WHATS HOT AND NEW IN CONTRACTING

1. October 2017 WHATS HOT AND NEWIN CONTRACTING

2. When Did We Start to Write the Rulesfor Gov’t Contracting? • “The cost of a public building was met by appropriations from the treasury or through public subscription. They… seemed to have made a fetish of keeping the public informed of the progress and cost of public works. • When the architect and the building commission had agreed on the design, a herald in the marketplace invited bids for parts of the work. The architect was expected to draw up specifications for each part and contracts were awarded to the lowest bidders, each backed by a guarantor. Since there is no sign of profit for the guarantors, they were probably performing a civic service. • Instructions to contractors were probably posted on a wooden bulletin boards… they included requests for tenders, specifications for materials and workmanship, the length of the working day, fines for overruns, and procedures for the resulting lawsuits. Citizens were no less eager than now to know what became of the taxpayers money.”

3. Daniel J. Boorstin – “The Creators” • The Ancient Greeks in mid 5th century BC • Discussing the building of the Parthenon

4. Acquisition Provisions in annual NDAA as passed Note: Federal Acquisition Streamlining Act of 1994 Contained 203 Sections

5. DoD Leadership Secretary of Defense: James Mattis • DoD Business Priorities: Improve warfighter readiness Achieve program balance by addressing pressing shortfalls Build a larger, more capable, and more lethal joint force USD (AT&L): Ellen M. Lord Undersecretary of Defense for Acquisition, Technology and Logistics

6. Ellen Lord’s Ideas • Find and adopt what she called “80 percent solutions” to meet its technology and modernization requirements • “I think we need to make far more use of commercial technology, and I think the Congress has provided many authorities to the Department of Defense… that can be more widely utilized.” • “…make sure we take advantage of the opportunities to bring in subject matter experts, to use special funds that have been set aside to make sure that commercial hardware and software is procured. …. I think using more of [the Strategic Capabilities Office], DIUx, the different rapid fielding, I think we have enough authorities to do it. We just need to implement.”

7. USD AT&L being divided into 2 separate offices • Under Secretary of Defense (Research and Engineering) • Under Secretary of Defense ( Acquisition and Sustainment) • NLT 1 FEB 2018 • Why? • Adversaries are making substantial gains that threaten U.S. military technological dominance • Too focused on compliance at the expense of innovation

10. Defense Procurment and Acquisition Policy Director (Acting) Mr. Shay Assad Operations Mr. Robert Jarrett Contract Policy/ International Contracting (CPIC) Ms. Jill Stiglich Defense Acquisition Regulations System (DARS) Ms. Linda Neilson Acquisition Policy (AP) Mr. Skip Hawthorne Program Development & Implementation (PDI) Ms. LeAntha Sumpter Contingency Contracting (CC) VACANT Program Acquisition (PA) VACANT Services Acquisition (SA)/ Strategic Sourcing (SS) Mr. Kenneth Brennan

11. FAR and DFARS/PGI Changes • 93 Federal Acquisition Circulars (FACs) issued since • March 2005 [Through FAC 2005-93] + 4 Amendments + 1 Technical Amendment + 4 Revisions + 1 Addendum [20 pages] + 1 Thresholds Matrix [34 pages] + 11 Corrections • 211 Defense FAR Supplement Publication Notices1 issued since January 2008 [Through DPN 20161222] • 46 Open FAR Cases • 56 Open DFARS Cases [1 Previously Designated Defense FAR Supplement Change Notices] These changes do not even take into account the myriad of USD(AT&L) and DPAP policy memoranda. Last Change ─ 9 Jan 2017

12. Sources of FAR Changes Legislation IG & GAO Recommendations Court Decisions FAR DFARS PGI OFPP Policy Letters Executive Orders Agency Recommendations Individual Recommendations Industry Recommendations Policy Changes

13. DPAP Hot Topics Contract Pricing, Should Cost Contract Types and Incentives, CPAR Promote Competition Improve Tradecraft in Services Acquisition Proper Use of Interagency Agreements Source Selection Small Business Commercial Items and Non-Developmental Items Data Vulnerability Government Property

14. 1. Contract Pricing: Change the Attitude About $ • 20 Aug 2014 Policy letter signed by AT&L (Kendall) and Comptroller (McCord) • Focusing on obligating all funds by the end of the fiscal year on threat that future funding will be taken away is a “strong and perverse motivator” • Frank Kendall, 21 March 2016 Report: Annual cost changes across Major Defense Acquisition Program contracts for development and early production have decreased. “Keep up the good work” • Secretary Mattis, 21 July 2017, You are stewards of taxpayer $ • Supplemented by Mr. Assad memo 26 July 2017 • “Cavalier or casually acquiescent decisions to spend taxpayer dollars in an ineffective and wasteful manner are not to recur”

15. Contract Pricing : What is Should Cost? • “Should Cost is fundamental to proactive cost control throughout the acquisition lifecycle” • Seek out and eliminate low-value-added program cost • Reward those in Gov’t and Industry who do this • Give money back to the program offices • Incentivize cost reduction (FPIF/CPIF)’ • Every acquisition manager’s performance evaluation should consider effective cost control including should cost management

16. Acquisition Lifecycle Cost Control (1/3) By Functional Responsibility A B C Should Cost is a PM Responsibility – but a multifunctional team effort

17. Success Story - Stryker • Bundle buy concept • Achieved economies of scale by combining order for 294 Double V-Hulls (FY11) with 100 NBCRVs (FY12) • Required senior leader authority to purchase on tight timeline • Test cost efficiencies • Utilize existing test data • Combine test events Realized savings: ~$18M bundle-buy; ~$7.7M test efficiencies (FY12)

18. 2. Contract Types and Incentives: Align Profitability More Tightly with Department Goals • Profit is key to motivating contractor’s to perform DoD goals • Currently profit is very aligned with risk • Need to tie profit with cost-effective solutions and contract outcomes • (AT&L): THINK & Use the appropriate contract type • CPIF and FPIF contracts show a high correlation with better cost and schedule performance • Always consider them and use when appropriate

19. Contract Types and Incentives :Align Profitability More Tightly with Department Goals • 1 April 2016, DPAP “Guidance on Using Incentive and Other Contract Types” - Profit is not a cost-cutting measure - Tie better performance with higher profit and poor performance with lower profit - Strong evidence that incentive contracting can lead to better results • Guidance added to PGI 216.104 • July 2017, GAO “DoD Needs Better Information on Incentive Outcomes” • CLC’s 135, 137, 139 How to do Incentives

20. Contract Types and Incentives: Documenting Contractor Past Performance • Everyone must use CPARS and use “Guidance for CPARS” http://www.cpars.gov/, including A&E and Construction • Past performance evaluations required at least annually and at the time the work under a contract or order is completed • Also check FAPIIS – look up offeror and all predecessors of the offeror that held the contract within the past 3 years • FY 14 goal was 95%, FY 15/16/17 goal is 100% • DoD is trying….. 79.43% in Sep 13, 81.51% in Jan 14, 80.43% in Dec 2014, 80.82% in March 15, 83.3% in Sept 15, 85.3% in April 16, 83.75% in April 17

21. Promote Competition:Defense Competition Statistics Fiscal Year 2016 Source: DPAP Memorandum, Publication of DoD Competition Reporting  4th Quarter FY 2016, FPDS-NG Data as of 10/25/2016 Trend

22. Competition Trends: Goals/Actuals Note: DoD’s competition goals for FY 2016 and 2015 were 57.0% and 59.0%. DoD’s achieved rates of competition were 52.8% and 55.1%. [Source: DPAP.] DoDdid not establish goals until FY 2010. Performance of the Defense Acquisition System 2016 Annual Report

23. Actions to Improve DoD Competition • USD(AT&L) memorandum dated August 21, 2014, “Actions to Improve Department of Defense Competition” and caused changes to the PGI • Issued “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense, Dec 2014” • PGI 215.371-2 Requires Contracting Officers to solicit feedback from companies that expressed interest during the market research phase of an acquisition that resulted in only one offer on why they did not submit an offer. (kept in contract file with source selection documents) • PGI 206.302-1 Require Contracting Officers to use RFI’s or Sources Sought notices before soliciting non-competitive acquisitions and to include results of this inquiry in the applicable justification document. • PGI 206.303-2, 206.304 ,208.405-6, and 216.505 Justifications for non-competitive follow-on acquisitions of the same supply or service, shall include the prior J&A as part of the new J&A package to determine whether actions to remove barriers to competitions were completed.

24. 4. Improve Tradecraft in Services Training: • ACQ 265 Mission Focused Services 4 day classroom experience • SAW Service Acquisition Workshop, 4 day acquisition focused workshop (mandatory > $1B) • CLC 013 Acquisition of Services On line course 3 hours • COR 222 Contracting Officers Representative Course 4 day classroom • CLC 222 COR Course 32 hours • CLC 106 COR Course 8 hours • CON 280 is two weeks of Services Contracting • ACQ 255 Services Acquisition Tools (ARRT/SS), 20 hrs Tools: • SAM - Service Acquisition Mall • Online resource for Service Acquisition knowledge and tools. • ARRT – Automated Requirements Roadmap Tool • Compose Performance Based requirements • Generate PWS, QASP, PRS • Linked to DFARS and PGI 237.102 • Market Research Guide for Services • Linked to DFARS and PGI 210.70

25. “Defense Acquisition of Services”the New DoDI 5000.74 • SeniorServicesManagers,responsibleforthe planning,strategicsourcing,execution, andmanagementof acquisitionsof serviceswithin theirComponent • ServicesAcquisitionManagers/FunctionalServices Managers(FSMs),whomanageriskandstructurea tailored, responsive,andefficientservicesacquisition program,ensuringeffectivedeliveryof servicesand achievementof costgoals • Requirements review required for contracts above $10M

26. DoDRecommendationfor ServicesAcquisitionFunctionalArea(Pending*) Experience: 4Years Experience: Less Than1Year Experience: 1Year Experience: 2Years Experiencewith financial,schedule,orperformanceresponsibilities

27. Functional Domain Expert (FDE) Structure for Services USD(AT&L) or Designee The Honorable Alan Estevez, Principal Deputy, USD(AT&L) Engineering & Technical Services Mr. Stephen Welby CLLs • Executive Secretariat Mr. Ken Brennan and staff Actions: 32.3K Dollars: $13.4B Program Mgmt Services Ms. Darlene Costello CLLs Actions: 37.5K Dollars: $14.1B Transportation Services FDE Mr. Paul D. Peters Logistics Management Services FDE Mr. Paul D. Peters Equipment Related Services FDE Mr. Paul D. Peters Electronics & Comm. Services FDE Mr. David De Vries Medical Services FDE Dr. Karen S. Guice Facilities Related Services FDE Mr. John Conger Knowledge Based Services FDEs Management Support Services Mr. David Tillotson Component Level Leads Component Level Leads Component Level Leads Component Level Leads Component Level Leads Component Level Leads Component Level Leads CLLs Actions: 2.1K Dollars: $1.0B Statistics Actions: 11.5M Dollars: $8.1BB Statistics Actions: 8.2K Dollars: $4.6B Statistics Actions: 42.3K Dollars: $16.6B Statistics Actions: 121.0K Dollars: $15.8B Statistics Actions: 15.5K Dollars: $14.1B Statistics Actions: 163.8K Dollars: $26.1B Statistics Actions: 94.8K Dollars: $32.5B Administrative & Other Services Mr. Ken Brennan CLLs Actions: 7.9K Dollars: $1.3B Component-Level Leads Professional Services Mr. Ken Brennan DPAP & military department/agency Senior Service Managers (SSMs) provide cross cutting staff support Army Air Force Navy CLLs Actions: 4.1K Dollars: $780.9M Defense Logistics Agency Missile Defense Agency Defense Health Agency Education & Training Mr. Frank DiGiovanni CLLs Actions: 11.0K Dollars: $2.0B Source: FY14 data from Business Intelligence Tool Note: Numbers may not add due to rounding

28. 5.Proper Use of Interagency Agreements Violations of the Anti-deficiency Act?

30. 5. FSS/GWAC/MAC • Reasonable Fees for Assisted Acquisitions, 11 June 14 Policy Ltr • Know and document the fees when using non-DoD vehicle if the assisting agencies approach is to use another agencies contract vehicle • Using a non-DoD Agency, FAR 17.7, Aug 2015 • A DoD acquisition official may acquire supplies or services for DoD in excess of the simplified acquisition threshold through a non-DoD agency only if the head of the non-DoD agency has certified that the non-DoD agency will comply with defense procurement requirements including DoD financial management regulations

31. Sales under GSA Schedules Programs [Exclude VA Schedules]

32. Class Deviation 2014-O0011, March 13, 2014DPAP Memo, July 31, 2015 • Class Deviation: Determination of Fair and Reasonable Prices When Using Federal Supply Schedule Contracts • Effective immediately • In lieu of FAR 8.404(d) must use FAR 15.404-1 • GSA determination of fair and reasonable prices does not relieve the ordering activity contracting officer from making determination of Fair & Reasonable Price for individual orders, BPA’s or orders under BPAs. • Must use proposal analysis techniques at 15.404-1 • Must seek discounts on all FSS orders

33. 6. Source Selection • Appropriate Use of LPTA and Associated Contract Type, Mr. Kendall Memo, 4 March 2015 • Clear, but limited place in “Best Value” continuum • Only applies if we can clearly define the requirements and can do a technical evaluation based on “acceptable/unacceptable” • If these standards are subjective, then LPTA is not appropriate • Can be appropriate for commercial and non-complex supplies and services • Think about using CPFF LOE in Knowledge-based Services because it is well-suited to these requirements • LPTA case working its way through the FAR System resulting from FY 17 NDAA Section 813

34. 6. Source SelectionProvide Clear and Objective “Best Value” Definitions to Industry • 1 April 2016, DoD Source Selection Procedures • In LPTA source selection, no credit for exceeding minimum performance • In tradeoff source selection, importance of evaluation factors varies but offerors don’t know how much more Gov’t will pay for exceeding minimum • The Value Adjusted Total Evaluated Price (VATEP) technique addresses this by identifying the “value” Gov’t places on specific above-minimum performance levels • The Government considers affordability and worthiness of pursuing above-threshold requirements when developing the evaluation factors • RFP identifies the price increase Government may be willing to pay for levels of performance between minimum and maximum criteria (e.g., probability of hit, specific operational ranges) • It’s a structured technique for objectivizing how requirements will be treated in tradeoff process and communicating that to offerors • No extra credit given for exceeding maximum performance level stated in RFP

35. VATEP Adjustment Example Offeror A TPP = $1000 Offeror A Goal Adjustment Applied TEP = TPP - $20 TEP = $1000 - $20 TEP = $980 YES Offeror B TPP = $990 Threshold (Minimum) Rqmts Met? Objective (Maximum” Rqmts Met? YES YES Offeror C TPP= $950 NO NO Offeror C is ineligible for further consideration for award Offeror B No TPP Adjustment TEP= TPP TEP== $990 TEP of Offeror A is less than Offeror B after the price adjustment is made

36. SSA Tradeoff Decision Technical approach is more important than management and these two combined are more important than past performance. All these factors when combined are significantly more important than cost/price. What decision would you make as the SSA?

37. Source Selection • While the SSA may use reports and analyses prepared by others (SSAC, ), the source selection decision shall represent the SSA's independent judgment. • The source selection decision shall be documented, and the documentation shall include the rationale for any business judgments and tradeoffs made or relied on by the SSA, including benefits associated with additional costs • A, B and C could be chosen with the proper documentation

38. 7. The Small Business Programs • It is DoD policy that a fair proportion of DoD total purchases, contracts, subcontracts, and other agreements for property and services and for sales of property, be placed with Small Business Programs: • Small Business (SB), • Veteran-Owned Small Business (VOSB), • Service-Disabled Veteran-Owned Small Business (SDVOSB), • Historically Underutilized Business Zone Small Business (HUBZone), • Small Disadvantaged Business (SDB), including 8(a) • Women-Owned Small Business (WOSB) / Economically Disadvantaged WOSB, • DoD Pilot Mentor-Protégé Program, • Indian Incentive Program, • Small Business Innovation Research (SBIR), and Small Business Technology Transfer (STTR) • Rapid Innovation Fund (RIF) and that such small businesses have the maximum practicable opportunity to participate as subcontractors in DoD contracts, consistent with efficient contract performance.

40. 7. Changes to Small Business • DFARS 207.170-2 defines Consolidation – A solicitation for a single contract for work previously done by two contractors • FAR 2.101 defines Bundling - subset of consolidation. Two or more requirements, previously performed under separate contracts into a single contract that is likely to be unsuitable for award to a small business Consolidation and Bundling approvals are tightened. 10/01/16 • DD 2579, Small Business Coordination Record, instructions in PGI 253.219-70 • FAR 19.705-6 Requires prime contractors to make good faith efforts to utilize their small business subcontractors as described in their bid or proposal 11/01/16 • In future: Consider applicability of small business regulations to contracts performed outside the United States. (FY17 NDAA)

41. 7. Small Business • New training for Small Business professionals • 9 Courses over 3 levels of certification • Open to everyone • CLM 059 replaces CLC 025, effective Oct 17 • Required for Level One certification • Good course for getting 80 CLP’s • Lots of small business updates

42. 8. Commercial Items • 3 Aug 2015, FAR 13.5, Permanent Authority for use of the Simplified Acquisition Procedures for Certain Commercial Items • Test program for commercial items $150K<X<$6.5M • Congress made permanent in 2015 NDAA • Commercial Items and Determination of Reasonableness of Price, Feb 15 DPAP memo • Timeliness: KO’s need to make a determination of “commercial of a type” within 10 days of assembling support data • Pay Fair and Reasonable Price: Must evaluate for price reasonableness; If market pricing isn’t available or sufficient, KO’s may use cost data • Changes to DFAR, PGI and Commercial Item Handbook are coming • FY 17 NDAA, Clarification of requirements relating to commercial item determinations ????

43. 8. Commercial ItemExpand Opportunity for R&D and tech firms to do business with DoD • Military Purpose Non-Developmental Item, Deleted the non-traditional contractor and competition requirements, raised the threshold from $53.5 M to $100M. Pilot until Dec 2019, that incentivizes contractors by allowing the use of commercial procedures for items developed exclusively at private expense. Hoping to attract small business R&D firms to work with the Gov’t.(Final 4 Nov 2016)) • FY 16 NDAA, (DFARS 2016-D016 not implemented yet) Once implemented will provide exception from certified data for small businesses or nontraditional contractors using BAA or SBIR, less than $7.5M. Pilot until Oct 2020 • FY 16 NDAA, (DFARS 2016-D006, not implemented yet) Expected to allow contracting officer to treat supplies and services provided by nontraditional defense contractors as commercial items – exempt from CAS and certified data • Rights in Technical Data for Commercial Items in Major Weapon Systems, 23 Sept 2016, Makes it harder for the Gov’t to challenge a Contractors asserted restrictions on commercial item

44. 8. Commercial ItemExpand Opportunity for R&D and tech firms to do business with DoDAll new, nothing is implemented • FY 17 NDAA, 2017-DO20, Market research for determination of price reasonableness in acquisition of commercial item; Preference for commercial services; Treatment of commingled items purchased by contractors as commercial items; Treatment of services provided by nontraditional contractors as commercial items; • FY 17 NDAA, 2017-DO10, Inapplicability of certain laws and regulations to the acquisition of commercial items and commercially off the shelf items • FY 17 NDAA, Use of commercial or non Gov’t standards in lieu of military specs and standards • FY 17 NDAA, 2017-DO29, Defense pilot program for authority to acquire innovative commercial items • FY NDAA, Head of Agency pilot program for authority to acquire innovative commercial items

45. 9. Data Vulnerability • Safeguarding Unclassified Controlled Technical Information, DFARS 204.73, 18 Nov 2013, PGI 204.73, 16 Dec 2014 , FAR 4.73 16 May 2016 • Requires the contractor to safeguard DoD unclassified controlled technical information within the contractor’s unclassified information systems and report the compromise of unclassified controlled technical information, such as technical data, computer software, and other technical information • Procedures for requiring activity and contracting officer when a solicitation is expected to result in a contract with CTI. • Network Penetration and Contracting for Cloud Services, 21 Oct 2016 • Rules and contract clauses when procuring cloud computing services • Cybersecurity clause which requires contractor reporting on network penetrations • Contractors must be compliant by 31 Dec 2017

46. Cyber Security

47. 10. Government Property • DoD needs to strengthen the accountability and management of personal property owned by DoD when the property is provided to contractors for contract performance • FAR and DFARS clauses are not being included in solicitations and contracts as required • Accountability and auditability of Government-Furnished Property (GFP) cannot be achieved if contracts do not contain the appropriate contract clauses

48. 10. Government Property MANDATORY • FAR 52.245-1 Government Property, in all cost type and T&M solicitations and contracts, and in labor hour and fixed-price solicitations and contracts when the Government will provide property. • FAR 52.245-9 Use and Charges, in solicitations and contracts when the clause at 52.245-1 is included. • DFARS 252.245–7001 Tagging, Labeling, and Marking of Government-Furnished Property, in solicitations and contracts that contain the clause at FAR 52.245-1, Government Property. • DFARS 252.245–7002 Reporting Loss of Government Property, in solicitations and contracts that contain the clause at FAR 52.245–1, Government Property. • DFARS 252.245-7003 Contractor Property Management System Administration, in solicitations and contracts containing the clause at FAR 52.245-1, Government Property. • DFARS252.245–7004 Reporting, Reutilization, and Disposal, in solicitations and contracts that contain the clause at FAR 52.245-1, Government Property. • DFARS 252.211-7007 Reporting of Government-Furnished Property, in solicitations and contracts that contain the clause at FAR 52.245-1, Government Property. OPTIONAL • DFARS 252.245-7000 Government-Furnished Mapping, Charting, and Geodesy Property, in solicitations and contracts when mapping, charting, and geodesy property is to be furnished.

49. GFP FAR Clause 52.245-1 when Cost Reimbursable GFP DFARS Required Clauses (All contracts with FAR GFP Clause) Government Furnished Property (GFP) Clauses Scorecard as of 2016 Q4 *No cost-type contracts during the quarter. As of 12-9-16

50. BRAIN HURT? Having a hard time keeping up with all the changes?