“Inside the DoD’s Reporter’s Notebook” is biweekly feature focused on news about the Defense Department and defense community as gathered by Federal News Radio DoD Reporter Jared Serbu.
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DoD makes changes to how its contractors use GSA schedules
An interesting development occurred over the past few weeks with regard to how the Defense Department, the government’s biggest buyer, will use the General Services Administration’s schedules program going forward.
The Federal Supply Schedule is GSA’s governmentwide marketplace that lets agencies buy everything from ballpoint pens to complicated technical services, while skipping many of the bureaucratic hoops that usually go along with a traditional federal procurement. One of the schedules’ key selling points for agencies is that GSA already has negotiated prices with vendors at the contract level for every item.
So, according to current language in the Federal Acquisition Regulation, agencies are strongly encouraged to negotiate discounts from the published prices in the schedules, but they don’t need to reach their own formal conclusions about whether the prices they’re paying are “fair and reasonable” when they place an order.
But that’s no longer true for DoD. In a March 13 memo, the department’s Office of Defense Procurement and Acquisition Policy moved to override that section of the FAR.
“GSA’s determination does not relieve the ordering activity contracting officer from the responsibility of making a determination of fair and reasonable pricing for individual orders, (blanket purchase agreements) and orders under BPAs,” the deviation reads in part.
Vendor groups say there’s reason to worry that that single sentence could significantly reduce the value of companies’ hard-won positions on the schedules, and ultimately make the schedules less relevant as a government purchasing vehicle.
“I think that’s one of the key concerns I have. It might lessen the value of the schedules where there is reasonable competition elsewhere,” said Alan Chvotkin, executive vice president of the Professional Services Council. “The schedules have always been a very convenient and very flexible tool, particularly as they’ve migrated from products to services and now solutions. I think this adds another element to the decision making process that DoD contracting officers will have to go through before they choose to use the schedules. Every time you add to the administrative burden in the contracting process, you run the risk of some contracting officers saying, ‘Too hard. Let me look at something else.'”
Scheduling issues this week prevented DPAP from responding to our questions about the change, but the office’s co-director, Richard Ginman has agreed to talk with us next week, so stay tuned for more details about DoD’s rationale.
But in an emailed statement, GSA relayed its understanding of DoD’s motivations for the change.
It said DoD training organizations, such as the Defense Acquisition University, had begun to notice that contracting officers were relying entirely on published schedule prices and failing to do their own pricing analyses or seek discounts when they ought to have done so.
GSA also strongly hinted that the rest of the government may follow in DoD’s footsteps. The Pentagon has raised the issue with the FAR Council, the body that maintains and updates the government’s acquisition rules.
“Important changes have been made to the FAR to strengthen competition for orders and BPAs under the schedules program. However, certain regulatory language addressing the establishment of fair and reasonable pricing was not looked at during those efforts. The FAR Council is considering revisions to ensure the FAR is clear regarding contracting officers’ responsibility to ensure the pricing of schedule orders is fair and reasonable,” GSA said.
GSA schedules accounted for about $34.8 billion in sales in fiscal 2013, down $5 billion from its high in 2010. DoD accounts for about 25 percent of all sales under the schedules.
GSA’s Federal Acquisition Service brought in about $55 billion through all of its contracting vehicles and assisted acquisition service.
Roger Waldron, the president of the Coalition for Government Procurement, said the DoD move certainly adds uncertainty to the schedules program. But, he said, it’s far too early to know how much bureaucratic overhead the change will add to the schedules, and whether that additional overhead will undermine the schedules’ objective of simpler acquisition.
“That’s why people are sitting back and waiting to see how this is going to impact things,” he said. “If there’s still a lot of competition under the schedules at the order level, maybe it doesn’t have a huge impact. But if people go beyond that idea of competition and decide they want to do a lot of further analysis and require further information from the companies, are you losing the benefits of the schedules? Where’s the balance of making sure you get a good deal versus having a streamlined approach? For schedules and for multiple-award contracts in general, there’s been a layering on of additional requirements over the years, and a lot of it is the government doing things it doesn’t have to do. For example, many agencies use FAR Part 15 source selection procedures to do task order competitions under schedules or under other IDIQ contracts. There’s nothing in law that requires that — they just imposed them on themselves, and they’re overly complex. So where’s the tipping point?”
Waldron also points out that given the myriad contracting activities and layers of administration within DoD, the way contracting officers interpret and act on the new rule is probably going to vary quite a bit.
“You worry that some people are going to take an overly bureaucratic approach because they’re worried about who’s looking over their shoulder to see if that determination was sufficient,” he said. “That documentation does get reviewed from time to time, so, do you create a process that goes to the least common denominator because no one wants to get in trouble?”
Publicly, GSA says DoD’s decision is no big deal, and it’s confident the schedules’ prominent status as a governmentwide acquisition vehicle will remain intact.
“To use the schedules, customer agencies have long been required to take a number of steps before placing orders, which includes, as a general matter, conducting competition and seeking discounts to obtain the best value for the taxpayer,” GSA said. “Establishing that prices paid are fair and reasonable is a fundamental tenet of our federal acquisition system and clarifying that this is part of the ordering process under the Federal Supply Schedules program should not change the overall appeal of the program to contractors small and large as an important and popular gateway to the federal marketplace.
DoD’s new electronic health record system still three to four years away
After years of back-and-forth about the path forward for the modernization of DoD and the Department of Veterans Affairs’ respective electronic health record systems, including an abandoned initiative to build a shared system, DoD made pretty clear last year that it intends to go its own way and pursue a commercial acquisition for its future EHR.
VA is on a different path, gradually modernizing its own EHR, known as VistA, through a combination of in-house work and contributions from the open source community. VA released VistA’s source code into the public domain in 2011.
In testimony before the House Appropriations Committee last week, VA Secretary Eric Shinseki acknowledged that yes, DoD believes it has different requirements for an EHR than his department does. But after years of dogged effort, he’s still committed to bringing DoD into the fold, and wants VistA itself to be a strong competitor in that commercial acquisition.
“As DoD declares requirements, if we don’t have that capability, we’re going to include it in our electronic health record, so that as we get down to where they’re ready to make a decision, we’re competitive,” he said.
Shinseki also let slip a depressing detail: he doesn’t expect DoD to reach that decision point for another three to four years.
“But I’ve been assured by Secretary Hagel that we’ll be in the hunt. And that’s why I need to get us moving,” he said.
Shinseki emphasized DoD and VA have made a lot of progress on sharing electronic health data, even if they aren’t sharing an electronic health system.
And Jonathan Woodson, DoD’s assistant secretary for health affairs, said this week that the data interoperability issue is where his department is focusing its efforts.
“If I were to ask everybody to hold up their cellphone, we would have a variety of different cellphones, but we could all text each other, call each other and email each other,” he said. “We could work documents and then send them to our fellows. Electronic records are like those platforms, and the barrier to sending information and developing that interoperability has to do with the standardized way of handling the data.”
New leader at the Defense Contract Management Agency
The Defense Contract Management Agency hasn’t yet updated its website to reflect this fact, but the Pentagon announced this week that Air Force Maj. Gen. Wendy Masiello is about to become the Defense Contract Management Agency’s new director — a post that’s been held by civilian officials until now. As part of the assignment, Masiello will pin on a third star.
She is currently the Air Force’s deputy assistant secretary for contracting, and previously led an Air Force initiative that DoD undersecretary for acquisition, logistics and technology Frank Kendall has said he’d like the other military services to follow: creating a single, centralized management structure for service contracting.
Coincidently, Masiello is scheduled as the keynote speaker for AFCEA Northern Virginia’s April monthly luncheon in Tyson’s Corner on April 18.
In the meantime, two very large DoD conferences will be competing for attention next week. The National Defense Industrial Association hosts its annual Science & Engineering Technology Conference from April 8-10 in College Park, Md.
And during the very same days, the Navy, Marine Corps and Coast Guard are taking part in the sea services’ biggest event of the year, the annual Sea-Air-Space conference. That’s in National Harbor, Md.
On DoD focuses on the programs and policies that affect the Defense Department. Each week, Defense Reporter Jared Serbu speaks one-on-one and in depth with the people responsible for managing the inner workings of the federal government's largest department, and those who know it best.