Resume Padders Wanted (Not)

December 27, 2013, 4:39 pm

≫ Next: Exercising Options: There is more to it than just the FAR.

In a hearing held on November 14, 1973, before the Subcommittee on Priorities and Economy in Government of the Joint Economic Committee of Congress, the late, great Elmer Staats, Comptroller General of the United States and member of the special Commission on Government Procurement, told the late, great Senator William Proxmire of Wisconsin of his high hopes for the proposed Office of Federal Procurement Policy (OFPP) as a source of leadership in the formulation and execution of procurement policy:

We think that there is a literal nightmare of conflicting and confusing contracting regulations or statutes as to procedures, which can do nothing more than cost the Federal Government a great deal of money by virtue of not having a stronger point of leadership in the executive branch to deal with these problems… There is no disagreement anywhere on the need for stronger leadership… [W]ithout legislation the executive branch is not going to face up to this problem in a realistic way.

* * *

As you know, a three year effort was recently completed for the Commission [on Government Procurement], created by Congress, of which I was a member, devoted entirely to a study of Government Procurement. Through this effort, we found a widespread consensus at both the grass-roots and highest levels in Government and industry of the need for a focal point in the executive branch to exercise leadership in (1) formulating and coordinating basic procurement policies and (2) overseeing their implementation in a procurement process which now involves the expenditure of $50 billion annually. It was found also that a central point of leadership was needed to work with the Congress in modernizing and consolidating the present fragmented statutory base and to develop a more uniform regulatory system among the many Federal agencies with extensive procurement activities.

Well, the system now spends about $500 billion annually, and we have our titular leadership focal point, the Administrator for Federal Procurement Policy in the Office of Management and Budget in the Executive Office of the President. Unfortunately, with only few exceptions, that leadership position has been occupied by a series of resume-padding bench warmers with few if any qualifications for the job (other than, maybe, a law degree -- which is not the same as professional knowledge of procurement) or with little if any leadership vision or ambition. The latest of them has announced his departure and plans to go to work for a reverse auction contractor. He will not be missed. Few will even notice he is gone.

According to the December 2 issue of Time magazine:

The President has never surrounded himself with people who have deep experience in managing government.

OFPP is a case in point.

The duties and authority of the Administrator for Federal Procurement Policy are set forth in 41 U.S.C. 1121 and 1122. According to 41 U.S.C. 1121(a) and ( b ):

(a) Overall Direction and Leadership. The Administrator shall provide overall direction of procurement policy and leadership in the development of procurement systems of the executive agencies.

( b ) Federal Acquisition Regulation. -- To the extent that the Administrator considers appropriate in carrying out the policies and functions set forth in this division, and with due regard for applicable laws and the program activities of the executive agencies, the Administrator may prescribe Government-wide procurement policies. The policies shall be implemented in a single Government-wide procurement regulation called the Federal Acquisition Regulation.

According to 41 U.S.C. 1122, the functions of the Administrator are as follows:

(a) In General.— The functions of the Administrator include—
(1) providing leadership and ensuring action by the executive agencies in establishing, developing, and maintaining the single system of simplified Government-wide procurement regulations and resolving differences among the executive agencies in developing simplified Government-wide procurement regulations, procedures, and forms;
(2) coordinating the development of Government-wide procurement system standards that executive agencies shall implement in their procurement systems;
(3) providing leadership and coordination in formulating the executive branch position on legislation relating to procurement;
(4)(A) providing for and directing the activities of the computer-based Federal Procurement Data System (including recommending to the Administrator of General Services a sufficient budget for those activities), which shall be located in the General Services Administration, in order to adequately collect, develop, and disseminate procurement data; and
( B ) ensuring executive agency compliance with the record requirements of section 1712 of this title;
(5) providing for and directing the activities of the Federal Acquisition Institute established under section 1201 of this title, including recommending to the Administrator of General Services a sufficient budget for such activities.
(6) administering section 1703 (a) to (i) of this title [management of the acquisition workforce];
(7) establishing criteria and procedures to ensure the effective and timely solicitation of the viewpoints of interested parties in the development of procurement policies, regulations, procedures, and forms;
(8) developing standard contract forms and contract language in order to reduce the Federal Government’s cost of procuring property and services and the private sector’s cost of doing business with the Federal Government;
(9) providing for a Government-wide award to recognize and promote vendor excellence;
(10) providing for a Government-wide award to recognize and promote excellence in officers and employees of the Federal Government serving in procurement-related positions;
(11) developing policies, in consultation with the Administrator of the Small Business Administration, that ensure that small businesses, qualified HUBZone small business concerns (as defined in section 3(p) of the Small Business Act (15 U.S.C. 632 (p))), small businesses owned and controlled by socially and economically disadvantaged individuals, and small businesses owned and controlled by women are provided with the maximum practicable opportunities to participate in procurements that are conducted for amounts below the simplified acquisition threshold;
(12) developing policies that will promote achievement of goals for participation by small businesses, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns (as defined in section 3(p) of the Small Business Act (15 U.S.C. 632 (p))), small businesses owned and controlled by socially and economically disadvantaged individuals, and small businesses owned and controlled by women; and
(13) completing action, as appropriate, on the recommendations of the Commission on Government Procurement.

We still need leadership, now more than ever, but we are not going to get it -- not from this president or the next one. No one seems to take OFPP seriously, and with good reason based on its history. Only one administrator in recent memory has shown any leadership, Steve Kelman, and he left during President Clinton’s second term. No one since him has made much of an impression. (How many of them can you name?) No administrator has used his or her authority under 41 U.S.C. 1201 and 1703 to improve the quality of training provided to acquisition personnel by the Federal Acquisition Institute and the Defense Acquisition University. The leadership we have gotten has consisted mainly in showing up at this or that function, saying a few things about how important procurement is and how great the workforce is, putting out a not very memorable memo or two that most people don't read, and then taking off for greener pastures after a decent interval. The standard decent interval is about two years. We didn’t even get a decent interval from this last guy.

Our statutes and regulations are a mess. Our processes are cumbersome and inefficient, and needlessly costly and time-consuming. The members of our workforce, though smart enough, have little knowledge of the complex rule system (read the posts in Wifcon Forum), lack top-notch practitioner skills, and are not as competent as they should and could be. Yet, despite a lot of talk, we do not have an even adequate regime of professional education and training, much less an excellent or "World Class" one. In short, acquisition is a mess. Witness the health care website fiasco.

We need an administrative powerhouse, a heroine or a hero, not just a good guy or a nice gal, but heroines and heroes are not easy to find. Even if we found one, I doubt that she or he would want the job. A capable person might consider the nomination an insult. It is unlikely that anyone but another helpless and useless resume padder would want it. There will be another resume padder. I guarantee it.

Somebody in the Senate, anybody, of either party, should think about next year’s $500 billion, and the billions to come in the years after that, and block the nomination.

↧

Exercising Options: There is more to it than just the FAR.

January 26, 2014, 12:02 pm

≫ Next: Is the contract for supplies or for services?

≪ Previous: Resume Padders Wanted (Not)

In Government contracting under the FAR, a contract option is an offer contained in a contract that Government can accept in accordance with its terms, and that the contractor cannot revoke, until the acceptance period has expired. See also the definition of option in FAR 2.101.

The recent Federal government budget problems and the government shutdown have caused confusion with respect to the exercise of annual options in service contracts. I want to try to clear up some of that confusion.

A Primer On Contract Options

When a Government contract contains an option, the option is an offer that the Government can accept or reject. Acceptance of the offer is called "exercising the option."

The most common options in Government contracting are offers to (1) deliver additional quantities of supplies or (2) provide services for an extended period. It is the options in service contracts that are at issue.

In the main, options have two contractual components: (1) an option line item that describes the offer with reference to product specification, service statement of work, product or service pricing, and delivery date or performance period, and (2) an option clause that describes the rights and obligations of the parties with respect to exercise of the option. A standard rule of contract interpretation says that a contract must be interpreted as a whole. Thus, any attempt to answer questions about a contract option must consider both the terms of the contract line item and the terms of the applicable option clause.

FAR provides five standard clauses that stipulate the rights and obligations of the parties with respect to options. There are two standard clauses for supply contracts: FAR 52.217-6. Option for Increased Quantity (MAR 1989) and FAR 52.217-7, Option for Increased Quantity--Separately Priced Line Item (MAR 1989). There are two standard clauses for services contracts: FAR 52.217-8, Option to Extend Services (NOV 1999) and FAR 52.217-9, Option to Extend the Term of the Contract. In addition, there is FAR 52.237-3, Continuity of Services (JAN 1991), which requires a contractor to provide phase-in training and best efforts to “effect an orderly and efficient transition to a successor. While the latter clause is a kind of option, it is a special case, and I am omitting it from the remainder of this discussion.

FAR Subpart 17.2 describes two standard service contract options: (1) the so-called -8 option, named after its standard clause, FAR 52.217-8, which provides for short term extensions of up to six months, supposedly for use when award of a new contract is delayed, and (2) the so-called -9 option, named after its clause, FAR 52.217-9, which is the common "annual" extension option (although extensions need not be for a full year).

Exercising Options

When it comes to exercising a contract option (i.e., accepting the option offer), it is well established in Government contracting case law that an option must be exercised “in exact accord” with its terms. See System Planning Corp. v. U.S., 107 Fed. Cl. 710 (2012), quoting the U.S. Court of Appeals for the Federal Circuit in Freightliner Corp. v. Caldera, 225 F.3d 1361 (Fed. Cir. 2000):

“For an option order to be effective, the Government must exercise the option in exact accord with the terms of the contract.” Freightliner Corp. v. Caldera, 225 F.3d 1361, 1366 (Fed. Cir. 2000); see also Arko, 553 F.3d at 1379.

See also DeMarco Dirzo Development Co. v. U.S., 69 Fed. Cl. 262 (2005):

[T]he United States Court of Appeals for the Federal Circuit has held that “to properly exercise [an] option, the government's acceptance of the offer had to be in exact accord with the terms of the contract[.]” New England Tank Indus. of New Hampshire, Inc. v. United States, 861 F.2d 685, 687 (Fed.Cir.1988); see also Uniq Computer Corp. v. United States, 20 Cl.Ct. 222, 231–32 (1990) (quoting A. Corbin, CORBIN ON CONTRACTS, A COMPREHENSIVE TREATISE ON THE WORKING RULES OF CONTRACT LAW § 264) (1963) (The exercise of an option “must be unconditional and in exact accord with the terms of the option.”) (emphasis added)) (quoting Civic Plaza Nat'l Bank v. First Nat'l Bank of Dallas, 401 F.2d 193 (8th Cir.1968)) (“The acceptance of an option, to be effective, must be unqualified, absolute, unconditional, unequivocal, unambiguous, positive, without reservation, and according to the terms or conditions of the option ... An acceptance of an option must be such a compliance with the conditions as to bind the parties, and if it fails to do so it binds neither.” (emphasis added)). Therefore, as a matter of law, an attempted exercise of an option is ineffective, unless it is in “exact accord” with the terms of the option. See Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 323–24 (Fed. Cir. 1997) (holding the “partial exercise” of an option improper); International Telephone and Telegraph, ITT Defense Communications Div. v. United States, 197 Ct.Cl. 11, 453 F.2d 1283 (1972) (holding that a contracting officer's telegraphic notice that was sent on last date for giving notice, but not received until following morning, and contracting officer's oral notice on last date for notifying contractor was insufficient as a matter of law to “exercise an option,” where the contract provided that the contracting officer must notify the contractor of the exercise of an option, in writing, not later than a specified date); Uniq Computer, 20 Cl.Ct. at 231 (citing S. Williston, A TREATISE ON THE LAW OF CONTRACTS § 61D (3d ed.1957) (“This requirement is strictly construed.”).

As the Federal Circuit explained in Freightliner:

As option holder (optionee), the Government possesses what is generally called a power of acceptance. The option binds the optionee to do nothing but grants it the right to accept or reject the offer therein in accordance with its terms within the time and in the manner specified in the option. In order to bind the optionor, “the notice by which the power of an option holder is exercised must be unconditional and in exact accord with the terms of the option.” Nothing less will suffice, unless the optionor waives one or more of the option's terms. It is settled that the exercise or “acceptance of an option, to be effectual, must be unqualified, absolute, unconditional, unequivocal, unambiguous, positive, without reservation, and [strictly] according to the terms or conditions of the option.” Civic Plaza National Bank v. First National Bank in Dallas, 401 F.2d 193, 197(8th Cir. 1968); Holly Corp., ASBCA No. 24975, 83-1 BCA ¶ 16,327 at 81,164-65; see Corbin on Contracts § 264 (1963); Williston on Contracts §§ 61B, 61D (3d ed., 1957).

Do not confuse this common law rule, which requires the contracting officer to exercise the option in exact accord with the terms of the contract, with the rules in FAR 17.207 about exercising options, which are internal rules of the Government, not terms of a contract.

If a contracting officer fails to comply with FAR 17.207, the Government can declare the exercise of the option to be invalid on the ground that the CO exceeded his or her authority. Thus, if the CO exercises an unpriced and unevaluated option without first complying with FAR Part 6 (see FAR 17.207(f)0, the Government could repudiate the exercise without breaching the contract. But if the exercise was in accord with the exact terms of the contract, failure by the CO to otherwise comply with FAR 17.207 will not be grounds for the contractor to successfully argue that the exercise of the option was invalid. See Freightliner again, in which the contractor argued, among other things, that the CO had not complied with FAR 17.207(f) in exercising the option and for that reason the exercise of the option was improper and ineffective. The court rejected that argument, saying:

In order for a private contractor to bring suit against the Government for violation of a regulation, that regulation must exist for the benefit of the private contractor. See Cessna, 126 F.3d at 1451; Rough Diamond Co. v. United States, 173 Ct. Cl. 15, 351 F.2d 636, 640–42 (Ct.Cl.1965). If, however, the regulation exists for the benefit of the Government, then the private contractor does not have a cause of action against the Government in the event that a contracting officer fails to comply with the regulation. See Cessna, 126 F.3d at 1451–52; Rough Diamond, 351 F.2d at 642. Furthermore, each regulation must be analyzed independently to determine whether it confers a cause of action upon the private contractor. See Chris Berg, Inc. v. United States, 192 Ct. Cl. 176, 426 F.2d 314, 317 (Ct. Cl. 1970) (explaining that it is not “possible to determine that all of ASPR [predecessor to DAR] was or was not made for the benefit of bidders”).

* * *

On appeal, Freightliner contends that TACOM's failure to comply with FAR § 17.207(f) rendered TACOM's option exercise ineffective. When TACOM issued the P00051 modification, the FAR regulation provided as follows:

Before exercising an option, the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract.

FAR § 17.207(f) (1989).

The above regulation explains that, before exercising an option, a contracting officer must satisfy the requirements in FAR § 17.207(f) and FAR Part 6; otherwise, the Government must treat the option order as a “sole source” procurement and justify it under an exception to the requirement of obtaining supplies under full and open competition. See FAR § 6.101 (1989). Freightliner asseverates that, because TACOM failed to satisfy the conditions in FAR § 17.207(f) and did not obtain approval for the sole source justification, the P00051 modification was an ineffective option order. TACOM responds that, even if it violated FAR § 17.207(f), that regulation was not enacted for the contractor's protection, and Freightliner therefore cannot avoid its contractual obligations based on an alleged violation of that regulation.

In order for a private contractor to bring suit against the Government for violation of a regulation, that regulation must exist for the benefit of the private contractor. See Cessna, 126 F.3d at 1451; Rough Diamond Co. v. United States, 173 Ct. Cl. 15, 351 F.2d 636, 640–42 (Ct. Cl. 1965). If, however, the regulation exists for the benefit of the Government, then the private contractor does not have a cause of action against the Government in the event that a contracting officer fails to comply with the regulation. See Cessna, 126 F.3d at 1451–52; Rough Diamond, 351 F.2d at 642. Furthermore, each regulation must be analyzed independently to determine whether it confers a cause of action upon the private contractor. See Chris Berg, Inc. v. United States, 192 Ct. Cl. 176, 426 F.2d 314, 317 (Ct. Cl. 1970) (explaining that it is not “possible to determine that all of ASPR [predecessor to DAR] was or was not made for the benefit of bidders”).

Read holistically, FAR § 17.207 is designed to ensure that a contracting officer exercises an option to fulfill existing needs, see FAR § 17.207( c )(2) (“The requirement covered by the option fulfills an existing Government need ....”), and that exercising the option presents the most cost effective manner of fulfilling that need, see FAR § 17.207(d) (“The contracting officer, after considering price and other factors, shall make the determination....”). The regulation does not proscribe the contracting officer from taking a particular action, rather it provides the Government with a mechanism for maintaining orderly business transactions. In particular, FAR § 17.207(f) serves as an internal operating procedure that requires a contracting officer to document the reasons for exercising the option and the procedural steps taken in doing so. FAR § 17.207(f) exists to ensure that the contracting officer acts in the best interest of the government; it therefore does not exist for the benefit of the contractor. Cf. Cessna, 126 F.3d at 1452 (holding that a regulation which prevented a contracting officer from obligating funds before they were appropriated constituted an internal operating procedure existing for the benefit of the government). Accordingly, we hold that, even if TACOM failed to comply with FAR § 17.207(f), it would not render the P00051 modification ineffective.

The part of the first sentence of FAR 17.207(f) that states: “the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option,” serves merely to ensure that the CO complies with the common law rule. But even though FAR 17.202 makes FAR Subpart 17.2 inapplicable to some contracts, such as construction and research and development contracts, the common law rule still applies to them.

Bottom line: Except as provided by the express terms of the contract, e.g., a Changes clause, the Government cannot unilaterally change the terms of an option without the contractor’s assent.

FAR 17.207, "Exercise of options."

After reminding COs that they must exercise options in exact accord with their terms, FAR 17.207(f) goes on to remind COs of other conditions that must be met prior to the exercise of a contract option. You can read them for yourself, but I want to emphasize two:

(1) The exercise of the option must satisfy the requirements of FAR Part 6 with respect to full and open competition.

(2) The option must be exercisable in an amount stipulated in the contract or otherwise determinable from the contract terms.

The first reminds the CO that he or she must have complied with the Competition in Contracting Act (CICA) with respect to the option. The second is necessary for such compliance, because CICA requires that price be an evaluation factor in every CICA competition. A CO’s failure to comply with FAR 17.207 won’t excuse the contractor from performance, because FAR 17.207 was not written for the benefit of contractors. However, a bid protester can use such a failure as grounds to protest the exercise of an option. (Think of it this way: contractors complain about breaches of contracts; protesters complain about violations of regulations and solicitation terms.)

Questions at Wifcon Forum

As I said, the budget turmoil has caused some confusion about the exercise of options. Some of that confusion is reflected in a 14 November 2013 post to Wifcon Forum under the heading “FAR Clause 52.217-8 and -9”:

I was hoping to get some insight on the interpretation regarding the following statement, which was posted in one of the Army Contracting Directorate regarding FAR Clause 52.217-8 and 52.217-9:

In accordance with FAR Clause 52.217-8, Option to Extend Services, the contract may be extended, at the Government’s sole discretion, for a period of up to six (6) months, exercisable in increments of not less than one (1) month. If the contract contains an unexercised option period, the Government may elect to exercise the option pursuant to FAR Clause 52.217-9, Option to Extend the Term of the Contract, during any short-term extension. The short-term extension(s) shall be subtracted from the total duration of the immediately succeeding option period that may follow as a result of the exercise of the option pursuant to FAR Clause 52.217-9 so that the combination of the short-term extension(s) and the option will not exceed 12 months duration. [Emphasis added.] If the Government exercises one or more short term extensions in accordance with FAR Clause 52.217-8 and this instruction or an option period pursuant to FAR Clause 52.217-9, or any combination thereof, the contract as extended shall be deemed to include this extension instruction and FAR Clause 52.217-8; thus, the authority to extend services pursuant to FAR Clause 52.217-8 and this instruction may be exercised at the end of the base period and at the end of each option period.

Question: Can this be done? Excercising [sic] -9 and then cut it short and use -8?

The poster later explained:

[T]he situation is the result of the customer anticipation of not needing the services due to budget issues among other reasons. Anyways, we are at the point when we need to exercise the 2nd option period. Contracting office proposed we exercise -8 for 2-months and once customer confirms they need the service, -9 would be excercised [sic] following its respected [sic] period (PoP on option is idnetifed [sic] in Section F - 12-month periods).

As I interpret the post, the question is whether the Government can exercise the 52.217-8 option for two months and then the 12-month 52.217-9 option for 10 months.

The answer is no, unless the CO first modifies the 52.217-9 option with the contractor’s assent. Any attempt to exercise the 52.217-9 option for less than the stipulated 12 months would violate the common law of contracts and constitute a cardinal change -- a breach of contract -- which would entitle the contractor to refuse to perform or which would be handled as a constructive change entitling the contractor to an equitable adjustment, depending on which version of the Disputes clause, FAR 52.233-1, is in the contract. See FAR 33.213, “Obligation to continue performance.”

The fact that the 52.217-8 option plus a 10-month extension under the 12-month 52.217-9 option would equal 12 months is to no avail, because a 12-month 52.217-9 option stipulates performance for a period of 12 months and must be exercised in exact accord with its terms. The 52.217-8 option and the 52.217-9 option are different terms and presumably are under separate line items for the purposes of pricing and proposal evaluation. (According to the GAO, 52.217-8 options must be priced and the prices must be evaluated in order for exercise to be CICA-compliant. See Major Contracting Services, Inc., GAO Dec. B-401472, 2009 CPD ¶ 170 (Sep. 14, 2009), reconsid. denied, 2009 CPD ¶ 250 (Dec. 7, 2009).) One cannot combine the 52.217-8 option and the 52.217-9 option in order to satisfy the time requirement of the 52.217-9 option.

Perhaps some practitioners think that because paragraph ( c ) of the 52.217-9 option limits “the total duration” of the contract, that the 52.217-8 option cannot be used to extend the contract beyond that total duration. They reason that exercise of the 52.217-8 option prior to exercise of a 52.217-9 option requires that any excess time be deleted from the 52.217-9 option, justifying exercise of the 52.217-9 option for less than its stipulated period. To illustrate: Suppose that the Government has one remaining 52.217-9 option for a 12-month extension. According to paragraph ( c ) of the 52.217-9 clause, the total duration of the contract cannot go beyond the end of the final 52.217-9 option. Thus, if the Government exercises the 52.217-8 option first, for two months, then exercises the 52.217-9 option, it may do so for only 10 months. Not true. See the decision of the Court of Appeals for the Federal Circuit in Arko Executive Services, Inc. v. U.S., 553 F.3d 1375 (2009):

Arko argues first that the government's attempt to require services pursuant to FAR 52.217–8 after the fifth year of the contract exceeded the time limits of the contract. This argument is based on Arko's contention that FAR 52.217–9( c ), which states that “the total duration of this contract, including the exercise of any options under this clause, shall not exceed five years,” is an absolute bar to provision of services more than five years after the beginning of performance. This interpretation, however, ignores the phrase “including the exercise of any options under this clause.” The presence of this phrase suggests that the five-year limit includes the options discussed in the FAR 52.217–9 clause—which are the four one-year renewals discussed in F.4.1 and F.4.2—but does not include options to extend services, such as FAR 52.217–8, that are not under the clause.

More importantly, construing the up to six months of extended services authorized by FAR 52.217–8 as allowable in addition to the five years of performance under FAR 52.217–9( c ) is consistent with the purpose of FAR 52.217–8. According to another provision of the FAR:

Award of contracts for recurring and continuing service requirements are often delayed due to circumstances beyond the control of contracting offices. Examples of circumstances causing such delays are bid protests and alleged mistakes in bid. In order to avoid negotiation of short extensions to existing contracts, the contracting officer may include an option clause (see 17.208(f)) in solicitations and contracts which will enable the Government to require continued performance of any services within the limits and at the rates specified in the contract.

48 CFR § 37.111.

There is more to an option than the option clause, 52.217-8 or 52.217-9. The option clause merely states the terms for exercising the option. The option line item and other option terms of the contract, such as the specification or statement of work and the stipulation of the option performance period, are also part of the option. The option line item and other option terms must be read together with the option clause, and reading the line item and the clause together and applying the common law, a CO cannot exercise a 12-month option for 10 months, even if he or she exercises the 52.217-8 option for two months, because when it comes to exercising either option, they are different terms of the contract. A CO cannot read them together to arrive at a different interpretation of either of them than is clearly spelled out in the contract.

Any attempt to exercise an option based on terms different than those specified in the contract would constitute a counteroffer. The contractor can agree to or reject the counteroffer. However, if the contract agrees to accept the counteroffer, the CO will have conducted a sole source negotiation, which must be justified and approved in accordance with FAR Part 6. See Magnavox Electronic Systems Co., GAO Dec. B-231795, 88-2 CPD ¶ 431 (Nov. 2, 1988):

The FAR also provides that an agency may exercise an option only if the exercise accords with the terms of the option. FAR § 17.208(f). An agency is not permitted to negotiate with the awardee to reduce the option price stated in the contract if price competition for the option quantity is available. Varian Associates, Inc., B–208281, Feb. 16, 1983, 83–1 CPD ¶ 160, aff'd in relevant part sub nom Department of the Army—Reconsideration, B–208281.2, July 12, 1983, 83–2 CPD ¶ 78. [Footnote omitted.]

Presumably, the same would apply to any attempt to negotiate an option period of performance.

The solution to the problem posed in the original Wifcon Forum post would be to exercise the 12-month option and then terminate the contract for convenience if the requiring activity later decides that it does not need 12 months of services.

When Can COs Use The 52.217-8 Option?

A related matter that came up in the thread was whether the exercise of the 52.217-8 clause has to be consistent with the purposes stated in FAR 37.111, which states:

Award of contracts for recurring and continuing service requirements are often delayed due to circumstances beyond the control of contracting offices. Examples of circumstances causing such delays are bid protests and alleged mistakes in bid. In order to avoid negotiation of short extensions to existing contracts, the contracting officer may include an option clause (see 17.208(f)) in solicitations and contracts which will enable the Government to require continued performance of any services within the limits and at the rates specified in the contract. However, these rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance thereunder shall not exceed 6 months.

In other words, must the agency be in a tight spot in order to exercise the 52.217-8 option, or can it do so for its convenience? I think that the answer ought to be that an agency can exercise the option only when “circumstances beyond the control of contracting officers” delay award of a contract. But, as pointed out by Don Mansfield in one post in the thread, the Armed Services Board of Contract Appeals has ruled that regulatory purposes do not restrict the use of the 52.217-8 clause, since the clause says nothing about those purposes. See Griffin Services, Inc., ASBCA No. 52280, 02-2 BCA ¶ 31943 (Aug. 2, 2002).

In Griffin, the contract included the 52.217-8 option and some 52.217-9 options. It was badly priced and the contractor did not want the Government to exercise the 52.217-9 option. The CO failed to provide timely notice of intent to exercise, and the contractor refused to waive the deadline without a price adjustment. The CO then used the 52.217-8 clause to extend the contract for several months. The contractor filed a claim, arguing that the exercise of the option was not based on circumstances beyond the CO’s control. The board rejected that argument:

[T]he appellant seems to confuse what may have motivated the Government to provide for a standard clause extending contract services, and the expression of contractual intent which the language conveyed. As the Supreme Court has recently reminded in a unanimous opinion, when the Government enters the marketplace by way of contract and does business with its citizens, its rights and duties are governed generally by the law applicable to contracts between private individuals. Franconia Associates v. United States, 122 S. Ct. 1993, 2001 (U.S. 2002). Thus, we look to contract rules, not regulatory rules, for the interpretation of this clause.

The plain, objective, language of the Option to Extend Services clause is not limited as to the reasons for its use.

Conclusion

When Congress shut down the Government, it put at risk virtually every annual extension option in every Government contract, to the extent that those options could not be exercised in exact accord with their terms. COs punted, and it appears that everyone who did got away with it, at least as far as we know. But no CO should be deluded about the rules. The solution to such funding hiccups is not the wacky one proposed by the Army contracting director, but to write terms that would permit the CO to make unilateral adjustments to option terms in response to future funding delays and shutdowns.

When answering questions about the proper exercise of options, begin with the terms of the contract, which should include (1) the terms of the option itself (i.e., the offer to perform) and (2) the terms of the applicable contract clause, and then remember that COs must adhere to both the common law rules about options as well as the requirements of FAR Subpart 17.2 and FAR supplements.

For a general discussion of the legal issues associated with the exercise of options, see Nibley and Armstrong, The Government’s Exercise of Options, Briefing Papers (July 2013). It’s must-reading.

↧

Is the contract for supplies or for services?

February 13, 2014, 6:22 am

≫ Next: Introducing Emptor Cautus

≪ Previous: Exercising Options: There is more to it than just the FAR.

The DAU Director for the Center for Contracting, Mr. Leonardo Manning, posted a short, one-paragraph blog entry on February 10 entitled, “Is your Acquisition a Supply or a Service?”

https://dap.dau.mil/career/cont/blogs/default.aspx

It's interesting, but it doesn't analyze the problem in enough detail. It's more complicated than presented.

FAR 2.101 defines supplies as follows:

Supplies means all property except land or interest in land. It includes (but is not limited to) public works, buildings and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration and installation of the foregoing.

There is no definition of services or service contract in FAR Part 2, which means that there is no definition of those terms that applies throughout the FAR. See FAR 2.101(a). However, there are several definitions pertaining to services and service contract scattered about in various places.

FAR 2.101 defines personal services contract as follows:

Personal services contract means a contract that, by its express terms or as administered, makes the contractor personnel appear to be, in effect, Government employees (see 37.104).

FAR 37.101 defines nonpersonal services contract as follows:

Nonpersonal services contract means a contract under which the personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the Government and its employees.

FAR 37.101 defines service contract as follows:

Service contract means a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a nonpersonal or a personal contract. It can also cover services performed by either professional or nonprofessional personnel whether on an individual or organizational basis. Some of the areas in which service contracts are found include the following:

(1) Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment.

(2) Routine recurring maintenance of real property.

(3) Housekeeping and base services.

(4) Advisory and assistance services.

(5) Operation of Government-owned equipment, real property, and systems.

(6) Communications services.

(7) Architect-Engineering (see Subpart 36.6).

(9) Transportation and related services (see Part 47).

(10) Research and development (see Part 35).

That definition applies only in FAR Part 37. It does not apply in any of the other 52 parts. It does not apply to Part 22. See FAR 2.101(a).

FAR 22.001 defines service contract as follows:

Service contract means any Government contract, or subcontract thereunder, the principal purpose of which is to furnish services in the United States through the use of service employees, except as exempted by the Service Contract Act (41 U.S.C. chapter 67; see 22.1003–3 and 22.1003–4). See 22.1003–5 and 29 CFR 4.130 for a partial list of services covered by the Act.

There are also definitions of advisory and assistance services, architect-engineer services, child care services, and utility service.

The purpose of the FAR definitions is to provide a basis for applying appropriate policies, solicitation provisions, and contract clauses when conducting acquisitions. They are not meant to define supplies and services in and of themselves.

There is no definition of service per se; the FAR does not tell us what a service is. The closest we get is that part of the definition of service contract that refers to performance of an identifiable task rather than to furnish an end item of supply. That’s an odd criterion, and it makes the definition of service contract somewhat problematical. If you buy a product of a company’s own design that the company makes, stocks, and sells, you are clearly buying an item of supply. But what if a CO hires a contractor to make and deliver an item of the government’s design? Is the CO buying an item of supply or the time and effort of performing an identifiable task? Seems to me that making something is an identifiable task and that hiring someone to make something for you is hiring them to perform such a task. However, I think that most of us would agree that such a contract would be a supply contract. Right?

If you award a contract to someone to manufacture something to your specifications, have you bought an item of supply or have you hired the contractor to expend time and effort to perform an identifiable task? Surely, the custom manufacture of something to your design is different than contracting with a firm to sell you a standard item that it makes to its own design and stocks or makes on order for sale. Moreover, doesn’t the maintenance, overhaul, repair, servicing, rehabilitation, etc., of items of supply entails the alteration of those supplies, which, according to the definition of supplies, is supplies?

Which brings us to the Service Contract Act. FAR 22.1003-1 says that FAR Subpart 22.10, “Service Contract Act of 1965, As Amended,” applies to all government contracts awarded for the principle purpose of acquiring services to be provided by service employees. It then says:

The nomenclature, type, or particular form of contract used by contracting agencies is not determinative of SCA coverage.

FAR Subpart 22.10 makes no mention of the definition of service contract in 37.101, but 22.1003-5 contains a list of examples of contracts covered by the SCA that includes many that are similar to the list of examples in that definition.

The Department of Labor regulations at 29 C.F.R. Part 4, Labor Standards for Federal Service Contracts, does not define service or service contract, but provides as follows at § 4.111(a), which says, in part:

This remedial Act is intended to be applied to a wide variety of contracts, and the Act does not define or limit the types of services which may be contracted for under a contract the principal purpose of which is to furnish services. Further, the nomenclature, type, or particular form of contract used by procurement agencies is not determinative of coverage. Whether the principal purpose of a particular contract is the furnishing of services through the use of service employees is largely a question to be determined on the basis of all the facts in each particular case. Even where tangible items of substantial value are important elements of the subject matter of the contract, the facts may show that they are of secondary import to the furnishing of services in the particular case. This principle is illustrated by the examples set forth in §4.131.

As for the examples in § 4.131:

(a)… A procurement that requires tangible items to be supplied to the Government or the contractor as a part of the service furnished is covered by the Act so long as the facts show that the contract is chiefly for services, and that the furnishing of tangible items is of secondary importance

* * *

( c ) [An] example of the application of the above principle is a contract for the recurrent supply to a Government agency of freshly laundered items on a rental basis. It is plain from the legislative history that such a contract is typical of those intended to be covered by the Act. S. Rept. 798, 89th Cong., 1st Sess., p. 2; H. Rept. 948, 89th Cong., 1st Sess., p. 2. Although tangible items owned by the contractor are provided on a rental basis for the use of the Government, the service furnished by the contractor in making them available for such use when and where they are needed, through the use of service employees who launder and deliver them, is the principal purpose of the contract.

Okay, but then the regulation says:

In general, contracts under which the contractor agrees to provide the Government with vehicles or equipment on a rental basis with drivers or operators for the purpose of furnishing services are covered by the Act. Such contracts are not considered contracts for furnishing equipment within the meaning of the Walsh-Healey Public Contracts Act. On the other hand, contracts under which the contractor provides equipment with operators for the purpose of construction of a public building or public work, such as road resurfacing or dike repair, even where the work is performed under the supervision of Government employees, would be within the exemption in section 7(1) of the Act as contracts for construction subject to the Davis–Bacon Act. (See § 4.116.)

I presume that equipment rental for other purposes is covered by the Walsh-Healey Public Contracts Act, which applies to contracts for the "manufacture or furnishing" of materials, supplies, articles, and equipment. See FAR 22.602.

If you Google <car rental service> you’ll get the websites for Hertz, National Car, etc. They rent cars without drivers, and Hertz’s corporate profile says that they have provided “Quality Car Rental Service” for over 90 years. So in the commercial marketplace, car rental is a service, as is equipment rental generally. It’s not immediately clear to me why renting laundry is different from renting vehicles without drivers and other equipment.

Assuming that you want to award a fixed-price contract for the recurrent supply of fresh laundry, would you specify the laundering process, the properties of the fresh laundry to be delivered, or both? Would you insert the clause at FAR 52.243-1, Changes--Fixed Price (AUG 1987) (ALT I) (APR 1984), which is the one for services, or would you insert the basic clause which is for supplies? Or would you insert (ALT II) (APR 1984), which is for services and supplies? Would you insert the clause at FAR 52.246-4, Inspection of Services--Fixed-Price (AUG 1996), or the one at FAR 52.246-2, Inspection of Supplies--Fixed-Price (AUG 1996)? There is no alternate inspection clause for both supplies and services. So would you include both clauses and assign them to separate line items or subline items for services and supplies? Would you separately priced the items?

Would those questions occur to you? Would the answers matter to you? Do you think that all practitioners would answer them the same way?

I do not think this is a big problem. My point is that contracting regulations are written over the course of time to implement laws and policies that are often developed on an ad hoc basis in response to particular problems as they arise. They tend to be formulaic in the sense of mandating that when X then Y. A formula specified in one part of the FAR may make perfect sense within its policy domain, but no sense at all within another. (That’s one of the reasons for the definitions rule at FAR 2.101.) Thus, it is possible that a contract might appropriately be thought to be for supplies when selecting clauses, but for services when selecting labor laws.

Veteran practitioners tend to take these things for granted, mainly because they were told how to think about them during their early training. This is supplies. That is services. They know that the regulations do not always answer questions definitively and that, sometimes, practitioner experience is all you have to go on. But newcomers to our business can get hung up on some of these logical inconsistencies.

And now: Is painting the walls of a building a service or is it construction? Does the Service Contract Act apply or the Davis Bacon Act? And while we’re at it, what about elevator repair?

↧

Introducing Emptor Cautus

March 24, 2014, 4:30 pm

≫ Next: What is a contract? What is contract management?

≪ Previous: Is the contract for supplies or for services?

We have a new blogger at Wifcon, who calls himself Emptor Cautus. Since I've known him for 40 years, he asked me to write an intro for him, and this is it.

E.C. will remain anonymous, which is a good sign. He retired from Government service after a 30+ year career in which he held several high level posts, and he is still working in the field, so I figure he might say something that might get someone excited, and he doesn't want it held against him. That's good news.

E.C. spent most of his career with the Department of Defense as a contracting officer, contracting director, headquarters staffer, chief procurement officer, and even as an assistant commander in major systems acquisition offices. He worked some very big and important programs and there are not many people alive who know as much about contracting as he does. He is a detail man, which means that he will look closely at your official work and hold you to a very high standard in that regard. He is a thinker, and in a conversation, if you say something unsupported, inconsistent, or just plain wrong, you are likely to hear the dread, "Well, now, wait a minute." Which is the prelude to a Socratic examination of your logic. I can tell based on personal experience that alcohol seems to have little if any effect on his reasoning powers. If you say something about a professional topic, be ready.

E.C. is a prolific and thoughtful writer, and if you do much reading in our field, you have probably read some of his articles in various professional publications. He is a Certified Professional Contract Manager and a Fellow of the National Contract Management Association.

We are close friends, and I hold him in the highest personal and professional esteem. I think you will enjoy reading what he posts.

↧

What is a contract? What is contract management?

March 28, 2014, 7:08 am

≫ Next: Enter the contest! Win a book!

≪ Previous: Introducing Emptor Cautus

What follows is a draft that I have written for general descriptive and explanatory purposes on the topics: "What is a contract?" and "What is contract management?" It is intended to be brief and introductory in nature. The intended audience is contract managers, prospective contract managers, and personnel managers in both the public and private sectors and in Government and private sector contracting.

I invite you to submit comments on the substance of it. What do you like, agree with, if anything. What do you dislike, disagree with? (This is a first draft, so don't address typos, format, etc.) You can comment publicly, here at the blog, or you comment privately via the Wifcon member channel.

Thanks in advance for your time.

What is a Contract?

What is Contract Management?

What Is A Contract?

The concept of contract is extraordinarily complex. One can define the word broadly and in general terms, or narrowly, in legal terms, depending on your purpose.

Common Dictionary Definitions

According to current edition of The Oxford English Dictionary (OED Online March 2014), the ultimate source of the English noun is the Latin verb contrahere, which means to draw together, collect, unite. The word came into English via Old French, and its first recorded use in English was by Geoffrey Chaucer, who used it in The Canterbury Tales in the year 1386 (and spelled it “contractes”).

According to the OED, contract (noun) means:

A mutual agreement between two or more parties that something shall be done or forborne by one or both; a compact, covenant, bargain; esp. such as has legal effects….

Similar definitions appear in the American Heritage Dictionary of the English Language, 5^th and in Webster’s Third New International Dictionary (Unabridged).

Legal Definitions

Restatement of the Law of Contracts 2d, § 1, defines contract as follows:

A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

Black’s Law Dictionary 9^th (2009) devotes 11 pages to the definition of contract, defining the basic word and many variations, such as adhesion contract, bilateral contract, blanket contract, consensual contract, cost-plus contract, fixed-price contract, gratuitous contract, informal contract, parol contract, requirements contract, service contract, subcontract, unilateral contract, and void contract.

The basic definition in Black’s is:

An agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law…. 2. The writing that sets forth such an agreement….

(Note the distinction made between the actual agreement between the parties and the document that memorializes it.)

Definitions in Statute and Regulation

The word contract is used (but not defined) in the U.S. Constitution in Article I, Section 10, and in Article VI, and both used and defined in many ways for different purposes in hundreds of places throughout the United States Code (U.S.C.) and the Code of Federal Regulations (C.F.R.). See, for example, the regulations of the Office of Management and Budget at 5 C.F.R. § 1315.2:

Contract means any enforceable agreement, including rental and lease agreements, purchase orders, delivery orders (including obligations under Federal Supply Schedule contracts), requirements-type (open-ended) service contracts, and blanket purchases agreements between an agency and a vendor for the acquisition of goods or services and agreements entered into under the Agricultural Act of 1949 (7 U.S.C. 1421 et seq.). Contracts must meet the requirements of § 1315.9(a).

A much more common definition, which appears in several places in the C.F.R., is given in Department of Agriculture regulations, at 7 C.F.R. § 3016.3:

Contract means (except as used in the definitions for grant and subgrant in this section and except where qualified by Federal) a procurement contract under a grant or subgrant, and means a procurement subcontract under a contract.

See Department of Energy regulation, 10 C.F.R. 784.12:

Contract means any contract, grant, agreement, understanding, or other arrangement, which includes research, development, or demonstration work, and includes any assignment or substitution of parties.

The Federal Acquisition Regulation (FAR), 48 C.F.R. Chapter 1, § 2.101, defines contract as follows:

“Contract” means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by 31 U.S.C. 6301, et seq. For discussion of various types of contracts, see Part 16.

(That definition refers to what is sometimes called a “procurement contract” for the purchase of property or services. See 31 U.S.C. § 6303.)

Perhaps the most sensible answer ever given to the question, “What is a contract?” was written by John D. Calamari and Joseph M. Petrillo and appears in their legal textbook (hornbook), Calamari and Petrillo on Contracts 6^th (2009) on page 1:

No entirely satisfactory definition of the term “contract” has ever been devised. The difficulty of definition arises from the diversity of the expressions of assent which may properly be denominated “contracts” and from the various perspectives from which their formation and consequences may be viewed.

The Core Concept

The core concept is that of agreement between two or more parties about promises they have made. Such an agreement might be referred to as a bargain, deal, meeting of the minds or, more formally, mutual assent. A contract can be for an undertaking as simple as an immediate purchase-sale transaction between individuals, in which nothing is written and little if anything is said, or as complex as a years-long relationship between a team of corporations and a government agency that attracts national or even international attention and in which thousands of managers and workers are employed, millions of pages of documents are prepared, and hundreds of meetings are conducted.

Some persons categorize contracts as either discrete or transactional on one hand and relational on the other. See, for example, Macneil, "The Many Futures of Contracts," Southern California Law Review, (1973 - 1974), 47 S. Cal. L. Rev. 691, 693-4:

The purity and simplicity of the traditional tenet arises from its presupposition that a contract is a discrete transaction. A transaction is an event sensibly viewable separately from events preceding and following it, indeed from other events accompanying it temporally one engaging only small segments of the total personal beings of the participants. Only this separability permits such a clean and clear definition of contract as that of the Restatement, and with it the singular future of contract based only on promise-with-law.

But is the world of contract a world of discrete transactions so defined? Or is it a world of relation, an ongoing dynamic state, no segment of which--past, present or future--can sensibly be viewed independently from other segments? Is it a world entirely of segmental personal engagements, or is it one tending to engage many aspects of the total personal beings of the participants?

[Footnotes omitted.]

Contracts are created through an often complex and lengthy process that is sometimes referred to as contract formation or as offer and acceptance. The process might take place more or less as follows: One party, an offeror, makes an offer, which is a promise, to another party, an offeree, seeking to get something in exchange, usually a return promise. The promise might be to do something or to refrain from doing something. If the offeree agrees to the offeror’s terms for the exchange of promises, then he or she is said to have accepted the offer, thereby making a promise in return. The offeree’s return promise is deemed consideration for the offer — something that the offeror bargained for and that “seals the deal” between the parties. Assuming that both parties are legally competent to engage in such an exchange, and assuming that the promises exchanged are lawful, the parties’ agreement is mutual assent to the terms of the exchange and forms a contract. The parties are now bound to one another, and the courts will enforce the contract. (For a more complete discussion of the process, see Joseph M. Perillo, Calamari and Perillo on Contracts 6^th (2009) Ch. 2.)

The specialized role of professional contract manager developed when contracts became complex, the rules governing them became voluminous and difficult to understand, and the work of making and maintaining them became specialized. Contract managers view contracts as business relationships that require great care and attention to detail in planning, creation, maintenance, and in closing out when completed. That process is called contract management.

What is Contract Management?

Contract management is the professional art of negotiating mutually beneficial business agreements and of forging and maintaining mutually rewarding business relationships. Contracts involving anything more than simple and immediate purchase and sale transactions are relationships. While contract management entails compliance with laws, regulations, policies, court decisions, etc., it is not primarily a legal process. Contract management is, first and foremost, a relationship management process. Contract managers enable and assist people and organizations to unite and cooperate to their mutual benefit.

Business is regulated in most countries, so contract managers must know and ensure compliance with many statutes, regulations, policies, and judicial and administrative decisions (collectively, “the rules”) that govern the contracting process, and they must be able to advise others in their organizations concerning the proper interpretation and application of the rules. This is especially true of Government contracting. The rules are complex and often written in arcane language using officially defined words and specialized terms of art. (The FAR alone contains more than 800 officially defined words and terms.) In order to be able to interpret and apply the rules properly and advise others how to do so, contract managers must be prodigious readers, so they can stay abreast of the latest developments in the law, in the industries and markets in which they do business, and in their profession.

The contract management process plays out in four phases: (1) research and planning, (2) contract formation, (3) contract execution, and (4) contract closeout.

The Research and Planning Phase

During the research and planning phase, the buyer determines its acquisition objectives — what it lacks and what its specific requirements are, decides how to proceed through the contract formation and contract execution phases, and establishes a budget and a schedule for the accomplishment of its objectives.

As generalists, contract managers should have, or be able to obtain through market research, information about the products or services to be acquired under contract. Generally, this will be the knowledge of an educated layperson, rather than a technical expert. They should be sufficiently familiar with the industries that produce or provide those products or services and the markets in which they are sold to be able to review specifications or statements of work for clarity, suitability, and general adequacy, to negotiate product or service specific contract terms, and to negotiate prices, estimated costs and fees, or hourly labor rates. They should have a general understanding of the methods of production or performance and of quality control and quality assurance used by the industry.

Contract managers who support projects or programs should understand the fundamentals of project management and some of the tools used by project managers, such as Work Breakdown Structures, Earned Value Management Systems, the Program Evaluation and Review Technique, and the Critical Path Method. (See A Guide to the Project Management Body of Knowledge (PMBOK Guide) 2000 Edition), ANSI/PMI 99-001-2000.) They should understand project funding and contract financing arrangements. And they should understand the fundamentals of intellectual property law, policy, and practice regarding patents, rights in technical data, and copyrights.

Contract managers must be effective relationship designers and builders. In order to unite people and organizations, contract managers must investigate and understand their respective points of view, objectives, needs, requirements, concerns, perceptions of risk, and differences. They must analyze the business strategies of their own organizations and of prospective business partners, determine how they mesh and conflict, if at all, and then must estimate, predict, and plan accordingly. They must choose and employ ethical and appropriate tactics to achieve the parties’ respective objectives in mutually acceptable ways. They must know how to use the arts of explanation and persuasion to acknowledge and resolve differences, and know how to draft agreements that impose reasonable obligations and fairly allocate business risks.

The Contract Formation Phase

The crucial phase in contract management is contract formation, the process of offer and acceptance. The objective is mutual assent — a meeting of the minds. The judgments, decisions, plans, proposals, and agreements made during contract formation will set the stage for all that follows. A well-managed and conducted contract formation process greatly increases the likelihood of successful contract execution and reduces the risk of disappointment or failure. For that reason, seasoned contract managers should play the lead role in contract formation. If someone else is chosen to play that role — perhaps a program or project manager — the contract manager should be that person’s key advisor.

In Government contracting, the contract formation process is managed under extensive and complex rules — statutes, regulations, policies, and protest case law — and contract managers engaged in Government contract formation must be thoroughly familiar with them. The Government’s contracting officer is the process manager, responsible for ensuring that it is conducted in strict accordance with the rules and that all offerors are treated fairly. See FAR 1.602-1( b ):

No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met.
Moreover, contract managers must have a thorough understanding not only of the contracting rules, but also of the fundamentals of sound business decision-making that underlie the proposal evaluation and source selection process used by most federal agencies. And since they must analyze business proposals and negotiate contract terms, including prices, they should understand the industry that produces the goods or services being acquired, the practices used to set their prices, and the market in which they are sold and purchased.

In Government contracting, more regulation is devoted to contract pricing than to any other single topic, and contract managers involved in proposal analysis and contract negotiations should have an expert understanding of the pricing rules, which include rules about the submission and certification of cost or pricing data, cost allowability, cost accounting standards, cost and price analysis, and subcontract pricing. In order to engage in proposal analysis and contract pricing, contract managers must be knowledgeable of the fundamentals of cost estimating and of product and service pricing, and of pricing laws, regulations, and policies. They must be competent in the use of basic arithmetic and at least basic business mathematics. Such competence is essential to an understanding of the fundamentals of cost estimating, cost uncertainty analysis, cost risk, and contract pricing.

The Contract Execution Phase

During contract execution, contract managers must ensure that the parties fulfill their obligations to each other and respect each other's rights. This requires that they be thoroughly familiar with the contract terms and understand the basics of contract interpretation.

Reality does not always match expectations, and contract managers must know how to adapt when plans do not work out and when the worst case turns out to be the real case. Contract managers must be problem solvers par excellence. They must know how to ease tensions and avoid conflicts or resolve them when they occur. When problems arise, as they almost inevitably will from time to time, contract managers must come to the conference table with coherent and rational analyses, persuasive, evidence-based answers and explanations, and a menu of appropriate solution alternatives. In complex undertakings, unexpected events and change are inevitable, and contract managers must manage the change process so as to facilitate smooth transitions from old to new plans and contract terms, control costs and maintain schedules, if possible, and prevent misunderstandings and disputes.
While there will often be some tension between buyers and sellers, especially under fixed-price contracts, the parties should try to meet on common ground, and to create common ground when necessary, in order to make their relationship as productive as possible and to prevent it from becoming a zero-sum game. The contract execution phase should not be a period in which the parties race to see who comes out best. The goal should be to reach the finish line at the same time through honesty, mutual respect, cooperation, good faith, and fair dealing.

If disputes do arise, contract managers must prevent them from becoming disruptive to the point of putting the entire relationship at risk. In government contracting, the disputes process is governed by statute (41 U.S.C. §§ 7107 et seq.) and regulation (FAR Subpart 33.3). In settling disputes, the contracting officer must play the crucial role of impartial judge and make a decision based on his or her own independent judgement, an especially demanding task, but one that the courts and boards of contract appeals have found the contracting officer to be contractually bound to perform. See Atkins North American, Inc. v. United States, 106 Fed. Cl. 491 (2012).

The Contract Closeout Phase

Once a contract has been fully performed (“executed”), the parties may have some final administrative actions to take in order to complete their records and “close out” the business file. In Government contracting, FAR § 4.804 specifies a number of closeout tasks to be performed. Statute or regulation may require that the parties retain and store certain of their records for specified periods of time. See, for example, FAR Subpart 4.7. This work might be done by a contract manager or by administrative or clerical staff. Whoever does it, it must be done promptly and attentively.

The Requisite Skills of the Contract Manager

In order to do their work, contract managers must be skilled in oral and written communication.

Contract managers must be confident and persuasive presenters, able to describe and explain complex ideas to others, either with preparation or extemporaneously, to both informed colleagues and to those with little understanding of the issues, to both supporters and to skeptics or even opponents. They must be wise and skilled fact-finders and negotiators.

Contract managers often must write letters, emails, plans, and various memoranda that describe, explain, and justify their judgments, recommendations, decisions, and actions in order to establish compliance with statutes, regulations, policies, and contracts. So they must be competent writers of descriptive and advocatory business prose, because governments at all levels demand that businesses create and maintain often extensive records of their transactions and business relationships. Assessments of the quality of their work and of their professional and personal integrity will rest in no small measure on the contemporaneous documentation they create. Their documentation must be truthful, accurate, complete, and demonstrative.

Summation

In conclusion, the contract management process entails forging and maintaining mutually beneficial relationships. It requires thorough research and planning, sound contract formation, cooperative contract execution, and prompt and attentive contract closeout. In order for contract managers to do that work effectively, they must know laws, regulations, and policies, industries and markets, business principles, procedures, and techniques, and be effective communicators.

↧

Enter the contest! Win a book!

May 22, 2014, 10:01 am

≫ Next: Status of the Contest and My Definitions

≪ Previous: What is a contract? What is contract management?

I am launching a contest. I will give a copy of The Government Contracts Reference Book, 4^th ed., by Nash, O’Brien-DeBakey, and Schooner, published by Wolters Kluwer Law & Business and The George Washington University Law School, to the Wifcon member who writes the best set of definitions of the 20 terms (words and phrases) listed below. The Reference Book retails for $80.

The following words and phrases are commonly used by contracting practitioners and frequently used in regulations, guidebooks, handbooks, and contracts. A parenthetical entry beside the word or phrase gives usage context.

1. audit (as in proposal audit)
2. competition (as in competition improves quality and reduces prices)
3. complex (as in she’s working on a large, complex acquisition)
4. condition (as in terms and conditions)
5. contract term (as in they won’t accept that contract term)
6. cost (as in cost estimate)
7. dispute (as in a dispute must be handled under FAR 33.2)
8. equitable adjustment (as in they want an equitable adjustment)
9. evaluation factor (as in source selection evaluation factor)
10. fairly (as in COs must treat contractors fairly)
11. incentive (as in contractual incentive)
12. need (as in an acquisition should fulfill the Government’s needs)
13. profit (as in we offered them a fair profit)
14. purchase request package (as in the purchase request package was inadequate)
15. rating (as in evaluators will assign a proposal rating)
16. relative importance (as in evaluation factor relative importance)
17. requirement (as in the program office specified its requirements)
18. risk (as in contract performance risk)
19. tradeoff (as in source selection tradeoff analysis)
20. uncertainty (as in uncertainty about performance outcomes)

None of those words and phrases is defined in FAR.

I will not accept dictionary or otherwise published definitions. The definitions must explain in your own words what you mean when you use those terms.

The qualities I am looking for in the definitions are:

(1) contextual appropriateness,

(2) clarity,

(3) definiteness (neither vague nor ambiguous),

(4) simplicity, and

(5) brevity.

Write enough to be clear, but don’t write dissertations. Write something that would make clear to a non-contracting person what you, as a contracting practitioner, mean when you use the selected words and phrases. Don’t substitute one vague word or phrase for another. Don’t define by giving examples. State attributes common to all instances of use.

For some background about definitions go to:

http://en.wikipedia.org/wiki/Definition http://en.wikipedia.org/wiki/Stipulative_definition
http://www.philosophypages.com/lg/e05.htm
http://www2.warwick.ac.uk/fac/soc/philosophy/people/faculty/longworth/definitions.pdf

Here are my rules for the contest:

1. Participation is open to all Wifcon members.

2. You must define all 20 of the listed words and phrases.

3. You must post your definitions here, as a comment on this blog entry, for all to see. Do not submit your comments directly to me via email.

4. The deadline for submission is June 18 at midnight. The date and time of your submission are the date and time on the posted comment. Minor post-deadline edits are permitted, but not wholesale rewrites. I'll be the sole judge of whether a post-deadline edit is actually a rewrite.

5. Begin each definition as follows: [Word or phrase] means…

6. Each definition must be in your own words. You may collaborate with others in your office, but you cannot quote or reword a definition found in a published source, including government publications and board, court or GAO decisions. I’ll use the internet to check for quotes and close paraphrases.

7. In evaluating the submissions I will seek input from Don Mansfield and Emptor Cautus, two other Wifcon bloggers. However, I reserve the right to pick the winner based on my own opinion and to pick no winner if I think that none of the submissions is good enough.

8. By participating you agree that participation gives you no legal right to anything.

What would you say if someone were to ask you what you mean when you use any of those words or phrases? Could you answer immediately, or would you have to think about it for a while and maybe do some research?

Take a shot. What have you got to lose? It might be worth the effort just to develop your own thinking. Most of you post anonymously, so don't worry. Have fun with it and maybe you'll win an expensive book.

↧

Status of the Contest and My Definitions

June 30, 2014, 7:33 am

≫ Next: Recommended Reading

≪ Previous: Enter the contest! Win a book!

We are evaluating the entries and will announce a decision later this week. Thanks to all who made submissions. In the meantime, here are my definitions of the 20 terms.

1. audit (as in proposal audit)

Audit (n.) means an examination of a contractor’s records in order to verify information provided by the contractor in a proposal, invoice, voucher, request for equitable adjustment, or claim or to determine costs incurred.

2. competition (as in competition improves quality and reduces prices)

Competition (n.) means a formal contest in which two or more firms contend on a head-to-head basis for the award of a Government contract; [2] a market state in which multiple firms independently sell goods or services that are close substitutes for one another in specific applications.

3. complex (as in she’s working on a large, complex acquisition)

Complex (adj.) means comprised of many interdependent parts that combine to perform as a whole, such that the performance of any one affects the performance of the whole.

4. condition (as in terms and conditions)

Condition (n.) means a contract term that requires that an event occur, or not occur, before a specific contractual obligation is imposed or a specific contractual right is conferred.

5. contract term (as in they won’t accept that contract term)

Contract term (n.) means any part of a contract that imposes an obligation or confers a right.

6. cost (as in cost estimate)

Cost (n.) means a measure, expressed in monetary terms, of resources that a contractor uses or consumes or of expenses that it incurs in the performance of a contract.

7. dispute (as in a dispute must be handled under FAR 33.2)

Dispute (n.) means a disagreement between the Government and a contractor that they have been unable to resolve.

8. equitable adjustment (as in they want an equitable adjustment)

Equitable adjustment (n.) means a modification of a contract term — usually, but not necessarily, the price, the estimated cost and fee, or the delivery schedule — that is made in order to compensate one of the parties for the effect of an act or omission by the other party.

9. evaluation factor (as in source selection evaluation factor)

Evaluation factor (n.) means an attribute (feature, quality, or characteristic) of an offeror or of its offer that provides value to the Government, either through its presence or its absence.

10. fairly (as in COs must treat contractors fairly)

Fairly (adv.) means in a manner that is considered to be in accordance with widely accepted customs and standards applicable to the business at hand and to be appropriate under the circumstances.

11. incentive (as in contractual incentive)

Incentive (n.) means a contract term that is designed to motivate a contractor to do something or to refrain from doing something.

12. need (as in an acquisition should fulfill the Government’s needs)

Need (n.) means the absence of something that is necessary for the fulfillment of an agency mission or specific task.

13. profit (as in we offered them a fair profit)

Profit (n.) means the difference between a contract price and the cost of contract performance.

14. purchase request package (as in the purchase request package was inadequate)

Purchase request package (n.) means the information and documentation required from a requisitioner or requiring activity in order for a contracting officer to award a contract in compliance with applicable laws and regulations.

15. rating (as in evaluators will assign a proposal rating)

Rating (n.) means a symbolic expression — usually, but not necessarily, adjectival or numerical — that concisely summarizes more detailed information about how well or how poorly an offeror or its offer has performed in terms of an evaluation factor or set of evaluation factors.

16. relative importance (as in evaluation factor relative importance)

Relative importance (n.) means the degree of an agency’s preference for one evaluation factor over others, assuming that the agency cannot get as much as it wants of each and that more of one means less of one or more of the others.

17. requirement (as in the program office specified its requirements)

Requirement (n.) means what an agency specifies that it wants from a contractor in its performance of a contract.

18. risk (as in contract performance risk)

Risk (n.) means the exposure to a harmful possibility, formally expressed in terms of (1) a description of a specific contingent event, (2) a statement of the probability that the event will occur, and (3) a statement of the measure of harm that would be suffered if the event does occur.

19. tradeoff (as in source selection tradeoff analysis)

Tradeoff (n.) means a decision to forego getting some of one or more evaluation factors in order get more of another when it is not possible to get as much as is wanted of each.

20. uncertainty (as in uncertainty about performance outcomes)

Uncertainty (n.) means doubt about whether an event will occur, often expressed in terms of the probability that the event will occur (e.g., “a 50-50 chance”).

↧

The Definitions Contest: The Winner

September 5, 2014, 5:35 am

≫ Next: A Contracting Trainee And Her Supervisor Discuss Source Selection Evaluation Factors - Part I

≪ Previous: Recommended Reading

Who won?

I received entries from the following Wifcon members:

jonmjohnson
wvanpup
Just Me
Whynot
MLCM
August
hereiskim
jukulend

Here_2_Help also submitted one, but it was received after the deadline.

The entries were posted for all to see. I also posted my own definitions.

With help from a couple of friends I reviewed the entries and chose... all of them.

I could not pick a winner among them. So I declared all of them to be winners, including Here_2_Help. I know, I know, but it was impossible to declare one set of entries better than the others, and I want to do something to thank people who went through the trouble. As hereiskim said, it was harder than you might think.

I will contact everyone through Wifcon to obtain mailing information and will send each a copy of the newest edition of The Government Contracts Reference Book.

↧

A Contracting Trainee And Her Supervisor Discuss Source Selection Evaluation Factors - Part I

May 3, 2015, 8:59 am

≫ Next: Part II - A Contracting Trainee and Her Supervisor Discuss Source Selection Evaluation Factors

≪ Previous: The Definitions Contest: The Winner

Alice Wonderly, a contracting trainee, has been given the job of “putting together” a source selection plan and has some questions for her supervisor, Mr. Sagesse, a contracting officer with an unlimited warrant.

TRAINEE: Hi, Mr. Sagesse. May I come in?

SUPERVISOR: Hi Alice. Of course, of course. Always happy to talk to you. Sit down.

A: Thanks. I’ve been told to develop a source selection plan for the Foochi-Minooli Project, but I’ve never done one before. I’ve read FAR Subpart 15.3, and someone gave me an old plan to cut and paste from, but I’d like to understand what I’m doing.

S: That’s commendable. I like a thinker.

A: Well, could you answer a question? What is an evaluation factor?

S: I’m pretty busy right now [stands and begins gathering papers from his desk and stuffing them into his briefcase]. Look, just go to the office of the evaluation team and tell them you need some evaluation factors. When you get them, plug them into the template.

A: Template? You mean the cut-and-paste version?

S: Exactly.

A: Well, I went to the evaluation team’s office, and they said they’ve never done a source selection, and they asked me to explain the process to them.

S: Just print out FAR Part 15 and give them copies.

A: But, they'll only ask me questions, and I don’t understand FAR Part 15 well enough to explain it to someone else. FAR 15.304 and 15.305 talk about evaluation factors and give some examples, like past performance, experience, and cost or price, but they don’t provide any information about the underlying concept.

S: Concept? What don’t you understand?

A: Well, for instance, what exactly is an evaluation factor?

S: It’s a criterion you consider when you score--oops, I meant rate--and compare proposals.

A: What do you mean by “criterion”? The dictionary says a criterion is a standard.

S: Exactly. A standard.

A: What kind of standard?

S: Something you measure something else against.

A: That's what the dictionary said. But what is it that you measure?

S: That depends on what the criterion is. You measure against the criterion.

A: So we’re back to criterion, but you still haven’t told me what an evaluation factor is in source selection. According to what you’ve said, an evaluation factor is a criterion, and a criterion is a standard, and a standard is a criterion, and a criterion is an evaluation factor.

S: Exactly! Now you’ve got it!

A: But, I’m just right back where I started. I still don’t know what an evaluation factor is. Please, tell me, what is an evaluation factor?

S: It's something like past performance.

A: Well, I know that FAR 15.304 and 15.305 talk about past performance, but that doesn’t help me to understand the concept of an evaluation factor. What kind of thing is an evaluation factor?

S: I just told you--it’s a criterion for comparison.

A: But calling an evaluation factor a criterion or a standard doesn’t tell me what an evaluation factor is. I want to know what it is. What do all source selection evaluation factors have in common that makes them source selection evaluation factors?

S: I don’t understand what you don't understand. Look, it's simple. An evaluation factor is something you consider when you evaluate and compare proposals. But you don't evaluate them by comparing them, except to the evaluation factors.

A: What? Wait...

S. FAR 15.305 explains it all.

A: Not really. Forgive me, Mr. Sagesse, but we’re still going in circles. Do you have another example of an evaluation factor?

S: Sure. Technical acceptability.

A: What is that?

S: Being technically acceptable.

A: What makes a proposal technically acceptable?

S: Being technically good enough.

A: What makes a proposal “good enough”?

S: That depends on what the criteria are for technical acceptability.

A: [Sighs]

S: It’s something that satisfies the requirement by meeting the standard for acceptability.

A: So, being technically acceptable is being good enough and being good enough is satisfying the requirement, which is meeting the standard for technical acceptability?

S: Now you're catching on.

A: So, technical acceptability is proposing to do what the requirement requires, based on the standard for that, which is a criterion, which is an evaluation factor? Is that it?

S: Exactly! Well, that, and explaining how they’re going to do it.

A: So, it’s not enough for an offeror to say that they propose to satisfy the requirement? They have to explain how they’re going to do it?

S: Yes. We’re talking best value, not sealed bidding.

A: So, if they promise to satisfy the requirement, and if they tell you how they’re going to do it, then they’ll be technically acceptable?

S: Yes. Well, assuming that their approach is sound.

A: So, technical acceptability is promising to satisfy the requirement, and describing how they’re going to do it, and having a sound approach?

S: Yes. That’s it.

A: “Approach.” I know you’re busy, so I’ll look that word up in FAR. But what makes an approach “sound”?

S: Being good enough to get the job done.

A: But what makes an approach good enough to get the job done?

S: That depends on the criteria.

A: [Sighs]

S: Well, among other things, a realistic estimate of the cost. That sort of thing.

A: So a sound approach is one that comes with a realistic cost estimate?

S: Well, that, and things like the right kinds and amounts of labor and materials.

A: What makes the kinds and amounts of materials “right”?

S: Well, being right for the job.

A: What job?

S: The job of satisfying the requirement.

A: What does that job entail?

S: That depends on how they’re going to do the work.

A: So, if they promise to satisfy the requirement, and tell you how they’re going to do it, and propose the “right” kinds and amounts of labor and materials, and give you a “realistic” cost estimate, then they’ll be technically acceptable?

S: Yes. Well, assuming that their description of how they’re going to do it will actually get it done.

A: How will we know that?

S: Well, that’ll be up to the evaluators to decide.

A: How will they decide?

S: They’ll compare the proposed approach to their evaluation standards.

A: To their standards?

S: Yes, to their criteria for soundness.

A: To their criteria?

S: Yes--to the evaluation factors. Their evaluation must be based on the factors in the RFP. They can’t consider anything else. Unless something else is reasonably encompassed by the those factors.

A: What? Wait… Oh, never mind. Mr. Sagesse, we’ve come around in a circle again, and I still don’t know what all source selection evaluation factors have in common that makes them source selection evaluation factors.

S: What they have in common is that they will be used to evaluate and score--I mean rate--proposals.

A: Yes, but Mr. Sages, what kind of thing do you use as evaluation factors? What do all evaluation factors have in common?

S: I think you’re being a little argumentative.

A: I don’t mean to be. I just want to understand.

S: Well, I have explained it to you.

A: Okay. I guess I’ll read FAR some more. May I ask one more question?

S: What is it, Alice? I have to get to my car pool.

A: What, exactly, is rating, and how does it differ from scoring?

S: That’s two questions, and I have to go now. You’d better get started on that source selection plan. Just use the template. Can't go wrong that way. [Leaves.]

To be continued...

↧

Part II - A Contracting Trainee and Her Supervisor Discuss Source Selection Evaluation Factors

May 6, 2015, 6:28 pm

≫ Next: Interlude: Long-winded, rambling phone messages

≪ Previous: A Contracting Trainee And Her Supervisor Discuss Source Selection Evaluation Factors - Part I

Alice Wonderly, a contracting trainee, is walking back to her cubicle after talking with her OJT supervisor, Mr. Sagesse, a contracting officer with an unlimited warrant. She has been tasked with developing a source selection plan and has been given an old one from which to cut and paste. But she wants to understand what she’s doing. She especially wants to understand the concept of “evaluation factor,” instead of just having "samples" and learning the rules in FAR about their use. She wants to understand what kind of things they are and what they all have in common. She thinks that may be the key to understanding the evaluation process. She asked Mr. Sagesse about evaluation factors, but did not get a helpful answer. All he said was that they are “criteria” and “standards.” To Alice, that was nothing more than referring to evaluation factors by a different name, without explaining what they are.

Discouraged, Alice is walking down a corridor when she runs into her friend and fellow trainee, Patrick Moore, who works in the Optimum Momentum Program. They stop to chat.

Patrick: Hi Alice, what’s going on with you?

Alice: I’ve been told to prepare a source selection plan. I’m working with the typical cut-and-paste “template” they give you, but I’d sure like to understand what I’m doing for once.

P: Wouldn’t we all. How’s it going?

A: Not well. I just went to Sagesse to see if I could get some answers, but I got nothing.

P: [Chuckling.] Yeah, well... I did a training rotation with Sagesse. Good luck getting anything from him.

A: Who’s your OJT boss?

P: Mr. Ewing. He’s great. I was pretty lucky to draw him at the last trainee assignment lottery.

A: Good OJT?

P: The best. If you have questions and do your homework before going to him, you’ll get a clear and concise explanation and plenty of references for stuff to read. But heaven help you if you didn’t do your homework first.

A: Tough?

P: Demanding. He expects you to think. Half the time, when I go to him with a question, he asks me questions before he answers my question. He’s checking to see if I did my homework before asking for help. He reads my documentation closely and asks me questions to test my thinking and conclusions. He insists on good writing. He says people think in words and sentences and when a person writes poorly it's either because he thinks poorly or is lazy. I graduated with honors and thought I was a good writer until I went to work for him. He makes me rewrite things a lot. He will pick out words that I’ve used in a memo and ask for a definition. If I don’t spit it out right away he says that a person who can’t define a word he’s used literally doesn’t know what he's talking about. And he’s a punctuation fanatic. It made me angry at first. He saw the anger in my face once and he said, “I’m here to teach you. You’re here to learn. Work at learning, or go to the training office and tell them you want to work for someone else.”

A: Yikes!

P: Yeah, he intimidates some of the trainees. You know, some people are always talking about being intimidated by this or that. Fragile flowers. But I can see that my thinking and writing have improved a lot since I came to work for him, and I feel like I’m really learning the business. A lot of his former trainees are GS-14s and 15s now. There are even a couple of generals that were former trainees of his. They stop in to visit from time to time.

A: So Ewing is actually training you.

P: You bet. He says that training is one of a manager’s most important personal responsibilities. He personally conducts weekly one-hour training sessions every Wednesday during lunch. He calls them “brown baggers.” Attendance is voluntary, but I know he keeps track of who comes and who doesn’t. He’s looking for commitment. Every week he covers a topic chosen by someone in the office, like data rights, cost analysis, cost estimating, performance-based payments, or cost allowability. He explains concepts, principles, rules, and practices. He doesn’t just tell you. He shows you. But you’ve got to put in the time to study on your own, too. He won’t hand-hold you.

A: You’re lucky. I think.

P: I'm lucky. Look, let’s go see him, and you can ask him your question.

A: But I haven’t done much research. I’ve read the FAR and our supplement and the source selection manual. I’ve looked in dictionaries and a couple of contracting books, but I haven’t found anything helpful. I don’t want to get trashed for not being ready.

P: A fraidy-cat? You? Look, he can kill you, but he won’t eat you. Come on. I think he’ll be okay with it, since you don’t work for him.

They go to Ewing’s office. One wall of the office is covered with small picture frames, 5 by 7 inches, in each of which there is a piece of rag paper on which a quote has been typed on a manual typewriter. Some of the sayings are:

“Reflective thinking is always more or less troublesome because it involves overcoming the inertia that inclines one to accept suggestions at their face value; it involves willingness to endure a condition of mental unrest and disturbance. Reflective thinking, in short, means judgment suspended during further inquiry; and suspense is likely to be somewhat painful. As we shall see later, the most important factor in the training of good mental habits consists in acquiring the attitude of suspended conclusion, and in mastering the various methods of searching for new materials to corroborate or to refute the first suggestions that occur. To maintain the state of doubt and to carry on systematic and protracted inquiry—these are the essentials of thinking.” -- John Dewey

“Never be afraid to sit awhile and think.” -- Lorraine Hansberry, playwright

“Knowledge of the product or service, and its use, is essential to sound pricing.”

-- Armed Services Procurement Regulation 3.802-1, “Product or Service”

“Managing is getting paid for home runs someone else hits.” -- Casey Stengel

“I get angry about things, then go on and work.” -- Toni Morrison, Nobel laureate

“The best advice I ever got was that knowledge is power and to keep reading."

-- David Bailey, fashion photographer

“Improvise. Adapt. Overcome." -- Unofficial motto of the U.S. Marine Corps

“The question isn’t who’s going to let me; it’s who’s going to stop me.” -- Ayn Rand, novelist and philosopher

“Consider yourself an enemy, and be on the lookout for ambushes.” -- Epictetus, philosopher, 2d Cent. C.E.

“Don't feel entitled to anything you didn't sweat and struggle for.” -- Marian Wright Edelman, social activist

“In this outfit, officers jump first and eat last.” -- Maj. Gen. James M. Gavin, Commander, 82d Airborne Division, WWII.

“He that wrestles with us strengthens our nerves and sharpens our skill. Our antagonist is our helper.” -- Edmund Burke, politician, statesman, and philosopher

“We are all born ignorant, but one must work hard to remain stupid.” -- Benjamin Franklin

“If you obey all the rules, you miss all the fun.” -- Katherine Hepburn

There is a bookcase. Alice sees the Cibinic and Nash series and about 100 other books, shelved alphabetically by title. Some of the titles are:

The Acquisition of Defense Systems

The Cambridge Dictionary Of Space Technology

The Cambridge Grammar Of The English Language

Challenges in Managing Large Projects

Cost Estimating

The Craft of Argument

Decision Analysis for Management Judgment

Defective Pricing Handbook

Dictionary of Modern Legal Usage

Dictionary of Statutory Interpretation

Elements of Contract Interpretation

Elements of Spacecraft Design

Garner’s Modern American Usage

Government Contract Changes

Government Contract Cost & Pricing Handbook

Guide To Federal Agency Rulemaking

Handbook Of Technical Writing Practices

How Spacecraft Fly

How To Read A Government Contract

Informal Logic

Introduction To Decision Analysis

It’s Only Rocket Science: An Introduction in Plain English

Licensing Software And Technology To The Government

The Mind And Heart Of The Negotiator

The Negotiation Game

Nonsense

The Polaris System Development

Probability Methods For Cost Uncertainty Analysis

Rights In Technical Data and Computer Software

The Science and Technology Dictionary

Tacit & Explicit Knowledge

Thinking Mathematically

The U.S. Air Force And The Culture of Innovation

The Visual Display Of Quantitative Information

There is a notebook on top of the bookcase bearing a label that says:

“If you want to borrow a book, write (1) your name, (2) your office symbol, (3) the date that you’re checking a book out, and (4) the date that you will return it. You can’t borrow any book for more than two weeks.”

“These books are mine, not the Government’s. You can borrow a book, but the penalty for not returning one of my books is death. Don’t write or highlight in one of my books. If I have to call you to get a book back, you won’t be able to borrow any more books.”

Ewing is sitting with his back to the door at a small table that is separate from his desk and computer. There is nothing on the table but a pad of blank paper and a pencil. He appears to be thinking.

P: Mr. Ewing?

Ewing: [Turning and looking up.] Ummm? Oh, Hi, Patrick.

P: I’d like to introduce a friend, another trainee, Alice Wonderly.

A: Hello, Mr. Ewing.

E: Nice to meet you, Ms Wonderly. What are you doing here in the Optimum Momentum Program Office? Visiting Pat?

A: Well, not actually. I’ve been looking for an answer to a question, but I’m having a little trouble, so Patrick suggested I come see you.

E: [Hesitates.] Well, who do you work for? Have you spoken with him or her?

A: My boss is Mr. Sagesse.

E: Oh, I see. Well, Jack Sagesse has a lot of experience.

A: Yes, I know. Sorry to bother you.

E: You’re not bothering me. Out of curiosity, what is your question?

A: I’m working on the Foochi Minooli Program and I have to prepare a source selection plan. I want to understand the concepts, not just cut and paste.

E: Well, that’s good, but please state your question.

A: [Hesitating… thinking.] What kind of thing is an evaluation factor? I know that they’re also called criteria and standards, but I want to know what kind of thing they are.

E: Ah. You don’t want a lexical definition. You want a stipulative definition.

A: I’m not sure what those are.

Ewing reaches to the bookcase, pulls out a slim volume, and hands it to Alice. The title is Definition by Richard Robinson.

E: Read in this. Before you leave, put your name and office address in the notebook and read the lending rules. Return the book by the end of next week.

According to the author, a lexical definition tells you the words to which a word or phrase refers. A stipulative definition explains the thing to which a word or phrase refers.

A: Oh. Well, that’s exactly what I want, an explanation of “evaluation factor.”

E: What research have you done?

A: I’ve read FAR Part 15. And I read in the Cibinic and Nash books, Formation and Competitive Negotiation. But they tell you the rules and the case law about evaluation factors. That’s not what I’m looking for.

E: It’s rare to meet someone who asks about concepts. Are you sure you want to know?

A: Uhhhh, yes. Why do you ask?

E: I ask because knowing the answer might make your thoughts clearer, but it won’t make your job easier. It would be much easier to let your question lie and just cut and paste. That’s why people do it. You know what they say: “Ignorance is bliss,” and “Why reinvent the wheel.”

A: How can knowing more make my job harder?

E: Because once you know the answer, you and your team will have to choose between doing a professional job and thinking very hard or doing a cut and paste job and not thinking much at all. I consider that a moral decision. Your technical clients might enjoy thinking hard about technical matters, but they might not like having to think hard about mere contracting matters.

A: I still want to know.

E: Ever taken a class in decision analysis?

A: No.

E: Okay. Do you have total recall, or do you want to take notes?

A: Oh, yes, I’ll take notes. [Hurriedly takes a spiral notebook and a pen out of her brief case.] Ready.

E: An evaluation factor is an attribute of an offeror or of its offer--a feature, property, or characteristic of an offeror or of its offer that provides value to the government by its presence or its absence.

A: [Writing furiously.]

E: Anything else?

A: [Hesitating.] Well, could you elaborate just a little on “attributes”?

E: Sure. All things and ideas have features, properties, or characteristics that are either inherent in them or that are ascribed to them on the basis of subjective judgments. Some of those features, properties, and characteristics are desirable because they are useful or, as we say, “valuable” and so the more of them the better. Some are undesirable, because they’re damaging and detract from value, so the less of them the better. The word “attributes” refers to those features, properties, and characteristics. When we in the government decide to evaluate offerors and their offers on the basis of such attributes, we call them “evaluation factors,” which is a term of art in government contracting.

A: [Writing furiously.]

E: [Continuing.] We choose contractors by comparing offerors and their offers on the basis of the value provided by “evaluation factors.” “Value” is a general attribute that we ascribe to offerors and their offers on the basis of evaluation factors. Consideration of individual attributes yields various measures of value, which can be weighted for importance to our objectives and “synthesized” or “integrated,” as we say, to yield the summary attribute that we call “total value.” The competitor that ends up having the highest total value will be what we call the “best value.”

Formally, what we call “source selection” is a version of what is called “multiple attribute decision making,” which is a collection of several formal methods for making rational choices from among alternatives.

A: [Still writing] Could you provide some specific examples of attributes?

E: Of course. Let’s say we’re buying hammers and we decide to evaluate offers for hammers. Hammers have certain attributes: functional design features, such as the claw on a claw hammer, which is for extracting nails, and the ball on a ball peen hammer, which is for working metal; material composition—some have wooden handles, others have graphite core or fiberglass handles; weight; size; durability; et cetera. They also have properties that buyers ascribe to them subjectively, such as “balance,” “heft,” and “feel.” And they come with “assigned” properties, such as price, availability, and warranty.

In order to evaluate offers, we must determine which attributes are important to us. We must then somehow determine how much of each attribute is found in each offered hammer. Then we must compare and rank the offered hammers to determine which is best.

A: So that’s how we evaluate proposals.

E: Actually, we don’t evaluate proposals.

A: Huh? I don’t understand.

E: We don’t evaluate proposals. We evaluate offerors and their offers. Think of a proposal as a package that contains (1) information about the company that submitted it and (2) statements of the promises that the company is offering. You don’t evaluate the proposal, per se. You evaluate the offeror and the offer described in the proposal based on offeror attributes and offer attributes.

A: But everybody says we evaluate proposals.

E: Yes, well, "everybody" says all kinds of things. That’s not what matters. What matters is what's true and what's not. Saying that we evaluate proposals is just a careless way of saying that we evaluate offerors and their offers based on the information in their proposals. When we say that a company submitted an excellent proposal, we’re really saying that the offeror and the offer described in the proposal were excellent. At least, that's what we should be saying.

A: That’s an entirely new way of thinking. No one has said that to me before.

E: Think it over.

A: I will. Can I ask more questions?

E: You've got enough to think about for a while. When learning concepts, it’s best to proceed methodically. You do want concepts, right? You’re not looking for a manual of source selection, are you?

A: No, I’ve read the manual. I want to understand the underlying concepts.

E: Good, but are you willing to struggle a little?

A: Yes, sir.

Ewing opens his desk drawer, flips through some files, pulls out a paper, and hands it to Alice. The 20-page paper is entitled, "SMARTS and SMARTER: Improved Simple Methods for Multiattribute Utility Measurement," by Ward Edwards (1994).

E: Read this. Think. Then write down any questions you have and come back in a week.

Patrick: May I have a copy, too?

E: [Hands a copy to Patrick and smiles.] If you hadn’t asked, I would have wanted to know why not.

A: Mr. Ewing, thank you so much. I really appreciate your time and answers.

E: The best way to thank me and to show your appreciation is to read the paper, think hard about it, and come back with some good questions. Okay, you two, I have to get back to work now.

Ewing turns back to his table, pencil, and blank pad of paper. Alice and Patrick leave.

P: [As they walk.] Alice, if you come back, those questions had better be good ones and well-written. He has high standards for questions. Topic and query had better be clear and show that you did some thinking and made reasonable presuppositions.

A: Huh?

P: He conducted a “brown bagger” on questions and questioning strategy and tactics, and he gave us assigned readings. Come to my office, and I’ll give you copies of the readings.

To be continued…

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Interlude: Long-winded, rambling phone messages

May 24, 2015, 9:02 am

≫ Next: Part III - The Trainees Discuss Decision Analysis With Mr. Ewing

≪ Previous: Part II - A Contracting Trainee and Her Supervisor Discuss Source Selection Evaluation Factors

And now, a short break in the discussions between Alice Wonderly and Mr. Ewing while we provide a public service message.

I just got back from a trip and had a batch of phone messages on my office phone. Am I the only one who gets long-winded messages, sometimes rambling? Some people call and go on and on and on about what they want to talk to you about. You have to listen to the whole darned thing until you get to their phone number. By then you've forgotten their name.

Am I the only one whose blood is getting warm by the end of such a message, boiling by the end of a series of them? By the end of such messages I not only do not want to talk to the caller, but I want to locate them and send someone to tie them up and play their message to them for 24 hours straight.

Don't they teach anything about this in business school, the way they used to teach how to write a letter or a memo? I'm serious.

A good phone message is:

(1) name [organization is useful, but not essential];

(2) date and time of the call [day of the week is optional];

(3) phone number [and extension, if necessary, like when it will spare me a recording followed by having to punch numbers or going through an operator];

(4) VERY brief statement of the topic, for example:

(a) "I have a question about task order contracts" or

( b ) "I have the address for your your dinner with Marion Cotillard," followed by,

( c ) "Please call," or "Please call right away," or "Thank you," then,

(5) repeat the name and phone number, followed by, "Goodbye." [Not "Have a nice day" or some variation thereof ("great," "terrific," "glorious," "blessed.," etc.).]

If the message is longer than 30 seconds, it is probably too long, unless you are providing the location of a lost child, dog, or wallet.

Plan ahead for the possibility that you'll have to leave a message, so it won't start with "Oh! I thought... Unhhh... let's see... well... I... "

And please, talk at a reasonable pace and speak distinctly.

I'm serious. It's a business matter. Really. Practice.

Thank you. Now, back to our program.

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Part III - The Trainees Discuss Decision Analysis With Mr. Ewing

June 4, 2015, 7:12 am

≪ Previous: Interlude: Long-winded, rambling phone messages

Alice Wonderly has read the article given to her by Mr. Ewing. She shared it with other trainees in her program and they’ve discussed it, but they have questions. So Alice telephones Mr. Ewing to set up a meeting.

Alice: Hi Mr. Ewing. I read the article you gave me and I wonder if you’d have some time to talk with me about it. I wrote down some questions. And, well, I shared the article with some other trainees in my program office, and they’d like to know if they can come, too. They have questions, too. And I shared my notes of our last conversation with them, the one about evaluation factors.

Ewing: Okay. Good. That’s fine. Patrick told me you’d be calling. How about tomorrow at 11 a.m.? We can work through lunch, so bring brownbag lunches. Patrick will be here, too, with some other trainees in our program.

A: That sounds great. I’ll see you then.

E: Okay. And bring your copies of the article and your reading notes.

A: Will do.

Wednesday, 11 a.m., Mr. Ewing’s conference room.

A: Hi Mr. Ewing.

E: Alice. Come in.

A small troop of seven trainees enters the room and take seats at the conference table.

E: Introduce your colleagues.

A: Mr. Ewing, this is Denise Clare, a second-year intern. This is Jack Dixon, a first-year intern, like me. And this is Jane Mera, also a first-year intern.

Patrick: And Alice, I’ve brought Carol Spicer and Sotero Dominquez, both first-year interns.

E: Hi all. And you’ve all read the article?

All: Yes.

E: And did you make reading notes?

All: Yes.

E: And do you all have questions?

All: Yes.

A: We consolidated our questions and made sure they were clear as to subject, query, and presuppositions.

E: Where did you learn about those elements of questions?

A: From the reading materials you gave to Patrick.

E: Good. Very good. How was the article? Did you find it difficult?

Denise: A little. Lots of academic language and a technical style. But we got some things sorted out through a little internet research and discussion. For instance, we found some illustrations and explanations of “value trees” that helped a lot. And we found some stuff about “swing weighting.”

E: Very good. Before you ask your questions, let me give you some background that might make my answers easier to understand. Sound okay? You might want to take some notes.

All nod and take out notebooks and pens.

E: Economists have long tried to understand how people make important choices. After World War II, economists, psychologists, and systems analysts and engineers began intensive study and theorizing about how people do and should make important decisions. They were especially interested in how people make important and complex policy and business decisions when there is uncertainty about the consequences of any particular decision. They wanted to figure out the best way to make such decisions.

By the 1950s, researchers at Harvard, University of Michigan, Stanford, Rand Corporation, Johns Hopkins and other institutions were very active in the study of decision making. They read, theorized, conducted experiments, and proposed procedures, and they wrote technical papers and books about their findings. Much of their research was funded by the Department of Defense, which was very interested in systematic, rational decision making.

By the mid-1960s this field of study had became known as “decision analysis,” and its prescriptions were being applied in all kinds of government and business endeavors, including acquisition. Another name for the field is Multiple Attribute Utility Theory or MAUT.

The key problem in decision analysis was to determine the best way to go about making a decision when the decision maker has multiple and conflicting objectives and must consider multiple evaluation factors and make tradeoffs. How do you do it consistently and rationally rather than by instinct?

As you know, the article you read was by Dr. Ward Edwards, a psychologist and a pioneer and leading figure in the science of decision analysis. He died in 2005.

He had taught at Johns Hopkins University, the University of Michigan, and the University of Southern California. He did research in decision making for the Advanced Research Projects Agency, the Air Force, the Navy, and Rand, and wrote a very large number of scholarly papers, around 100, and a couple of important books. He was the co-author of the 1986 magnum opus on decision analysis, Decision Analysis and Behavioral Research. The research in that book was sponsored in part by the Navy’s Office of Naval Research.

Shows them a thick, well-worn volume.

Dr. Edwards wrote a good background paper and summary of the early research in 1954, “The Theory of Decision Making." That paper was funded by the Office of Naval Research and Johns Hopkins University. He wrote an update in 1961, entitled, “Behavioral Decision Theory,” which was funded by the Air Force. In 2001 he wrote “Decision Technology,” about the impact on computers and the web on decision making. All of those papers are available on the internet.

In the 1950s and 60s we were in the middle of the Cold War with the Soviet Union. We faced many technical and economic challenges. What kinds of systems did we need to counter the threat? What kinds of technologies should we develop and use? What design concepts should we choose? What economic choices should we make?

In 1961, Charles Hitch, the Assistant Secretary of Defense (Controller) and Roland McKean, a Rand research economist, discussed decision making challenges in a famous book, The Economics of Defense in the Nuclear Age. They discussed the problems in detail in Part II. Chapter 9, “The Criteria Problem,” is especially interesting. Actually, if you read that book you’ll see that some of the authors’ points still apply today.

Shows them another thick, well-worn volume.

Among DoD’s challenges was figuring out how to evaluate proposals for the complex new weapon and space systems we needed and how to select a concept and a contractor. DoD wanted to know how to choose the right evaluation factors, how to rank the factors in importance, how to evaluate proposals and document evaluation findings, and how to make and justify selection decisions. And when you track the development of the source selection process you can detect the influence of decision theorists and systems engineers.

You can see the influence of decision analysis in source selection in the description of the Air Force source selection for the Tactical Fighter Experimental or TFX, conducted in 1961 and 1962. The TFX became the FB-111 fighter-bomber. After evaluating proposals, the Air Force chose Boeing, but Secretary of Defense McNamara rejected the Air Force’s decision and gave the contract to General Dynamics, instead.

That was extremely controversial and distressed certain members of the U.S. Senate, which held lengthy hearings in 1963 about the Secretary’s action. In testimony before the Senate, Colonel Charles Gayle, who chaired the evaluation panel, described the proposal evaluation process in detail.

Shows them a volume of the Senate hearing testimony.

Over the course of several days Colonel Gayle provided what is probably the most interesting insider description of a major source selection that’s even been given. What he described was an instance of the application of decision analysis methods, though not the specific method Dr. Edwards described in the paper you read.

He described the evaluation panel (about 200 people). He described aspects of the operational requirement and the work statement. He described the evaluation criteria, and in that description you would recognize a “value tree.” He described some of the evaluation findings – proposed costs, most realistic costs, and nonprice strengths, deficiencies, and weaknesses. He explained raw scores, importance weights, and weighted scores, and he explained the panel’s recommendation.

The procedure used by the Air Force in 1961-62 was very similar to procedure it used in 2008 to select the air tanker contractor. One difference was that in the TFX source selection the Air Force used numerical scoring, while in the air tanker source selection it used the current DOD color rating system.

Here’s an old official document, “Guide for Proposal Evaluation and Source Selection,” dated July 1966, 52 pages long, and published by the Systems Development Division of the U.S. Army Aviation Materiel Laboratories. It includes a sample evaluation plan. It’s right out of the TFX source selection playbook, complete with the same 0 to 10 point numerical scoring system. It’s an early decision analysis approach, but it never explicitly mentions decision analysis, and neither did Colonel Gayle in his Senate testimony.

Shows them the guide.

My pitch is this: In order to truly understand the source selection proposal evaluation process, explain the process to others, and lead a team in planning and executing major source selection, you need to understand something about decision analysis concepts and processes.

In 1991, two professors at the Air Force Academy wrote a paper entitled, “The Application of Decision Analysis Methods to Source Selection in the United States Air Force.” They cited Edwards’s 1986 book Decision Analysis and Behavioral Research and his 1977 paper describing the SMART method, which was cited in the paper that you read. The authors claimed that source selection could be improved by greater application of decision analysis, specifically, the Analytical Hierarchy Process, which is a decision analysis method. By the way, they were critical of the color rating method.

In 2006, an Air Force officer submitted a master’s thesis to the Graduate School of Engineering and Management at the Air force Institute of Technology entitled, “A Decision Analysis Tool For The Source Selection Process.”

There are at least one hundred papers catalogued by the Defense Technical Information Center, DTIC, that discuss the application of decision analysis in source selection, dating from the 1970s to the recent 2000s.

Decision analysis methods are useful not only for source selection, but for all kinds of nontrivial acquisition decision making, and COs are decision makers or, at least, they’re supposed to be. Here are some papers that provide examples:

A 1974 study report submitted to the Defense Systems Management College was entitled, “Decision Analysis for the Program Manager.”

A 1981 master’s thesis submitted to the Naval Postgraduate School was entitled, “Multi-Attribute Utility Theory To Assist Top-Level Acquisition Decision-Making.”

A master’s thesis submitted to the Graduate School of Engineering and Management at the Air Force Institute of Technology in 2005 was entitled, “Decision Analysis Using Value-Focused Thinking To Select Renewable Alternative Fuels.”

A 2010 paper by a professor at the Naval Postgraduate School about the use of decision analysis in acquisition was entitled, “Economic Evaluation of Alternatives.”

And there’s a 2008 paper entitled, “Integrated Decision Technology for Acquisition and Contracting” that was published by the Naval Postgraduate School.

Decision analysis can be used in business case development. Here is a handbook, Better Business Cases: Guide to Developing the Detailed Business Case, 28 February 2014, written by Treasury office in the United Kingdom.

You can even use decision analysis in negotiation and in claim decision making. Here's an article from a 2004 issue of Marquette Law Review, entitled, "Decision Analysis in Negotiation." Here's a chapter from The Handbook of Dispute Resolution (2005), entitled, "Finding Settlement with Numbers, Mays, and Trees." And here's a 1996 article from the Harvard Negotiation Law Review entitled, "Decision Analysis As A Mediator's Tool."

The paper that I gave you to read, which was published in 1994, is a relatively recent contribution to decision analysis. Contributions are still coming in.

There are many academic journals today that are devoted to decision making, such as Journal of Multi-Criteria Decision Analysis, International Journal of Management and Decision Making, Journal of Behavioral Decision Making, Judgment and Decision Making, Decision, and Decision Analysis. The current issue of Decision Analysis, has an article entitled, “Search Before Tradeoffs Are Known.” I haven’t read it yet, but the abstract says [reaching and thumbing through a stack of papers, choosing one, and reading aloud]:

uncertainty about trade-offs is likely to occur, especially in settings that involve parallel search (e.g., vendor selection, new product development, innovation tournaments). We show that incorporating uncertainty about trade-offs into a model changes its search strategy recommendations. Failing to account for such uncertainty, which is likely in practice, leads to suboptimal search and potentially large losses.

That sounds interesting, since it mentions vendor selection.

Now, look -- all the stuff in those journals is academic, technical, and hard for non-specialists to understand. The journals are pricey. I don’t subscribe to them, and I don’t think you need to read them. But you can find nontechnical articles about decision making in publications like the Harvard Business Review and the MIT Sloan Management Review.

The May 2015 of HBR issue has four articles about decision making, and the HBR website has a recent digital article entitled, “How You Make Decisions is as Important as What You Decide.”

The MIT Sloan Management Review website has posted many articles about decision making. A Spring 2015 article is entitled, “When Consensus Hurts the Company.” Those are the kinds of things you might want to read.

An especially good article for contracting folk is “Even Swaps: A Rational Method for Making Trade-offs,” which was in the March-April 1998 issue of HBR. It was written by three prominent decision analysts.

So, why did I give you Ward Edwards’s technical article? Because you have a career choice to make. Contracting is a combination of professional, administrative, and clerical work. The most interesting part of it is the professional work. The administrative and clerical work is necessary and unavoidable, but boring. If that’s all there was to contracting, I would have changed careers long ago.

One of the jobs of a contracting pro is to explain professional issues and methods to laypersons like engineers and other requirements personnel. Source selection is a contracting task, which is why FAR makes the contracting officer the default source selection authority. That means that one of the jobs of the contracting officer is to be able to explain the proposal evaluation process to those who must do it. In order to be able to do that, the contracting officer must have what I call “deep conceptual understanding.” And that kind of understanding comes only after a struggle. You have to read, think, read some more, and think some more.

Official guidance, such as the DoD source selection procedures, explain procedures, but not the reasons for them and the concepts that underlie them. It’s likely that the people who write such manuals don’t know about the reasons and concepts. You have to read other things, things like Dr. Edwards’s paper, in order to see and understand the deep stuff. And, as you now know, reading that kind of thing is real work.

Now, look -- you can do good work in contracting without knowing the deep stuff. You can study the FAR and GAO decisions and learn the rules, you can cut and paste, and you can get promoted. But you’ll never be a leader and innovator. You’ll never be the person that they won’t start the meeting without, unless all they want to hear about is rules. And you won’t be able to teach the next generation, except by talking to them about rules and giving them something to cut and paste.

Anyone can learn to read FAR, read GAO decisions, and cut and paste a source selection plan. But you can’t learn underlying concepts that way or how to apply those concepts in different types of acquisitions. What you learn by cutting and pasting won’t help you brief and explain proposal evaluation and tradeoff analysis to a trainee or an inexperienced source selection team. Cutting and pasting won’t teach you how to be an expert professional advisor to a program manager and how to be an acquisition leader and innovator. Cutters and pasters can only be advisors and leaders in the art of cutting and pasting. They can only be expert followers.

By reading the article I gave you and coming here today, you proved to me that you’re willing to do the hard professional work in pursuit of deep understanding.

So far, at least.

Okay. End of the introductory briefing and sermon. Take out your copy of the article and your reading notes.

Having read the article, you know that Dr. Edwards’ SMARTS and SMARTER methods of decision analysis entail:

Step 1. Identifying who will participate in the decision process and determining what their objectives are with respect to the decision to be made.

Steps 2 and 3. Identifying the choice alternatives you’re going to evaluate and the evaluation factors.

Step 4. Creating an object/factor matrix and entering factor values into the cells.

Step 5. Eliminating any “dominated” alternatives.

Step 6. Converting raw measurements on various scales to a common “uitility” scale.

Steps 7 and 8. Ranking the evaluation factors and assigning specific weights, then calculating the total “utility” weighted scores.

Step 9. Making the decision.

There are several variations on this method, such as the Analytical Hierarchy Process and others. But they are generally based on the same kind of “additive weighting” approach.

Now, what are your questions?

To be continued…

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