Importance of a proper NAICS code and product or service code- revisited

I wrote earlier about the importance of using proper codes in FedBizOpps (especially). Recently, the GAO sustained the protest of TMI Management Systems, Inc., (file number B-401530, dated September 28, 2009) when the contracting officer used a product code rather than a service code in the FedBizOpps solicitation.

The GAO stated that Competition in Contracting Act (CICA) requires full and open competition, publicizing requirements and allowing contractors an opportunity to make informed decisions about whether or not to provide a proposal. Similarly, the GAO notes that the FAR says to use FedBizOpps and to use the "most appropriate procurement classification category."

The GAO also found that there were probably other service codes that may have been closer matches to these services needed. The way they tested it out was to see what cods were used by other solicitations that listed the same NAICS code. None were listed with the product classisfication code.

As part of its claim, the protestor claimed they could locate the requirement as they searched using the codes they could perform and the GAO found that that was a reasonable practice and that searching for others codes, assuming the agencies would use the wrong codes, is an unreasonable assumption contractors shold have to make.

In summary, GAO declared that "misclassification of this procurement deprived [the contractor] of an opportunity to respond to the RFP and that [the agency] therefore did not use reasonable methods to obtain full and open competition as required by CICA.

Government, pay the contractor costs and resolicit the requirement.

What to take away? When in doubt, search through FedBizOpps to determine what codes were used for the same NAICS code. Choose a better fit for your requirement.

Comments? Let me know.

Wondering what is "new" in this field of contracting? Check it out...

Here is an updated link to my latest readings of the past week or three.

Selecting the right NAICS code can make or break your next procurement.

Picking the proper NAICS code is often one of those tasks that we as contracting professionals do but we do it almost routinely. Many times, not too much thought is put into it and we rely on those codes we are familiar with, especially if we deal in a small range of products or services. For instance, those who work in a contracting office that supports environmental services, there are only a few NAICS codes that are strictly for environmental remediation and support services.

However, choosing the right NAICS code can make a big difference. Think of what you do with that code. You use it to conduct market research. The results of that market research are used to determine contract type, whether the requirement is for a commercial item or service, and even whether or not you can set aside the requirement for small business. That in turn affects the amount of competition for the award as well as whether an unrestricted solicitation is made.

The contractor has limited appeals for your selection. The Small Business Administration's Office of Hearings and Appeals is the appeal authority. A small business contractor might appeal for one of two reasons (see page two of this linked newsletter): to limit competition to just themselves (or a very few) by getting a more restrictive size standard, or to expand the size standard to allow access to that requirement. Of course, a large business would want a very restricted NAICS code that would have fewer than 2 potential offerors which would allow for an unrestricted requirement.

So, choose your NAICS code carefully.

Performance based contracting versus counting contractor employees

According to a recent summary, the early markup of the FY 2010 National Defense Authorization Act (H.R. 2647 for those scoring at home) includes provisions to convert 11,000 contractor positions to DOD civilian personnel positions and will require, if passed,

“DOD to include contractor employee data for service contracts in annual budget documents...” and to “...report on how it plans to achieve its insourcing (using civilian employees for new work or work that is currently being performed by contractors) goals.”

This seems to go against the goals of performance based service procurements where the desired results were all that was important. Who cared how many people the contractor used (except installation commanders that needed to know how many people needed access to the post and its related services)? If the end result of their work was the correct and desirable one, that was the entire issue and the contractor got paid.

So now we need to count contractor employees for all our service contracts. That leaves us with two other questions. First, is the Contractor Manpower Report acceptable? Second, do they mean bodies (including part time employees) or do they want to count full time equivalents (FTEs)? For those services that do not need a full time employee year ‘round, do we need to hire one?

We will have to stay tuned.

Reforming Government Contracting- deadlines loom

In March 2009, President Obama sent a memorandum to the Heads of the Executive Department and Agencies outlining his plan to reform government contracting. Here is a link to a presidential press/media fact sheet on this memo. The intent of his memo is to call attention to the use of sole source and limited source contracting vehicles (that would include multiple award task/delivery order contracts), the need for greater contract management and oversight and the need to define "inherently governmental activities" that should not be outsourced.

Within the memo is a call to action for the Office of Management and Budget to issue guidance on how to award better contracts by July 1, 2009. That dealine is fast approaching. It would be great to be able to solve the government contracting problem with a piece of guidance written in less than 4 months.

September 30, 2009 is the date we will get the answers to these age-old contracting dilemmas (the answers are both basic and complicated, to say the least):

• How to use and manage sole-source and other types of noncompetitive contracts and to maximize the use of full and open competition and other competitive procurement processes;
• How to use and oversee all contract types, in full consideration of the agency’s needs, and to minimize risk and maximize the value of government contracts generally;
• Is there sufficient capacity and ability of the Federal acquisition workforce to develop, manage, and oversee acquisitions appropriately; and
• When is (or is not) governmental outsourcing for services appropriate.

Can't wait for the answers. Stay tuned.

Managing the contracting process- Is the contracting office doing its job?

The dilemma for nearly all managers of contracting offices is how to manage the process of creating contracts. A typical way to do that is to first, look at the contracting process in place right now. Then comes the work of "managing:

• Determine if it is working (and that depends on your definition, perhaps)
• If it is "working," how well is it working- and how do you know
• If not, figure out what needs fixing, then fix it
• Measure how things are going
• Go back to the first step

To know if the contracting process is "working" at any particular office, it is important to look at your office's raison d'être- purpose for being- and the expectations of its "customers."

For instance, if your office is supporting an activity in a remote location and they are satisfied with the support they are receiving, perhaps there are no overall problems (we aren't going to address personnel issues, personality conflicts, or any of thousands of internal issues that can erupt in an organization).

What if your contracting office supports multiple missions with multiple customers. That complicates things, doesn’t it?

Regardless, of the number of customers or missions, if the customers cannot fulfill their missions because of the work of your contracting office, the process is not working. That means that if the mission is not being met by your team, for instance that activity at a remote location still needs support from "the home office" for even simple contracting actions, the process there is not working.

Similarly, if, from a technical standpoint, the activity's mission is sort-of supported by your office but the customer is not satisfied- for whatever reason- there is a question as to whether things are actually working there at this time.

For those that say, “But we’re getting the mission accomplished…” you might be correct. However, there is something missing- in the customer’s eyes- in accomplishing that mission. For instance:

• Perhaps the customer is not pleased with the length of time the entire process takes.
• Being left out of the process is also a problem for many customers.
• Being required to participate too much in the process may be an issue as well
• Not being consulted/informed at each stage of the process concerns many customers

If you do not include your customer in the process, given a choice that customer may find a more “customer friendly” contracting shop to deal with. It happens all the time using General Services Administration (GSA) schedules, doesn’t it?

To sum up, to know if the process is working, it is important to know what your customers’ missions are and if those customers feel they are successful because of what your office does.

What do you think? How do you measure this?

Best expense account around- your government contract

We, in the the contracting community have been slammed for mismanaging contracts once awarded. The big magnifying glass from above (this week) is on those award fees paid when the contractor is not a good performer. However, in this case involving a pair of contracts (almost $600 million in value) to help Iraq improve their local governing processes, contract payments were made in a curious turn of events:

"On August 19, 2004, Research Triangle Institute physically lost $185,481 in Local Governance Project cash," the report [by the Special Inspector General for Iraq Reconstruction] said. "It reported the loss to USAID, and on October 3, 2004, the USAID Iraq contracting officer issued a letter" stating the loss was "unforeseen" and not the institute's fault. [Inspector General Stuart] Bowen's office said it had no details on how or where the money was lost and the institute and USAID didn't immediately provide an explanation on Tuesday. But Bowen said USAID approved the payment of more than $242,000 to the institute in the case — including the $185,481 in lost cash and an additional $57,000 in "general and administrative expenses" and a "fixed fee."

I guess we need to be more careful out there. If cash is involved, I would hope it's security (and potential loss) would have been "foreseen" and appropriate protections taken.

Maybe next time.

Comments??

No wonder program offices don't understand

This article looks at the subject of acquisition planning from the program office perspective. The author writes about how program offices perceive acquisition planning and how they tend to have difficulty with contracting officers that demand competition after they have done all that work already:

Let's suppose the program people at a customer agency did a thorough job of analyzing and pricing several different technologies and options over the course of 18 months. Various manufacturers had competed hard during this period to show that their technology was the best value. [Emphasis mine]

Later in the artcle, he says,

When these activities [acquisition planning in accordance with the agency's IT plan] are performed, there is an abundance of meaningful competition during which each manufacturer seeks to prove that it offers the best value. During this sales process, it usually becomes quite apparent which product is best for a particular situation, and everyone knows it. [Again, my emphasis]

What is occurs to me is that the requiring activity does not understand that the "competing"and "sales process" is not part of their job.

The contracting rules were designed to allow fair and open- transparent- transactions between the government and its contractors. These rules have placed responsibility on two groups. The requiring activites- the program offices- and the contracting officers.

The program offices represent the end users of what is being purchased. They are the subject matter experts, the planners and engineers. They are responsible for determining what performance parameters- those key features, specifications, certifications, etc.- that are the minimum requirement to meet the needs of the government.

The contracting community, then, creates the opportunity for vendors across the country to determine if they can meet the government's need in a cost-effective way. They do it in a formal process (controlled by rules and regulations enacted way above their pay grades) that allow a maximum number of vendors to compete in a standardized manner, with transparency to the entire transaction.

This means that the formal acquisition process- and those pesky contracting officers- is where the "competing" and "sales process" takes place on a level playing field, in the full light of the rules and regulations of US Code and the FAR. Working that way, the author and his program colleagues would notice far fewer justifications and approvals needed (J&As).

If the program office does not know what they need and must rely on "competing" vendors to "sell" them on a solution, perhaps they are not doing the job the government is expecting of them.

Am I wrong on this? Comment below.

"Contracting Officers often click through mindlessly when entering contracts in FPDS-NG"

Is this you? Looking on page three of the DOI IG's report you can see the importance of correctly inputting information. Also, having the correct data is good, too.

A solution suggested is to have periodic "statistical sampling." Is there a better solution?

Let me know in the comments.



For other articles on this and other data integrity issues, check out my feed on data integrity.

Once again the experiment continues

Last year, I thought I could contribute enough to our profession by these posts to change the way we think about federal contracting and promulgation of policies. I lost steam as I was hampered by work-related obstacles and infrastructure security issues.

So, undeterred, I am seeking other ways to do this.

Check the two news-related entries on sidebar. I simply have to bookmark interesting articles that I find along the way and they will automatically appear to the right.

Way cool.

Let's see how this plays out.

Now it is Cronyism and Corruption

The assault on the federal procurement process continues.

The Center for American Progress, a progressive think tank, uses the words, "cronyism" and "corruption" as the headline of their press release about an "event" featuring Rep. Henry Waxman, the chairman of the House Oversight and Government Reform Committee as its keynote speaker.

Both Federal Computer Week (FCW.com) and Government Executive (GovExec.com) reported on this event and neither one used those words. In fact, the text of the organization's release talked of Rep. Waxman's vision of increasing the size of the government acquisition workforce. The release says that,

He cited the need for more contract managers and government overseers and proposed that 1 percent of federal procurement spending be set aside for
procurement management and oversight.

That doesn't sound like everyone in the federal contracting profession are on the take. However, his remark that,

While government contractors are getting richer, taxpayers are getting soaked

sounds a little more inflammatory.

We must redouble our efforts, as federal contracting professionals to keep our eyes on the goal of being good stewards of the taxpayer's money and earning their continuing confidence on a daily basis.

House passes Small Business Fairness in Contracting Act

Sorry for the delay between posts at this important time for small business issues.

The reports are true, this bill (HR 1873) passed the House and heads for the Senate. An amendment that increased the percent of federal contracting dollars earmarked for small businesses from the current 23 percent to 30 percent was added to the final package sent forward.

The House Small Business Committee chair (Chairwoman Rep. Nydia Velazquez (D-N.Y.) believes that the government understated its compliance with this goal over the past few years.

There is little in this bill to help achieve a 30 percent higher goal.

Small Business Fairness in Contracting Act moves out of committee with changes

The House Oversight and Government Reform Committee passed a revised Small Business Fairness in Contracting Act (HR 1873) on May 1, 2007. This bill, originating in the House Small Business Committee, has the primary effect of limiting small business bundling and upping the small business participation goals. The bill as passed will up the small business goal from 23 to 28 percent, according the the GovExec article and waters down the original from virtually eliminating all bundling to those requirements that were originally satisfied by two or more small businesses.

For a discussion of the original bill, click here, here, and here. For the text of the original bill, click here. The amended bill is not yet available online and will be posted when it is available.

Will keep you up to date on the latest changes.

Reps. Moran and Davis comment on Acquisition Reform

Check it out...both of Northern Virginia's representatives have a vision for acquisition reform. Rep. Davis believes

(Y)ou get the best acquisition officials you can find. If you give them a tool box of different contracting vehicles so that they can decide what’s best for the government, and you train them well and allow them to do their job, if you do that right — they will make a mistake once in a while — but most of
the time you’re going to get a good outcome.

Rep. Moran is taking a slightly different tack. According to this article, he believes that

Government contracting desperately needs oversight and reform, especially regarding the contracting workforce and small-business support.

He also says that more government employees should be scrutinizing contracts.

We have got, as far as I am concerned, to move people from the private sector into the public sector to provide those inherently governmental
functions

I guess we have a lot of reform to look forward to.

Proposed rule looks at small business and subcontractors

Here is a collection of articles that deal with a proposed FAR rule. As the introduction to the rule states,

Federal Funding Accountability and Transparency Act of 2006 (FFATA) (Pub. L. 109-282) requires the existence and operation of a searchable website that provides public access to information about Federal expenditures

This proposed rule puts into place the FAR requirements to make this happen. Among the issues this raises is the public access to subcontractor information that has not be available in the past. This information will eventually be captured and searchable at federalspending.gov.

A secondary issue is that small businesses, which have received a pass on a lot of accountability issues, will be faced with the government wanting- and getting- more details about how they do business.

Emily Murphy, the General Services Administration’s former chief acquisition officer, says that the government will have more information than ever on small businesses, so they need to better manage their government contracts.

Murphy said many small businesses have not mastered the intricacies of their contracts. For example, FAR small-business set-aside provisions limit how much of the contract’s subcontracting work can go to large businesses.

That means more work for them, reducing their ability to be fully functioning business partners.

[Note: Rep. Jim Moran says that about "ninety percent of the companies receiving small-business set-aside contracts will go out of business." Another encouraging word.]

2008 Defense Appropriations Bill fills up, but not with money...

I wrote earlier about Rep. Jim Moran (D-VA) wanting to reform acquisition in the 2008 Defense Appropriations Bill to be considered when Congress gets back to work soon. Now, Rep. Ike Skelton (D-MO) has his own ideas and is readying them for the same legislation. He hopes to form a Defense-Industry partnership that can solve some tough procurement issues- getting the military's equipment stocks built up and able to reinforce troops heading into harm's way.

To help take advantage of the country's industrial capacity, Rep. Skelton hope to use this council to "mobilize this nation and its industrial base" and "bold action is needed" to do that.

Rhetoric aside, we may need some sort of group to help, but adding to the appropriations bill in such a way just adds to the procurement confusion.

Contracting becomes a political issue

Using contractors to perform the government's work has become a political issue. Mrs. Clinton is calling on cutting 500,000 government contractor jobs. According to the article, this ups John Kerry's call to cut 100,000 contractors during the last election cycle.

Based on the reports, there wasn't a discussion of which, if any, government functions would be cut or if the federal workforce would increase to account for the lost contractor support.

Regardless, contracting issues are becoming issues of interest in political arenas. Stay tuned...

More acquisition reforms coming in defense spending bill

The operative word is more! This article says that there will be more attention to contracting and subcontracting contained in the 2008 Defense Appropriations bill, just now being staffed on Capitol Hill.

That is in addition to the other "reforms" that the "new" Congress has in mind.

For instance, the Accountability in Contracting Act is already in play (the Supplemental Appropriations bill- with it attached- is in the hands of the Senate). Now Rep. Jim Moran (D-VA) on the House Appropriations Committee’s Defense Subcommittee wants more oversight. According to the article, his aim is

(m)ore government employees should be scrutinizing contracts

That should be good new for us, but I can't believe that means more people to do the scrutinizing. Maybe even more contractors to help with the scrutinizing.

Regardless, we need to watch for new developments.

Accountability in Contracting Act tacked onto Supplemental Appropriations bill

Chairman of the House Oversight and Government Reform Committee, Rep. Henry Waxman (D-Calif.), gained House passage of his contracting bill but had no companion Senate bill to create a law. So, he used the important-to-our-troops supplemental appropriations bill to get it in position to become a law.

If it stays stapled to this bill, along with the other earmarks used to gain passage in the House of their controversial version, this will become law. All in the name of supporting our soldiers, sailors, airmen and marines.

If only I had a project I wanted to get passed. This looks like the gravy train to put it on. Such are our stakeholders up North in the domed building.

Flunking Subcontracting Limitation is a proposal acceptability issue, not responsibility issue

The Governement Accountability Office sustained (Case B-298364.6; B-298364.7, TYBRIN Corporation, March 13, 2007) the protest of a total small business set aside contract where the apparent winner did not meet the limitations on subcontracting. The Air Force tried twice to get that contractor qualified (note: adding the work actually performed by the contractor with the work of small business subcontractors does not count), eventually getting an SBA Certificate of Competency.

The GAO's response to that was:

[the] Air Force’s determination that [the apparent winner's] proposal failed to comply with a material term of the solicitation (the subcontracting limitation) and, [thus] could not form the basis for award under the RFP, the agency should have found [their] proposal to be unacceptable, rather than finding [them] nonresponsible and forwarding the matter to the SBA for its consideration.

The SBA disagreed. It believes that whether or not a small business contractor will perform the contract is a responsibility issue. However, the GAO's "final" comment is:

the issue here does not concern whether a bidder or offeror can or will comply with the subcontracting limitation requirement during performance of the contract (where we recognize that the matter is one of responsibility) ...but
rather, whether the bidder or offeror has specifically taken exception to the subcontracting limitation requirement on the face of its bid or proposal.
Given that [this] circumstance involves the evaluation of a bid or proposal for compliance with a material term of the solicitation, the determination is one of responsiveness or acceptability, rather than responsibility.

It is simply a matter of the contractor meeting the requirements in the RFP.