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Breakout Session # 310 Rob Lloyd, CPCM, Fellow U.S. Department of State April 12, 2006

The Wright Brothers’ Contract: Lessons in Ambiguity & Bureaucracy. Breakout Session # 310 Rob Lloyd, CPCM, Fellow U.S. Department of State April 12, 2006 2:25-3:25 p.m. Background. Vern Edwards’ article in wifcon.com Peformance-based focus Other aspects just as important

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Breakout Session # 310 Rob Lloyd, CPCM, Fellow U.S. Department of State April 12, 2006

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  1. The Wright Brothers’ Contract: Lessons in Ambiguity & Bureaucracy Breakout Session # 310 Rob Lloyd, CPCM, Fellow U.S. Department of State April 12, 2006 2:25-3:25 p.m. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  2. Background • Vern Edwards’ article in wifcon.com • Peformance-based focus • Other aspects just as important • Historical document (1908) • 3-1/2 pages (incl. cover) • Similarities to today’s Federal contracts • Good contracting or not? NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  3. Acquisition Planning & Lead-times • January 18, 1905 – February 28, 1908 • PALT from Wrights’ letter to Congressman to contract signature by Army Signal Corps OR • 49 days’ PALT • December 23, 1907 solicitation issued • February 28, 1908 contract award/approval NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  4. Budgeting & Funding • Wrights’ unsolicited proposal $100,000 • Available funds: $10,000 • Another source: emergency fund left over from Spanish-American War • Multiple awards • Augustus Herring $20,000 • Wright Brothers $25,000 NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  5. Publicizing & Seeking Competition • Unsolicited proposal via Congressman to War Department (January 18,2005) • Reply sent January 24, 2005 • Second attempt October 9, 2005 • Improper procedure? • Specification No. 486 issued December 23, 1907 • Solicitation document • Bid/proposal terminology • “Advertisement and Specification” = combined Fedbizopps synopsis/solicitation NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  6. Solicitation Preparation & Issuance • Issue date: December 23, 1907 • Bids due: February 1, 1908 • One-page solicitation • General wording • Intended to be flexible, OR • Due to lack of knowledge? • Provision/clause similarities to FAR: • Right to reject proposals • Inspection, etc. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  7. Bid Opening & Evaluation • Public solicitation or fig leaf for sole source (Edwards)? ($500 threshold) • Price dropped from $100,000 to $25,000) • 41 bids (as low as $1,000) • 39 of 41 rejected (bond issues, etc.) • Low bidder (Herring): $20,000 • Next in line (Wrights): $25,000 • Solution: award two contracts NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  8. Contract Award Document-Order #3619 • Wording/legalese – halcyon days or not? • Standard clauses • Inspection (appeal rights) • Default/reprocurement costs • Prohibition on assignment of claims • Officials not to benefit (political influence) • Review and approval • Chief Signal Officer • Consumed 18 days NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  9. Monitoring Contractor Performance & Dealing with Delays • Award effective February 28, 1908 • Delivery date: 200 days ARO-ambiguity • Delivery made August 20, 2008; trials • Aircraft destroyed September 7; not completed • Extension to June 28, 1909 • Excusable delay? • Two more extensions to August 2 • Passed trials, but late (no consideration?) NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  10. Contract Payment & Incentives • Payment clause vague (not 30 days) • Bonus/penalty clause • Wrights flew at 42 mph • Incentive bonus of $5,000 (speed only) • No incentives for early delivery NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  11. Termination & Bonds • 10% bid bond required • 100% performance bond • Herring failed to perform, forfeited bond (which one?) • Nice money to have, but must deposit in Treasury NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  12. Conclusion • Short contracts – then and now • PALT – depends on point of view • Source selection – worked, but questionable process • Results achieved – but late delivery • Overall lesson – dealing with ambiguity is a crucial skill, throughout history NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

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