Contracting Cone

• Basis:  Improper use, did not comply with applicable statutory and regulatory requirements
• Decision:
  • • Dismissed as untimely
    • Denied  — “agency did not abuse its discretion in deciding that the award met applicable statutory requirements”

My cell phone rang as I walked into my office. No coffee, not even time to put my armload of papers on my desk.

“We have a situation,” one of my Program Managers told me. “Come to Room 1–now. We need your contracting expertise.”

All the seats at the conference room table were already taken when I walked in, all by people who far outranked me. The big screen TV on the wall repeated the news coverage I’d seen over breakfast. Someone wheeled in a spare chair for me and I scooted close to the head of the table, within eyesight and earshot of the highest ranking person in the room. He was polling his audience for ideas.

“What do we have out there that we can test today to see if it’s the answer, how much will it cost, and when can the contractor deliver?”

Not “When can you get on contract?” or “When can you get a proposal?”  

No.

“When can the contractor deliver?”

 Why this Course of Action

We needed something new, something we could test and put at least a few in the field within a few days. Something deliverable within hours after finding the best solution we could.   In the on-the-spot market research, we had nothing but a few possibilities that might work for this particular scenario but none had been tested in this situation. Nothing in inventory and nothing already on contract. Nothing commercially available. Whatever the solution, it would be a fast turn because if the first one failed, we needed to get to the next possibility immediately.

We looked at several options, or courses of action (COAs), over the next half-hour.

Among the COAs were:

1.Direct our prime contractor to go to the 3 possible vendors to acquire units to test. Biggest problems: The scope was questionable, the time required of middlemen to get involved, and—though it wasn’t our primary concern—some steep pass-through fees. The prime contractor also wasn’t known for being extraordinarily responsive.

2. Issue Undefinitized Contractual Actions (UCAs) to the 3 possible vendors. While this was a relatively fast way to move forward if we had money and a requirement, the UCA approval authority wasn’t in the program office chain of command and he was known for being risk averse. The last UCA he had approved had taken over a month to get his approval when the problem came with an Urgent Operational Need (UON) attached and both funding and requirements paperwork in order. Even if by some miracle, he approved the UCA issuance, the vendors might fail and then we would have to shut down the effort to keep from wasting resources, and all that after a significant delay. We would also have to deal with the aftermath of a UCA definitization. All this assumed the vendors would accept a UCA, which is not always true. If we had an existing contract with any of them that was close enough in scope, we might have considered a change order, but this COA was iffy for too many reasons.

3. Using a CRADA was briefly considered but none of the vendors were willing to give up a unit for nothing in return and due to the particular scenario, there was nothing they would have wanted that we could have given them in turn for essentially destroying their property in the testing of it. Money needed to change hands. A small business still has bills to pay.

4.Use 10 USC 2373 for the purpose of testing each vendor’s unit, which fit under the signal technology area.

These and several other COAs were considered. All but 10 USC 2373 would take too long or create issues with either money or scope, and 10 USC 2373 could be enhanced by adding other innovative techniques.

How It Was Used

The 3 vendors were not in competition with one another at this point.   We were essentially still in market research mode, and we hoped to buy from all.

We called the 3 vendors to see if they could provide the unit to be tested the next day, which we could buy under this statutory authority that day with funds available within the program office. One was a no-go; they weren’t as far along as they’d been advertising. The other two said yes, either to driving it to the program office or to someone from the program office picking it up and bringing it back for testing the next day. The estimated cost for one was well below any thresholds for coordination or review, including legal review, but over SAT. Easy.

We followed up via email with the two vendors to ask each for a quote and a brief technical description to be emailed back and followed up by an oral presentation over the phone that lasted maybe 10 minutes and answered any questions we had. We wrote the contracts that day, as well as the minimal documentation required. We used the 10 USC 2373 authority the same as we would for FAR 6.3 authorities on the cover page of the agreements.

Behind the scenes, we dropped everything else we needed to work on that day, and the other functionals, particularly FM, sped in lock step with us so we had the final funding docs by the time the contracts were signed.

Results

The vendors delivered the units the next day and the units were tested by that afternoon. One was not optimal in certain weather/climate, which didn’t provide a solution but did provide valuable information.

The other solution was deemed acceptable and the vendor was able to provide a temporary solution through 10 USC 2373 while strategies for the longer term were considered. The next step might’ve been an Other Transaction for Prototype or a Production contract or FAR Part 12 contract, but real world events dictated a different direction and the situation resolved itself after additional units under the contract were tested downrange.

The Program Office was testing a new aircraft. They needed to know how the aircraft would react to carrying 5 specific bombs/missiles, 2 each.

Why this Course of Action

One course of action that was considered was to pull the bombs/missiles off their current production lines. For one weapon, that was possible.   For the other four, the production contracts were limited by Justification and Approval documents to a maximum number of units, which were already accounted for, and the Contracting Officers for those contracts were unwilling to go through the unwieldy process to add 2 units to each contract.

The quickest way to acquire the other 8 units (four pair) was to use 10 USC 2373, under the ordnance technology, though they might possibly have use aeronautical supplies since technically the aircraft was being tested, not the ordnance.

How It Was Used

The Contracting Officer wrote multiple contracts to the contractors who produced the bombs/missiles, including one contract that represented more than one of the needed pairs. These were written as FAR-based contracts under 10 USC 2373, supported by a single D&F, and less any reportable or review-triggering threshold, not by intent but by virtue of what was needed.

The contracts were simple, with quick delivery because the contractors were able to pull units off existing production lines and make up the quantities for their production contracts. Prices were easy to negotiate based on existing production contracts and price bands.

Because analysis cannot be contracted via 10 USC 2373 and the Program Office needed an assessment of the testing, a separate contract was written to a single contractor for that purpose as an in-scope modification to an existing contract.

Results

The four pair of units were provided seamlessly and in time for flight tests that were able to determine any impact of each pair of units on the aircraft as well as the fifth pair. Analysis was successfully performed under a different, independent contract.

In a war time situation, my Program Office had had a lot of success with one particular manufacturing method related to ordnance. Only one contractor could perform this kind of work at that time, and it was more expensive than a different manufacturing method that had not been tested.

The contractor had suggested the new method might be an equally good solution but cheaper. We were able to acquire the more expensive version without any problem, so it wasn’t an emergency but we couldn’t take forever either. We wanted to have a better solution before the current inventory using the older manufacturing method ran out.

Why this Course of Action

Our market research determined that only one contractor could produce even small quantities using both manufacturing methods so that the DoD could test six of each method to see if the new method was as strong as the old method. The total estimate was over the simplified acquisition threshold at the time.

Our Contracting Director refused to sign Justification and Approval (J&A) documentation under any circumstances because he felt a sole source acquisition, even at that size and justifiable, would attract negative attention. Source selection procedures at that time required us to hold a competition that would’ve lasted months and ultimately would have been competition for competition’s sake with an award going to the only company who could perform.

We decided to try 10 USC 2373 because it allowed us to test manufacturing methods in small quantities and in a sole source situation under the ordnance technology area.

How It Was Used

We used 10 USC 2373 as the authority on the cover page of the contract and purchased six units using one manufacturing method and six using the other method. The agreement was in the form of a short FAR-based R&D supply contract. It took less than 2 weeks from the day the requirement was identified to the request and review the proposal and then to award the contract, with no rush. Maybe another couple of days before the units were received for testing.

The Contracting Officer and Program Manager signed a one-page Determination and Finding (D&F) as the sole source justification.

Results

The twelve units were tested, and the Program Office was able to make a decision on whether to acquire more units using the older, more expensive manufacturing method or the newer, cheaper method. Very little manpower was tied up in the contract award, and resources weren’t spent disproportionately on a source selection. It was even faster than FAR Part 6 source selection procedures at that time and location.

The Program Office was considering a restricted-source competition of 3 large defense contractors with bombs that might meet the requirement and go to production. The bombs had been developed on the contractors’ dime in two cases and under a Government contract in the third.   The original expectation to get to a “fly-off” was a year or longer. That did not include requesting and obtaining proposals on the next phase if the fly-off was successful. The cost estimate was under $5M, but the Program Manager’s chain of command initially insisted on using small-dollar source selections “as practice” for larger future source selections instead of waiving or streamlining where possible.

Why this Course of Action

After lengthy discussions with the Program Office’s legal counsel, the strategy that cost the least resources and moved the program closer to production was to use 10 USC 2373 as a restricted competition under the ordnance technology area.

A source selection would take far too long.   A J&A would be required for anything faster, and the Competition Advocate was known for lengthy approvals, if any.

How It Was Used

The acquisition strategy agreed upon by the Program Office, Contracting Officer, and legal counsel was to use 10 USC 2373 as the authority for a limited competition among the three contractors for a fly-off. The competition was customized and didn’t look like a normal Part 15 source selection, with none of the same wording.   In addition, the fly-off results and data were to be delivered to the Government as a proposal for a follow-on production contract, which would make the next phase much faster.

We did not consider an Other Transaction for Prototype as a next step or an Other Transaction for Production because the Contracting leadership at that time was opposed to Other Transactions for Prototype and an OT for Production had not yet been written into statute.

The acquisition strategy contemplated contract delivery within three months, including the lead time to get on contract.

Results

Unfortunately, the Program Office reorganized before the acquisition strategy could be approved. As a result, this and other upcoming contracts were shifted to a different Contracting Officer in a different buying office who preferred a standard source selection which took significantly longer.

The prior name for this statute was Acquisition for Experimental or Test Purposes. In this case, procurement  is synonymous with acquisition.

If you use RDT&E funds, then the intent of the purchase and the wording of your documentation must match RDT&E.

If what you are buying meets the intention of O&M funding, then the documentation must Operations and Maintenance, not Research and Development.

A: Currently, no. The only way to enter an Other Transaction for Production is through a successfully completed Other Transaction for Prototype. The Section 809 Panel’s Recommendation #81 opens the aperture for pathways other than Other Transaction for Prototype to get to Other Transaction for Production. To expand the use of 2373’s, Congress would need to amend 10 U.S.C. §2371b, which governs Other Transaction for Production criteria.

Over the last few years, there has been more of a blending between the procurement authority of Procurement for Experimental Purposes and the agreement framework of an Other Transaction for Prototype. This has been primarily because few people know what anything other than a FAR-based contract looks like and think that non-FAR agreements are synonymous with other transaction  agreements.

Be careful not to mix the authorities even when using them together, called “stacking” by Richard Dunn of The Strategic Institute (see references section of this page). Mixing authorities can lead to misunderstanding or misinterpretation as demonstrated in the  Air Tractor, Inc GAO protest.

For a war story of how the law was changed, watch the 10-minute video, 2373 — Rapid Acquisition for Experimental & Test Purposes, from Richard Dunn and the Strategic Institute.

Not enough consistent information exists at this time for any other type of agreement, so consult your Policy and/or Legal offices if the agreement doesn’t fit one of these two categories.

If you transition directly to a FAR-based production contract, you may need to add documentation that would be required to begin your FAR-based contract but that was not required for your 2373 contract/agreement. The same applies to Other Transactions for Prototype that transition to a FAR-based production contract. If you may need FAR-based documentation to transition, plan ahead so you can work that documentation concurrently.

If you transition directly to a FAR-based production contract, you may need to add documentation that would be required to begin your FAR-based contract but that was not required for your 2373 contract/agreement. The same applies to Other Transactions for Prototype that transition to a FAR-based production contract. If you may need FAR-based documentation to transition, plan ahead so you can work that documentation concurrently.

If you transition directly to a FAR-based production contract, you may need to add documentation that would be required to begin your FAR-based contract but that was not required for your 2373 contract/agreement.  The same applies to Other Transactions for Prototype that transition to a FAR-based production contract.  If you may need FAR-based documentation to transition, plan ahead so you can work that documentation concurrently.