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.