Chapter 1:The Legislative History of Source Selection

Many people ask “Why do we have to do this?” during their first competitive source selection. Often, certain procedures are required by law. This chapter explains significant pieces of legislation, and the resulting regulatory framework, that affect competitive negotiated source selections. Occasionally, requirements appear not to make sense or seem overly burdensome, but each step of the acquisition process is backed by some law or regulatory interpretation. Laws and regulations drive this very formal, highly regulated method of spending public money.

Congress lays out the overall structure of and mandates for acquisitions in two primary statutes. The Armed Services Procurement Act of 1947 (10 USC 137) prescribes the general requirements for the Department of Defense (DoD), the National Aeronautics and Space Administration (NASA), and U.S. Coast Guard, while the Federal Property and Administrative Services Act (41 USC 251-260) covers almost all of the rest of the executive branch of the federal government.

The process shown in Figure 1-1 illustrates the competitive source selection process. On this flow chart, Gs indicate the government’s responsibilities; the Is, actions taken by industry.

We will discuss the entire acquisition process, from strategy development through contract award. We will not discuss contract performance or closeout, which are important parts of the overall acquisition process but are beyond the scope of this text.

Every aspect of this process has been prescribed by Congress. When Congress perceives that there is a problem related to federal acquisitions, it is often very quick to impose a solution. This is one reason why the process seems extraordinarily complex—and in many respects it is. What must be remembered, however, is that the public is entitled to great visibility into how its tax dollars are spent, and further, it is entitled to a level of assurance that its money is spent in a fair, equitable, and unbiased manner. Hence the close scrutiny, disclosure, and formalization.

Figure 1-1 The Competitive Source Selection Process

Congress has passed many laws, called acts, that affect the way the federal government does business. Some of these acts resulted from studies that were intended to improve the acquisition process, such as the Federal Acquisition Streamlining Act (FASA) and the Federal Acquisition Reform Act. Others were passed in response to heavily publicized horror stories; the Competition in Contracting Act and the Procurement Integrity Act are two examples. In either case, congressional influence on the procurement process is significant.

Even if existing legislation already addresses a situation, Congress sometimes responds to federal acquisition problems by creating additional requirements for the process. The Truth in Negotiations Act and the Procurement Integrity Act are the result of Congress’ desire to fix a problem, even though it was already addressed by law or regulation. Let’s look at both of these acts and their impact on competitive source selection. We begin with the Truth in Negotiations Act (TINA), which became law in 1962.

THE TRUTH IN NEGOTIATIONS ACT

Many acquisition professionals think that TINA established the requirement for certified cost or pricing data, but this requirement was part of the old Armed Services Procurement Regulation (ASPR) clause number 3-807.3, Certificate of Current Cost or Pricing Data, from 1959. The clause required contractors to certify that the cost or pricing data they were submitting was current.

Regardless, the General Accounting Office (GAO) was concerned that contractors were continuing to overcharge the government, and in 1961 a clause (7-104.29) was added to the ASPR that permitted the government to reduce a contract price if a contractor provided defective cost or pricing data.

Congress passed TINA (Public Law 87-653) in September 1962 because it believed that the government was not receiving factual data from contractors and so was hindered in negotiations. This law is codified at 10 USC 2306 and was initially only applicable to the Department of Defense (DoD), the Coast Guard, and NASA, but Public Law 89-369 made TINA applicable to all executive branch departments and agencies.

Cost or Pricing Data

Cost or pricing data are information that prudent buyers and sellers would reasonably expect to have a significant effect on price negotiations and that are true as of the date of price agreement. The contracting officer (CO) and contractor may agree that the data can be accurate as of an earlier date that is as close as practicable to the date of price agreement.

It is important to note that cost or pricing data are factual, not judgmental, and as such, they must be verifiable. While they do not indicate the accuracy of the offeror’s judgment about estimated future costs or projections, they do include the data forming the basis for that judgment. Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include such factors as:

Vendor quotations

Nonrecurring costs

Information on changes in production methods and in production or purchasing volume

Data supporting projections of business prospects and objectives and related operations costs

Unit-cost trends, such as those associated with labor efficiency

Make-or-buy decisions

Estimated resources to attain business goals

Information on management decisions that could have a significant bearing on costs.

Submitting cost or pricing data can be a burdensome requirement, especially for large or complex acquisitions. For example, companies must certify that the data is accurate, in accordance with Federal Acquisition Regulation (FAR) 15.406-2. Contrary to what some government personnel assert, this information is not typically collected by all companies in the conduct of ordinary business. This is a unique federal government requirement. This is why companies look for exceptions to submitting cost or pricing data.

What exceptions to submitting certified cost or pricing data are available to contractors? Specifically, t he government may not ask for cost or pricing data for acquisitions at or below the simplified acquisition threshold. In addition, t he contracting officer shall not require a company to submit cost or pricing data to support any action (contracts, subcontracts, or modifications) when any of the following conditions apply:

The contracting officer determines that prices agreed upon are based on adequate price competition. (Adequate price competition is discussed later in this chapter.)

The contracting officer determines that prices agreed upon are based on prices set by law or regulation.

The government is purchasing a commercial item , as defined in FAR 2.101, or any modification to the item, as defined in paragraph (3)(i) of that definition, that does not change the item from a commercial item to a noncommercial item.

The head of the agency has granted a waiver.

The action is a contract or subcontract modification for commercial items.

Even if one ofthese conditions does exist, however, certified data may still be required. For example, the U.S. Air Force KC-X aerial refueling tanker aircraft request for proposals required certified cost or pricing data even though it was a competitive acquisition. Sometimes, high-visibility or high-dollar-value acquisitions require certified cost or pricing data, although more recent changes have restricted contracting officers from automatically requesting certified data.

Adequate Price Competition

Adequate price competition exists when two or more responsible offerors, competing independently, submit priced offers that satisfy the government’s expressed requirements. The government will award a contract to the offeror whose proposal represents the best value when price is a substantial factor in source selection. To receive a contract award, the price of an otherwise successful offeror must be reasonable. If the price is found to be unreasonable, the determination of unreasonableness must be factually supported and approved at a level above the contracting officer.

For example, the CO may be faced with an unusual situation where an urgent requirement must be awarded quickly and all of the offerors submitted price proposals that far exceed the government’s estimate. The CO could select the “lowest” price proposal but it still would exceed the government’s estimate. In this situation the CO must get approval to make the contract award in a timely manner to meet the urgent requirement.

Can there still be adequate price competition if only one offeror submits a proposal? In order for that to occur, the contracting officer must have a reasonable expectation, based on market research or other assessment, that two or more responsible offerors, competing independently, would submit priced offers in response to the solicitation’s requirements. In addition, the contracting officer must be able to reasonably conclude that the offer was submitted with the expectation of competition. Indications of expected competition include the following:

The offeror believed that at least one other offeror was capable of submitting a meaningful offer, and had no reason to believe that other potential offerors did not intend to submit an offer.

The contracting officer dete rmines that the proposed price is based on adequate price competition.

The contracting officer’s price analysis clearly demonstrates that the proposed price is reasonable in comparison with current or recent prices for the same or similar items, adjusted to reflect changes in market conditions, economic conditions, quantities, or terms and conditions under contracts that resulted from adequate price competition.

For example, the CO may determine after conducting market research that three companies are capable of meeting the requirements and send a request for proposals (RFP) to all three companies. One company is too busy to submit a proposal, and another company doesn’t want to enter the federal marketplace. So only one company submits a proposal, but it doesn’t know it submitted the only proposal. Thus, the CO may reasonably conclude that the company that submitted a proposal did so anticipating a competitive acquisition. If the proposed price is reasonable, the CO must get approval to award because only one company submitted a proposal.

The CO may, however, need information other than cost or pricing data to support a determination of price reasonableness or cost realism. A contracting officer should only require an offeror to submit cost information other than cost or pricing data when he or she expects that the offeror will be exempted from submitting certified cost or pricing data, but he or she still needs cost information to determine price reasonableness or cost realism. From the data received, the CO should be able to answer the following questions:

Does the proposed price appear reasonable based on its relationship with estimated costs?

Are proposed costs realistic for the work to be performed?

Do proposed costs reflect a clear understanding of contract requirements?

Are proposed costs consistent with the offeror’s technical proposal?

The offeror may submit this data in their company’s format. If a company submits cost or pricing data, they must be current, accurate, and complete, or the government may find its pricing data to be defective and seek a price reduction.

Defective Pricing

The government may not know or suspect that the pricing is defective until contract performance begins. After contract award, the government should pay close attention to invoices and performance and compare actual data to the cost proposal.

Factors suggesting cost or pricing data may be defective include:

A review of current contract performance indicates that the contractor duplicated cost estimates of the current contract.

The incurred costs are significantly less than projected.

The data presented during later negotiations are significantly different from data provided for earlier negotiations.

The budget plans contain data that are different from data submitted in the proposal.

An estimating system review reveals deficiencies.

A review of current contract performance indicates that quantity estimates were erroneous because the contractor did not use current information.

The consequences of providing defective pricing data are beyond the scope of this book, but readers should be aware that a defective pricing investigation can lead to investigations by the inspector general, the Defense Contract Audit Agency, or the Department ofJustice. If a contractor’s pricing information is found to be defective, each invoice it submits may be considered to be a false claim, and additional liability and penalties, both civil (such as fines) or criminal (such as imprisonment), can be levied against the contractor. Thus, if there are any applicable exceptions to submitting certified cost or pricing data, it is advisable for your company to take advantage of them.

The 1986 amendments changed TINA; they required that the government prove that it relied on defective cost or pricing data before it could recover costs that resulted from the defective data. The FASA amendments of 1994 and the Clinger- Cohen Act amendments of 1996 made even more changes. One significant change periodically increased the dollar-value threshold for submitting cost or pricing data. The threshold stands at $650,000 as of June 2009; readers are encouraged to check FAR 15.403-4 for the current threshold. FASA also created a new category of information, “information other than cost or pricing data,” as mentioned above.

In addition to the cost or pricing data requirement, TINA also introduced the concept of a competitive range determination.

The Competitive Range

The highest ranked proposals in a negotiated acquisition competition comprise the competitive range. The use of a competitive range is one way the government narrows down the field in negotiated acquisitions. Contracting officers must hold discussions with all offerors in the competitive range per Public Law 87-653: “Written or oral discussions shall be conducted with all responsible offerors who submit proposals within a competitive range, price, and other factors considered.”

TINA’s Impact on Source Selection

The Truth in Negotiations Act had a significant impact on competitive source selection because it established many requirements that are an integral part of source selection today:

Pursuing adequate price competition

Establishing the competitive range.

Certified cost or pricing data include all facts that prudent buyers and sellers would reasonably expect to significantly affect price negotiations. These facts must be accurate as of the date of the price agreement. Note that facts are verifiable. They are not judgments, projections, or estimates. All facts reasonably available as of the date of the price agreement must be disclosed. Some companies have an unwritten policy of “when in doubt, disclose” when it comes to submitting data because it’s safer to disclose information than to withhold it.

An allegation of defective pricing is serious and has serious consequences. FAR 52.215-10 (Price Reduction for Defective Cost or Pricing Data) states in part:

If any price, including profit or fee, negotiated in connection with this contract, or any cost reimbursable under this contract, was increased by any significant amount because (1)The Contractor or a subcontractor furnished cost or pricing data that were not complete, accurate, and current as certified in its Certificate of Current Cost or Pricing Data; (2) A subcontractor or prospective subcontractor furnished the Contractor cost or pricing data that were not complete, accurate, and current as certified in the Contractor’s Certificate of Current Cost or Pricing Data; or (3) Any of these parties furnished data of any description that were not accurate, the price or cost shall be reduced accordingly and the contract shall be modified to reflect the reduction.

Adequate price competition, one exception to submitting certified cost or pricing data, takes advantage of the competitive forces of the marketplace. The presumption in this exception is that competition drives down prices and makes them more reasonable; certified cost or pricing data are thus not needed to establish reasonableness. As we’ll see in the next section, encouraging competition for federal government contracts is a recurring theme in federal legislation.

Narrowing the field of competitors by establishing a competitive range helps to speed up the acquisition process by eliminating those vendors that have no chance of receiving the award. The government can then focus on the proposals that have a reasonable chance of being selected for award.

It is interesting to note that in 1962, the philosophy guiding the inclusion of proposals in the competitive range was “When in doubt, keep them in” ; now it’s “When in doubt, throw them out.” This shift was due, in part, to the desires of offerors, especially small businesses. Proposals are extremely expensive endeavors, and if a company no longer has a reasonable chance of overtaking the front runners, it is better for business to stop spending money on a lost cause. Unfortunately, offerors have no way of knowing if this is the case and must rely on the government to use its best judgment.

THE COMPETITION IN CONTRACTING ACT

In 1979, the Commission on Government Procurement recommended that agencies improve competition. This commission planted a seed that was fertilized by procurement scandals in the early 1980s. During this period, the Pentagon’s peacetime spending increased significantly. It was purchasing everyday items such as hammers, pliers, coffee makers, and ash trays at inflated prices, which engendered mistrust. Congress determined that lack of competition was the cause of the problem and enacted the Competition in Contracting Act (CICA) in 1984.

The regulations in place at the time already required competition; the Federal Procurement Regulations required “all purchases and contracts, whether by formal advertising [the old way of doing sealed bidding] or by negotiation, [to] be made on a competitive basis to the maximum practicable extent.” But before CICA, agencies used the negotiated acquisition method only if formal advertising wasn’t practical and if one of 17 exceptions to obtaining competition applied. Therefore, the government still awarded many contracts on a sole source basis. In 1985, the General Accounting Office asserted:

All potential contractors should have the opportunity to do business with the government and the right to compete with others equally. Contracts should not be awarded on the basis of favoritism, but should go to those submitting the most advantageous offers to the government. Offering all contractors the opportunity to compete also helps to minimize collusion. In addition, competition is intended to insure that the government pays reasonable prices. The benefits of competition go beyond short-term price advantage. The competitive process provides a means for finding out what is available to meet a particular government need and choosing the best solution. The most important benefits of competition can often be the improved ideas, designs, technology, delivery, or quality of products and services that potential contractors are motivated to produce or develop to obtain government contracts. The chance of winning a government contract or the threat of losing it provides a key incentive for greater efficiency and effectiveness.

CICA Requirements

CICA’s requirement for full and open competition means that all responsible sources may submit proposals or bids. Not only is competitive procurement the law, it also makes good business sense. Competition can offer cost savings, higher quality, better service, and creative solutions. By advertising requirements to a broad industry base, the government will receive better solutions at reasonable prices. Before CICA, competition was required, but just “to the maximum extent practicable.” So if it wasn’t practical to have a competitive procurement, it was pretty easy to simply use a sole source.

CICA requires that the government’s requirements be synopsized, or publicized, in a timely manner. When CICA was passed, synopsis was done through a daily publication called The Commerce Business Daily (CBD). Now synopsis is done electronically through the governmentwide point of entry, www.FedBizOpps.gov (short for Federal Business Opportunities). But the objective remains the same: to advertise the government’s requirements so that more businesses have an opportunity to compete.

Congress felt so strongly about the importance of competition that it established a new position, the competition advocate, for acquisitions. Each agency is now required to appoint a senior official as its competition advocate. He or she is responsible for challenging barriers to full and open competition and submitting annual reports on competition to Congress.

Finally, CICA requires agencies to use advance procurement planning and market research. Conducting market research to find out which companies can meet the government’s requirements can expand the list of potential offerors. The act prohibits the use of noncompetitive procedures based on justifications that rely on funding uncertainties or lack of planning. In other words, CICA prevents agencies from using sole source acquisition just because they didn’t plan for their requirements or because funding is about to expire.

Despite the requirement for full and open competition, there are still situations in which it is necessary to conduct a sole source procurement. Sole source acquisitions must be justified using one of the following seven exceptions.

Exceptions to Full and Open Competition

CICA requires that “all responsible sources are permitted to compete.” To contract without full and open competition, one of the following exceptions must exist:

There is only one responsible source, and no other supplies or services will satisfy agency requirements. The source must have a unique and innovative concept or unique capability for this exception to apply.

The need is of such unusual and compelling urgency that the government would be seriously injured unless the agency is permitted to limit the number of sources.

Industrial mobilization; engineering, developmental, or research capability; or expert services. This exception applies when it is necessary to maintain a facility, manufacturer, or other supplier in case of a national emergency. It may also be used to establish or maintain an essential capability to be provided by an educational or other nonprofit institution or a federally funded research and development center, or to acquire the services of an expert or neutral person for litigation or dispute.

International agreement. Full and open competition is not required when precluded by the terms of an international agreement or treaty between the United States and a foreign government or international organization.

A statute (such as the Small Business Act or the Javits-Wagner-O’Day Act) expressly authorizes or requires that the acquisition be made through another agency or from a specified source.

National security. Full and open competition is not required when disclosing the agency’s needs would compromise national security. Requiring access to classified information is not, in and of itself, a justification for using a sole source.

Public interest. When the agency head determines that it is not in the public interest to conduct the procurement with full and open competition, Congress is notified in writing at least 30 days before contract award.

Note that the government is not automatically granted authority for a sole source acquisition just because one of the exceptions applies. Although a contracting officer may conduct an acquisition without using full and open competition when one of the aforementioned conditions exists, he or she is still expected to “solicit offers from as many potential sources as practicable under the circumstances.” For example, agencies in the intelligence community still use competitive acquisition, but only vendors that have the appropriate security clearance are considered as potential sources. This is known as a limited competition.

Planning, Solicitation Requirements, and Protests

In an attempt to broaden the industrial base from which the government selects contractors, CICA requires that agencies use advance procurement planning and conduct market research, though it does not explain who should do the market research or how it should be done. The current FAR part 10 (Market Research) stems from the Federal Acquisition Streamlining Act, which we’ll discuss later in this chapter. And although CICA does not state how agencies should perform acquisition planning, the text in FAR part 7 (Acquisition Planning) is a direct result of CICA requirements.

Not only does CICA require full and open competition, market research, and acquisition planning, it also created requirements for how the agency attracts competition. For example, CICA requires that the government:

Specify its needs and solicit proposals in a manner designed to achieve full and open competition for the procurement

Develop specifications in such manner as is necessary to obtain full and open competition with due regard to the nature of the property or services to be acquired.

“Specifying needs and soliciting proposals in a manner designed to achieve full and open competition” means that the government must advertise its requirements sufficiently in advance of the proposal due date to give vendors a fair opportunity to compete. In 1985, when CICA was implemented in the FAR, contracting officers were required to “publicize contract actions in order to increase competition, broaden industry participation in meeting government requirements, and assist small business concerns in obtaining contracts and subcontracts.” At the time, the government was required to synopsize its requirements at least 15 days before issuing the solicitation, and it had to allow at least 30 days for vendors to submit offers. (These requirements have since been changed.)

CICA also established requirements for how a solicitation should be written. For example, the specifications must permit full and open competition and may include restrictive provisions only to the extent necessary to satisfy the needs of the executive agency or as authorized by law. This requirement addresses the concern of “wiring” an RFP to a particular company. If the specifications are written so that only one company can meet the requirements, it is considered to be “wired.” This doesn’t fulfill the intent of CICA. To avoid this situation, CICA requires that agencies write specifications in terms of:

Function, so that a variety of products or services may qualify;

Performance, including specifications of the range of acceptable characteristics or of the minimum acceptable standards; or

Design requirements.

CICA also introduced minimum requirements for evaluation criteria. Per 41 USC 253a, they must include a statement of:

A. All significant factors (including price) which the executive agency reasonably expects to consider in evaluating competitive proposals and the relative importance assigned to each of those factors; and

B. A statement that the proposals are intended to be evaluated with, and awards made after, discussions with the offerors, but might be evaluated and awarded without discussions with the offerors; and the time and place for submission of proposals.

Finally, CICA requires agencies to evaluate offers based only on the evaluation criteria stated in the solicitation. It also introduced the concept of award without discussions (with the exception of minor clarifications)

when it can be clearly demonstrated from the existence of full and open competition or accurate prior cost experience with the product or service that acceptance of an initial proposal without discussions would result in the lowest overall cost to the Government.

CICA also added provisions relating to bid protests to Title 31 of the United States Code, which comprises the entire body of congressional actions. All bills passed by Congress that become permanent law are codified, or placed within a system for finding and referring to the law. In simple terms, the language is given a section number and placed in one of the titles of the U.S. Code. The laws within are grouped into similar subject areas; Title 31 covers money and finance.

The Budget and Accounting Act of 1921 is the basic legislation that established the GAO. The act granted GAO authority to determine the legality of public expenditures. Based on this authority, GAO has ruled on protests filed by interested parties concerning solicitations, proposed awards, or contracts for property or services. CICA established an express statutory basis for such decisions. It set strict time limits for the issuance of bid protest decisions and, in many cases, requires agencies to suspend, or stay, a protested procurement action until the comptroller general issues a decision. In addition, the act authorizes GAO to award successful protestors their costs of pursuing a protest as well as their costs of preparing bids and proposals.

CICA’s Impact on Source Selection

The effects of CICA on source selection are felt today. They affect the entire acquisition cycle, from planning to solicitation preparation, evaluation, and award. Now we take for granted that agencies plan for competition, but competition was not required by law before CICA. The FAR language that requires agencies to list evaluation factors and their relative importance and to state whether award will be made with or without discussions came directly from CICA. CICA encouraged contracting officers to use competitive procedures by requiring agencies to choose a competition advocate, which added another impediment to contracting on a sole source basis. Finally, CICA also allowed timely protest to stop contract award.

THE PROCUREMENT INTEGRITY ACT

CICA’s 1984 debut made acquisition more challenging for agencies and contractors in the mid-1980s. In 1986, the Naval Investigative Service launched a two-year ethics investigation of both government and contractor personnel. The investigation, known as Ill Wind, uncovered corrupt behavior of civilian, military, and contractor personnel within the Department of Defense. The investigation revealed that government officials had awarded contracts to favorite contractors by revealing source selection information; contractors rewarded these officials with bribes and gratuities. Using evidence from court-approved wiretaps and more than two million documents, the Justice Department successfully convicted 70 people.

The acquisition community would never be the same. Congress set forth to make sure a situation like this could never happen again. Despite the existence of other ethics laws and regulations such as the 1978 Ethics in Government Act (P.L. 95-521), the Anti-Kickback Act (18 USC 874), and bribery, graft, and conflict of interest statutes (18 USC 201, 207, and 208), Congress passed another ethics law, the Procurement Integrity Act (P.L. 100-679), in 1988. This act tightened the reins on procurement officials and contractors alike by establishing new rules regarding ethical behavior for government and contractor personnel, including technical staff.

New Rules for Ethical Behavior

The Procurement Integrity Act mandates that during the conduct of any federal agency procurement, no competing contractor or consultant shall knowingly:

Make any offer or promise of future employment or business opportunity or engage in any discussion of future employment or business opportunity with any procurement official

Offer, give, or promise to offer or give any money, gratuity, or other thing of value to any procurement official

Solicit or obtain proprietary or source selection information from any officer or employee of the agency before contract award.

Federal agency procurement officials shall not knowingly:

Solicit or accept any promise of future employment or business opportunity from any competing contractor or consultant

Ask for, demand, solicit, accept, receive, or agree to receive any money, gratuity, or other thing of value from any officer, employee, representative, or consultant of any competing contractor

Disclose any proprietary or source selection information to any individual other than a person authorized by the agency head or contracting officer.

The Procurement Integrity Act goes on to define who is considered a procurement official for purposes of the aforementioned restrictions. A procurement official is one who has participated personally and substantially in evaluating proposals, selecting sources, or conducting negotiations in connection with a solicitation and contract. This includes postaward actions such as agreements to modify or extend a contract. Thus, these restrictions apply not only to acquisition/contracting personnel but to technical personnel who help evaluate proposals and negotiate contracts. The Procurement Integrity Act also imposes a requirement on offerors to certify in writing that they have not violated the act.

The Procurement Integrity Act’s Impact on Source Selection

The Procurement Integrity Act was intended in part to close a “revolving door”: government personnel awarding contracts to a company, then going to work for the same company right after contract award. No procurement official may participate personally and substantially in evaluating, negotiating, awarding, or modifying contracts for a particular contractor for a period of two years before working for that company. Similarly, companies must be careful not to express an interest in hiring a government procurement official. To avoid problems, some companies discourage staff from making even vague statements that could be construed as employment offers. The Procurement Integrity Act also requires annual ethics training that explains the requirements of the law and penalties for noncompliance. Anyone who participates in a source selection should attend this training.

THE FEDERAL ACQUISITION STREAMLINING ACT

Shortly after the Procurement Integrity Act was implemented, section 800 of the National Defense Authorization Act for fiscal year 1991 directed a panel of experts in procurement law and policy from both the public and private sectors to make recommendations on streamlining defense acquisition. The Section 800 Panel’s recommendations were the impetus for FASA. The goals of the panel were to:

Streamline the defense acquisition process and prepare a proposed code of relevant acquisition laws

Eliminate acquisition laws that were unnecessary for the establishment and administration of the buyer and seller relationships in procurement

Ensure the continuing financial and ethical integrity of defense procurement programs.

The Section 800 Panel evaluated more than 600 laws and recommended almost 300 for repeal, deletion, or amendment. The panel focused on:

streamlining (fewer and more understandable laws), the use of commercial items wherever possible, and the implementation of a set of simplified acquisition procedures (reducing the administrative overhead associated with “small” purchases)…. which led to several far-reaching changes in the acquisition process.

The panel issued its report in early 1993. President Bill Clinton established a National Performance Review (NPR) led by Vice President Al Gore the same year. NPR’s goal was to make federal government functions less expensive and more efficient. The NPR also recommended statutory changes to reform the acquisition system.

Both the Section 800 Panel and the NPR identified existing procurement laws that created barriers to entering the federal government contract marketplace. Competition and innovation were limited by burdensome regulatory requirements unique to the federal government, including:

Overreliance on outdated specifications and standards

Restrictive technical data-rights requirements

Onerous accounting requirements.

The Federal Acquisition Streamlining Act of 1994 sought to address these issues. FASA repealed or substantially modified 225 statutes. The act also introduced new approaches to procurement, including:

Emphasizing commercial contracting methods

Using past performance as an evaluation factor

Using electronic resources in the procurement process, such as the Federal Acquisition Computer Network (FACNET)

Eliminating burdensome paperwork by amending the Truth in Negotiations Act

Streamlining the acquisition process by requiring prompt notification of contract award and by conducting debriefings in a timely manner.

Although the effects of FASA are far reaching, this book will focus on those that affect source selection.

Emphasizing Commercial Contracting Methods

FASA expanded the definitions of the terms commercial item and nondevelopmental item. Before this change, the definition of a commercial item was derived from an exception in the Truth in Negotiations Act. This exception allowed vendors to avoid submitting certified cost or pricing data for commercial items—those items that had established catalog or market prices and were sold in substantial quantities to the general public. Thus, new computers or software updates were not considered commercial items because they hadn’t yet been sold in substantial quantities to the general public. This made it difficult for federal agencies to purchase the latest computer technology.

The new definition of commercial item from FASA, per FAR 2.101, is:

Any item, other than real property, that is of a type customarily used for nongovernmental purposes and that—

1.Has been sold, leased, or licensed to the general public; or,

2.Has been offered for sale, lease, or license to the general public;

Any item that evolved from an item described in paragraph (1) of this definition through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Government solicitation;

Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but for—

1.Modifications of a type customarily available in the commercial marketplace; or

2.Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. “Minor” modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. Factors to be considered in determining whether a modification is minor include the value and size of the modification and the comparative value and size of the final product. Dollar values and percentages may be used as guideposts, but are not conclusive evidence that a modification is minor;

Any combination of items meeting the requirements of paragraphs (1), (2), (3), or (5) of this definition that are of a type customarily combined and sold in combination to the general public;

Installation services, maintenance services, repair services, training services, and other services if such services are procured for support of an item referred to in paragraphs (1), (2), (3), or (4) of this definition, and if the source of such services—

1.Offers such services to the general public and the Federal Government contemporaneously and under similar terms and conditions; and

2.Offers to use the same work force for providing the Federal Government with such services as the source uses for providing such services to the general public;

Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed under standard commercial terms and conditions. This does not include services that are sold based on hourly rates without an established catalog or market price for a specific service performed;

Any item, combination of items, or service referred to in paragraphs (1) through (6) notwithstanding the fact that the item, combination of items, or service is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or

A nondevelopmental item, if the procuring agency determines the item was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments.

Under this expanded definition, items that are not yet available in the commercial marketplace can still be considered commercial items, provided they evolved from an existing commercial item due to advances in technology. This new definition applies well to computer technology updates and computer software upgrades. Also, services can be considered commercial if they are purchased as part of a commercial item package. Such services typically include maintenance agreements that are purchased along with a piece of equipment. For example, when your agency buys a copy machine, its maintenance is considered a commercial service if the copier and service agreement are purchased together.

FASA also made many laws inapplicable to commercial item procurements. This change helped make it easier for traditional commercial companies (those without separate accounting and recordkeeping systems for government contracts) to participate in federal acquisitions. Some firms never competed for government contracts because they were unwilling or unable to set up different divisions just to do business with the government. FAR 12.5 contains the list of laws not applicable to commercial item acquisitions.

Using Past Performance as an Evaluation Factor

FASA also emphasized the evaluation of contractors’ past performance. Evaluating past performance is essentially the same thing as evaluating quality. Past performance information is relevant information, for future source selection purposes, regarding a contractor’s actions under previously awarded contracts. Past performance can include not only federal work, but also work done under state, local, and commercial contracts. New companies without a record of past performance receive a neutral evaluation and will not be deemed nonresponsible when contracting officers make a responsibility determination pursuant to FAR 9.104. Under FASA, past performance evaluation is required for all competitively negotiated acquisitions expected to exceed $100,000. (If past performance information is not evaluated, the contracting officer must document in the contract file why it was not evaluated.)

Because many agencies did not have accurate records of vendors’ past performance, they developed past performance surveys, which are part of the RFP package. Off- erors ask their customers to complete the (often lengthy) questionnaires before the proposal due date. Then the government’s evaluators read the responses and determine the risk of awarding the contract to each offeror based on its past performance. If responses regarding a particular vendor are negative, it is given an opportunity to provide a rebuttal. (Respondents may be concerned about backlash for providing negative information about a company, but by law, the names of the individuals who complete the performance surveys may not be disclosed.)

What past performance information do agencies evaluate? Agencies are interested in a contractor’s record of:

Conforming to specifications and standards of good workmanship

Forecasting and containing costs on previous cost-reimbursable contracts

Adhering to contract schedules, including the administrative aspects of performance

Being reasonable and cooperative, with a commitment to customer satisfaction

Having a businesslike concern for the interest of the customer.

The Federal Acquisition Computer Network

The Federal Acquisition Streamlining Act also mandated the establishment of the Federal Acquisition Computer Network, which enabled federal agencies and vendors to do business electronically. FACNET was intended to be used primarily for purchases valued above the micropurchase threshold ($2,500 in 1995) up to the simplified acquisition threshold ($100,000 in 1995). Federal officials and others expected to reap many benefits from FACNET, including expanded contracting opportunities for small businesses, increased competition, lower prices for goods and services, reduced contract processing times, simplified procurement processes, and improved federal productivity.

FASA required that FACNET provide (1) widespread public notice of both contracting opportunities and awards; (2) a means for vendors to electronically review, request information on, and respond to solicitations and similar information; and (3) record keeping for each procurement action. The act also required that, if practicable, FACNET provide other capabilities, such as issuing orders under existing contracts and making payments.

Technology, however, quickly surpassed FACNET’s capabilities, and in 1997 Congress amended FASA, adding new provisions for electronic commerce (defined as “electronic techniques for accomplishing business transactions,” including email, Internet, electronic bulletin boards, purchase cards, and Electronic Data Interchange (see 41 USC 426)). Specifically, the National Defense Authorization Act for fiscal year 1998 expressly mandated that agencies use e-commerce to the maximum extent practicable to buy goods and services. (See also 48 CFR 4.502, which requires the use of e-commerce in government contracting “whenever practicable or cost effective.”)

In 2007, Federal Acquisition Circular (FAC) 2005-21 amended the FAR to remove FACNET references. This did not prevent agencies from continuing to use FACNET, but it did serve to recognize alternative technologies and processes agencies were already using. The government now uses www.FedBizOpps.gov as its one-stop virtual marketplace. FedBizOpps lists proposed government procurement actions, contract awards, sales of government property, and other procurement information for acquisitions over $25,000. The information is updated daily. Through this single point of entry, agency buyers can post and amend opportunities, and contractors can search for federal business opportunities.

Amendments to the Truth in Negotiations Act

FASA amended TINA in several significant ways. First, it changed the exceptions to submitting certified cost or pricing data. Companies no longer have to pass the “sold in substantial quantities” test for a commercial item to be exempt from certified cost or pricing data. Vendors offering commercial items, as newly defined in FASA, are generally exempt from submitting certified cost or pricing data. Competition in the commercial marketplace is expected to keep prices fair and reasonable, so certified cost or pricing data is considered unnecessary.

FASA also restricts the circumstances under which contracting officers may require cost or pricing data. The act specifically prohibits contracting officers from requiring cost or pricing data for acquisitions under $500,000 unless the head of the contracting activity states in writing that the data is necessary. A contracting officer may still, however, request certain information related to cost or pricing, such as sales data or prices and quantities for the same or similar items in the commercial marketplace, to determine price reasonableness. The vendor provides this data in its own format.

Contracting officers are expected to purchase supplies and services from responsible sources at fair and reasonable prices. FASA prohibits contracting officers from obtaining more information than is necessary to establish the reasonableness of offered prices. To the extent that TINA permits, contracting officers shall generally use the following order of preference to determine the type of information required:

No further information from the offeror if the price is based on adequate price competition.

Information other than cost or pricing data; for example:

1.Information related to prices (e.g., established catalog or market prices), relying first on information available within the Government; second, on information obtained from sources other than the offeror; and, if necessary, on information obtained from the offeror.

2.Cost information, which does not meet the definition of cost or pricing data.

Cost or pricing data. The contracting officer should use every means available to ascertain a fair and reasonable price before requesting cost or pricing data. By law and regulation, contracting officers shall not unnecessarily require cost or pricing data because it leads to increased proposal preparation costs, generally extends acquisition lead time, and wastes both contractor and government resources.

Another implication of FASA’s TINA amendments is that the threshold for the mandatory submission of certified cost or pricing data is adjusted every five years. That threshold, provided at FAR 15.403-4, is currently at $650,000.

Best Value Acquisitions

Since 1995, the FAR has allowed contracts to be awarded without discussions to an offeror other than the one whose proposal is priced lowest: “There is no requirement that cost-reimbursement contracts be awarded on the basis of lowest proposed cost, lowest proposed fee, or the lowest total proposed cost plus fee.” This concept is known as best value acquisition. This change allowed contracting officers to escape the “lowest bid mentality” by freeing agencies to pay more for higher quality. Agencies no longer had to select lower-quality proposals simply because they were the least expensive.

Since then, FAR part 15 has been rewritten; best value is now defined as the expected outcome of an acquisition that, in the government’s estimation, provides the greatest overall benefit in response to its requirements. Now, agencies have the flexibility to award a contract to a company offering higher quality at a higher cost, provided they document the rationale for the business judgments and trade-offs made, including the benefits associated with the additional costs.

Notifying and Debriefing Offerors

The acquisition streamlining created by FASA benefits government agencies as well as companies doing business with the government. For example, before FASA, companies sometimes had to wait a long time to find out whether they won or lost contracts. FASA requires agencies to notify unsuccessful offerors about contract award in writing or by electronic means within three days after the date the contract is awarded. This notice need not identify the winning offeror or the contract price. Unsuccessful offerors are given this information in a debriefing.

FASA requires the government to conduct debriefings in a timely manner. In the past, some unsuccessful companies had to file protests in order to find out why they lost; other companies requested debriefings that were never done or were done so late or so poorly that even if there were improprieties in the award of a contract, protesting was no longer an option.

Within three days of notification of award, an unsuccessful offeror may, in writing, request a debriefing. The agency must provide the debriefing within five days of receipt of this request. The debriefing must include all of the following:

An evaluation of the significant weak or deficient factors in the offeror’s proposal

The overall evaluated cost and technical ratings of both successful and unsuccessful offers

The overall ranking of all offerors, when a ranking has been developed

A summary of the rationale for award.

The debriefing may not include point-by-point comparisons with other offerors.

FASA also changed source selection protest procedures. The act defined day as a calendar day, not a working day. Agencies are now allowed to take corrective action, including payment of costs to the protester. Agencies were allowed to stay contract performance in the face of a likely protest. Both agency and GAO protests had to be filed within 14 calendar days of learning the basis for the protest, instead of the former ten working days as required by CICA. The timeframe for filing a protest returned back to ten calendar days in 1997.

FASA’s Impact on Source Selection

FASA had a significant effect on how the federal government conducts competitive source selections. Because the act expanded the definition of commercial items, the government is able to purchase more products and services faster with fewer regulations. The act’s emphasis on past performance helps the government select contractors with an established history of successful contract performance.

FASA also brought federal purchasing into the twenty-first century by introducing and requiring electronic transactions. Although the Internet overtook FACNET, FACNET paved the way to expedited purchasing, which benefited both government and industry.

FASA updated the Truth in Negotiations Act requirements by limiting the circumstances under which certified cost or pricing data is required and increasing the acquisition cost threshold for the submission of such data. These changes help keep the government informed but do not place additional burdens on private industry.

Another of FASA’s significant contributions is the concept of best value source selection. Best value allows agencies to award contracts to higher-priced offerors if they are better qualified—a major step in getting higher-quality supplies and services. Finally, FASA helped improve communication between the government and private industry by requiring timely notification of offerors regarding contract award and timely debriefings.

Although these changes improved the acquisition process, Congress didn’t stop there. Shortly after the implementation of FASA, on February 10, 1996, Congress passed the Federal Acquisition Reform Act (P.L. 104-106).

THE FEDERAL ACQUISITION REFORM ACT

The Federal Acquisition Reform Act (FARA) was signed into law as part of the National Defense Authorization Act for fiscal year 1996. FARA can be found in Division D of the authorization act. FARA was later dubbed the Clinger-Cohen Act to recognize its sponsors, Rep. William Clinger, chairman of the Government Reform and Oversight Committee, and Sen. William Cohen, chairman of the Governmental Affairs Subcommittee, Oversight of Government Management and the District of Columbia. FARA took the theme of acquisition reform begun by FASA further by introducing new concepts such as efficient competition.

Efficient Competition

FARA states that full and open competition must be pursued in a manner that is consistent with the government’s need to efficiently fulfill its requirements. This provision does not represent a change from the Competition in Contracting Act, but it caused concerns for small businesses, which feared they could be unfairly excluded from procurements.

Efficient competition is intended to give contracting officers more flexibility to limit the competitive range when they are dealing with large numbers of proposals. Before FARA, competitive ranges comprised proposals that had a reasonable chance of contract award, were acceptable or could be made acceptable through discussions, had deficiencies that could be corrected through discussions, and did not require major revisions to be acceptable. Many offerors’ proposals thus fell into the competitive range.

FARA allows the contracting officer to limit the size of the competitive range to the greatest number of proposals that will permit an efficient competition among the most highly rated offerors. Before FARA, questionable proposals were allowed into the competitive range; now, FARA permits the contracting officer to exclude questionable proposals. If a solicitation states that the competitive range can be limited for the sake of efficiency, the contracting officer may determine that the number of proposals that might otherwise be included in the competitive range exceeds the number with which the government can conduct an efficient competition. The contracting officer may then limit the number of proposals in the competitive range.

This determination should depend on the number of offerors initially included in the competitive range and the issues involved in the competitive discussions. For example, it may be possible to efficiently conduct discussions with 20 offerors if the issues are relatively simple. When complex issues are involved, efficient competition may require limiting the competitive range to five firms or fewer. The government should not limit the number of firms arbitrarily (e.g., to five); instead, the government should establish the competitive range after evaluating the proposal ratings and the complexity of the issues involved in the discussions.

Preaward Debriefing

When a contracting officer excludes an offeror that submitted a competitive proposal from the competitive range (or otherwise excludes such an offeror from further consideration before the final source selection decision), the excluded offeror may request in writing a debriefing before award. This request must be made within three days after the date on which the unsuccessful offeror receives notice ofits exclusion. The contracting officer shall make every effort to debrief the unsuccessful offeror as soon as practicable, but may refuse a request for a debriefing if it is not in the best interest of the government to conduct a debriefing right away—for example, if time is of the essence. Properly preparing for a debriefing can be time-consuming, so it’s reasonable for a contracting officer to want to award the contract before doing the debriefing.

The contracting officer is required to debrief an excluded offeror after award is made only if that offeror requested and was refused a pre-award debriefing. The pre-award debriefing must include the following elements:

The executive agency’s evaluation of the significant elements in the offeror’s proposal

A summary of the rationale for the offeror’s exclusion

An answer to relevant questions posed by the debriefed offeror as to whether source selection procedures set forth in the solicitation, applicable regulations, and other applicable authorities were followed by the executive agency.

The debriefing may not disclose the number or identity of other offerors or information about the content, ranking, or evaluation of other offerors’ proposals.

Commercial Item Amendments

FARA also affected source selection in commercial item acquisition. Although FASA changed the definition of the term commercial item, FARA made other important improvements. FARA amended TINA to simplify getting exempted from submitting certified cost or pricing data for commercial items. Now there are strict limits on what kind of information a contracting officer may require when purchasing commercial items. Although certified cost or pricing data may not be required, the contracting officer may ask for information on sale prices for the same or similar items that is sufficient to evaluate price reasonableness.

FARA states that certified cost or pricing data shall not be required for commercial items. It also eliminates postaward audit rights for information that commercial suppliers provide instead of certified cost or pricing data. The purpose of this change was to encourage more strictly commercial firms to enter the federal marketplace, thereby increasing competition and lowering prices.

In addition, FARA permits the use of simplified acquisition procedures for contracts up to $5 million when a contracting officer reasonably expects that vendors will offer only commercial items. These simplified acquisitions are exempt from certain Competition in Contracting Act requirements, and the agency may conduct the source selection without a source selection plan or competitive range determination.

Amendments to the Procurement Integrity Act

To further streamline and simplify federal acquisition, FARA amended certain aspects of the Procurement Integrity Act. For example, some of the reporting requirements were repealed for government officials. Former government employees do not need to file a report if they work for a contractor or become a consultant to a defense contractor. Department of Defense procurement officials don’t have to report employment contacts made with defense contractors.

FARA retains the act’s prohibition on releasing procurement information, but now the restriction applies to anyone who has access to contractor bid or proposal information or source selection information. No person shall “knowingly disclose contractor bid or proposal information or source selection information before the award of a federal agency procurement contract to which the information relates.” This amendment focuses on protecting the source selection information, rather than whether or not the person disclosing the information is a source selection official.

FARA also requires agency officials who are participating personally and substantially in a federal agency procurement over the simplified acquisition threshold to report any employment offers and to disqualify themselves from further participation in that procurement if the contractor offers employment. A former official may not accept compensation from a contractor as an employee or consultant within a period of one year after he or she participated in a source selection over $10 million.

FARA’s Impact on Source Selection

FARA, like its predecessor FASA, had a major impact on source selection. The concept of efficient competition—limiting the number of proposals in a competitive range—has allowed source selection teams to focus on only the top- rated proposals and to review fewer proposal revisions, streamlining the source selection process.

Pre-award debriefings give offerors a chance to find out why their proposals were eliminated from the competitive range before contract award. Getting this important information earlier in the process can help a vendor submit better proposals in the future and improve its chances of winning contracts.

FARA also made significant changes to commercial item acquisition; notably, it allows the government to use simplified acquisition procedures for contracts up to $5 million. This change allows agencies to bypass some of the burdensome rules that delay contract award, speeding up the acquisition process.

Finally, FARA amended the procurement integrity laws by eliminating some of the certification requirements and focusing on protecting source selection information. Additional reporting requirements were imposed to slow the “revolving door” of federal employees going to work for contractors.

STREAMLINING THE SOURCE SELECTION PROCESS

Chapter 1 explores some of the major statutes that direct federal government source selection procedures. Figure 1-2 summarizes the impact each law has had on source selection.

Now you understand that we have to do many things simply because they are required by law. Contracting officers didn’t write the rules to make your life difficult. If contracting officers wrote the rules, they would be much less complicated and more efficient. Nonetheless, acquisition reform of the 1990s did help streamline the acquisition process and helped redefine the contracting officer as a business advisor, rather than a paper pusher.

Figure 1-2 Summary of Major Laws Affecting Source Selection

Federal acquisition laws are much like a pendulum on an old clock that methodically swings back and forth. The pendulum moves from more restrictions and oversight (for example, the Truth in Negotiations Act and the Competition in Contracting Act) to more flexibility and less oversight (the Federal Acquisition Streamlining Act and the Federal Acquisition Reform Act). The pendulum will, no doubt, swing back the other way, imposing more rules and more oversight as new horror stories make the news. Something that will get Congress’ attention—like the contracting missteps in the wake of the Katrina hurricane disaster—is sure to happen. When it does, watch the pendulum slowly make its way back to restrictions and oversight.

CHAPTER SUMMARY

In this chapter, we explore the history of source selection legislation. Congress has passed a number of laws intended to address federal government contracting problems, beginning with the 1962 Truth in Negotiations Act, which, among other provisions, required executive agencies to get certified cost or pricing data in certain circumstances, allowed agencies to get a price reduction if a contractor submitted defective cost or pricing data, and required the presence of adequate price competition for offerors to be exempt from submitting certified cost or pricing data.

TINA was followed by the Competition in Contracting Act (1984), which required full and open competition, with several exceptions. It also mandated that the government perform market research, publicize requirements to increase competition, include significant proposal evaluation factors in RFPs, and award contracts based only on those factors.

The Procurement Integrity Act (1988) is the next major piece oflegislation we review. It added new rules for ethical behavior, including a prohibition on the government’s releasing source selection information before contract award and a restriction on procurement officials’ freedom to leave the government to work for contractors with whom they have had dealings.

Next, the Federal Acquisition Streamlining Act (1994) emphasized the use of commercial contracting methods and past performance as an evaluation factor. It required the CO to promptly notify offerors of contract award and to conduct timely debrief- ings, and it introduced the use of electronic systems in the procurement process.

Finally, the Federal Acquisition Reform Act (1996) introduced the concept of efficient competition, revised the definition of competitive range, and made pre-award debriefings available to offerors eliminated from the competitive range.

Now that you understand the legislative requirements behind some of the regulations directing source selection, we’re ready to move on and learn about the procurement planning process.