As promised, this week’s Comment proposes draft Best Practices for Federal Supply Schedule (FSS) Blanket Purchase Agreements (BPAs). The purpose is to promote practices that enhance competition and opportunity for government and industry. Sound FSS BPAs leverage requirements and deliver best value to customer agencies. Correspondingly, sound FSS BPAs result in positive business outcomes for FSS contractors.
Please read our BPA Best Practices statement and provide us with your feedback. We will be posting the current draft on the Coalition website and on our FAR and Beyond Blog. We look forward to your comments.
DRAFT
GSA Schedules – Best Practices for Establishing Blanket Purchase Agreements
The GSA Schedule program provides agencies with an excellent platform to acquire commercial services, solutions and products at reasonable prices. Agencies can forge relationships with commercial partners and further leverage their buying power by establishing Blanket Purchase Agreements (BPAs). The regulatory requirements for establishing BPA’s are set forth in FAR 8.4. In addition to complying with the regulatory requirements, there are specific strategies that have proven to be successful in allowing an agency to structure BPA’s in a manner that increases the ability of GSA Schedule contractors to respond in a more competitive manner. This paper sets forth best practices that have resulted in BPA’s that are successful for both federal agencies and GSA Schedule contractors.
Overview
Commercial contractors overwhelmingly report that they offer their best terms and prices to customers who provide the most detailed information about their requirements and usage. Commercial customers that get the best deals share the following traits. They have:
1. Known, requirements which they share with potential suppliers
2. Commitment to acquire a specific volume
3. Centralized program management
4. Strategies for partnering with suppliers
Specific information about the factors listed above, when included in a statement of work, have great potential to enhance the Government and industry’s ability to provide best value to the taxpayer.
Specific requirements, volume commitments and/or guaranteed minimums for BPAs will lead to enhanced competition and better pricing. Generic BPAs that rely on subsequent task order competitions introduce a level of complexity and cost that is counterproductive.
Best BPA Practices
The following practices have resulted in BPA’s that improve efficiency and enhance real competition while providing best value to the government.
1. Focus on requirements. BPAs should be structured with a focused set of requirements to enhance effective competition and pricing. Real requirements lead to real price competition in the FSS ordering process.
- BPAs reflecting single agency requirements should be preferred over multiple agency or government-wide BPA’s. Single agency BPAs allow the government to state specific, realistic, authentic requirements that can be accurately priced.
- Include maximum as well as minimum requirements. This information enables bidders to provide targeted pricing and avoid the need to build in cushions to cover risks and changes that may never materialize.
- Include a sound estimate of the government’s anticipated usage
2. Include real economic incentives for competition. Commercial pricing policies commonly extend favorable pricing to customers with terms and guarantees that offer the company an economic benefit. Economic incentives include:
- A commitment to acquire a guaranteed minimum volume.
- Absent a guaranteed minimum the BPA can include a list of required users
- If an agency cannot commit to a guaranteed minimum or list of required user, the BPA should be evaluated based on technical requirements only; price can be established based on competition among technically qualified BPA holders at task order level
3. Pay attention to BPA management. Major BPAs should have a program manager assigned to ensure effective execution, implementation and administration. Too often BPAs are established without a focused management plan for effective use. Program Managers can be particularly effective in:
- Establishing robust communication between the contractors and end users to continually improve the contract administration
- Eliminating unnecessary administrative requirements that add unnecessary costs to the process
- Monitoring agency ordering
- Periodically reviewing BPA’s to ensure continued best value.
4. To the extent allowable, involve industry partners in the development of acquisition strategy. The Government should use industry meetings and statements of work to share statements of the agency objectives. In some cases, agencies are focused entirely on negotiating low price and may miss opportunities to acquire new commercial solutions that could improve the delivery of services or provide cutting edge technology. Agencies may also be focused on lowering the unit price of products or services without considering more significant opportunities to lower the total cost of operations by changing what or how they buy. Fully incorporating industry discussions early in the process can open opportunities for suggestion new, cost saving strategies from commercial partners.
5. Eliminate “generic BPAs” (no stated users, no minimum volume, broad statement of requirements). Generic multiple award BPAs that rely on subsequent task order competitions add an extra level to the FSS ordering process that is unnecessary and should be avoided. These BPAs represent vertical contract duplication and increase costs for both government and industry. Moreover, any price competition when establishing these BPAs is illusory. Subsequent BPA task order competitions for specific requirements establish the real price paid by the government—it is more efficient to compete these requirements directly against GSA Schedule contracts.
2. Majority of Contracts Unaudited by DCAA
The Defense Contract Audit Agency (DCAA), a branch of the Defense Department that conducts audits to ensure fair pricing, has reduced its output over the last decade, with the number of completed audits drastically falling within the last two years. The number of audits performed by the DCAA has dropped by about 75% since 2008, with only just over 7,000 audits completed last year. Despite an increase in staff, the DCAA still holds a backlog of $560 billion worth of paid, but unaudited contracts– the total backlog is estimated at over a trillion dollars. According to a report by Richard Loeb, if audits are not conducted, it reduces the government’s ability to monitor where its money is spent, causing pricing to go unchecked. The growing audit backlog produces a threat of billions of dollars wasted in overpayment, particularly because once the six-year time span for a contract audit has expired, the government loses grounds to dispute pricing. Loeb asserts that the lack of oversight is bad for all sides of Federal contracting: the government and the taxpayer lose money in potential overpayment, and contractors are slowed to close out contracts because of the increasing backlog. The DCAA stated that the reason for the drastic reduction in audits is because of the desire to focus on the quality of the audits and not quantity. However, Loeb and other oversight experts are calling for the DCAA to work to meet its mission and increase their output to identify savings and fair pricing.
Don’t miss the Coalition’s upcoming MAS Basic Training, June 14 -15 at the offices of McKenna Long in Washington, DC. The intensive, two-day training workshop teaches the basics of utilizing the Multiple Award Schedules program. Over the course of the workshop you will learn how to obtain and manage your GSA schedule, market GSA contracts, comply with Federal procurement requirements, follow policy changes, and prepare for MAS audits. A highlight of the course is training on GSA’s electronic tools including, eBuy, GSA Adavantage! and GSA eLibrary. Other material covered will include structuring your contract to address the schedule compliance requirements while retaining flexibility to compete in the federal and commercial market place, as well as training on the new FAR 8.4 ordering procedures. The courses will be taught by those on the front lines of GSA schedule negotiations and contract management, including experts from Baker Tilly, McKenna Long & Aldridge LLP, Washington Management Group and The Coalition for Government Procurement. Attendees are eligible to earn up to 10 CLP credits with submission of an attendance certificate and course training packet available for pick-up after the event.
4. Last Chance to take the Contract Duplication Survey!
During the Coalition’s Spring Conference, DoD Director of Pricing, Shay Assad, expressed interest in the results of the Coalition’s Contract Duplication Survey. The deadline for members to take the survey has been extended to Friday, June 8th.
The purpose of the Contract Duplication Survey is to collect data on the costs and impacts associated with duplicative government contracts for the same or similar services. Survey responses will be used to develop a white paper that will serve as the foundation for a dialogue with acquisition leadership, including the Department of Defense, on the impact of contract duplication.
Note: Members will need their Coalition Login information in order to access the survey. If you do not know your login information, please contact Roy Dicharry at (202) 331-0975 or rdicharry@thecgp.org.
Take the Contract Duplication Survey!
Please respond by COB Friday, June 8th.
5. Myth-Busters Meeting with Wright-Patterson Air Force Base
The Coalition for Government Procurement engaged in a myth-busters dialogue with the Enterprise Sourcing Group (ESG) at Wright-Patterson Air Force Base this week. We appreciate the opportunity to discuss strategic sourcing and furniture acquisition with ESG Director, Mr. Robert Carl Shofner and the ESG team. The Coalition looks forward to future communications with the Air Force about their acquisition strategy and how to maximize competition and achieve efficient best value furniture procurements for the American taxpayer. We will be meeting with the Furniture Committee to discuss next steps on this issue.
6. Acquisition Leadership Confirmed by Senate
On May 24, the Senate confirmed two key acquisition officials, Joseph Jordan as Administrator for Federal Procurement Policy and Frank Kendall as Acting Under Secretary of Defense for Acquisition, Technology and Logistics.
Joseph Jordan joined the Office of Management and Budget (OMB) last December as a senior adviser to Acting Director Jeffrey Zients. Prior to his move to OMB, Jordan was the Associate Administrator of Government Contracting and Business Development at the Small Business Administration. In a previous hearing before the Senate Committee on Homeland Security and Government Affairs, Mr. Jordan introduced his top three priorities: buying smarter, building the right supplier relationships, and strengthening the acquisition workforce.
Frank Kendall has served as Acting Under Secretary of Defense for Acquisition, Technology and Logistics since Ashton Carter was confirmed as Deputy Secretary of Defense. He has more than 35 years of experience in engineering, management, defense acquisition and security affairs in private industry, government and the military. In the private sector, Frank Kendall was Vice President of Engineering for Raytheon Company and Managing Partner at Renaissance Strategic Advisors. In the government Mr. Kendall served as Director of Tactical Warfare Programs in the Office of the Secretary of Defense for Strategic Defense Systems and also spent ten years on active duty with the Army in Germany and taught engineering at West Point.
The Coalition looks forward to working with Administrator for Federal Procurement Policy Joseph Jordan and Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall, on the mutual goal of common sense acquisition.
Proposed Rule Would Create SBIR and STTR Opportunities For Investment Companies
Guest Bloggers: Richard Oliver and Agustin Orozco, McKenna Long & Aldridge LLP
The Small Business Administration (“SBA”) recently issued a proposed rule which, for the first time, would allow venture capital operating companies, hedge funds and private equity firms (“investment companies”) to meaningfully participate in the Small Business Innovation Research (“SBIR”) and Small Business Technology Transfer (“STTR”) programs. This proposed rule would implement provisions of the National Defense Authorization Act for Fiscal Year 2012. Specifically, the proposed rule would revise the affiliation rules for participants in the SBIR and STTR programs to permit participation by concerns that are majority-owned by multiple investment companies. See 77 Fed. Reg. 28520-30, May 15, 2012.
Access to the SBIR and STTR programs would be a significant funding opportunity for small businesses that are largely owned by investment companies. The SBIR and STTR programs were created to award federal research grants to small businesses. Specifically, the purpose of the SBIR program is to stimulate technology innovation by strengthening the role of innovative small business concerns in federally-funded research and development. Federal agencies may award up to $150,000 for a Phase I SBIR contract and up to $1,000,000 for a Phase II contract. Agencies also will have discretion to exceed the SBIR contract award amounts by up to 50 percent and even to award a second Phase II contract. Similarly, the STTR program requires certain federal agencies to enter into funding agreements with small business concerns that engage in a collaborative relationship with research institutions.
The proposed rule would allow investment companies to participate in the SBIR and STTR programs, as long as no single investment company owns more than 50 percent of the concern. The proposed rule would modify the affiliation rules solely for the SBIR and STTR programs. Currently, such concerns would not be eligible, because the concern would be considered to be affiliated with not only the investment companies, but also the other companies owned by these investment companies. SBA’s general principles of affiliation state that if two or more persons own, control or have the power to control less than 50 percent of the concern’s voting stock, but the blocks of stock are equal or approximately equal in size, the SBA presumes each person to control the business concern. By contrast, SBA’s proposed rule provides that where an SBIR or STTR applicant’s voting stock is widely held or where two or more persons (including investment companies) hold large blocks of voting stock but no one person owns more than 50 percent of the stock, the board of directors controls the applicant. The investment companies, therefore, would not be affiliated with the SBIR or STTR applicant.
The proposed rule would also amend the current affiliation rules with respect to an investment company’s portfolio companies. Under the proposed rule, an SBIR or STTR applicant would not be affiliated with a portfolio company of an investment company solely on the basis of shared investors. Additionally, the proposed rule states that if an investment company is determined to be affiliated with an SBIR or STTR applicant, the applicant will not be affiliated with a portfolio company of the investment company, unless: (1) the investment company owns a majority interest in the portfolio company; or (2) the investment company holds a majority of the seats of the board of directors of the portfolio company.
There are several aspects of the proposed rule that may be addressed during the public comment period. While the proposed regulation references stock ownership by “multiple” investment companies, it does not address the allowable percentage amount of minority ownership. Thus, two investment companies could each own 49 percent of the concern. The proposed rule also does not require that the multiple investment companies not be affiliated. Two “sister” investment companies could each own 49 percent of the stock, with the small business being 98 percent owned by two related investment companies.
In order to participate in the SBIR and STTR programs, these small businesses must qualify as a “domestic business concern.” The proposed rule would revise the definition of domestic business concern in anticipation of the participation of small businesses owned by multiple investment companies. The new definition would continue to use the SBA’s definition of “business concern or concern,” however, it would also require the business concern to be created or organized in the United States, or under the law of the United States or of any State.
The proposed rule would amend the time at which SBA makes size and eligibility determinations for SBIR and STTR contracts. Currently, size and eligibility are determined at the time of award for both Phase I and Phase II awards. The proposed rule, however, would require the SBIR or STTR applicant to meet the size and eligibility requirements both at the time of submission of the application and at award.
Finally, with respect to certification, the proposed rule would require concerns that are majority-owned by multiple investment companies to register with SBA on or before the date they submit a response to an SBIR solicitation. In addition, these concerns would be required to indicate in their SBIR proposals that they have completed this registration.
Comments on the proposed rule are due on or before July 16, 2012.
LA:17954701.3
8. NIH Announces Awardees for CIO-SP3
On May 25th the National Institutes of Health (NIH) awarded its Chief Information Officers-Solutions and Partners 3 (CIO-SP3) governmentwide acquisition contract (GWAC). The contract is designed to support the full range of IT services and health IT needs across the federal government. Fifty-four Indefinite Delivery/Indefinite Quantity contracts were awarded and have a performance period of 10 years with a maximum value of $20 billion. With the addition of Carolyn Alston as Executive Vice President and General Counsel, the Coalition will increase its focus on multiple award contracts (MACs) and governmentwide acquisition contract (GWACs) under a new policy committee. We look forward to working with the membership on topics related to MACs and GWACs.
Please see the FedBizOpps announcement for a full list of awardees.
The Senate Armed Services Committee passed the National Defense Authorization Act (NDAA) for FY 2013 on May 25. The bill has now moved to the Senate floor. However, the Committee rejected many of DoD’s budget proposals. In reaction, deputy secretary of defense, Ashton Carter warned that any deviation from DoD’s proposed budget could negatively affect the department’s ability to complete its mission. The committee cut service contract spending by 5% over the next five years and capped contractor executive reimbursement at $237, 000. TRICARE fees were not raised, despite DoD’s request to increase fees along with increasing healthcare costs. Also, the Air National Guard’s budget will be kept at FY 2012 levels, despite DoD’s plan to downsize. Carter affirmed that DoD does not plan on sequestration because of its potential impact on both government and industry. Stating that sequestration is “irrational,” he warned Congress that it should be avoided while he continued to emphasize that Congress should not change DoD’s proposed budget package.
10. NIST Releases Cloud Computing Paper
The National Institute of Standards and Technology (NIST) released a paper this week explaining the cloud in “plain terms” to Federal agencies. The paper also issued cloud recommendations to Federal IT management. NIST describes the move to cloud computing as a business decision in which the business case should consider the relevant factors, some of which include readiness of existing applications for cloud deployment, transition costs and life-cycle costs, maturity of service orientation in existing infrastructure, and security and privacy requirements. NIST also states that in order for organizations to better understand which cloud computing solution would best fit their need, they should analyze how clouds can be deployed, what kinds of services can be provided to customers, the economic opportunities and risks of using cloud services, the technical characteristics of cloud services such as performance and reliability, typical terms of service, and the security opportunities and risks.
During an interview with Government Computer News (GCN), Rear Adm. David Simpson of the Defense Information Systems Agency (DISA) explained that DISA will be implementing a portion of the planned DoD enterprise mobile network by the end of the year. In addition to services such as voice and text, the network will support enterprise e-mail and a mobile enterprise applications store. Originally announced in April at the FOSE Conference, the DoD network will begin to rollout a series of pilots this summer in order to test the system. DISA has been tasked with leading the implementation of the new network and has been given authority to quickly develop classified and unclassified mobile services, GCN reported. DISA hopes to utilize commercial devices with security architecture built-in through SIM cards and mobile device management systems. The initial pilot program will be released this summer and will provide DoD users with end-to-end mobility, security and network management. The pilot will involve around 100 devices run by a mobile device management system. Airtime could be provided by one vendor during the pilot, however, when the entire system launches, it is expected that there will be several service providers in the U.S. and key nations where the DoD has facilities, Simpson said. A second pilot program will follow the first, combing different additional aspects with the architecture established in the first. The pace of federal mobility strategy has gained speed over the last year, most recently with the release of OMB’s Digital Strategy and the Shared Services Strategy.
Source: Government Computer News
12. GSA Digital Services Innovations Center
OMB’s recently released Digital Strategy established the Digital Services Innovation Center, to be managed by the General Services Administration. Gwyne Kostin has been appointed head of the new GSA center. In an interview with Federal News Radio, Gwyne Kostin outlined three main goals of the Innovation Center detailed in the released strategy:
- Make open content management systems the default – the new strategy calls for support implementation through training and best practices. This will offer agencies an alternative to building their own platforms in isolation and enable code sharing and modular development.
- Make high-value data available through Application Programming Interfaces – all with the goal of unlocking valuable data by providing expert resources and other support to enable developers, entrepreneurs, and other end users take advantage of government data and content.
- Help agencies in mobile app development – coordinate efforts with the Federal CIO Council that will help agencies develop secure, device-agnostic mobile applications, provide a development test environment to streamline app delivery, foster codesharing, and validate official government applications.
The government aims to transform the way it handles data and content to accommodate the digital age and new technologies.
13. The BGOV 200 Federal Industry Leaders Reception
On Thursday, June 7, Bloomberg Government will host an evening reception to introduce its new rankings of the top federal contractors for fiscal year 2011. This event will recognize and celebrate the leading companies that supported federal agencies in their missions across multiple categories, within agencies and government-wide, and will give special recognition to rising smaller businesses. By Invitation Only— for additional information, please contact bgovevents@bloomberg.com