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NCMA: What’s In it For You! Twin Cities Chapter April 19, 2011

NCMA: What’s In it For You! Twin Cities Chapter April 19, 2011. Karen L. Wilson, J.D., LLM, Fellow President National Contract Management Association. NCMA – The First 50 Years. >150,000 people have joined as members. >50,000 people have volunteered. 120 chapters.

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NCMA: What’s In it For You! Twin Cities Chapter April 19, 2011

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  1. NCMA: What’s In it For You!Twin Cities ChapterApril 19, 2011 Karen L. Wilson, J.D., LLM, Fellow President National Contract Management Association

  2. NCMA – The First 50 Years >150,000 people have joined as members. >50,000 people have volunteered. 120 chapters. >100,000 people attended NES (since 1986). >35,000 people attended national conferences (since 1961). 400,000 Journals delivered (since 1966). 540,000 copies of CM Magazine delivered (since 1977). ~8,000 people have been certified (since 1976). >6,000 people have taken e-courses (since 1998). >75,000 audio-seminar participants (since 2004). Facebook page, LinkedIn group, Twitter following - 2008. First virtual conference 2009 – Small Business Contracting CoP. First virtual chapter – 2010 – 250 members! 2

  3. NCMA is Stronger Today Than Ever! • >20,000 members! • FY2009-2010 was best financial year ever…>$750k net gain! • Significant financial reserves and investments, headquarters office building in Ashburn, VA! • World Congress continues to grow and excel… >1600 participants July 2010! • Leading presence in social media. • Leading voice for the CM profession….professionalism advocacy!

  4. Megatrends Shaping CM Sphere • The demand for CM talent exceeds the supply. • The people doing CM work are defining ‘career’ differently. • Changes in the U.S. federal regulatory and budgetary environment will continue at a high pace for foreseeable future.

  5. NCMA Has a New Strategic Plan! Mission • NCMA’s mission is to advance the contract management profession. Vision For The Profession • Contract management will be viewed by all organizations – public and private – as an essential business management function that directly contributes to organizational success. • People will recognize contract management is a challenging and rewarding profession, and will prepare for and seek out positions in the profession. • Universities will provide undergraduate and graduate degree programs and courses designed to prepare students for entry into or advancement in the contract management profession. Vision For The Organization • NCMA will lead in defining the standards and the body of knowledge for the contract management profession. • NCMA will provide tools that enable the entry, development, and advancement of all CM professionals. • NCMA will be a model for not-for-profit individual membership organizations, recognized for innovation, effective and efficient operations, and agile responsible governance.

  6. Strategic Objectives • Develop and institutionalize an effective advocacy and outreach program that provides a neutral forum for the profession. The desired outcomes for this objective are public recognition that CM is an essential business management function, and public recognition that NCMA is the preeminent neutral forum for contracting professionals. • Create standards for the profession that are widely recognized and adopted. The desired outcome for this objective is for NCMA's standards to be accepted across multiple domains (Government, Industry, Academia) as a framework for best practices.

  7. Strategic Objectives • Create programs and services to help people enter into and progress within the contract management profession. The desired outcome is for the contract management profession to be recognized as a career field in which education, professional development and advancement opportunities exist for long-term practitioners as well as recent entrants into the profession. • Enhance and develop program delivery techniques to improve value for existing and potential members. The desired outcome for this objective is that NCMA will have multiple program and service delivery methods to maximize member value and engagement opportunities.

  8. Environment Affecting Acquisition Policy • Carter and Gates Efficiency Initiatives. • Competition. • Reducing services contracts. • Improving tradecraft in services. • Reducing non-productive processes. • FY11 NDAA provisions. • FY11 and FY12 budgets and process. • Evolving issues on: • OCI • Insourcing and work reserved for Federal employees • Competition and Life Cycle Management 8

  9. Gates Efficiency Directive 9 • Adopted recommendations on March 14, 2011. • Defense-wide savings of $78 billion across the FYDP. • Directed a reduction in service support contracts by $6 billion. • Freeze on civilian personnel levels and pay ($25 billion). • Services developed additional savings of $100 billion across FYDP. • Includes additional contractor support reductions of $6.7 billion • $98 billion reinvested ($28 billion for higher operating costs)

  10. Carter September 14 Memo on Better Buying Power “Doing more without more” – “with less”? 10 • Challenge – Achieve annual savings of 2-3% ($8-12B) on a base of $400 billion in contracted dollars to match DoD overhead reduction initiatives ordered by Secretary Gates in May 8 Eisenhower Library speech. • USD (AT&L) meetings with industry at CSIS on June 28 and July 15. • Focus on new contracts and implementation over time. • Follow-up, strongly-worded implementation memo on November 3. • No savings from these initiatives included in Gates’ broader effort.

  11. Guidance Roadmap 11 Promote Real Competition Present a competitive strategy at each program milestone Remove obstacles to competition - Allow reasonable time to bid - Require non-certified cost and pricing data on single offers - Assad Nov. 24, 2010 memo. - Require open system architectures and set rules for acquisition of technical data rights - New tech data interim rule pending. Increase dynamic small business role in defense marketplace competition

  12. Guidance Roadmap 12 Incentivize Productivity & Innovations in Industry Reward contractors for successful supply chain and indirect expense management - New weighted guidelines under consideration - Fee on fee issue Increase the use of FPIF contract type where appropriate using a 50/50 share line and 120 percent ceiling as a point of departure Adjust progress payments to incentivize performance Extend the Navy’s Preferred Supplier Program to a DoD-wide pilot Reinvigorate industry’s independent research and development and protect the defense technology base - DFARS March 2 Proposed rule on reporting efforts above $50K

  13. Guidance Roadmap 13 Improve Tradecraft services Acquisition Create a senior manager for acquisition of services in each component, following Air Force example – Completed Adopt uniform taxonomy for different types of services Address causes of poor tradecraft in services acquisition - Assist users of services to define requirements and prevent creep via requirements templates - Assist users of services to conduct market research to support competition and pricing - Enhance competition by requiring more frequent re-competes of knowledge-based services contracts - Limit the use of time and materials and award fee contracts for services Require that services contracts exceeding $1B contain cost efficiency objectives Increase small business participation in providing services

  14. Guidance Roadmap 14 Reduce Non-Productive Processes and Bureaucracy Reduce the number of OSD-level reviews to those necessary to support major investment decisions or to uncover and respond to significant program executive issues Eliminate low-value-added statutory processes Reduce by half volume and cost of internal and congressional reports Reduce non-value-added overhead imposed on industry - Request for information by 3/31/11 in Federal Register. - DAU DoD-Industry meeting on April 21. Align DCMA and DCAA processes to ensure work is complementary Increase use of Forward Pricing Rate Recommendations (FPRRs) to reduce administrative costs - January 4 DPAP memo on DCAA-DCMA alignment.

  15. FY11 NDAA Highlights 15 • HR 6523 , “The Ike Skelton National Defense Authorization Act for Fiscal Year 2011”. • Enacted on January 7, 2011 as P.L. 111-383. • 65 acquisition and cyber security policy provisions in the bill. • No separate version passed in Senate prior to completion of “conference” bill.

  16. Section 321. Technical Amendment to requirements for service contract inventory. • Requires to DoD to collect direct labor hours and associated cost data from services contractors to support the preparation of the annual services contract inventories in the services and defense agencies. • Section 323. Prohibition on establishing goals or quotas for conversion of functions to performance by Department of Defense civilian employees. • Prohibits use of goals or quotas in decisions to in-source work unless such goal or targets is based on considered research and analysis. • Requires use of DTM 09-007 cost comparison methodology in cases where cost is the determining factor for in-sourcing decisions. • Excludes decisions regarding acquisition functions or other critical functions from the requirement to use a cost comparison methodology. • Section 806. Requirements for information relating to supply chain risk. • Provides broad authority for DoD to exclude a contractor or subcontractor from providing items under a a contract or subcontract in cases where the contractor or subcontractor is deemed to be a risk a s source of sabotage or other subversion by a foreign adversary. • Each use of the authority requires the joint recommendation of the USD(AT&L) and the DoD CIO on the basis of a risk assessment by the USD (Intel) as well notification to appropriate congressional committees. • The use of the authority decision is neither subject to a protest nor otherwise legally actionable . • DoD is not required to provide any details to an affected source or to the prime contractor in the case of a subcontractor. 16

  17. Section 811. Cost estimates for program baselines and contract negotiations for major defense acquisition and major automated information systems programs. • Removes the 80 % confidence level “gold standard” for cost estimates and replaces it with a requirement to develop and provide to Congress a rationale for any confidence level used. • Prohibits using cost estimates developed for baseline descriptions from being used for contract negotiations or other purposes requiring the obligation of funds. • Section 824. Guidance relating to rights in technical data. • For purposes of determining rights in technical data, requires that IR&D funding be considered as Federal funding in any case of an item that ,but for contractor IR&D funding ,would be considered to have been developed solely at government expenses . • Section 825 . Extension of sunset date for certain protests of task and delivery order contracts . • Extends from May 27, 2011 to September 30, 2016 the authority for interested parties to lodge GAO protests on task and delivery order decisions by DoD. • Civilian agency contracts are not covered under the protest extension 17

  18. Section 845. Requirement for entities with facilities clearances that are not under Foreign Ownership Control or Influence risk mitigation. • Requires the Secretary of Defense to develop a plan to ensure that covered entities with facility clearances but not under foreign ownership control or influence risk mitigation procedures maintain policies and procedures that meet requirements under the national industrial security program. • Requires the Secretary to consider whether or not such entities should be required to establish government security committees similar to those required for companies that are subject to foreign ownership control or influence mitigation measures. • Section 863. Requirement for the acquisition of services. • Requires the Secretary of Defense to ensure that each of the military departments and defense agencies has a process in place to identifying, assessing, reviewing , and validating requirements for the acquisition of services . • Section 893. Contractor business systems. • Explicitly applies a materiality standard in the definition of a “significant deficiency” which would be the basis for a determination of system inadequacy in the provision. • In the event of a system or systems deficiency, limits the total of withholds to no more than 10 percent of payments under covered contracts. • A fixed-price contract is not a covered contract , but unlike under the DoD rule, there is no dollar value threshold in the definition of a covered contract (THIS IS LIKELY TO BE AMENDED). • Requires a DoD official to work directly with a contractor to develop a corrective action plan for significant deficiencies and requires any withholds to be reduced if the contractor agrees to adopt the corrective action plan and follows it.      18

  19. FY11 and FY12 budget process 20 • Deal pending on FY11 CR. • Fully funds DoD through September 30. • Short-term CR in place until midnight April 15. • Passage of long-term CR in House and Senate expected by tomorrow night. • FY11 Defense base appropriations bill down $18 billion from request ($531.1 billion to $513 billion) • Debt ceiling vote enters the picture (May 15) . • Timing of FY 12 budget and appropriations process uncertain. • HASC marking on schedule. • Further defense cuts by Congress in FY12 request likely. • No cuts to Defense FY12 request reflected in Ryan FY12 budget resolution, but Gates’ Efficiency cuts of $178 Billion (with services reinvestment of $98 Billion) over the FYDP assumed. • Per DoD (Robert Hale), no supplemental planned for Libya • $550 million so far. • Reprogramming the option of choice

  20. FY11 defense budget details • Major cuts and omissions • $9 billion across the O&M accounts • $2 billion – JSF • $2 billion – civilian pay freeze • $2 billion - rescissions of prior year funding • No funding for second JSF engine • Some adds • $350 million - defense health care • $20 million – cyber security pilots

  21. Organizational Conflicts of Interest 22 • GAO protest and Court of Federal Claims decisions • Impaired objectivity (GAO Alion decision – January 2006). • Biased ground rules. • Unequal access to information. • Acquisition Advisory Panel report – January 2007 • “Uniform regulations providing guidance to contracting officers and contracting agencies could help to reduce the frequency of failures to identify and mitigate OCIs.” • Recommendation for uniform guidance and the use of standard contract clauses and policies prescribing use. • OFPP advanced notice of proposed rulemaking following the AAP construct on March 26, 2008. • DSB Task Force: Creating an Effective National Security Industrial Base for the 21st Century – July 2008 • “Clusters of these conflicts (OCI’s in the product and service provider side) in a market area are not inherently resolvable through firewalls or similar mitigations. Recusals and other structural solutions are necessary.”

  22. Organizational Conflicts of Interest 23 • Proposed broad DFARS rule published on April 22, 2010. • Narrow final DFARS rule published on December 29, 2010. • Implements section 207 of WSARA for Major Defense Acquisition Programs. • OFPP about to issue proposed rule updating FAR 9.5. • Likely to incorporate case law and GAO decisions in three broad areas. • Impaired objectivity. • Biased ground rules. • Unequal access to information. • Expected to allow more flexibility than DFARS rule for impaired objectivity cases. • Impact on existing agency practices unclear. • OCI within the confines of a program vs. OCI within an agency across programs. • Industry consensus on issue remains difficult to achieve. • Northrop Grumman opposed to any mitigation, for example.

  23. Insourcing Sea Change? 24 • Major DoD insourcing effort in 2008—2010. • Increase funding for approximately 33.4K new civilian manpower authorizations, 10,000 of which are for the Defense acquisition workforce. • DTM 09-007 “Estimating and Comparing the Full Costs of Civilian and Military Manpower and Contract Support” posted February 2, 2010 • Methodology biased in favor of Government performance. • Individual employee focused rather than capability focused. • Expires on September 30, 2011. • Gates abandoned policy in August 9 Efficiency Initiative • “The savings did not pencil out.” • SecArmy reservation of insourcing decision authority on 02-03-11 • New OFPP proposed policy letter pending on work reserved for Federal employees imminent. • Inherently Governmental Functions, Critical Functions, and Critical Positions per section 321 of the FY09 NDAA. • Hill looking to move to a more stable, balanced policy on blended workforce

  24. Systems Support and Depot Policy 25 • Performance-based Logistics. • DoD views evolving. • Section 805 of the FY10 NDAA on PSI/PSM . • Hill interest in O&S and life cycle cost management increasing. • Implementation of mandates in WSARA section 202 on life cycle competition • Driving sustainment efficiencies into early program decision-making • Long-awaited LMI study on depot issues sent to Congress in February. • Interest from House Armed Services Committees in moving beyond the traditional debate but no concrete proposals yet. • Industry proposing changes including moratorium on 50-50.

  25. What’s Next? 26 FY12 budget process underway. • HASC FY12 NDAA committee markup to be finished on May 11 with floor action from May 23-June 3 (open rule). • Additional policy provisions with market impact likely. • Congressional oversight • SASC Readiness Subcommittee. • OFPP OCI proposed rule. • OFPP revised policy letter on work reserved for Federal employees. • HASC considering action to move to a more rational, integrated approach based on IGF, Critical Functions, Critical Positions framework and restarting A-76. • Revision of December 3 proposed rule on contractor business systems audits. • Examination of DCAA/DCMA policies and procedures by Congress.

  26. What you can do? Engage in your profession! Lead by your actions. Stay informed on the issues. Have opinions, and engage in the discussion. Participate in continuous learning. Demonstrate your competency by getting certified. Be a “chief courage officer” Resist cynicism and skepticism. Participate in your NCMA chapter – Be a Leader! 27

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