For federal IT vendors, a lot to like in House, Senate Defense bills

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Jared Serbu | June 4, 2015 8:48 pm

From the perspective of federal technology companies, there’s a lot to like in this year’s House and Senate Defense authorization bills. Indeed, a leading industry group’s main complaint is that the acquisition reforms in the legislation only apply to DoD — not the rest of the government.

While the leaders of both the House and Senate armed services committees say they’re taking an incremental approach to acquisition reform in their respective versions of this year’s Defense authorization bill, the Senate version, released last week, appears to try to achieve more change within a single year.

The measure tackles everything from the role of the military service chiefs in procurement decisions to the acquisition workforce and establishing new “alternative” pathways to buy goods and services and pressing the Defense Department to make more use of commercial technology.

In a briefing with reporters Wednesday, the IT Alliance for Public Sector (ITAPS), a lobbying group and association for federal IT contractors, said it had no substantive disagreements with any provisions in either of the Defense bills — an extremely rare occurrence for any advocacy group with interests in the huge, annual National Defense Authorization Act (NDAA).

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The group is especially enthusiastic about provisions that would require the department to pay more attention to commercial technologies when making its procurement decisions.

“When you read the report language, especially on the Senate side, it tells DoD over and over again to get the (commercial-off-the-shelf stuff) first,” said Pamela Walker, who handles defense and homeland security matters for ITAPS. “Most of this stuff doesn’t need to be modified. It’s already being used worldwide.”

Reaffirm COTS

The Senate bill attempts to prod DoD into using more commercial technologies by reasserting a preference for off-the-shelf technologies.

It’s something that the Senate Armed Service Committee says Congress has been repeating since the 1990s, but has ebbed-and-flowed as a matter of policy over the past two decades of DoD authorization bills, and that the department has sometimes ignored.

For example, it would require DoD to conduct research into the commercial market and limit the department’s ability to buy government-customized technology unless acquisition officials can demonstrate that commercial IT solutions won’t suffice.

The legislation also would make several changes to how DoD classifies commercial items versus the military hardware it’s used to buying in its traditional acquisition procedures. For instance, if the department deems an item “commercial,” officials will need to apply that decision consistently across all of its procurements of the same item and not change its decisions from year-to- year.

A separate provision in the House bill would require DoD to create a specialized cadre of engineers and other experts within the Defense Contract Management Agency (DCMA) to determine whether an item is indeed commercial — and then maintain a repository of those decisions. DCMA’s determinations then would be relied on by the rest of the Defense components for similar items.

“One of the challenges the department and the industry has faced is that even if an item has been deemed a commercial item year after year, the contracting officer might have a different set of data and change his mind in the ninth year of buying the same item,” said Erica McCann, the director for federal procurement at ITAPS. “Sometimes that’s fair, but most of the time it’s probably not. There’s some really strong language in the bill that says that once something’s determined to be commercial, it needs to continue to be recognized as commercial.”

For contractors, the distinction between commercial and Defense-unique is vital. If DoD designates something it wants to buy as “commercial,” the federal acquisition regulation provides for a somewhat streamlined acquisition process which assumes that the government doesn’t need to put much additional legwork into determining a fair price, since private sector companies are buying the same items in a free marketplace.

But industry officials have criticized the department for past decisions which have pushed DoD contracting officers to reach their own independent determinations about whether the commercial products they are buying are indeed fairly priced, which often means demanding cost and pricing data in a government-specific format from companies which aren’t accustomed to providing — or even collecting — that sort of data.

Liability protection for counterfeit IT

The new NDAA provisions attempt to ensure those demands for cost and pricing data are only imposed on companies as a last resort, said Trey Hodgkins, ITAPS’ senior vice president.

“If I’m buying a laptop, the first thing I’m supposed to do now is go out and do basic market research that looks at computers with the same size screen, memory, computing power and whatever, and I can tell whether I’m getting a fair price by looking at Amazon or eBay or CDW,” he said. “Unfortunately, cost and pricing data has become the first stop in the process. That has something to do with oversight: We have a risk-averse acquisition workforce that doesn’t want to have their decisions second-guessed by an inspector general or have their bosses called before a congressional hearing.”

Both the House and Senate bills also address longstanding industry complaints surrounding the technology industry’s liability for counterfeit products that make their way into the Defense supply chain.

A provision in the 2012 Defense bill gave companies the ultimate responsibility to ensure that no counterfeit parts were included in their final products and saddled them with most of the financial costs of replacing counterfeit parts with genuine ones if a fake part were to be discovered.

Earlier than in previous years

But a new provision in the House version of the bill would grant liability protections to companies who have inadvertently supplied counterfeit parts as long as the firms are following the regulations DoD has prescribed for detecting them.

“We’ve been arguing this point for multiple years, because the government prescription is the challenge. If there’s a failure in the supply chain, the failure needs to be shared between the contractor and the government, because we’re doing it based on how we’re supposed to be looking for counterfeit parts,” Hodgkins said. “But we know that the government doesn’t always keep pace with the ability to look for counterfeit parts and other threats. If we’re doing it the way DoD tells us we have to do it, then the government should share some of the responsibility if there’s a failure.”

Both the House and Senate Defense bills share a lot in common, including bolstering the acquisition workforce by creating a permanent fund to hire procurement personnel, institutionalizing hiring authorities for those personnel and attempting to remove unnecessary bureaucracy from the DOD acquisition process.

The House already has passed its version of the NDAA; Senate leaders hope to follow suit before another recess in advance of the July 4 holiday, putting this year’s Defense bill well-ahead of schedule compared with the last several years’ NDAAs, which have tended to wait until late December before final passage. This year’s version is further complicated by a disagreement between the White

House and Congress about overall funding allocations for the Defense Department and how to manage the Budget Control Act.

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