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FROM BOOM TO BUST: WHY CONTRACTORS NEED TO BE CAREFUL ABOUT BIDDING ON FOLLOW-ON IDIQ CONTRACTS

Even in the era of “Best in Class” contracts and resultant reductions in contract duplication, contractors must be careful about the number and types of contracts on which they bid.  Not everyone produces the business expected.  This can be due to a number of factors.  Protests sunk the GSA Alliant II SB contract.  Inadequate market research has resulted in others being issued without any apparent market for them.  Issuing follow-on contracts that look little like their successful predecessors is another.  Perhaps the most obvious example of that, so far, is the Army’s transition from Encore II to Encore III.  Federal buyers, especially those in the intelligence community (IC), loved Encore II.  Its ability to consider both technical factors and price made it a solid vehicle through which the community, the contract’s heaviest user, could issue complex task orders. The Army, though, significantly changed the format of Encore III, making it an LPTA-based contract and introducing other changes popular at that time that made it difficult for the IC community to use it.   The Army did this despite consistent expressions of concern from both users and contractors.  The Army Encore III team was told several times that users wanted the new vehicle to look largely like the old one.  Despite this feedback, the Army ploughed ahead.  The result?  Federal Procurement Data System (FPDS) information shows that Encore III business plummeted almost 77% from Encore II.  Sales data from fiscal years 2017 to current day (after Encore II expired) show that Encore II racked up $1,247,850,080 in sales vs. $289,301,552 for Encore III.  It is obvious that the bulk of Encore II work is now being done under other contracts.  It should also be obvious to contractors that they need to invest bid and proposal assets wisely.   Just because one vehicle has been successful, doesn’t mean that the follow-on will be – especially if the follow on is considerably different.  Agencies contemplating follow-ons to their own successful vehicles should take note as well.  If your customers and contractors are concerned with your new approach, perhaps that approach should be revisited, even if it is designed with good intentions.

AGENCIES MUST CONSIDER APPLICATION TO RULE OF TWO REQUIREMENTS FOR ACQUISITIONS

Federal agencies must consider whether a procurement can be set-aside for small businesses under the FAR 19 “Rule of Two” requirements as part of their acquisition planning process.  The Court of Federal Claims (COFC) affirmed this requirement recently in Tolliver Grp. Inc. v. United States, but may have confused the matter in so doing.  First, it is important to note that nothing in the new COFC ruling changes the ability of agencies to conduct acquisitions pursuant to FAR 8.4.  Federal agencies are still able to buy from GSA Schedule contracts, just as they were before.  They may, of course, set-aside a procurement for small businesses, but they are not required to do so.  What the COFC really said in Tolliver is that an agency can’t bypass the need to consider whether small businesses are capable of meeting a procurement action.  Merely deciding that an IDIQ contract is the appropriate acquisition method does not indicate that this requirement has been satisfied.  In Tolliver, the Army originally awarded a contract under a set-aside acquisition.  The losing small business protested and the Army cancelled the award and went back to the drawing board.  Its new plan was to acquire its needs via a newly-competed IDIQ contract that did not include small businesses.  The original small business protested and the COFC agreed.  The Court said that the Army had to make a new Rule of Two determination as they were conducting a new procurement.  They could not bypass that requirement in favor of using the new IDIQ.  Agencies must show that they considered using small businesses in their acquisition planning file and then decide on an acceptable acquisition method.

DEVELOPING BUSINESS THROUGH A TRANSITION: THREE THINGS TO CONSIDER DOING NOW IN FEDERAL BUSINESS

It can be difficult to set customer briefings or follow-up meetings right now as career professionals take time to brief a new wave of political appointees.  Here are three things contractors should consider now to keep their customer discussions going.  1.  Make sure you have a “hook”:  What’s new or really special about your solution?  How is it different from the last time you briefed the customer you’re reaching out to now?  Whether its new functionality or the way your solution supports a new operational goal, a well-defined hook can get you the follow-up or new discussion you seek.  2.  Do you have a new partner to introduce?: A new business partner, whether a “brand name” company or a specialized small business with a unique talent, can also catch the interest of an otherwise over-committed customer.  Like a hook, a new partner gives you something different to talk about.  It adds to your previous capabilities, something that can be attention-getting if those capabilities now align more closely with agency priorities.  New partners can make your company look dynamic and able to meet a wide array of needs.  3.  Consider an incremental approach:  Some customers may not want to commit to longer-term projects at a time when new leadership is coming in. Indeed, larger pieces of business may be subject to review during a transition.  Consider a “start small” proposal that allows your project to get underway and start showing its worth.  Whether it’s a task order against an existing contract, or a buy made via Simplified Acquisition Threshold procedures, this approach gets you business now and positions your firm for any follow-on business.  It may, however, not be the time to talk about “pilot” projects unless you know your customer will be receptive.  “Pilot” may sound too new.  Overall, understanding what your customer can and can’t do during a transition time is key to success now and after the transition is complete. 

AFTER FURTHER REVIEW, CONGRESS SEEMS RELUCTANT TO FULLY-FUND TMF

Despite support from the Biden Administration and several Senators, substantial additional funding for the Technology Modernization Fund (TMF) no longer seems likely.  A lack of Congressional support for adding $9 billion to the fund as part of a COVID-relief bill became apparent during the recent confirmation hearing for OMB Administrator-designate Neera Tanden. The problem with fully funding the TMF is not that Congress believes that large-scale IT modernization across federal agencies isn’t needed.  Rather, the fund’s non-agency specific status means that legislators would have to cede control of where the money is applied, something Congress is always reluctant to do.  Appropriating money for specific projects enables Members and Senators to direct spending and conduct oversight.  A general pot of money, not allocated for any specific initial purpose, is also difficult to account for within current budget and appropriations rules.  Tanden stated that she was optimistic that other avenues could be found to increase technology accounts, even if a more traditional agency-by-agency approach was used.  Among her many comments of support was a statement on pandemic-related IT spending.  “We recognize the importance of this modernization during a global pandemic where we need to make sure that our agencies’ information and essentially the public’s privacy is protected and protected well.”  Although this, and other positive statements, indicate that Tanden might be an ally for increased tech spending, her well-documented reputation for smearing those with whom she disagrees may want to make contractors think twice about fully engaging with OMB.  Working with specific customer agencies may be a better approach.

DON’T CUT COMPLIANCE CORNERS, EVEN IN A PANDEMIC

Anecdotal information is emerging about contractors rushing to meet federal customer needs on an increasingly-wide range of pandemic-related projects, but failing to ensure that they maintained compliance with applicable contract terms.  We don’t mean to seem school-marmish, but the reality is that contractors must comply with applicable contract terms and conditions whether serving a client with an urgent need or in the normal conduct of business.  Additionally, contractors cannot “assume” that rules were waived.  While some waivers have been issued for pandemic-related acquisitions they are very closely defined.  It is important to have those waivers in your contract file, too, before you cut a corner.  The “my customer told me it would be ok” defense doesn’t work without an actual document to back it up.  Experienced contractors know all too well that customers will also hedge on whether they said something was “ok” if a compliance issue arises.  Remember that customers are just as wary of their inspectors general as you are.  Competitors, too, will be watching.   The annals of False Claims Act litigation show that competitors absolutely know enough about each other’s business to be suspicious and take action when they believe a violation has occurred.  The result could be costly litigation for your company and/or a hit to your reputation, even though you thought you were doing your patriotic duty to help a customer in need.  Cutting a corner now doesn’t help anyone if you end up running into a wall later on.