Policy Memo on TINA Sweeps - Referenced Spector Memo

The Assad policy memo seems to have disappeared.

For some details about one company's view of the practical aspects of the Assad "TINA Sweep" policy memo see

https://www.youtube.com/watch?v=xgAiP99x3Dg

Here it is.

USA000646-18-DPAP.pdf

I would not use the memo that the previous poster linked because it is dated June 5.  The memo I linked on June 5 for June 6 is now dated June 7.  I would use the June 7 memo on the Home Page of this site because there may have been an edit by the issuer.

Thank you Bob.  I read both side by side and the difference in the final one dated Jun 7 is that on the second page, the last sentence in the paragraph that starts "Effective immediately..." is revised  as follows:

"Contracting Officers shall implement this policy for all future solicitations that require a Certificate of Current Cost or Pricing Data  [emphasis added] and, to the extent practicable, in currently open solicitations."

I think the memo, as revised, is nothing but a threat of blackmail.

I like it.

Edit: Shay Assad knows what he is talking about.  He worked for Raytheon for almost 22 years, in all of their business lines, both government and commercial. He was a senior executive with Raytheon, including a stint as Chairman and CEO of Raytheon Engineers and Constructors, whom I had to tangle with over three seemingly endless years on a major Defense Program. They held two major systems contracts on our program at the time. 

He and I once sat face to face across a small meeting table in a hotel in Salt Lake City, surrounded by Senior government and Raytheon officials standing at the walls. Raytheon was trying to compel the government to pay them tens of million dollars in alleged but unsupported  impact costs on a contract that they were in the process of losing their shirts on. I told them that the government would work with them to resolve the issues but we weren’t going to simply pay them without them justifying their case. I offered them a team of several project controls experts who worked for me to work with their staff to perform a deep review of all the issues and background data in their system, including cost, schedule, manpower productivity, etc. Assad agreed to do that and to continue performance    

There are several articles on Shay Assad’s current role, such as: 

https://www.politico.com/story/2016/04/defense-pentagon-spending-assad-221776

joel hoffman said:

I like it.

You shouldn't like it.

Large defense contractors instituted the use of TINA sweep processes back in the 1980s in order to mitigate the risk of unintentional defective pricing that arises in large organizations in which cost or pricing data relevant to a particular negotiation may be scattered about in multiple offices and divisions and among many subcontractors. Cost or pricing data that is relevant to one such negotiation might also be relevant to another, but persons within large companies may not be aware of other ongoing negotiations and of the need to share such information in order to ensure that it is furnished to multiple COs.

Keep in mind that FAR 15.406-2(b) states:

Quote

If the contractor had information reasonably available at the time of agreement showing that the negotiated price was not based on accurate, complete, and current data, the contractor’s responsibility is not limited by any lack of personal knowledge of the information on the part of its negotiators.

Emphasis added.

Keep in mind that the government might take the term "contractor" to mean the entire corporate enterprise and not just the office or division or affiliate engaged in a particular negotiation. Sweeps are a form of self-defense, and sweeps can take time, because some contractors are huge enterprises and relevant cost or pricing data may be scattered among offices located all over the country and even in foreign countries.

Now, DOD is being criticized for taking too long to award and modify contracts. To the extent that it takes a long time, it's in large measure because Congress, DOD, and DOD contracting activities have cluttered their processes and because many of their people are not competent. So the DOD pricing office wants COs to ask contractors to certify the accuracy, completeness, and currency of their cost or pricing data no later than five business days after price agreement, and hints at threats to contractors' estimating systems if they don't comply. And this sweeping memorandum does not advise COs to take specific circumstances into account when making their demands for certification within five business days.

Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long. How about waiving the requirement to submit certified cost or pricing data in urgent procurements? Then again, perhaps the risk of criticism for approving too many waivers is just too great a risk for DOD to take.

govtacct02 said:

Here it is.

USA000646-18-DPAP.pdf

The above link is to the wrong version of the memo. The memo at that link is the June 5 version. The official version is dated June 7 and should be accessible here:

https://www.acq.osd.mil/dpap/policy/policyvault/USA000646-18-DPAP.pdf

The link on the Wifcon home page takes you to the official version. The differences seem to be very slight, but it's best to use the official version.

Vern Edwards said:

You shouldn't like it.

Large defense contractors instituted the use of TINA sweep processes back in the 1980s in order to mitigate the risk of unintentional defective pricing that arises in large organizations in which cost or pricing data relevant to a particular negotiation may be scattered about in multiple offices and divisions and among many subcontractors. Cost or pricing data that is relevant to one such negotiation might also be relevant to another, but persons within large companies may not be aware of other ongoing negotiations and of the need to share such information in order to ensure that it is furnished to multiple COs.

Keep in mind that FAR 15.406-2(b) states:

Emphasis added.

Keep in mind that the government might take the term "contractor" to mean the entire corporate enterprise and not just the office or division or affiliate engaged in a particular negotiation. Sweeps are a form of self-defense, and sweeps can take time, because some contractors are huge enterprises and relevant cost or pricing data may be scattered among offices located all over the country and even in foreign countries.

Now, DOD is being criticized for taking too long to award and modify contracts. To the extent that it takes a long time, it's in large measure because Congress, DOD, and DOD contracting activities have cluttered their processes and because many of their people are not competent. So the DOD pricing office wants COs to ask contractors to certify the accuracy, completeness, and currency of their cost or pricing data no later than five business days after price agreement, and hints at threats to contractors' estimating systems if they don't comply. And this sweeping memorandum does not advise COs to take specific circumstances into account when making their demands for certification within five business days.

Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long. How about waiving the requirement to submit certified cost or pricing data in urgent procurements? Then again, perhaps the risk of criticism for approving too many waivers is just too great a risk for DOD to take.

Shay Assad knows the Defense Industry. He was an insider.  I edited my above post to add some perspective, including some personal experience dealing with him as a Raytheon exec on a major defense acquisition program.

joel hoffman said:

Shay Assad knows the Defense Industry. He was an insider.

Is that supposed to be an argument in support of the policy?

Vern Edwards said:

Is that supposed to be an argument in support of the policy?

https://www.politico.com/story/2016/04/defense-pentagon-spending-assad-221776

Joel:

I know Mr. Assad. I sat on a panel with him a couple of years ago at which we discussed contract pricing. I respect him, but I do not share all of his opinions. Are you arguing that the policy is sound because Mr. Assad is promoting it? That's why you like it? You read an article in Politico?

Please tell me that's not the case. If it is, just say so. If it's not, then tell us your reasons for liking the policy. Your responses thus far have been insulting.

Joel:

Wait. I didn't see your edit.

joel hoffman said:

Shay Assad knows what he is talking about.  He worked for Raytheon for almost 22 years, in all of their business lines, both government and commercial. He was a senior executive with Raytheon, including a stint as Chairman and CEO of Raytheon Engineers and Constructors, whom I had to tangle with for four seemingly endless years on a major Defense Program. They held two major systems contracts on our program at the time. 

He and I once sat face to face across a small meeting table in a hotel in Salt Lake City, surrounded by Senior government and Raytheon officials standing at the walls. Raytheon was trying to coerce the government to pay them tens of million dollars in alleged but unsupported  impact costs on a contract that they were in the process of losing their shirts on. I told them that the government would work with them to resolve the issues but we weren’t going to simply pay them without them justifying their case. I offered them a team of several project controls experts who worked for me to work with their staff to perform a deep review of all the issues and background data in their system, including cost, schedule, manpower productivity, etc. Assad agreed to do that and to continue performance on the contract. 

Shortly after that, Raytheon sold REC to another major US company in the engineering and construction business.

As far as I was concerned at the time, they were as close to being bullies and extortionists as I had ever experienced. Of all the contractors that I ever dealt with, which included several of the top ten US construction companies, Raytheon was the most difficult one. They were also the slowest in processing contract actions, including conducting sweeps after completion of negotiations, even on fairly routine mods.

Okay, I've read the above addition to your earlier post. None of that supports the wisdom of the memo. Knowledgeable people make bad decisions, and in my opinion that policy is a bad decision for the reasons that I gave above.

If you have nothing to say about the policy itself, I'll put down your approval of it to celebrity worship and nothing more. It's like saying the Vietnam War was a good idea because John Wayne supported it, he made a lot of war movies, and you met him while he was filming "The Green Berets" at Fort Benning in 1965.

No celebrity worship here. 

I saw the article while refreshing my memory on what his official title was during the time. It provides some background on him,  the policy and industry perspective

You are a contractor and entitled to your opinion. I was a career government acquisition employee (technically still am as a re-employed annuitant when called upon for an assignment) and am entitled to my opinion concerning the policy. 

I don’t intend to debate you, as a contractor, about it.

joel hoffman said:

I don’t intend to debate you, as a contractor, about it.

What a crock, accompanied by more irrelevant biographical information. Who cares that you once detested Mr. Assad and then read an article about him that apparently changed your opinion? What's that got to do with the policy pros and cons?

The bottom line is that I think you must not know much about TINA sweeps, their origin and historical development, the rationale for conducting them, and the arguments against them, and you must not be familiar with the professional literature about them. You haven't considered the other options available to DOD policy people and to COs that would make sweeps unnecessary or at least less often so. What do you say to that? Are we going to get more biography?

And since when don't you debate contractors? In any case, you don't have to debate me as a contractor. You can debate me as a former major systems contracting officer, contracting director, and teacher and writer on contracting, and somebody with whom you often agree.

Many respectable persons have argued that sweeps are a good idea. Here's a link to an NCMA 2014 World Congress briefing on TINA given by two Naval Postgraduate School instructors and an attorney.

https://www.ncmahq.org/docs/default-source/default-document-library/pdfs/b10---enhance-your-understanding-of-the-truth-in-negotiation-act-(tina).pdf?sfvrsn=ed32202b_2

Look at chart 21, on which they say:

Quote

A “sweep” is not specifically required by regulations; it is a best practice internal control designed to improve TINA compliance.

And why didn't DOD consider alternatives to implied threats? Why not recommend the use of closing or cutoff dates for submission of data in order to reduce the need for sweeps? Why not consider waivers in urgent procurements?

I'm with Vern--this 5-day policy is based on flawed assumptions. Cost or pricing data that might pop up in a sweep are not limited to what might be included in a specific proposal or negotiation, nor roll into a specific estimating system. Perhaps that logic would have worked within Raytheon? No clue, but I do know all business systems are not created equal. I can think of several large mostly commercial item companies who have done non-commercial work for the Government. Sweeps take weeks because a nationwide review of pricing for similar offerings is required in order to certify.

I'm not sure the Government quite understands the legwork that goes into a certificate of cost or pricing data.  

For the five-day window to have any merit, I think a better definition of what data requires disclosure is necessary. Otherwise you're still stuck with the contractor guessing what the Government might find useful in a negotiation. And now it all has to be completed in five days.

To Vern's point about considering other alternatives, we do not know if there is data showing that sweeps play a significant role in any delays in awarding contracts.  Is this policy really about speeding up the process or a way of advancing a hidden agenda of which we are not aware?  In any event, I think it is inevitable that this will be challenged.

Retreadfed said:

To Vern's point about considering other alternatives, we do not know if there is data showing that sweeps play a significant role in any delays in awarding contracts.  Is this policy really about speeding up the process or a way of advancing a hidden agenda of which we are not aware?  In any event, I think it is inevitable that this will be challenged.

I have spoken with Mr. Assad and others in DOD who say that sweeps have delayed contract awards for weeks, even months. Such complaints are old, by the way. Government people have complained about sweeps ever since companies started doing them in the late 1980s. But I have not seen any hard data.

See for example, Impact of FASA on the Truth in Negotiations Act, by Simchak and Gildea, 95-08 Briefing Papers 1 (July 1995):

Quote

On major contracts, “sweeps” have taken weeks or even months to complete, with resultant delays in signing contracts because most CO's will not sign a contract until a Certificate has been included in the contract file. To minimize the delays associated with proposal updates, the proposed regulations encourage the CO and contractor to establish cutoff dates for the submission of cost or pricing data. Agreement on cutoff dates should end the current routine practice of time-consuming and expensive data “sweeps.”

Footnote omitted.

See Air Force Guidance Treats Cutoff Dates for Certified Cost or Pricing Data, 36 No. 32 Gov't Contractor ¶ 423 (August 1994):

Quote

Signed by AFMC Director of Contracting, Brigadier General Timothy Malismenko, the July 29 memorandum identifies cutoff dates as a “useful tool” that has the potential to shorten the acquisition cycle by minimizing delays associated with last-minute proposal updates and certification sweeps. Accordingly, it encourages contracting personnel to take advantage of cutoff dates, where appropriate. At the same time, the memorandum cautions that “criteria for cutoff dates should be designed to avoid limiting potential contractor liability,” as suggested by the Department of Defense Office of Inspector General in its Truth in Negotiations Act (TINA) Handbook (see 35 GC ¶ 295).

Emphasis added.

See Truth in Negotiations/Edition III by Morrison and Ebert, 89-11 Briefing Papers 1 (October 1989):

Quote

Only one “Certificate of Current Cost or Pricing Data” is required for a procurement. The FAR provides that you should submit the Certificate as soon as practicable after price agreement is reached. Citing this regulation, DOD and the Air Force have objected to the policy of some contractors to postpone submission of the Certificate until a postprice agreement review or “sweep” of data has been made.124 Although the purpose of these sweeps is to ensure that all cost or pricing data are accurate, complete, and current, DOD claims that delays in excess of 30 days in submitting the Certificate may indicate a deficiency in the contractor's estimating system.

Footnote 123 omitted. Footnote 124 says:

Quote

See Memorandum from Eleanor R. Spector, Deputy Asst. Secy. of Defense for Procurement, “Contracting Delays in Submitting Certificates of Current Cost or Pricing Data” (7 June 1989); Memorandum from Ira C. Kemp, Associate Dir., Contracting & Mfg. Policy, U.S. Air Force, “Contracting Delays in Submitting Certificate of Current Cost or Pricing Data” (27 Feb. 1987).

And see Subcontractor Cost or Pricing Data by Arnavas and Gildea, 93-08 Briefing Papers 1 (July 1993):

Quote

In deciding whether to perform “sweeps” or require them from subcontractors, a prime contractor must consider (1) the delay that consideration of such data will inevitably cause in the procurement process, (2) the real need to submit the data since the prime has no obligation to disclose data that were not reasonably available to it or are otherwise deemed insignificant, and (3) the likelihood that the additional data will cause the contract price to be unnecessarily reduced. These factors should be balanced against the specter of a possible defective pricing or false claims action by the Government if the data are not disclosed.

Emphasis added.

So as you can see, the issue of the effect of sweeps on the speed with which contracts can be awarded dates at least as far back to the late 1980s.

But keep in mind that the practice was started after the spare parts pricing scandals and the consequentially renewed interest in TINA and the False Claims Act. Companies felt that defective pricing was a high risk issue. It was and is.

TINA is one of the worst contracting laws ever enacted. It was originally proposed as a solution to unrealistically high targets in incentive contracts. I cannot prove it, but I believe that it has cost us more than it has saved. If there are significant delays associated with sweeps, the government has only itself to blame. And there are better solutions than this new policy. Among them: the use of cutoff dates and what I call "tailored" waivers.

BTW, contractors don't particularly like sweeps. See Price-Based Acquisition: Issues and Challenges for Defense Department Procurement of Weapon Systems, Lorell, Glaser, and Cook (Rand Corp., 2005):

Quote

One area of general agreement, especially among contractors, was that the requirement for certified cost or pricing data—that is, TINA data—adds additional time to the contracting process. The consensus was that the requirement for TINA data consumed about 30 extra days of effort, with little value added to the final price. Although other contracting actions can proceed while the TINA sweeps are made, the 30-day period just before contract award was seen as mostly “dead” time in the schedule

Despite the fact that contractors in some cases were more than willing to share their cost data with DoD, the addition of the TINA certification requirement was seen as a major complication to the cost data process. As pointed out previously, contractors already gather data to convince their management of the soundness of the business case for any given program, but the level of detail for internal decisionmaking is usually nowhere near the level of detail required by TINA certification. In addition, once the cost data are gathered to make the business case in a non-TINA situation, a sweep to update the data usually is not done, particularly in a period of generally stable prices. Even DoD COs confirmed that contractors typically expend considerable effort and time checking their final certified cost data to avoid defective-pricing accusations. Almost all interviewees agreed that the additional risks and criminal exposure raised by TINA are a significant and legitimate contractor concern. Sometimes program starts are delayed because contractors make extraordinary efforts to ensure that no errors, no matter how trivial, have crept into their estimates.

Thus, DoD did not see additional cost to itself because of TINA as a significant problem, but it did see delay in finalizing contracts as an issue. One CO noted that after a “handshake agreement” (agreement on costs, work scope, hours, etc.) involving an Alpha contracting process (more on this type of contract is provided below), the contractor still typically took six weeks or more to provide certified cost data. Such delays were often considered an unnecessary impediment to quick launch of a high-priority project.

Emphasis added. Footnotes omitted.

TINA is a bad law, and the new policy is a bad policy. There are other, better ways to fix the delay problem.

On 6/8/2018 at 9:18 AM, joel hoffman said:

You are a contractor and entitled to your opinion. I was a career government acquisition employee (technically still am as a re-employed annuitant when called upon for an assignment) and am entitled to my opinion concerning the policy.

[deleted]

On 6/8/2018 at 9:18 AM, joel hoffman said:

I don’t intend to debate you, as a contractor, about it.

*turns up nose, strikes a dramatic pose, struts off the dance floor*

On 6/8/2018 at 7:49 AM, Vern Edwards said:

Contractors who understand defective pricing know that it is a high risk issue involving not just DOD COs, but also DCAA auditors and the U.S. Department of Justice, two of the most ruthlessly predatory entities known to mankind. DOD may take months or even years to prepare and issue an RFP. Why put the weight on contractors and ask to them to risk a charge of defective pricing? There are many ways to speed up DOD contract award processes if they are taking too long.

bingo

On 6/7/2018 at 11:06 PM, joel hoffman said:

He and I once sat face to face across a small meeting table in a hotel in Salt Lake City, surrounded by Senior government and Raytheon officials standing at the walls.

[deleted]

Seriously, @joel hoffman, do you have an actual reason for liking this policy, other than 

On 6/8/2018 at 8:21 AM, joel hoffman said:

Shay Assad knows the Defense Industry. He was an insider.

...because PepeTheFrog is one of those, also. So is Vern Edwards. Who cares?

What about the Doctor Reverend Martin Luther King, who told us to judge frogs not by the color of their building badge, but by the content of their character (and merits of their statements)?

Pepe, I will ignore your condescending insults for the moment.  

Paragraphs 2-5 of the memo reflect the reasons that I like the idea.

Mr Assad was a Defense Industry Executive for many years and understands their business practices. 

I assume that he knows what he is talking about - and he signed the memo.

if you had read the article  that I cited, you would understand why Mr. Assad, as a former industry insider, should know what he is speaking of. 

 https://www.politico.com/story/2016/04/defense-pentagon-spending-assad-221776

joel hoffman, PepeTheFrog apologizes because that was meant to be poking fun, not an insult. PepeTheFrog is deleting the stuff that went too far.

PepeTheFrog remembers that article when it came out. It says that Shay Assad thinks (or knows) that the government overpays regularly. But this memo is about shortening the length of time for TINA sweeps, which is about shortening acquisition timelines, not necessarily getting a lower price. 

PepeTheFrog thinks that the government is usually outmatched by large contractors. But PepeTheFrog does not think that shortening the opportunity to do compliance checks for high-risk areas of liability like TINA sweeps is helpful for that issue. For the other issue of shortening acquisition timelines, it's a drop in the ocean and laughable. "Physician, heal thyself."

Another thought: If it's true that some negotiations are delayed for weeks or months because of TINA sweeps, why should all negotiations be held to a five-day rule?

Punish the sinners, not the innocent.

Pepe, apology accepted.  It isn’t the negotiations that are delayed because of the sweeps , it’s the certification of the cost or pricing data after the price agreement. Of course, the results of the sweep could cause further negotiations, which is another problem cited by Assad in the memo. 

I would agree with industry that, if the government takes an inordinate amount of time to evaluate the proposal and schedule and/or conduct negotiations, particularly on modifications for change orders or other actions that are underway (letter contracts, for example),  the proposal could be overcome by events, thus not necessarily current or accurate.

It would then seem reasonable to me that there may be some situations where a post agreement sweep would be prudent and necessary...  But a sweep shouldn’t take as much or longer time than it would take to prepare the proposal. The proposal should reflect the best information available at the time that it is prepared and submitted.

joel hoffman said:

The proposal should reflect the best information available at the time that it is prepared and submitted.

Joel, are you saying proposals need to be based upon the cost or pricing data submitted to the government?

Retreadfed said:

Joel, are you saying proposals need to be based upon the cost or pricing data submitted to the government?

See Table 15-2—Instructions for Submitting Cost/Price Proposals When Certified Cost or Pricing Data Are Required

Also notice within Note 1 of the instructions:

Quote

As later data come into your possession, it should be submitted promptly to the Contracting Officer in a manner that clearly shows how the data relate to the offeror's price proposal. The requirement for submission of certified cost or pricing data continues up to the time of agreement on price, or an earlier date agreed upon between the parties if applicable.

I did say that the "proposal should reflect the best information available at the time that it is prepared and submitted." 

Edit:  I probably should have added that the proposal should be updated, if necessary to reflect the best information available during the time of negotiations. For example, if the proposal was based upon judgmental labor mix and quantities prior to the work but the work is completed prior to negotiations, if the actual labor costs are known or should be known, then they might be considered cost or pricing data rather than judgmental data. Similarly, if the proposal is based upon a proposed subcontract cost and the contractor has either negotiated a lower price or hired another subcontractor at a lower price, then the cost or pricing data should be updated prior to or during negotiations.  In my experience, the negotiators were familiar with what was happening in reality - even with the biggies, such as Raytheon. For construction - it is common for labor and productivity data to be tracked weekly or bi-weekly for company internal earned value management purposes. And yes - it was that way with the Raytheons, Bechtels and other medium to large construction companies.  On the projects that I was involved with on my last large program, our site project controls specialists were viewing and reviewing their site guys' data, weekly and attending their daily superintendents meetings, tracking schedule, productivity and other issues. 

I recognize that this is not necessarily a universal fact for all types of contracts and situations.  However, I think that Shay Assad is saying that it shouldn't require weeks or months after the agreement to perform a "sweep" to compare actuals, as of the date of agreement against proposed cost or pricing data.

joel hoffman said:

The proposal should reflect the best information available at the time that it is prepared and submitted.

That statement is as clear as mud.

Vern Edwards said:

That statement is as clear as mud.

Agreed.  In my last post, I referred to the instructions in Table 15-2 for preparing the proposal and submitting cost or pricing and other than cost or pricing dTa. 

I then stated that I should have also added that the proposal should be updated, if necessary to reflect the best information available during the time of negotiations (after preparation and initial submission of the proposal),  referring to Note 1 of the FAR Instructions.  If you re-read the Assad Memorandum,  I think that you can see how the Note 1 instructions relate to the third paragraph in the Memorandum. 

The point is that the requirement to submit cost or pricing data continues up to the time of agreement on price, or an earlier date agreed upon between the parties if applicable. The contract clauses for submission of cost or pricing data refer to Table 15-2 , thus making it a requirement. 

According to the Memo, the contractor should provide current data to the extent possible prior to the settlement agreement, not take weeks or months afterwards to perform a sweep and resubmit. That is consistent with the instructions for Table 15-2, I think.

So do you all think Contractors will just delay official price agreement until they can verify their cost and pricing data is current, accurate, and complete?

Joel:

I'm not sure what you're trying to communicate.

joel hoffman said:

The proposal should reflect the best information available at the time that it is prepared and submitted.

It is not clear to me what you mean by "proposal," "reflect," "best,"  or "information."

By "proposal," did you mean the proposed price or something more?

By "reflect," did you mean made on the basis of, set on the basis of, derived from, or something else?

By "best," did you mean accurate, complete, and current or something else or something more?

By "information," did you mean cost or pricing data as defined by FAR, or something more?

In short, did you mean: A proposed price should be set on the basis of accurate, complete, and current cost or pricing data?

In your attempt to clarify your statement you have referred to or quoted the FAR. However, those references and quotes do not clarify what you meant by what you said.

The five day deadline for sweeps is a mighty incentive for a major contractor to pursue in earnest their own Blockchain Accountability System, similar to the idea advanced earlier on Wifcon for DoD to consider for itself: 

If a contractor implemented their own blockchain accountability system, every dollar could speak for itself...the contractor could determine their cost data (every use of every dollar) in near real time with such breadth and granularity that audience & report purpose, not system functionality, could determine the nature of any report: whether that is accountability, management reporting, or audit functions.

Vern, at the time that I originally said that, I was reflecting on my experiences where contractors would simply submit proposals that were primarily based upon estimating guides, even during execution of the contract action or after completion. 

When I said reflect the best information available at the time of preparation, I meant that, to the extent that factual data is available,  the proposal should incorporate it. The contractor shouldn’t  wait until after agreement to determine the correct data and clean up the proposal.  I didn’t intend to mean that everything in the proposal is cost or pricing data. I agree that what I said was unclear. 

My original statement doesn’t address the heart of the memorandum and my expanding on it will only go deep down a rabbit hole. 

What I want to emphasize Is what I said in my response to Retread that I should have added. The Table 15-2 Instructions and,  in particular,  Note 1 of the Instructions tracks with what Assad is saying in his third paragraph of the Memorandum. He explains why he wants to put a five day limit on getting the Certification. The requirement to submit cost or pricing data continues up to the point of agreement on the price. 

Thus - it shouldn’t take weeks or months after the negotiated agreement to perform a sweep and come back with a certification to confirm or to provide updated cost or pricing data to discuss the price furthe. Either result delays the award or closure of the contract action.

amthomf said:

So do you all think Contractors will just delay official price agreement until they can verify their cost and pricing data is current, accurate, and complete?

What is “official price agreement”?  There is a price agreement. Then the contractor is required to certify that the cost or pricing data that was submitted, as of the date of that agreement was current, complete, and accurate - as of that date (or other agreed date). The data might or might not have been relied upon to help determine the price.  There may also be data other than cost or price data that comprise all or part of the agreed price. 

I would guess that a price agreement isn’t “official” until the contractor provides the certification that it is current, complete and accurate as of the date. If it can’t certify that because something wasn’t , then the reasons have to be taken into account and the final price is adjusted or renegotiated, as necessary, so that the contractor can provide the certification.

I have always had a problem with the language referring to  submission of or submitting “certified cost or pricing data”. The certification usually doesn’t occur until after the data is submitted and after the price has been agreed upon.

One exception,  I suppose, might be where there has been no agreement and the price is all or part of a dispute claim.

Joel:

I'm not going to ask you anything more, because all I get in return is a lot of nonresponsive chatter. You like the memo and I don't. It's clear that we're not going to get to the heart of the matter.

Vern

joel hoffman said:

I have always had a problem with the language referring to  submission of or submitting “certified cost or pricing data”. The certification usually doesn’t occur until after the data is submitted and after the price has been agreed upon.

Some COs think that you should get a certificate with the original proposal in case you want to accept it without negotiation.

Vern, just please disregard what I said that you want me to amplify.  I wasn’t addressing the heart of the matter in that comment. 

In  my opinion, the heart of the matter is that, according to Assad, contractors should update available cost or pricing data after initial submission, if necessary, up to the time of agreement on price. That is consistent with the Instructions for Table 15-2, which are incorporated by reference in the applicable contract clause for submission of cost or pricing data. 

Edit: He apparently feels that, if contractors would do that, then it would avoid lengthy delays in obtaining the certicatiin after agreement.

@joel hoffman

To me the issue is not whether sweeps extend lead time. They often do.

To me the issue is whether the policy of demanding certification within five days of price agreement, regardless of the circumstances and the risks of defective pricing, is sound. It's not. It's unsound, and its contrary to law to the extent that it effectively demands that contractors certify to the truth of something that they do not know to be true.

The assertion that a contractor's estimating system should enable it to certify with confidence within five days of price agreement, regardless of circumstances, is baseless.

I reject your opinion that the policy is a good one because you believe that the person who signed the memo knows what he's talking about, which belief is based on your limited personal experience with that person from many years ago and something you read in a magazine article.

Since timing is (almost) everything might this rule to be certified within five days constitute "a new requirement for a certification"? If so, see FAR 1.107 Certifications:

"1.107 Certifications.

In accordance with 41 U.S.C. 1304, a new requirement for a certification by a contractor or offeror may not be included in this chapter unless—

(a) The certification requirement is specifically imposed by statute; or

(b) Written justification for such certification is provided to the Administrator for Federal Procurement Policy by the Federal Acquisition Regulatory Council, and the Administrator approves in writing the inclusion of such certification requirement."

Vern Edwards said:

@joel hoffman

To me the issue is not whether sweeps extend lead time. They often do.

To me the issue is whether the policy of demanding certification within five days of price agreement, regardless of the circumstances and the risks of defective pricing, is sound. It's not. It's unsound, and its contrary to law to the extent that it effectively demands that contractors certify to the truth of something that they do not know to be true.

The assertion that a contractor's estimating system should enable it to certify with confidence within five days of price agreement, regardless of circumstances, is baseless.

I reject your opinion that the policy is a good one because you believe that the person who signed the memo knows what he's talking about, which belief is based on your limited personal experience with that person from many years ago and something you read in a magazine article.

My belief didn’t  have a damned thing to do with something  I read in the article. I was looking up his exact title to refresh myself and the article simply explains where he is now and it cited his experience for others to understand that he knows the Defense Industry from his long time Industry experience  

I don’t know what you meant by limited experience with that person. Three years is not really “limited”.  

I understand your point of view.

joel hoffman said:

I understand your point of view.

Good.

On 6/12/2018 at 10:34 AM, joel hoffman said:

In  my opinion, the heart of the matter is that, according to Assad, contractors should update available cost or pricing data after initial submission, if necessary, up to the time of agreement on price. That is consistent with the Instructions for Table 15-2, which are incorporated by reference in the applicable contract clause for submission of cost or pricing data.

There's unfortunately little incentive for the contractor to conduct multiple sweeps during the negotiation process, because no matter how many they perform during negotiation, they are still going to need to conduct a sweep after agreement on price and before certification. And if their sweep process is correct, it's not going to take any less time or be any less complete simply because they already performed sweeps along the way.

On 6/8/2018 at 9:18 AM, joel hoffman said:

No celebrity worship here. 

I saw the article while refreshing my memory on what his official title was during the time. It provides some background on him,  the policy and industry perspective

You are a contractor and entitled to your opinion. I was a career government acquisition employee (technically still am as a re-employed annuitant when called upon for an assignment) and am entitled to my opinion concerning the policy. 

I don’t intend to debate you, as a contractor, about it.

Vern as a Contractor - really Joel - that is ridiculously minimizing to Vern's decades as Contracting professional with the Federal Government, his many published articles, his sage advice on this site, not to mention his impact on many of us currently succeeding as 1102s.  I am, quite frankly, surprised at your post.

kevlar51 said:

There's unfortunately little incentive for the contractor to conduct multiple sweeps during the negotiation process, because no matter how many they perform during negotiation, they are still going to need to conduct a sweep after agreement on price and before certification. And if their sweep process is correct, it's not going to take any less time or be any less complete simply because they already performed sweeps along the way.

Vern and I have debated this issue (privately) in the past. I maintain that post-price agreement sweeps are essentially worthless because they don't mitigate defective pricing risk, which ends on the date of price agreement. Accordingly, I assert that a contractor must perform its final sweep just before the final price agreement is reached, and that date becomes the effective date of the Certificate of Current Cost or Pricing Data.

As to "incentive" -- would a Level 3 CAR on the Estimating System provide adequate incentive? I would think that it would.

On ‎6‎/‎12‎/‎2018 at 10:59 AM, Vern Edwards said:

@joel hoffman

To me the issue is not whether sweeps extend lead time. They often do.

To me the issue is whether the policy of demanding certification within five days of price agreement, regardless of the circumstances and the risks of defective pricing, is sound. It's not. It's unsound, and its contrary to law to the extent that it effectively demands that contractors certify to the truth of something that they do not know to be true.

The assertion that a contractor's estimating system should enable it to certify with confidence within five days of price agreement, regardless of circumstances, is baseless.

I reject your opinion that the policy is a good one because you believe that the person who signed the memo knows what he's talking about, which belief is based on your limited personal experience with that person from many years ago and something you read in a magazine article.

I agree that five business days is aggressive. However, on my current program it takes 60 days or more for the contractor to certify, which is a significant amount of time. While I understand the contractor's reasons for conducting a sweep, our defective pricing shop has approximately one (maybe two?) individuals, so the likelihood of us opening a defective pricing case against the contractor is approximately nil. Sure, we would pursue this option if there was a particularly egregious incident, but the likelihood of that happening is, again, approximately nil.

One of my concerns about the five business days is the Government's loss of leverage in negotiating a downward adjustment to price. Once the contract is awarded, the contractor would use their usual tactics to make sure this doesn't happen.

Some of Vern's previous comments mention a cut-off date. Yes, that is the contractor's preferred way of speeding up this process, which explains why Mr. Edwards would advocate for this (Yes, Mr. Edwards, I know you used to work for the Government and know everyone better than anyone else; we get it. Going after Joel for his biographic information is a bit disingenuous, since you are constantly bringing up who you know... no offense, I just think you're being a bit unfair to him) However, I don't think a cut-off date makes sense at all. If the Government is going to give up its right to current data that could impact negotiations/final price, what do we get in return other than a faster award? Why should we compensate the contractor for their business deficiencies? Why does this make sense? I am curious, because I have never heard a good argument for a cut-off date. Yet, here we are. If anyone can make the case, it's Mr. Vern Edwards. Despite my earlier teasing, I respect you a ton, and I'm interested to hear what you have to say.

That said, I really wish I had the chance to negotiate with a Vern Edwards back in the day... it is so easy to rile him up.

Tony Bones said:

That said, I really wish I had the chance to negotiate with a Vern Edwards back in the day... it is so easy to rile him up.

I'm sure you do

Why do you assume Vern is riled up?  I didn't see any ALL CAPS, insults, emojis, or exclamatory punctuation in any of his posts.

Though maybe he used too many periods by properly punctuating his sentences:

https://newrepublic.com/article/115726/period-our-simplest-punctuation-mark-has-become-sign-anger

here_2_help said:

I assert that a contractor must perform its final sweep just before the final price agreement is reached,

H2H, how is the contractor to know when price agreement will be reached?  Just because negotiations are to take place on a certain date, does not mean that agreement on price will be reached on that date.

Retreadfed said:

H2H, how is the contractor to know when price agreement will be reached?  Just because negotiations are to take place on a certain date, does not mean that agreement on price will be reached on that date.

Right. The company will be wide open to the potential for defective pricing. Especially if a sweep takes a long time. Or even five days. By the time a sweep is done, it could be already be inaccurate with no way of knowing. But then you agree to price and sign the cert?

Sweeping after the agreement on price allows the contractor to apply a firm cutoff date for the sweep. That way the contractor can legitimately say whether cost or pricing data existed that was not disclosed prior to the agreement on price. And if new data exists, the Government is entitled to re-open negotiations. That stinks from a schedule standpoint, but it happens. And since no cert has been signed yet, the contractor isn't open to a defective pricing action.

kevlar51 said:

Right. The company will be wide open to the potential for defective pricing. Especially if a sweep takes a long time. Or even five days. By the time a sweep is done, it could be already be inaccurate with no way of knowing. But then you agree to price and sign the cert?

Sweeping after the agreement on price allows the contractor to apply a firm cutoff date for the sweep. That way the contractor can legitimately say whether cost or pricing data existed that was not disclosed prior to the agreement on price. And if new data exists, the Government is entitled to re-open negotiations. That stinks from a schedule standpoint, but it happens. And since no cert has been signed yet, the contractor isn't open to a defective pricing action.

Gosh fellows. I have been involved in several negotiations in my time, and we always knew when we were close to agreement. Further, we were frequently sweeping with subKs and ourselves during negotiations, seeking to see if we should update our pricing. It was always good news when we could deliver a cost savings during negotiations, through updated pricing. The customers always liked that.

But please don't think I'm trying to persuade you of anything. You do you. By all means, proceed with your post-agreement sweeps, if that's what you feel you have to do. Take as long as you need.

Finally, your comments don't address the difference between the effective date of the CCCPD and the date of price agreement. Two dates; not one.

here_2_help said:

effective date of the CCCPD

H2H, I don't know what you mean by this.  The certificate requires two dates, the "as of" date, i.e., the date by which the cost or pricing data must be current complete and accurate, and the date the certificate is executed, i.e., signed by the contractor.  See the form of the certificate at FAR 15.406-2.

Retreadfed said:

H2H, I don't know what you mean by this.  The certificate requires two dates, the "as of" date, i.e., the date by which the cost or pricing data must be current complete and accurate, and the date the certificate is executed, i.e., signed by the contractor.  See the form of the certificate at FAR 15.406-2.

15.407-1 Defective certified cost or pricing data.

*****

(b)(1) If, after award, certified cost or pricing data are found to be inaccurate, incomplete, or noncurrent as of the date of final agreement on price or an earlier date agreed upon by the parties given on the contractor's or subcontractor's Certificate of Current Cost or Pricing Data, the Government is entitled to a price adjustment, including profit or fee, of any significant amount by which the price was increased because of the defective data.

The first date is the date of price agreement; the second date is the effective date on the CCCPD. The dates do not have to be the same. For example, if the date of price agreement was 1 June but the contractor's final sweep was 28 May, then the parties could agree that the certification date is 28 May ... and any new cost or pricing data that arises between 28 May and 1 June is irrelevant to a determination that the contractor defectively priced.

I don't know why this is hard. It doesn't have to be.

Holy cats! I go off to the eye doctor for a couple of hours and look what happens. Okay, well, I'll respond to some of the comments.

Tony Bones said:

While I understand the contractor's reasons for conducting a sweep, our defective pricing shop has approximately one (maybe two?) individuals, so the likelihood of us opening a defective pricing case against the contractor is approximately nil.

@Tony Bones Tony, the biggest defective pricing case in history was the Air Force's charge of defective pricing against United Technologies that resulted from the Great Aircraft Engine War procurement of the mid-1980s. DCAA wanted that case pursued. The Air Force refused. DCAA brought political pressure to bear and the Air Force caved and pursued the case. Here is what happened.

In 1998, the Air Force sought a price reduction of $299 million due to defective pricing. Then, in 1999, the Justice Department charged United Technologies with false claims based on the alleged defective pricing and sought treble damages, about $900 million.

The defective pricing case was pursued before the ASBCA and the Federal Circuit. The ASBCA initially found that United Technologies had committed defective pricing, but owed the Air Force nothing due to offsets. On reconsideration, the ASBCA found that United Technologies had not committed defective pricing after all. The Air Force appealed the ASBCA decision before the Federal Circuit. In 2006 the Federal Circuit affirmed the ASBCA's reconsideration decision. Eight years of litigation and legal fees. See:

• United Technologies Corp., ASBCA 51410, 04-1 BCA ¶ 32556
• United Technologies Corp., ASBCA 53349, 05-1 ¶ 32860
• Wynne v. United Technologies Corp., 463 F.3d 1261(Fed. Cir. 2006)

The false claims charges were pursued independently in U.S. district court and before the 6th Circuit. In 2008, the district court found United Technologies liable for false claims damages in the amount of $657 million. United Technologies appealed to the 6th Circuit, which, in 2015, overturned the district court's judgement on the ground that the government had not proven damages and remanded the case to the district court to determine whether the government should have another chance to make its case. In 2016, the district court ultimately found that the government was entitled to $1,176,619. The parties let the matter drop. Eighteen years of litigation and legal fees. See:

• U.S. v. United Technologies Corp., 626 F.3s 312 (Sixth Cir., 2011)

So, Tony, who cares that your shop, whatever shop that is, has only one or two people. What makes you think that what your shop does or does not think or would or would not do has anything to do with the government's decision to pursue of a defective pricing case? Powers other than yours have an interest and a say. You don't have to take my word for it. Everything that I wrote above is a matter of public record if you know how to read and research board and court decisions. DCAA was the hellhound on United Technologies' trail, not the Air Force.

BTW, the United Technologies case shows why contractors take precautions like sweeps.

Next:

Tony Bones said:

I don't think a cut-off date makes sense at all. If the Government is going to give up its right to current data that could impact negotiations/final price, what do we get in return other than a faster award? Why should we compensate the contractor for their business deficiencies? Why does this make sense?

Well, Tony, my response is that judging from the memo, the government seems to be the party that's in a hurry. Why should a contractor give up its right to take its time and make sure that it can certify truthfully? If you won't agree to a cutoff date that precedes price agreement, you can just sit on your hands and wait until the contractor completes a sweep. Now here's the thing, paisano: The government enacted TINA in 1962 and has, from time to time, been very aggressive in pursuing contractors under it, especially since the spare parts pricing scandals of the mid-1980s. This aggressiveness, as illustrated by the United Technologies case, among others, has made them veeeeery nervous, and so they decided to protect themselves by conducting post agreement/precertification, precontract award sweeps. Just to make sure.

As for cutoff dates---smarter people than me have advocated them as an alternative to sweeps, and I think I cited some of them in one of my earlier post to Joel.

Now, the sum of my argument is as follows. The government wants contractors to obey the law. The law requires a contractor to submit accurate. complete, and current cost or pricing data to the contracting officer up until the time of price agreement. It is entirely possible that during the period of negotiations leading to price agreement the contractor, an affiliate, or a subcontractor may have been in possession of cost or pricing data that the contractor's negotiators did not know about and that the data holder did not recognize for what it was. For more than 30 years some contractor executives, who are at least as smart as Here_2_Help, have believed that after agreement, but before certifying and signing a contract, they should make one final check to try to sweep up any cost or pricing data that may have been laying around during negotiations but that were not submitted for one reason or another. Just to be safe. In most cases the contract won't be signed until the CO gets the certificate, and no liability attaches until a contract is signed in any event, so if the contractor finds some latent cost or pricing data they can hand it over to the government to consider before a contract is signed. That can avoid a whole lot of trouble.

Yet now DOD wants to intimidate contractors into signing a certificate of current cost or pricing data before they feel certain that they will be signing truthfully. Why? Because the government wants to speed up it's self-constipated processes. Any contractor thinking of going along when they're not comfortable about it should read some of the literature on defective pricing and some of the case histories.

Now here is some assigned reading. The literature on defective pricing is huuuuge. I'm taking the time to type out a few titles and quotes for you (and others) because I want my critics to have a clue. The following two articles were written in the late 1980s, about the time that contractors started to adopt the "sweep" procedure:

Overly, "Government Contractors Beware: Civil and Criminal Penalties Abound for Defective Pricing," Loyola of Los Angeles Law Review, April 1987:

Quote

Contractors seeking to do business with the government must be especially wary of the perils of defective pricing. Under the above criminal provisions, the Justice Department may be able to seek multiple indictments for the same defective pricing conduct. Submission of a false certification to the government may constitute a violation of 18 U.S.C. section 1001. The later submission of claims for payment, under such contract, may constitute false claims for money under 18 U.S.C. section 287. The Justice Department may also be able to allege a conspiracy under 18 U.S.C. section 371 on the basis that the claims being submitted are part of a contractor's scheme to defraud the government into paying an inflated contract price. If the contractor transmits its certification or contract claims by mail or wire, it could also be charged with mail or wire fraud under 18 U.S.C. sections 1341 or 1343. Finally, civil provisions of the False Claim Act (31 U.S.C. section 3729) may also apply to what in essence amounts to inadvertent defective pricing.

Shirk et al., "Truth or Consequences: Expanding Civil and Criminal Liability for The Defective Pricing of Government Contracts," Catholic University Law Review, Summer 1988:

Quote

The same acts establishing liability under the Truth in Negotiations Act are increasingly giving rise to civil and criminal liability under the various federal false claims and false statements statutes. Not all violations of the Truth in Negotiations Act constitute violations of the false claims or false statements statutes. A scienter requirement, establishing the intent of the contractor to submit defective cost or pricing data to the government, must be shown to establish liability for false claims or false statements but the same element is not required to establish liability under the Truth in Negotiations Act. Nevertheless, the line between Truth in Negotiations Act violations requiring no element of intent, and false claims or false statements violations requiring an element of intent has been blurred significantly. False claims and false statements statutes which formerly required proof of specific intent to defraud or actual knowledge of false submissions now merely require proof of reckless disregard for or deliberate ignorance of the truth or falsity of a claim or statement.

Yikes!

This is from the early 1990s:

Godinich, Jr., "Expanding Criminal Liability for Fraud Arising from Defective Pricing of Government Contracts," Houston Lawyer, May/June 1993:

Quote

Congress has clearly expressed a desire to punish those who defraud the government and to insure the United States is compensated fully for the consequences of such fraud. The hard line attitude taken toward prosecuting and punishing government contract fraud in recent years is here to stay. Actions by contractors are now being treated as criminally fraudulent, and contractors can expect this to continue for the foreseeable future. Business and industry should recognize that a stronger commitment to investigation and punishment of fraud by the government is a reality and that effective internal policing is now essential to avoid the severe criminal sanctions at the government's disposal.

See also Bodenheimer, Litigation and Proof in Defective Pricing Cases, 15-3 Briefing Papers 1 (April 2015).

(David Bodenheimer was one of the contractor attorneys in the ASBCA litigation of the United Technologies case. He is also the author of Defective Pricing Handbook, 2017-2018 ed.)

And see Sanders, Apogee Consulting, TINA Sweeps and Defective Pricing (2017), in two parts:

http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=1265:tina-sweeps-and-defective-pricing-part-1-of-2&catid=1:latest-news&Itemid=55

http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=1266:tina-sweeps-and-defective-pricing-part-2-of-2&catid=1:latest-news&Itemid=55

Finally:

Tony Bones said:

That said, I really wish I had the chance to negotiate with a Vern Edwards back in the day... it is so easy to rile him up.

To quote an Army buddy of mine from Oklahoma, in words uttered in 1966 in Vietnam somewhere to the southeast of Pleiku: "You'd rather sandpaper a wildcat's ass in a telephone booth."

By the way, Tony Bones, rejecting or trying to diminish my argument on the basis of my current status as a small time contractor who never has to submit cost or pricing data and has nothing personal at stake is a case of the ad hominem fallacy. Argue against the argument, not the person making the argument.

Bada bing... bada boom.

here_2_help said:

15.407-1 Defective certified cost or pricing data.

*****

(b)(1) If, after award, certified cost or pricing data are found to be inaccurate, incomplete, or noncurrent as of the date of final agreement on price or an earlier date agreed upon by the parties given on the contractor's or subcontractor's Certificate of Current Cost or Pricing Data, the Government is entitled to a price adjustment, including profit or fee, of any significant amount by which the price was increased because of the defective data.

The first date is the date of price agreement; the second date is the effective date on the CCCPD. The dates do not have to be the same. For example, if the date of price agreement was 1 June but the contractor's final sweep was 28 May, then the parties could agree that the certification date is 28 May ... and any new cost or pricing data that arises between 28 May and 1 June is irrelevant to a determination that the contractor defectively priced.

I don't know why this is hard. It doesn't have to be.

Some of the apparent confusion might be due to terminology. When the parties agree to insert a date on the certificate other than the date of price agreement, that date is called the "closing" or "cutoff" date. Nowhere in FAR Part 15 is it referred to as the "effective date." Here is the language of the certificate, from FAR 15.406-2(a):

Quote

This is to certify that, to the best of my knowledge and belief, the cost or pricing data (as defined in section 2.101 of the Federal Acquisition Regulation (FAR) and required under FAR subsection 15.403-4) submitted, either actually or by specific identification in writing, to the Contracting Officer or to the Contracting Officer's representative in support of ________* are accurate, complete, and current as of ________**. This certification includes the cost or pricing data supporting any advance agreements and forward pricing rate agreements between the offeror and the Government that are part of the proposal.

The date to be inserted in the space before the two asterisks is either the date of price agreement or an earlier date agreed upon by the parties. See this note to the certificate text:

Quote

** Insert the day, month, and year when price negotiations were concluded and price agreement was reached or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price.

And see FAR 15.406-2(c):

Quote

(c) The contracting officer and contractor are encouraged to reach a prior agreement on criteria for establishing closing or cutoff dates when appropriate in order to minimize delays associated with proposal updates. Closing or cutoff dates should be included as part of the data submitted with the proposal and, before agreement on price, data should be updated by the contractor to the latest closing or cutoff dates for which the data are available. Use of cutoff dates coinciding with reports is acceptable, as certain data may not be reasonably available before normal periodic closing dates (e.g., actual indirect costs). Data within the contractor’s or a subcontractor’s organization on matters significant to contractor management and to the Government will be treated as reasonably available. What is significant depends upon the circumstances of each acquisition.

In FAR 15.407-1 and FAR 52.215-10, the date on the certificate is referred to as the "as of date."

H2H,  I was was wondering when you would chime in. Thanks for your viewpoint.

I am somewhat familiar with one of the companies that you once worked for.  😄

here_2_help said:

Vern and I have debated this issue (privately) in the past. I maintain that post-price agreement sweeps are essentially worthless because they don't mitigate defective pricing risk, which ends on the date of price agreement

It is true that defective pricing risk ends on the date of price agreement or on an earlier date agreed to by the parties. But the problem is latent data in the possession of someone on the contractor's side that was not recognized as such before price agreement. Remember, the liability for defective pricing is not limited by the personal knowledge of the contractor's negotiators. If anyone anywhere in the company had cost or pricing data prior to price agreement that was not submitted to the government, the contractor will have committed defective pricing. Moreover, some matter might arise at some point during price negotiations that make something cost or pricing data that was not cost or pricing data before the matter arose---perhaps a change to the statement of work. If others are not notified of the change, they might possess cost or pricing data before price agreement that they do not recognize as such before the contract is signed.

In short, I don't agree that post agreement sweeps are "essentially worthless." Moreover, a lot of very smart people have thought for more than 30 years that post agreement sweeps are a best practice. I'm not about to say that they're fools. Contractors conduct sweeps because they are risk averse. As I pointed out earlier, they don't seem to like them any better than the government. If they did not think sweeps were in their own best interests I do not think they would do them. A sweep is a precaution.

In any case, there would be fewer government complaints about sweeps if the government's internal processes weren't so constipated and slow. Physician, heal thyself. (Did Pepe already say that?)

joel hoffman said:

I am somewhat familiar with one of the companies that you once worked for.  😄

Given that I spent more than a decade in the E&C industry, and then several years consulting to that industry, I'm pretty sure you are somewhat familiar with more than one of the companies I once worked for.

Tony Bones said:

Some of Vern's previous comments mention a cut-off date. Yes, that is the contractor's preferred way of speeding up this process, which explains why Mr. Edwards would advocate for this (Yes, Mr. Edwards, I know you used to work for the Government and know everyone better than anyone else; we get it. Going after Joel for his biographic information is a bit disingenuous, since you are constantly bringing up who you know... no offense, I just think you're being a bit unfair to him) However, I don't think a cut-off date makes sense at all. If the Government is going to give up its right to current data that could impact negotiations/final price, what do we get in return other than a faster award? Why should we compensate the contractor for their business deficiencies? Why does this make sense? I am curious, because I have never heard a good argument for a cut-off date. Yet, here we are. If anyone can make the case, it's Mr. Vern Edwards. Despite my earlier teasing, I respect you a ton, and I'm interested to hear what you have to say.

@Tony Bones Tony, going over my long response to you, it seems to me that I did not answer your question: "Why does [a cut-off date] make sense?" So, as punishment for your more snarkey remarks, I'm going to explain some more.

The best way to understand the argument for cut-off dates is to read Defective Pricing Handbook by David Bodenheimer. I'm looking at the 2012-2013 edition, Chapter 5, "Reasonable Availability of Cost or Pricing Data." There is a newer, 2017-2018 edition.

Here is as simple and short an explanation as I can write:

Contractor's must disclose cost or pricing data that are reasonably available to it for disclosure. You have to connect availability and disclosure. Data may exist within a company, but it takes time to identify and process it for disclosure. The process of going from identification to disclosure is not instantaneous. Bodenheimer refers to this time as "lag time." Here is an illustration and explanation from a famous 1967 defective pricing case:

Quote

We take up now what constitutes reasonable availability. The contracting officer found that in appellant's organization the time lag from receipt of a vendor's quotation and its posting or recording was two weeks to a month. The record indicates that the recognized method of checking prices under the make-buy structure was to examine ‘buy-cards' in the Purchasing Department and extract from them the latest purchase order prices or vendors' quotations. Thus a new price or quotation would not be available on the buy-card until two weeks to a month after the date of the purchase order or quotation. After the new data was entered on the buy-card the enormity of the task of rechecking all the pricing data involved in preparing such a complicated cost estimate would have prevented appellant from extracting the new pricing data as soon as it was entered on the buy-card. The record shows that 30 to 60 days was required for making a cost estimate on missile guidance sets, and there was not more reason for appellant rechecking pricing data on the make-buy structure than for rechecking the multitudinous other pricing data involved in preparing the cost estimate. The Government's own record of negotiations shows that consideration was given to cost experience through mid-August, which would seam to indicate that cost experience data after mid-August was not considered reasonably available by the Government negotiators.

American Bosch Arma Corp., ASBCA 10305, 65-2 BCA ¶ 5280. Of course, today's computer systems reduce the time lag.

Bodenheimer identifies two kinds of lag time, "availability lag time," which it the time required to compile and disclose data, and "organizational lag time," which is the time required to locate, identify, and process data existing in other parts of a large corporation. Cut-off or closing dates are supposed to take such lag times into account. How long a lag time should be allowed? That is a matter for negotiation.

Keep in mind that the definition of cost or pricing data is very broad. It includes more than accounting data:

Quote

“Cost or pricing data” (10 U.S.C. 2306a(h)(1) and 41 U.S.C. chapter 35) means all facts that, as of the date of price agreement, or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price, prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental; and are verifiable. While they do not indicate the accuracy of the prospective contractor’s judgment about estimated future costs or projections, they do include the data forming the basis for that judgment. Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include, but are not limited to, such factors as—

(1) Vendor quotations;

(2) Nonrecurring costs;

(3) Information on changes in production methods and in production or purchasing volume;

(4) Data supporting projections of business prospects and objectives and related operations costs;

(5) Unit-cost trends such as those associated with labor efficiency;

(6) Make-or-buy decisions;

(7) Estimated resources to attain business goals; and

(8) Information on management decisions that could have a significant bearing on costs.

Emphasis added.

Not all of those data are going to be readily identifiable as cost or pricing data and processable as such through accounting IT systems. Look particularly at items (3), (4), (7), and (8).

So cut-off and closing dates are an accommodation. You can agree to a reasonable cut-off or closing date in recognition of a reasonable lag time or you can wait for the results of a sweep. It's up to you. Choose.

The government has no authority, legal or moral, to force a contractor to sign a certificate before it feels reasonably certain that it will be telling the truth. It's not a matter of giving up the government's "right" to data and getting something in return. For the government it is a matter of deciding how much uncertainty to accept when negotiating a price. For the contractor it is a matter of how much risk to take of defective pricing litigation and even fraud prosecution.

Vern, I don’t see the relevance of the American Bosch Arma case from the mid- 1960’s era, keeping in mind that the circumstances occurred even before the year of the decision.  

A valid question would be whether or not contractors can reasonably establish estimating and accounting systems that can provide data to managers and project controls personnel in real time or near real time, etc. to provide current cost or pricing data to a contractor’s negotiation team and to the government’s contract administrators. 

I think the memo may be aimed at forcing improved estimating and accounting systems and management practices. 

Many (most?) pricing actions in design and construction contracts that would involve cost or pricing data occur on larger contracts.  Contractors  who are qualified to win such contracts now days are likely to have internal earned value management systems for managing costs, estimating and quantity takeoff’s, production, productivity, etc. It is essential not only for cost contracts but for FFP contracts, as well. 

The major systems contracts that I worked on not only included hundreds of millions of dollars of design and construction (FFP or cost reimbursement on different projects) but even more hundreds of millions of dollars of cost major services to test, systemiize train and operate major chemical weapons disposal plants. So, modern earned value management systems are used in design, construction, and services these days, whether or not they are required by the contract. 

In order to speed up acquisition times, It may be time to force the issue.

joel hoffman said:

Vern, I don’t see the relevance of the American Bosch Arma case from the mid- 1960’s era, keeping in mind that the circumstances occurred even before the year of the decision.

The relevance of the quote from American Bosch is illustrative. The quote sheds light on the concept of lag time. I would have thought you could see the relevance of that illustration, but apparently not.

I think the point you tried to make is that modern IT systems can reduce lag time. I agree.

My point is that information lag time in the sixties has much less relevance in comparison with the capabilities of today’s information management and project management systems used in Industry and commerce. 

Edit: The above comment was in response to:

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Hi joel hoffman, 
Vern Edwards has posted a comment on a topic, Policy Memo on TINA Sweeps - Referenced Spector Memo   

Vern Edwards said:

joel hoffman said:

Vern, I don’t see the relevance of the American Bosch Arma case from the mid- 1960’s era, keeping in mind that the circumstances occurred even before the year of the decision.  

The relevance is the illustration of the concept of lag time. I would have thought you could see the relevance of that illustration, but apparently not.

The rest of your post is more of your personal experience stuff and irrelevant musings, which I don't find interesting or persuasive in this discussion.

joel hoffman said:

The major systems contracts that I worked on not only included hundreds of millions of dollars of design and construction (FFP or cost reimbursement on different projects) but even more hundreds of millions of dollars of cost major services to test, systemiize train and operate major chemical weapons disposal plants. So, modern earned value management systems are used in design, construction, and services these days, whether or not they are required by the contract.

Of what use is that kind of chatter?

I have considerable personal experience with TINA, but I don't cite it to make my arguments. My personal experience has led me to feel a certain way about TINA and defective pricing, but I don't think my experience supports my argument. All you keep doing is stating the purpose of the memo and then writing something about something you worked on. Well, the purpose of the memo is clear on its face, and I don't not find that purpose, or your personal experience, to be justification for the policy.

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Vern Edwards said:

Physician, heal thyself. (Did Pepe already say that?)

Yes, great frogs think alike.

Vern Edwards said:

government wants to speed up it's self-constipated processes

😆🤣😅 Consider this phrase stolen! Great description of federal acquisitions and contracting. 

For everyone reading this thread and thinking about TINA sweeps...

Consider what it's like to have skin in this game, which precludes federal employees. PepeTheFrog is talking about the contractor employees who are responsible for defective pricing and false claims issues. 

You're the Director of Important Things at Giant Defense Contractor (GDC) and you certify cost and pricing data for GDC. Consider the cases Vern Edwards shared, and consider the immense risk and liability with certifying. You preside over five divisions in five different states, and you're now told that your TINA sweep must be five days. Does that change your opinion of this memo? (Even if Shay Assad, one person who used to have skin in this game and now sits in a federal employee position at Department of Defense, wrote the memo?)

joel hoffman said:

My point is that information lag time in the sixties has much less relevance in comparison with the capabilities of today’s information management and project management systems used in Industry and commerce. 

Edit: The above comment was in response to the email notification that I just read. I didn’t see the above edit by Vern but my point is the same. 

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Hi joel hoffman, 
Vern Edwards has posted a comment on a topic, Policy Memo on TINA Sweeps - Referenced Spector Memo   

Vern Edwards said:

joel hoffman said:

Vern, I don’t see the relevance of the American Bosch Arma case from the mid- 1960’s era, keeping in mind that the circumstances occurred even before the year of the decision.  

The relevance is the illustration of the concept of lag time. I would have thought you could see the relevance of that illustration, but apparently not.

The rest of your post is more of your personal experience stuff and irrelevant musings, which I don't find interesting or persuasive in this discussion.

joel hoffman said:

The major systems contracts that I worked on not only included hundreds of millions of dollars of design and construction (FFP or cost reimbursement on different projects) but even more hundreds of millions of dollars of cost major services to test, systemiize train and operate major chemical weapons disposal plants. So, modern earned value management systems are used in design, construction, and services these days, whether or not they are required by the contract.

Of what use is that kind of chatter?

I have considerable personal experience with TINA, but I don't cite it to make my arguments. My personal experience has led me to feel a certain way about TINA and defective pricing, but I don't think my experience supports my argument. All you keep doing is stating the purpose of the memo and then writing something about something you worked on. Well, the purpose of the memo is clear on its face, and I don't not find that purpose, or your personal experience, to be justification for the policy.

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PepeTheFrog said:

For everyone reading this thread and thinking about TINA sweeps...

Consider what it's like to have skin in this game, which precludes federal employees. PepeTheFrog is talking about the contractor employees who are responsible for defective pricing and false claims issues. 

You're the Director of Important Things at Giant Defense Contractor (GDC) and you certify cost and pricing data for GDC. Consider the cases Vern Edwards shared, and consider the immense risk and liability with certifying. You preside over five divisions in five different states, and you're now told that your TINA sweep must be five days. Does that change your opinion of this memo? (Even if Shay Assad, one person who used to have skin in this game and now sits in a federal employee position at Department of Defense, wrote the memo?)

It should be apparent that the ability to conduct effective, timely, TINA sweeps is a competitive advantage. That has always been the case, but the recent Assad memo should make it blindingly clear.

Litigation avoidance as a competitive advantage in the marketplace. Think about it.

PepeTheFrog said:

PepeTheFrog is talking about the contractor employees who are responsible for defective pricing and false claims issues.

Pepe, I'm glad you brought this up.  Much of the earlier discussion here has focused on the contractor.  However, the individual signing the certificate has personal exposure for false statements, and other potential criminal activity.  DoJ loves procurement certificates because it gives them a person to put the squeeze on in regard to potential corporate liability.  (Years ago, congress passed a law requiring agencies to eliminate unnecessary procurement certifications.  I had to review certifications that were of interest to my agency.  The DoJ attorney working the issue for DoJ specifically mentioned that DoJ wanted to minimize the number of certifications that were eliminated because it reduced its opportunity to have a person to go after.) You can't put a corporation in jail, but you can put a person in jail.

As for Vern's point about aggressive auditors or prosecutors, I once had an assistant U.S. attorney working a procurement fraud case tell me that he did not care if he was right or if he was wrong in regard to the case, the only thing he cared about was if he won.

here_2_help said:

It should be apparent that the ability to conduct effective, timely, TINA sweeps is a competitive advantage. That has always been the case, but the recent Assad memo should make it blindingly clear.

Litigation avoidance as a competitive advantage in the marketplace. Think about it.

H2H, you are going to have to explain this.  The requirement to submit certified cost or pricing data only applies when there is not adequate price competition.  That exception is getting narrower because of DoD unilateral action in the DFARS and the 2017 NDAA.  So I'm not sure what you mean when you refer to a competitive advantage?  Are you talking about competitive advantage in regard to other contractors or do you view conducting timely, effective sweeps as a competitive advantage in regard to the government?

joel hoffman said:

My point is that information lag time in the sixties has much less relevance in comparison with the capabilities of today’s information management and project management systems used in Industry and commerce.

IT management and project management systems have reduced lag time for firms that have them. It has not eliminated it.

But do you think that all DOD contractors that must submit cost or pricing data have such systems? Do you think that all subcontractors that must submit cost or pricing data to the prime have such systems? What percentage of them do? Boeing and Lockheed and such are not the only contractors who are affected by DOD's new policy. I'm not worried about them, because they'll tell DOD to stuff it.

Anyway, the author of the Defective Pricing Handbook, 2017 - 2018 ed. thinks there is still lag time, especially with respect to subcontractors, and he cites American Bosch as an illustration. Pardon me for taking his word for it.

here_2_help said:

It should be apparent that the ability to conduct effective, timely, TINA sweeps is a competitive advantage.

I don't know about competitive advantage. If there is competition, then there is no requirement for cost or pricing data. Cost or pricing data is required when there is no competition. Much of DOD's problem with sweeps is in connection with definitization of mods. In any case, I called around this morning to ask some people about their thinking about post-agreement sweeps. The people I spoke with considered them essential, because many subcontractors are not sophisticated or diligent about updating their cost or pricing data while the prime is negotiating. They are especially concerned about being charged with false claims.

Retreadfed said:

I once had an assistant U.S. attorney working a procurement fraud case tell me that he did not care if he was right or if he was wrong in regard to the case, the only thing he cared about was if he won.

I have always maintained that the motto of the Department of Justice is that they don't have to win the case in order to punish the contractor. They can just litigate them to death. They seem to have a bottomless budget with which to do so.

Anyway, I'm not going to waste time with Joel anymore, because he's a government retiree.

Vern Edwards said:

The people I spoke with considered them essential, because many subcontractors are not sophisticated or diligent about updating their cost or pricing data while the prime is negotiating.

Vern, is there a possible correlation between this issue and the points you are making in another discussion here concerning small business programs?  I am thinking specifically about small business subcontracting programs.

Retread:

No correlation intended or that I'm aware of.

Gee, I guess DOD is going to have to revise its Contract Pricing Reference Guides, Volume 4, Chapter 5:

Quote

Contractor Sweeps. Defective pricing could result, if any person in the contractor's organization knew that cost or pricing data submitted by the offeror were not accurate, complete, and current, when price negotiations were concluded and price agreement was reached or (if applicable) on another agreed-upon date. For example, defective pricing could occur if a subcontract buyer knew that a subcontractor intended to revise its proposal downward by $50,000, and failed to advise others in the prime contractor's organization.

To assure compliance with TINA requirements, many contractors have instituted programs for conducting extensive reviews of available cost or pricing data after negotiations are complete, but before submitting the Certificate of Current Cost or Pricing Data.

These reviews are commonly known as "sweeps."

The objective is to identify any new or revised data required to assure that all cost or pricing data are accurate, complete, and current.

The offeror then submits the new or revised data to the Government with the Certificate of Current Cost or Pricing Data.

In some cases, offerors have taken several months to complete a sweep for a single contract.

If a contractor requires more than 30 days to submit a Certificate of Current Cost or Pricing Data, the delay could indicate serious flaws in the contractor's estimating system. Consider the potential for such flaws as you analyze future cost proposals. I wonder if the memo should have been published in the Federal Register as a proposed change to the DFARS.

I wonder on what basis they shortened the time to five business days. I wonder if business days means government business days or industry business days. I wonder if the memo should have been published in the Federal Register. See 41 USC 1707:

Quote

(a) Covered policies, regulations, procedures, and forms.--

(1) Required comment period.--Except as provided in subsection (d), a procurement policy, regulation, procedure, or form (including an amendment or modification thereto) may not take effect until 60 days after it is published for public comment in the Federal Register pursuant to subsection (b) if it--

(A) relates to the expenditure of appropriated funds; and

(B)(i) has a significant effect beyond the internal operating procedures of the agency issuing the policy, regulation, procedure, or form; or

(ii) has a significant cost or administrative impact on contractors or offerors.

(2) Exception.--A policy, regulation, procedure, or form may take effect earlier than 60 days after the publication date when there are compelling circumstances for the earlier effective date, but the effective date may not be less than 30 days after the publication date.

(b) Publication in Federal Register and comment period.--Subject to subsection (c), the head of the agency shall have published in the Federal Register a notice of the proposed procurement policy, regulation, procedure, or form and provide for a public comment period for receiving and considering the views of all interested parties on the proposal. The length of the comment period may not be less than 30 days.

(c) Contents of notice.--Notice of a proposed procurement policy, regulation, procedure, or form prepared for publication in the Federal Register shall include--

(1) the text of the proposal or, if it is impracticable to publish the full text of the proposal, a summary of the proposal and a statement specifying the name, address, and telephone number of the officer or employee of the executive agency from whom the full text may be obtained; and

(2) a request for interested parties to submit comments on the proposal and the name and address of the officer or employee of the Federal Government designated to receive the comments.

(d) Waiver.--The requirements of subsections (a) and (b) may be waived by the officer authorized to issue a procurement policy, regulation, procedure, or form if urgent and compelling circumstances make compliance with the requirements impracticable.

(e) Effectiveness of policy, regulation, procedure, or form.--

(1) Temporary basis.--A procurement policy, regulation, procedure, or form for which the requirements of subsections (a) and (b) are waived under subsection (d) is effective on a temporary basis if--

(A) a notice of the policy, regulation, procedure, or form is published in the Federal Register and includes a statement that the policy, regulation, procedure, or form is temporary; and

(B) provision is made for a public comment period of 30 days beginning on the date on which the notice is published.

(2) Final policy, regulation, procedure, or form.--After considering the comments received, the head of the agency waiving the requirements of subsections (a) and (b) under subsection (d) may issue the final procurement policy, regulation, procedure, or form.

Retreadfed said:

H2H, you are going to have to explain this.

Actually, no. I do not have to explain it.

As a hint, you might consider looking at the quote to which I was responding. I requoted it to show the context of my statement. If the context is not clear then there's nothing else I can do.

There is no apparent relationship between the quote and your statement.

On 6/13/2018 at 9:57 AM, here_2_help said:

I maintain that post-price agreement sweeps are essentially worthless because they don't mitigate defective pricing risk, which ends on the date of price agreement.

I do not understand that argument. Does anyone?

Vern Edwards said:

I do not understand that argument. Does anyone?

As I said on my first post on this thread, I'm not making an argument and I'm not trying to convince (or even persuade) anybody. I'm sorry if that disappoints you (or anybody else). You and I have been down this road before and we are, I suspect, largely talking past each other. For example, I use the phrase "competitive advantage in the marketplace" and your response is that "if there is competition there is no requirement for cost or pricing data." Non sequitur. It's obvious that I'm not communicating well and I take responsibility for that.

here_2_help said:

As I said on my first post on this thread, I'm not making an argument and I'm not trying to convince (or even persuade) anybody. I'm sorry if that disappoints you (or anybody else). You and I have been down this road before and we are, I suspect, largely talking past each other. For example, I use the phrase "competitive advantage in the marketplace" and your response is that "if there is competition there is no requirement for cost or pricing data." Non sequitur. It's obvious that I'm not communicating well and I take responsibility for that.

Welcome to the club.  😄

here_2_help said:

For example, I use the phrase "competitive advantage in the marketplace" and your response is that "if there is competition there is no requirement for cost or pricing data." Non sequitur.

@here_2_help  Non sequitur? What does not follow from what?

My statement that if there is no competition there is no requirement for cost or pricing data was not supposed to follow from your statement about competitive advantage, like a conclusion follows from premises. It was a statement in response to something that at least two of us found to be obscure. How can there be a competitive advantage if there is no competition? Why is it too hard for you to explain? When Retread asked for an explanation, you said you don't have to explain. Well, if that's your attitude, why participate in a discussion forum?

On 6/13/2018 at 9:57 AM, here_2_help said:

I maintain that post-price agreement sweeps are essentially worthless because they don't mitigate defective pricing risk, which ends on the date of price agreement.

I don't get that.

Defective pricing risk does not end on the date of price agreement. What ends on the date of price agreement is the obligation to submit available cost or pricing data. Risk remains until the contractor verifies that all cost or pricing data that were available before price agreement were, in fact, submitted, assuming that verification is possible. A post agreement sweep is done in order to try to find any cost or pricing data that were available before price agreement, and that should have been submitted, but that inadvertently were not. It is due diligence before signing a certificate and a contract, and as such it reduces (mitigates) the risk of defective pricing. Corporate executives owe it to their stockholders to protect their companies from defective pricing and possible false claims litigation and penalties. Would it be better to have found the data and submitted them before price agreement? Yes, but organizations, people, and processes are not perfect. Every executive must decide whether the sweep process is worthwhile in light of the risk.

If I have misunderstood you, you could straighten me out with an explanation. But your attitude seems to be that you'll say what you want and explanations be damned. Well, so be it.

As for Joel's club, he must mean the Club of Irrelevant Recollection and Chatter.

Prime contractors continue to face some risk of defective pricing even after contract award.  See FAR 15.407-1(f)(2).

On 6/15/2018 at 4:35 AM, here_2_help said:

It should be apparent that the ability to conduct effective, timely, TINA sweeps is a competitive advantage. That has always been the case, but the recent Assad memo should make it blindingly clear.

Litigation avoidance as a competitive advantage in the marketplace. Think about it.

Vern asks the questions; “How can there be a competitive advantage if there is no competition? Why is it too hard for you to explain? 

How long do we assume stasis? Does anyone take issue with the idea that the ability to deliver a sole source solution is a competitive advantage for a business and is subject over time to pressures of the marketplace? Compettve advantage is a useful analytical tool and is in my view not misapplied here. 

Monopoly, competition, competitive  advantage, barriers to entry, the principle of substitution.... conceptually this is pretty basic B-School stuff.  Think patents, data rights and a myriad of other real world  situations...should we fail to recognize, or disregard the useful concept “competitive advantage” or perhaps insist that it be renamed before discussing the short run case of its limit (upper bound) which is monopoly or sole source? I don’t think so.

FAR-flung, H2H mentioned two types of competitive advantage:  (1) "the ability to conduct effective, timely, TINA sweeps" and (2)  "Litigation avoidance as a competitive advantage in the marketplace."  If you have any idea what he was talking about in either case, maybe you can explain it to us mere mortals.

Retreadfed,

These two ideas ((1) "the ability to conduct effective, timely, TINA sweeps" and (2)  "Litigation avoidance as a competitive advantage in the marketplace.") seem very clear to me and I am not sure why they may not seem clear to others.  My first guess is that treating them specifically will not help, but that discussing a possible difference in our viewpoints might.

I think some others may treat the word string competitive advantage in serial fashion where I see it as a single term ( a composite or term of art). When treated as two separate words "competitive" remains a strict qualifier which then minimizes the word "advantage"..such a reading would lead one down a certain alley...I can visit that alley, but I know another one that has a certain advantage I'll now discuss (pun intended).   

Instead, I understand the composite of these two words "competitive advantage" to be a term itself; it is a valuable concept and an analysis tool...Valuable and specialized enough, I guess, to call it a "term of art."  For this reason I am unconcerned about using the term in the limit case of a single source...this because in many instances, this very limit case was a precise aim of the business' pursuit of a competitive advantage...and as a result is sometimes the short run result of a business' successful focus.  

If none of that helps them maybe we could next look at the various kinds of competitive advantage to see the term at work. There are many kinds of competitive advantage...I started with a mention of just two examples: patents and data rights both may form the basis on which a business may legally hold rights that exclude or limit the competition it faces in the marketplace.  I think it is one of the most valuable ideas for the proprietors of any business to know what sets their business apart in the marketplace in general and in an individual transaction in particular.  Of course there are other concepts, market forces, and constraints to consider, but competitive advantage is an important one .

On 6/14/2018 at 12:35 PM, here_2_help said:

It should be apparent that the ability to conduct effective, timely, TINA sweeps is a competitive advantage.

Competitive advantage arises from certain qualities among companies that contend with one another for business. A particular quality is a competitive advantage for a company if it is a quality that will prompt customers to prefer it or its products to others.

Cost or pricing data must be submitted in non-commercial acquisitions when there will not be adequate price competition, prices set by law or regulation, or a waiver. It is in such acquisitions that timely sweeps might become a matter of concern. But such acquisitions usually occur when the customer is seeking a particular technical quality that outweighs all other prospective sources of competitive advantage. See e.g. FAR 6.302-1(a)(2)(i):

• a unique or innovative concept,
• a unique capability,
• a concept or services not otherwise available; or
• follow-on positioning.

In such cases the technical quality/source of advantage trumps all others.

Thus, in those cases in which cost or pricing data must be submitted and sweep delays might be an issue, the quality of being able to complete sweeps in a timely manner is outweighed by technical qualities and will not be a source of competitive advantage, at least not in the short term. Whether in the long term the customer would seek other sources in order to get faster sweeps is a matter of conjecture, but seems unlikely if the technical quality continues to be the only or principal source of competitive advantage.

If two or more companies could compete on the basis of their technical qualities, then the ability to complete sweeps in a timely manner would be irrelevant, because there would be adequate price competition, which would eliminate the need for cost or pricing data.

Companies that deal in the government market tend to know the sources of competitive advantage, and I doubt that DOD would have had to issue its memo if timely completion of sweeps were such a source.

I would be open to consideration of H2H's assertion about competitive advantage if he would make a persuasive argument, but he considers that to be beneath him or beyond his abilities. Based on what I am able to work out in my limited way, not only is it not "apparent" that the ability to complete sweeps in a timely manner is a competitive advantage, I cannot see how it would be so.

Vern,

I would appreciate it if you would refrain from speculation regarding my motivation for declining to engage further in this discussion. Some might say that your last comment about my motives is in violation of Rule #1 of this Forum. Knowing you, I know it wasn't an intentional affront.

Also, it is not clear to me as to over whom the contractor is gaining a competitive advantage.  A competitive advantage can arise in regard to a party with whom negotiations are being conducted.  The purpose of requiring contractors to submit certified cost or pricing data is to eliminate a supposed competitive advantage contractors have over the government in regard to the ability to make judgments concerning what would be a fair and reasonable price.  In the pre-award context, if cost or pricing data is not submitted until after agreement on price, the contractor may have a competitive advantage over the government in regard to whether the price agreed to should stand.  If the contracting officer believes negotiations should be reopened to allow the government to seek a lower price, there is little incentive, in the present case, for the contractor to agree.  Thus, the government can be faced with either accepting a price it believes is too high, or foregoing acquiring the supplies or services it needs.

Quote

RULES:

1. No personal attacks on another individual user. Personal attacks DO NOT include a disagreement with another poster's views. Users understand that professional disagreement and professional argument are a part of the learning process. Personal attacks include such things as calling a poster ignorant, unprofessional, etc. These posts will be removed or edited as soon as they are seen.

@here_2_help I didn't speculate. I asserted. I think a speculation would have begun with something like, I wonder if...  (Can you personally attack an anonymous person?)

I asserted that you thought it was beneath you to argue or that you felt you didn't have a good argument. Those were reasonable assertions and should not be insulting. In any case, you're right. I did not mean to affront you. Just goad you. It didn't work, I see.

On ‎6‎/‎14‎/‎2018 at 9:43 AM, Vern Edwards said:

@Tony Bones Tony, going over my long response to you, it seems to me that I did not answer your question: "Why does [a cut-off date] make sense?" So, as punishment for your more snarkey remarks, I'm going to explain some more.

The best way to understand the argument for cut-off dates is to read Defective Pricing Handbook by David Bodenheimer. I'm looking at the 2012-2013 edition, Chapter 5, "Reasonable Availability of Cost or Pricing Data." There is a newer, 2017-2018 edition.

Here is as simple and short an explanation as I can write:

Contractor's must disclose cost or pricing data that are reasonably available to it for disclosure. You have to connect availability and disclosure. Data may exist within a company, but it takes time to identify and process it for disclosure. The process of going from identification to disclosure is not instantaneous. Bodenheimer refers to this time as "lag time." Here is an illustration and explanation from a famous 1967 defective pricing case:

American Bosch Arma Corp., ASBCA 10305, 65-2 BCA ¶ 5280. Of course, today's computer systems reduce the time lag.

Bodenheimer identifies two kinds of lag time, "availability lag time," which it the time required to compile and disclose data, and "organizational lag time," which is the time required to locate, identify, and process data existing in other parts of a large corporation. Cut-off or closing dates are supposed to take such lag times into account. How long a lag time should be allowed? That is a matter for negotiation.

Keep in mind that the definition of cost or pricing data is very broad. It includes more than accounting data:

Emphasis added.

Not all of those data are going to be readily identifiable as cost or pricing data and processable as such through accounting IT systems. Look particularly at items (3), (4), (7), and (8).

So cut-off and closing dates are an accommodation. You can agree to a reasonable cut-off or closing date in recognition of a reasonable lag time or you can wait for the results of a sweep. It's up to you. Choose.

The government has no authority, legal or moral, to force a contractor to sign a certificate before it feels reasonably certain that it will be telling the truth. It's not a matter of giving up the government's "right" to data and getting something in return. For the government it is a matter of deciding how much uncertainty to accept when negotiating a price. For the contractor it is a matter of how much risk to take of defective pricing litigation and even fraud prosecution.

Oy,

Well, it's only fair that I take some blame here.

When I wrote my initial post, I assumed everyone knew that cut-off dates made perfect sense for industry. The question should have been: "Why does a cut-off date make sense for the Government?*" and then, "*'Earlier Award Date' is not an acceptable answer." I would include this caveat because the price for that earlier award date probably isn't worth it.

If I was a contractor and the Government agreed to a cut-off date, my first thought would be, "I guess I'm in the market for yachts now?!" Perhaps that's why Mr. Edwards is promoting this idea? Do you need a yacht to fit in with all your contractor friends, sir? I mean, I have heard that people collect exotic animals to keep up with the extravagant purchases of their peers, so why not yachts? Or, maybe you have your eye on a certain, special giraffe?

Random Thought: If the business practices of private industry are as efficient as everyone says they are, I am surprised that lag times pose such a huge problem. I know, I don't understand what industry is like, do I? I cannot even begin to imagine how hard it is to be a business in the U.S., especially those that work with the DoD. Is it the cash flow? Is the financing too good? The Government certainly doesn't do enough to accommodate industry, that's for sure. 

What's your concern, Contractor Vern? The memo is toothless. Contractors aren't going to start certifying within five business days. However, the memo, flawed as it is, draws attention to an issue that can have a huge impact on schedule to award. The attention given to the issue in this memo has allowed my program to begin having constructive conversations with our contractors on how data sweep timelines can be reduced.

Maybe you're mad DPAP stated that maybe, just maybe, industry is responsible for some schedule delays? That schedule slips aren't always the Government's fault? Is that the problem? The outrageous idea that industry can have a negative impact on schedule, just like the Government?

I wonder. You are an interesting fellow, Vern.

Oh, and you spelled snarky wrong. There is no "e" in the word.

Ha, I'm just joking around with you Vern... I hope you know this. You're awesome and I had a lot of fun.

@Tony Bones You're right about snarky. Damn! But thanks for the spell check. 😎

See the following at Federal News Radio:

https://federalnewsradio.com/defense-main/2018/05/aiming-to-speed-procurements-dod-wants-to-reduce-data-demands-on-contractors/

On 6/18/2018 at 12:10 PM, FAR-flung 1102 said:

These two ideas ((1) "the ability to conduct effective, timely, TINA sweeps" and (2)  "Litigation avoidance as a competitive advantage in the marketplace.") seem very clear to me and I am not sure why they may not seem clear to others.

PepeTheFrog agrees

On 6/18/2018 at 2:00 PM, Retreadfed said:

Also, it is not clear to me as to over whom the contractor is gaining a competitive advantage.

its competitors

On 6/18/2018 at 1:16 PM, Vern Edwards said:

A particular quality is a competitive advantage for a company if it is a quality that will prompt customers to prefer it or its products to others.

This is true, but your definition is too narrow. A competitive advantage is also a condition or circumstance that puts a company in a favorable or superior business position. PepeTheFrog is surprised @here_2_help 's comment drew any criticism or questions.

-efficient, responsive, accurate financial systems (ability to conduct effective, timely TINA sweeps)

-internal legal, compliance, risk controls (litigation avoidance)

Both of these lead to competitive advantages. Both of these help with TINA sweeps and mitigate legal risk. The conditions that allow a company to conduct efficient TINA sweeps create competitive advantages. How is any of this controversial?

On 6/18/2018 at 1:16 PM, Vern Edwards said:

Based on what I am able to work out in my limited way, not only is it not "apparent" that the ability to complete sweeps in a timely manner is a competitive advantage, I cannot see how it would be so.

PepeTheFrog has much deeper faith in your imagination if you allow it to wander beyond the boundaries you set to state your case. The conditions that lead to a company's ability to complete sweeps in a timely manner is a competitive advantage, right?

@PepeTheFrog Pepe, all you have done is repeat H2H's assertion without making an argument in its support accompanied by evidence or based on sound theory. It is not enough to say that something or other is a competitive advantage, you must explain on whom the advantage it works and how it works. 

Some of you people think you can just say stuff and claim it's true without making an argument in support. Well, you can, but you won't get away with it as long as any of us can think and are willing to spend (or waste) time arguing with you. I'm not going to waste more time on this side issue. Go back and read my post of Monday at 10:16AM and then respond. That, or although it might seem early, perhaps it's time for you to hibernate.

Actually, to take H2H's approach, you don't have to do anything, but please don't waste our time with more yakkity yak.

(Tony, Did I spell yakkity right? Help!)

Vern Edwards said:

all you have done is repeat H2H's assertion without making an argument in its support accompanied by evidence or sound theory

Yeah, well, you know, that's just, like, your opinion, man. PepeTheFrog challenged your definition of competitive advantage, proposed another more inclusive definition, and offered conditions that lead to better TINA sweeps and litigation avoidance. PepeTheFrog did a little bit more than repeat. 

Does it go without saying that your post was accompanied by evidence and sound theory? "Sound theory," huh? Sounds like a topic for discussion.

Vern Edwards said:

you must explain on whom the advantage it works and how it works

its competitors

(these are obvious, but you asked)

faster response times

less overhead costs

less chance of negotiating a bad deal

more contracts in a faster amount of time

less lawsuits, fines, penalties, other bad consequences from litigation

Even in your narrow definition for competitive advantage, over time, this stuff leads to an ability to provide greater value, offer lower prices, or produce better products or services than other competitors. But you knew that!

If a company could gain a competitive advantage by performing faster TINA sweeps, wouldn't one (or more) have done so by now?

I'm still having trouble figuring out where the competitive advantage comes in in those situations where certified cost or pricing data are required.  In those situations there are no viable competitors over whom to gain an advantage.

PepeTheFrog said:

Yeah, well, you know, that's just, like, your opinion, man.

@PepeTheFrog Right.

Static vs. Dynamic Analysis

Snap Shot vs. Moving  Picture

Long Run vs. Short Run Considerations

Transactional vs. Strategic Analysis

That last distinction includes opportunity for recognition that a business can better succeed over its competitors over time.  Are we willing to consider what happens over time? 

Vern, it seems to me you are sticking to an analysis of the transaction and not what happens to the business over time. Why do so?

I do so because I want insight into what keeps a business competitive and in business.

When looking for analysis tools I’m not quick to exclude tools and techniques that may help. I’m looking to learn something I don’t already know...broadening my considerations, reversing or revising the assumptions and playing with definitions are all part of the tool box. I want a big tool box. 

It seems that making and advocating Policy positions is different...that’s where we narrow our considerations considerably; we use a few quality tools.  Policy requires decisions and advocacy and by implication, if not in fact, choosing winners and losers...hopefully with the opportunity for feedback and revision, since the feedback loop is the most important part of any iterative process.

On 6/22/2018 at 9:54 PM, FAR-flung 1102 said:

Vern, it seems to me you are sticking to an analysis of the transaction and not what happens to the business over time. Why do so?

@FAR-flung 1102 

Frankly, I have no idea what you are talking about.

Vern, I think this one’s to me not FrankJon...

Vern Edwards said:

@FrankJon Frankly, I have no idea what you are talking about.

Yep,it’s a conceptual thing. I m saying that something is missing. Like a lot of stuff, the missing parts may not be obvious until and unless we see what the thing can’t do.  

My point is that the view of competitive advantage that you have subscribed to scarifices or gives up something else which  may be very valuable...This need not be the case. 

I have tried to describe the term’s other implications, but I have failed. I’m not fatigued, but I’m not effective either. 

Thank you all for entertaining these thoughts.

@FAR-flung 1102How weird. You string together a series of loosely connected phrases and sentences like a Timothy Leary and then say that you've tried to describe something. It's Friday night and that makes it all right so what have you got to lose? Is that it? You have to work hard to develop an idea and communicate it to others. You are not putting in the work. I have not entertained any of your recent thoughts in this thread, because you have been incoherent.

Get some rest. Try again later.

@Vern Edwards, you're moving too fast. Though I'm sure I've done something since Friday that would provoke your criticism, posting in this thread was not one of those things.

@FrankJonYou''re right, FrankJon. My last two posts should have been addressed to FAR Flung 1102. I have edited them.

So I’ve been following this thread for some time and no one seems to have raised this aspect of potential unintended consequences.

According to the DPAP memo, a company which is habitually late in complying with the 5 day sweep policy is exhibiting signs of a defective estimating system and may be grounds for review.

many of the top DOD contractors have approved estimating systems, and in my experience, the presence of such a system usually positively affects management ratings in competitive proposals as well as cost realism adjustments. 

It seems as though a large contractor is stuck between the risk of missing something in its sweep and having to defend against a defective pricing claim, or possibly the loss of confidence in its estimating system which can be a competitive advantage in a competitive award. 

Given that many of these same companies have products and services they sole source to various DOD agencies while competing for other lines of business, this policy appears to be quite heavy handed to me. It’s almost like DPAP is threatening give me a certificate in five days or face  possible downgrade of one of your business systems and thereby potentially lose future business.