Aiming for Best Value in Government Contracts

Transcription

1

2 Aiming for Best Value in Government Contracts John Dobriansky, MS, MBA, CPCM, Fellow Dr. Rene G. Rendon, CFCM, CPCM, Fellow Breakout Session A03 Date: July 22, 2013 Time: 11:30-12:45pm

3 Learning Objectives Gain an appreciation for current acquisition issues facing the federal agencies and related acquisition initiatives. Understand the major differences between a Tradeoff and LPTA contract award strategy source selection, and when each strategy is appropriate. Understand the best practices in government and industry source selection.

4 Overview Overview Background Best Value Continuum Factors to Consider in Selecting Award Strategy Organizational Considerations Recent Findings Best Practices in Source Selection Conclusion 4

5 Background Overview Contract Management Process Procurement Planning Solicitation Planning Solicitation Source Selection Contract Administration Contract Closeout 5

6 Background Overview Contract Management Process Pre-Sales Activity Bid/No Bid Decision-Making Bid/Proposal Preparation Contract Negotiation and Formation Contract Administration Contract Closeout 6

7 Procurement Planning Contract Management Process Procurement Planning Activities: Requirement analysis and definition Market research and analysis Develop preliminary budget and schedule Develop preliminary work statement (SOW, ) Preliminary consideration of procurement method and contract type 7

8 Solicitation Planning Contract Management Process Solicitation Planning Activities Prepare solicitation document (IFB, RFP) Document program requirement Identify potential sources Determine contract type, procurement method, evaluation criteria, contract award strategy Structure contract terms and conditions Finalize work statement (SOW, SOO, PWS) 8

9 Solicitation Contract Management Process Solicitation Activities Conduct solicitation conferences Conduct site visits Advertise procurement opportunity Maintain qualified offeror s list 9

10 Source Selection Contract Management Process Source Selection Activities Receive proposals Evaluate proposals Conduct negotiations Award contract Document contract agreement 10

11 Contract Administration Contract Management Process Contract Administration Activities Conduct pre-performance conference Perform contractor surveillance Monitor and measure contractor's performance Process contractor payments Manage changes to the contract 11

12 Contract Closeout Contract Management Process Contract Closeout Activities Conduct final acceptance of supplies or services Process final contractor payment Conduct property dispositions Document contractor's performance Document lessons learned and best practices 12

13 Contract Closeout Best Value Continuum (FAR ) the relative importance of cost or price may vary in acquisitions where the requirement is clearly definable and the risk of unsuccessful contract performance is minimal, cost or price may play a dominant role in source selection. 13

14 Contract Closeout Best Value Continuum (FAR ) the less definitive the requirement, the more development work required, or the greater the performance risk, the more technical or past performance considerations may play a dominant role in source selection. 14

15 Contract Closeout Best Value Continuum Lowest Price Technically Acceptable appropriate when best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price. 15

16 Contract Closeout Best Value Continuum LPTA non-price factors/subfactors may include the following: Technical: assess whether the offeror s proposal will satisfy the Government s minimum requirements. may include technical approach, key personnel and qualifications, facilities, and others. The team shall evaluate the offeror s proposal against these requirements to determine whether the proposal is acceptable or unacceptable. Source: DoD Source Selection Procedures,

17 Contract Closeout Best Value Continuum LPTA non-price factors/subfactors may include the following: Past Performance: shall be used as an evaluation factor unless waived by the PCO. Assessment is based on the offeror s record of relevant and recent past performance information. Source: DoD Source Selection Procedures,

18 Source: DoD Source Selection Procedures, 2011

19 Contract Closeout Best Value Continuum Tradeoff Process appropriate when it may be in the best interest of the Government to consider award to other than the lowest priced offeror or other than the highest technically rated offeror. LPTA HTRO 19

20 Contract Closeout Evaluation Factors Cost/Price Quality Past Performance Compliance with solicitation requirements Technical excellence Management capability Personnel qualifications 20

21 Contract Closeout Source: DoD Source Selection Procedures, 2011

22 Contract Closeout Source: DoD Source Selection Procedures, 2011

23 Contract Closeout Source: DoD Source Selection Procedures, 2011

24 Contract Closeout Source: DoD Source Selection Procedures, 2011

25 Contract Closeout Source: DoD Source Selection Procedures, 2011

26 Contract Closeout Trade-off Process Steps 1. Conduct proposal evaluations and identify proposal differences. 2. Analyze proposal differences impact on acquisition objectives in relation to importance of evaluation factors. 3. Compare proposals against the evaluation criteria. 4. Assess the best mix of cost/price and noncost benefits Source: Adopted from Rumbaugh,

27 The lowest-priced proposal offers superior performance in non-cost evaluation criteria. Yes Award to lowest-priced proposal. No There are no meaningful distinctions between the non-cost portions of the proposals. Yes No No Conduct trade-off analysis, and award to the offeror providing the best value. Do the strengths of the higher-rated proposal merit the cost premium? Source: Adopted from Rumbaugh, 2010 Yes Award to the higher-rated, higher priced offeror.

28 Contract Closeout Trade-off Decision Elements 1. Proposals total evaluated price/cost. 2. Proposal strengths, weaknesses, deficiencies, risks, and significance of non-cost differences. 3. Strength, weaknesses, deficiencies, risk for each factor. 4. Assessment of whether perceived benefits are worth the associated price premium. Source: Adopted from Rumbaugh,

29 Requirements Analysis Requirement clearly defined? Requirement complexity? Past acquisition history? Technical risk? Performance risk? Contract Closeout Factors to Consider in Selecting Award Strategy 29

30 Market Analysis Contract Closeout Factors to Consider in Selecting Award Strategy Measurable differences in technology? Speed of technology advancement? Measurable differences in market capability? 30

31 Contract Closeout Organizational Considerations Processes and Skills Needed for Tradeoff Source Selections Healthy organizational processes and skilled personnel are critical to successful Tradeoff Source Selections. 31

32 Contract Closeout Organizational Considerations Quality of Skilled Source Selection Personnel Make or Break the Source Selection Superb technical team evaluation lead Technical Subject Matter Expert (SME) evaluators 32

33 Contract Closeout Organizational Considerations Quality of Skilled Source Selection Personnel Make or Break the Source Selection superb contracting officer leadership business team evaluators cost/price analysis and 33

34 Contract Closeout Organizational Considerations Quality of Skilled Source Selection Personnel Make or Break the Source Selection contractor acquisition support personnel good legal support personnel exceptional and impartial government source selection official 34

35 Contract Closeout Organizational Considerations Critical processes for good Tradeoff Source selection At all critical steps of the acquisition process - meetings between offerors and Government Document, Document, Document to attain great trade off source selection results and avoid protests 35

36 Organizational Considerations Who are the Critical Players for the great Source Selection Team? Technical Team Chairman and Subject Matter Experts who know their craft and are skilled in competitor proposal evaluation 36

37 Organizational Considerations Who are the Critical Players for the great Source Selection Team? Lead contracting officer who can do their craft right Avoid frivolous Industry protests in the current constrained sequester budgetary environments. 37

38 Best Value Source Selection Case Be The United States Air Force Refueling Tanker Aerial refueling supports the effectiveness of DoD s air power in military operations and is, an important component of national security. 38

39 Best Value Source Selection Case Be The United States Air Force Refueling Tanker The Air Force s (AF) tanker fleet, consisting of the medium-sized KC-135 and larger KC- 10, is old; the AF s oldest combat weapon system. The AF established a three-pronged strategy to first replace the older KC-135 tankers. We are discussing the AF KC-X program. 39

40 Best Value Source Selection Case Be Basis For Award The Air Force request for proposal (RFP) stated that award of the contract would be on a best value basis and stated a detailed evaluation scheme that identified technical and cost factors and their relative weights. 40

41 Best Value Source Selection Case Be Basis For Award The solicitation provided that the Air Force would calculate a most probable life cycle cost estimate for each offeror s proposal, including military construction and fuel costs. 41

42 Best Value Source Selection Case Be Mandatory and Desirable requirements The AF RFP provided detailed minimum system requirements that offerors must satisfy to receive award. The AF RFP identified desired aircraft features and performance characteristics that offerors were encouraged, but not required, to meet. 42

43 Best Value Source Selection Case Be Mandatory and Desirable requirements The AF RFP provided detailed minimum system requirements that offerors must satisfy to receive award. The AF RFP identified desired aircraft features and performance characteristics that offerors were encouraged, but not required, to meet. 43

44 Best Value Source Selection Case Be The AF received proposals and conducted numerous rounds of discussions with Boeing and Northrop Grumman. The agency selected Northrop Grumman s proposal for award on February 29,

45 Best Value Source Selection Case Be Legal Standards - Air Force to Conduct Proposal Evaluations Procuring agencies are obligated to conduct proposal evaluations in accordance with the evaluation scheme set forth in the RFP Proposal evaluation judgments are often subjective; the exercise of judgments in the evaluation of proposals must be reasonable and must bear rational relationship to RFP criteria. 45

46 Best Value Source Selection Case Be Legal Standards - Air Force to Conduct Proposal Evaluations In negotiated procurements, procuring agencies may conduct discussions with offerors with respect to their proposals The discussions must be meaningful and fair, and they must not be misleading. 46

47 Best Value Source Selection Case Be Legal Standards - Air Force to Conduct Proposal Evaluations GAO found a number of significant errors in the AF s technical and cost evaluation GAO found the AF conducted misleading and unequal discussions with Boeing. 47

48 Best Value Source Selection Case Be Legal Standards - Air Force to Conduct Proposal Evaluations The AF RFP identified the relative order of importance of the requirements and features of the aircraft The AF documentation did not show that the Air Force applied the RFP criteria in evaluating the merits of the firms proposals. 48

49 Best Value Source Selection Case e Legal Standards - Air Force to Conduct Proposal Evaluations A key discriminator used by the AF in its selection of Northrop Grumman s proposal for award was not consistent with Section M of the RFP. 49

50 Best Value Source Selection Case Legal Standards - Air Force to Conduct Proposal Evaluations The AF gave extra credit to Northrop Grumman for proposing to exceed a key performance parameter objective for fuel offload versus unrefueled range. The AF RFP evaluation criteria did not give Boeing additional credit for proposing to exceed key non-mandatory performance objectives. 50

51 Best Value Source Selection Case Be Legal Standards - Air Force to Conduct Proposal Evaluations The AF conducted misleading and unequal discussions with Boeing. The AF informed Boeing it had fully satisfied a key operational performance parameter. Later, the Air Force decided that Boeing had not fully satisfied this particular objective, but did not tell Boeing. 51

52 Best Value Source Selection Case Be Legal Standards - Air Force to Conduct Proposal Evaluations The AF improperly accepted Northrop Grumman s proposal who took exception to a material RFP requirement for depot level maintenance The RFP required offerors to plan and support AF for initial depot-level maintenance within 2 years after delivery of the first full production aircraft. 52

53 Best Value Source Selection Case Legal Standards - Air Force to Conduct Proposal Evaluations The Air Force improperly increased Boeing s estimated non-recurring engineering costs in calculating Boeing s probable life cycle cost. 53

54 Best Value Source Selection Case Be GAO Recommendations: The AF reopen discussions with the offerors, obtain revised proposals, The AF re-evaluate the revised proposals, and make a new source selection decision, consistent with this decision. 54

55 Best Value Source Selection Case Be GAO Recommendations If the AF believe its s not adequately state its requirements, the agency should amend the solicitation prior to conducting further discussions with the offerors. If Boeing s proposal is selected for award, the Air Force should terminate the contract awarded to Northrop Grumman. 55

56 Best Value Source Selection Case Be GAO Recommendations GAO also recommended that Boeing be reimbursed the reasonable costs of filing and pursuing the protest 56

57 Best Practices Source Selection Best Practices Early on in the acquisition before RFP development make sure the program management, requirements development and contracting team are on the same page All proposals must be evaluated in accordance with Section M of the solicitation. 57

58 Best Practices Source Selection Best Practices Requirements management- mandatory and nonmandatory requirements should be well documented before RFP release Introducing undisclosed requirements in the proposal evaluation process and not evaluating proposals in accordance with Section M of the RFP, will lead to costly and time consuming protests. 58

59 Best Practices Be Best Practices in Source Selection Be careful what you ask for you may get it! Tradeoff decisions can be tough to defend Can you as the Government customer really document and defend a 25% + higher price premium for a significantly better technical solution a best value trade off basis? 59

60 Best Practices Best Practices in Sources Selection For major systems and major enterprise services acquisitions use experienced and seasoned technical and business proposal evaluators wherever possible 60

61 Conclusion Be Tradeoff Based Best Value Source Selection Works when the Government is faced with: Lack of well defined requirements, a complex acquisition and significant contract performance risk Both Government and Industry benefit 61

62 Government Conclusion Be With sequestration budgetary constraints there is the temptation force fit what should be tradeoff based best value acquisitions into lowest price technically acceptable. Resist the temptation to do so it will cost you more in the long run and give you poor outcomes. 62

63 Industry Conclusion Be clear and concise with your proposals use a detailed requirements matrix mapping strictly to the RFP requirements. Be a Tradeoff based Best Value contract award winner and you may obtain a better return on investment than with Lowest Price Technically Acceptable. 63

64 Questions? 64

65 References Federal Acquisition Regulation (FAR). GAO T, Air Force Aerial Tanker Refueling Protest GAO KC-46 Tanker Aircraft U.S. GAO-B ; B ; B DOD, USD, AT&L Better Buying Power Implementation Directive 2/13 Garrett, G. A., & Rendon, R.G. (Eds.). (2007). U.S. Military Program Management: Lessons Learned and Best Practices. Management Concepts, Vienna, Virginia. Garrett, G.A., & Rendon, R.G. (2005). Contract Management: Organizational Assessment Tools. National Contract Management Association, McLean, Virginia. Office of the Under Secretary of Defense (2011). Department of Defense Source Selection Procedures, Washington, DC. 65

66 References Federal Acquisition Regulation (FAR). GAO T, Air Force Aerial Tanker Refueling Protest GAO KC-46 Tanker Aircraft DOD USAF, Implementation of Air Force Efficiencies, March 4, 2011, Blaise Durant, Deputy Assistant Secretary, Acquisition DOD, USD, AT&L Better Buying Power Implementation Directive 2/13 Garrett, G. A., & Rendon, R.G. (Eds.). (2007). U.S. Military Program Management: Lessons Learned and Best Practices. Management Concepts, Vienna, Virginia. Garrett, G.A., & Rendon, R.G. (2005). Contract Management: Organizational Assessment Tools. National Contract Management Association, McLean, Virginia. 66

67 References Office of the Under Secretary of Defense (2011). Department of Defense Source Selection Procedures, Washington, DC. Rendon, R. G., & Snider, K. F. (Eds.). (2008). Management of Defense Acquisition Projects. American Institute of Aeronautics and Astronautics, Reston, Virginia. Rumbaugh, M.G. (2010). Understanding Government Contract Source Selection. Management Concepts, Vienna Virginia. 67