/articles/2011/06/08/nasa-budget-priorities-shift.aspx?s=wtdaily_090611

Contracting News

Read More

Contracting Tips

Read More

GTPAC News

Read More

Georgia Tech News

Read More