NDAA Implementation

Here is the section.

I found myself reading this in pirate voice

I’m not an attorney — but I say to follow the DFARS.

PepeTheFrog's opinion is that you should follow the FAR/DFARS in this case and as a general rule when similar situations arise.

Contracting officers can barely read and follow the FAR, so it's unreasonable to expect them to interpret and implement legislation, especially when there exists a system to implement the legislation into standard procurement regulations.

Even more, in this case, the law only directs DOD to change the regulations: "the Defense Federal Acquisition Regulation Supplement shall be revised."

I agree with ji and Pepe except if your agency decides by deviation to implement the NDAA now you in turn would have to follow the deviation.   My reasoning the statute as noted directs the DoD to change the regulations.   DoD has not changed the regulations and a CO and even the authorities noted in the NDAA language do not have the authority to change the DFARS unless they follow the deviation route.  You may want to ask your question in the agency beyond legal counsel.

Pepe and Carl:

Does the follwoing section of the law have meaning?

Quote

(b) Approval Requirement For Certain Cost-Type Contracts.—

(1) IN GENERAL.—A contracting officer of the Department of Defense may not enter into a cost-type contract described in paragraph (2) unless the contract is approved by the service acquisition executive of the military department concerned, the head of the Defense Agency concerned, the commander of the combatant command concerned, or the Under Secretary of Defense for Acquisition, Technology, and Logistics (as applicable).
(2) COVERED CONTRACTS.—A contract described in this paragraph is—

(A) a cost-type contract in excess of $50,000,000, in the case of a contract entered into on or after October 1, 2018, and before October 1, 2019; and
(B) a cost-type contract in excess of $25,000,000, in the case of a contract entered into on or after October 1, 2019.  (emphasis added)

Results:

Although legal were the ones originally raising this concern, they have since deferred to giving the DFARS precedence.  The Policy Team also agreed.  Common sense has won the day!

What else would sheep do?

Quote

Although legal were the ones originally raising this concern, they have since deferred to giving the DFARS precedence.  The Policy Team also agreed.  Common sense has won the day!

Also received confirmation from DASN(AP), stick to the DFARS.

bob7947 said:

What else would sheep do?

I don't think it has anything to do with being sheep (I am assuming sheep is meant to be an unflattering descriptor) -- staying with the DFARS for the time being is a prudent and entirely professional decision for a contracting officer.  If the Congress or the President are unhappy with DoD's process or compliance with the statute, they may raise that matter with the Department.

bob7947 said:

Pepe and Carl:

Does the follwoing section of the law have meaning?

Yes, it directs one agency in the Executive Branch, the Department of Defense, to change its procurement regulations and business practices. If there was no Defense Acquisition Regulations System or assortment of DFARS revision teams or Defense Pricing and Contracting or DFARS, then it would make sense for Congress to pass laws that directly, immediately control the behavior of DOD contracting officers. But that's not how the system has worked.

Congress delegated quite a bit of their legislative powers to the Executive Agencies in the form of rule-making, regulation, adjudication, and the rest of the Administrative Procedures Act smoke and mirrors. Similarly, Congress delegated quite a bit of their legislative powers to the Executive Agencies through the Office of Federal Procurement Policy Act. 

PepeTheFrog is pleased to see that bob7947 wants to eradicate the unconstitutional administrative state, neuter the oppressive federal regulatory agencies, and bring America back to the days of legislative accountability instead of the rise of the Deep State. For now, we will have to deal with unelected, tyrannical, elitist, and meddlesome Deep State bureaucrats. But don't worry, we are draining the swamp, slowly but surely.

In the meantime, contracting officers will wait for a deviation or for the FAR or DFARS to be revised.

I don't want to speak for Bob, but I see two separate requirements in the statute.  Subsection (a) requires DoD to change the DFARS to establish a preference for fixed price contracts.  Subsection (b) imposes an independent obligation on contracting officers in regard to cost reimbursement contracts.  (b) does not mandate DoD to do anything but is specifically directed at contracting officers.

Frog:

Quote

we are draining the swamp

There goes your habitat!

Here are my thoughts.

1. As I have written, there are too many changes in Defense contracting law every year,
2. Look at this page and read the Early Engagement Opportunity sections,
3. The regulators are falling behind under the legislative onslaught,
4. In these situations, to provide direction to the Defense contacting personnel, the USD's office must provide timely deviations to regulation.  It appears, this one slipped through the cracks.  You can search here to see if it was done and I missed it.

In Class Deviation 2018-00017 the USD's office wrote:

Quote

This class deviation remains in effect until it is incorporated in the DFARS

That, in the least, is what should have been done here.  Instead, the pirate encountered the problem.  As a result, the USD is violating the law, the pirate's advisors are violating the law, and the pirate is violating the law.  At least the pirate made sure his/her flak jacket is riding low.

Retread:

Quote

two separate requirements in the statute

Those are the two I saw.

bob7947 said:

As a result, the USD is violating the law, the pirate's advisors are violating the law, and the pirate is violating the law.

I might almost be convinced in a hard re-read of the language but are we (yep including myself now) sure?   

A full read says the CO can't do it "unless the contract is approved by the service acquisition executive of the military department concerned, the head of the Defense Agency concerned, the commander of the combatant command concerned, or the Under Secretary of Defense for Acquisition, Technology, and Logistics (as applicable)."   The OP has stated that the "DASN(AP)" said to go for it.   The DASN(AP) by my read is most likely the service acquisition executive of the military department (Navy?).  So if true in a full read the OP hasn't violated a law

Noting this what the DFAR will do is take the NDAA language and spider-web it into a most likely confusing and elongated approval process to do the contract.   The OP gets props from me in going to the right person, getting the ok, and moving on.

C Culham said:

The DASN(AP) by my read is most likely the service acquisition executive of the military department (Navy?).

Yarr, Deputy Assistant Secretary of the Navy (Acquisition and Procurement)

"The DASN AP serves as the Navy's Competition Advocate General, and advises the ASN on Federal Acquisition Regulation (FAR), Defense Acquisition Regulations System (DFARS) and Navy-specific acquisition regulations and policies."

I also would not go so far as to say the contracting officer is breaking the law — maybe the statement was only intended as hyperbole?

Contracting Pirate said:

Also received confirmation from DASN(AP), stick to the DFARS.

What does this mean?  The DFARS does not currently address what is in the NDAA.  Does this mean that a Navy contracting officer can now award a cost reimbursement contract in excess of $50M without the approval called for by the NDAA?  If such approval is not obtained, is the contract subject to being challenged as invalid because the contracting officer did not have the statutory authority to award the contract?

Retreadfed said:

What does this mean?  The DFARS does not currently address what is in the NDAA.  Does this mean that a Navy contracting officer can now award a cost reimbursement contract in excess of $50M without the approval called for by the NDAA?  If such approval is not obtained, is the contract subject to being challenged as invalid because the contracting officer did not have the statutory authority to award the contract?

Correct in yer first assumption.  Not sure about the rest of it.  I'm just a lowly scallywag followin' orders.

bob7947 said:

• As I have written, there are too many changes in Defense contracting law every year,
• Look at this page and read the Early Engagement Opportunity sections,
• The regulators are falling behind under the legislative onslaught,
• In these situations, to provide direction to the Defense contacting personnel, the USD's office must provide timely deviations to regulation.  It appears, this one slipped through the cracks.  You can search here to see if it was done and I missed it.

PepeTheFrogs agrees on all counts. PepeTheFrog's solution is different from empowering each and every brainlet contracting officer to implement the NDAA each year. Instead, stick with the current system, but administer severe beatings until morale and performance improves.

Congress should publicly horse-whip USD(A&S) and the Director of DPC for not being able to pencil-whip a deviation in time. It's bad enough that the FAR and DFARS cases take so long, but is it really that hard to pencil-whip a DOD Class Deviation memo? (As bob7947 pointed out, the deviations remain in effect until the actual DFARS case is finalized, so it can act as immediate relief.)

Can anyone tell PepeTheFrog why DPC cannot roll out a handful of DOD Class Deviation memos within one month of the day the NDAA is signed by President Trump? This seems inexcusable. What is the higher priority at DPC? How hard is it to stroll around the Pentagon and staff a memo up the chain?

Step 1. GS-13 procurement analyst drafts the memo.

2. Review by Director of DARS.

3. Review by the staff of the Director of DPC.

4. Review by the staff of USD(A&S).

5. Signature.

I agree with the frog.  We shouldn't blame individual contracting officers for not implementing the NDAA.

By the way, I think all the procurement analysts up there are GS-15.

Well said @PepeTheFrog, accountability of the responsible authorities tis' the best solution, yarr.

Pirate:

You wrote:

Quote

Although legal were the ones originally raising this concern, they have since deferred to giving the DFARS precedence.  The Policy Team also agreed.  Common sense has won the day!

and

Quote

Also received confirmation from DASN(AP), stick to the DFARS.

Have any of them given you an electronic or paper document directing you to ignore the law and stick to the outdated DFARS?

--------------------------------------------

PS:  I think the provision in the law is stupid.

Also consider that DoD, at least, has usually been involved during congressional drafting of acquisition related legislation that will affect DoD.  I doubt that anything of significance is much of a surprise by the time it gets to the President.

I know that the Congressional committees generally coordinate or at least ask for input and reaction from the USACE on military and civil works engineering and construction related matters, including acquisition methods , policy and procedures.

However, not all legislation can be implemented by simply issuing Class Deviations.

bob7947 said:

PS:  I think the provision in the law is stupid.

It seems like we are going back in time.  When I first got into this game, you had to have a D&F to use a cost reimbursement contract and a separate D&F listing one or more of 14 exceptions to the use of competitive procedures.  These had to be approved at various levels up to the Secretary of the Department.

Retreadfed said:

It seems like we are going back in time.  When I first got into this game, you had to have a D&F to use a cost reimbursement contract and a separate D&F listing one or more of 14 exceptions to the use of competitive procedures.  These had to be approved at various levels up to the Secretary of the Department.

For good reasons. Cost reimbursement contracts require some sophistication on the part of the government agency, including knowledge of cost principles, and effective project controls management (e.g., cost and schedule, productivity, etc.).  It takes a lotmore than just signing a contract then paying the bills when they come in.

Quote

It seems like we are going back in time.  When I first got into this game, you had to have a D&F to use a cost reimbursement contract and a separate D&F listing one or more of 14 exceptions to the use of competitive procedures.  These had to be approved at various levels up to the Secretary of the Department.

I was thinking about this type of thing this morning.  The agency appoints a contracting officer with some designated level of responsibility based on some qualification.  For the moment, let's assume the appointment process is working.

The contracting officer is preparing a procurement.  He/she knows there will be some level of review.  It's to be expected.

Then a congressman or senator reads a news article or a report and believes a problem exists.  He/she introduces a bill to solve the perceived problem.  To his/her amazement it gets enacted in the annual NDAA.  It is then implemented through regulation for the workforce to use.  

The contracting officer begins to follow the regulation and finds that his/her authority is being restricted further.  This happens every year.  The contracting officer realizes that some politician, who cannot distinguish a solicitation from a contract, indirectly is telling him/her that he/she is less competent than his office believes.  The best contracting officers can only take so much of this until they resign from government.

bob7947 said:

I was thinking about this type of thing this morning.  The agency appoints a contracting officer with some designated level of responsibility based on some qualification.  For the moment, let's assume the appointment process is working.

The contracting officer is preparing a procurement.  He/she knows there will be some level of review.  It's to be expected.

Then a congressman or senator reads a news article or a report and believes a problem exists.  He/she introduces a bill to solve the perceived problem.  To his/her amazement it gets enacted in the annual NDAA.  It is then implemented through regulation for the workforce to use.  

The contracting officer begins to follow the regulation and finds that his/her authority is being restricted further.  This happens every year.  The contracting officer realizes that some politician, who cannot distinguish a solicitation from a contract, indirectly is telling him/her that he/she is less competent than his office believes.  The best contracting officers can only take so much of this until they resign from government.

For goodness sakes, folks. The problem is not necessarily with a KO. It’s with the government’s (apparent to Congress) limited ability to manage complex cost contracts . 

KOs might “administer” cost contracts. However, it takes some extensive program management expertise to “manage” cost contracts of any magnitude or complexity. That’s my opinion from observation and participation in such contracts. 

Whether or not formal earned value management systems as detailed in DoD instructions and regs are contractually required, there is always earned value management involved in cost reimbursement contracting. In fact, larger construction contractors utilize earned value management processe in all of their contracts, whether fixed price, fixed price incentive, guaranteed maximum price (commercially) or cost reimbursement. In cost reimbursement federal contracting the government bears most of the risk for overruns and delays... it requires active management.

bob7947 said:

Have any of them given you an electronic or paper document directing you to ignore the law and stick to the outdated DFARS?

Email only

joel hoffman said:

Cost reimbursement contracts require some sophistication on the part of the government agency, including knowledge of cost principles, and effective project controls management (e.g., cost and schedule, productivity, etc.).

Is there evidence that agencies are not following FAR 16.301-3 and the clauses that go into cost reimbursement contracts?  If so is the problem wide-spread or isolated?  What is the problem that is supposed to be solved by this statute?  The system is constipated enough as it is without adding more unnecessary blockages.

Joel:

Quote

Whether or not formal earned value management systems as detailed in DoD instructions and regs are contractually required, there is always earned value management involved in cost reimbursement contracting. In fact, larger construction contractors utilize earned value management processe in all of their contracts, whether fixed price, fixed price incentive, guaranteed maximum price (commercially) or cost reimbursement. In cost reimbursement federal contracting the government bears most of the risk for overruns and delays... it requires active management.

How does the section of law under discussion affect program manager's and program management.

Pirate:

Quote

Email only

Keep it handy?

bob7947 said:

Joel:

How does the section of law under discussion affect program manager's and program management.

The preference is to use fixed price. You have to get permission to use cost plus.  I’m guessing that the approval mechanism should include some scrutiny whether the organization has the resources and knowledge to properly manage a cost reimbursement contract. 

Does the legislative history describe why that are expressing a preference and requiring approvals?  There must be an underlying reason or perceived problem, isn’t there?

Joel:

The legislative history is this diccussion's second post.  I'll post it again.  The conference report is below.

Quote

Preference for fixed-price contracts (sec. 829)

The Senate bill contained a provision (sec. 827) that would revise the Defense Federal Acquisition Regulation Supplement to establish a preference for fixed-price contracts, including fixed-price incentive fee contracts, in the determination of contract type and establish an approval mechanism for the use of cost-type contracts over $5.0 million in value.

The House amendment contained no similar provision.

The House recedes with an amendment that would expand the number of Department of Defense officials who can approve a cost-type contract and that would increase the contractual dollar threshold that require such approvals.

The Senate Report mentioned in the conference section is below.

Quote

Preference for fixed-price contracts (sec. 827)

The committee recommends a provision that would revise the 

Defense Federal Acquisition Regulation Supplement to establish
a preference for fixed-price contracts, including fixed-price
incentive fee contracts, in the determination of contract type
and establish an approval mechanism for the use of cost type
contracts over $5.0 million in value. While the committee
understands the flexibility and advantages inherent in a fixed-
price incentive contract, it is concerned that these contracts
could evolve to look more like a cost-type contract. The
Department needs to be vigilant in the proper usage of fixed-
price incentive contracts by focusing incentives on achievable
outcomes and not using these contracts as a gateway to trigger
government-unique data and accounting system requirements.

All this information is available on this site.  I guess your lucky the Senate did not get its way.  Every pissant cost contract would be getting approval.

bob7947 said:

Joel:

The legislative history is this diccussion's second post.  I'll post it again.  The conference report is below.

The Senate Report mentioned in the conference section is below.

All this information is available on this site.  I guess your lucky the Senate did not get its way.  Every pissant cost contract would be getting approval.

Bob, thanks.  You confirmed my guess. The concerns have to do with how the contracts are managed, not concerning whether or not a KO knows how to award one. It requires an entire knowledgeable team to properly manage a cost contract.

Quote

The concerns have to do with how the contracts are managed, not concerning whether or not a KO knows how to award one. It requires an entire knowledgeable team to properly manage a cost contract.

Fascinating.

I discovered that the DFARS case to implement Section 830 of the 2017 NDAA was rolled into the pending DFARS case 2017 D024 implementing Section 829. That may be a reason why it is still open.That Section requires use of fixed price contracts for Foreign Military Sales cases. 

My research skills are not as good as they once were. I am looking for more details on the background for Section 829. 

For now, my opinion is that cost contracts which exceed $50 million or even $25 million are going to be complex enough to require competent resources and skills to effectively manage. DoD has previously expressed policy preference for fixed price and even for fixed price incentive contract typesover cost reimbursement contract. 

I’ve asked a HQTRS USACE friend if he knows the background of Section 829 of the 2017 NDAA.

I found the following here - https://fas.org/sgp/crs/natsec/R44561.pdf (page 5)

"The committee is frustrated by the continuous dependence of the Department of Defense on the use of cost type contracts. While there are some circumstances where cost-type contracts may be appropriate, the Department has over the years expanded the use of these types of contacts as a forcing mechanism to achieve absolute certainty in visibility over contractor costs.... The effect of the overuse of cost-type contracts is the narrowing of the industrial base as commercial firms make a choice not to invest in the unique accounting and financial systems necessary to execute a cost contract. While the committee has not mandated a complete ban on cost contracting this provision is designed to set up incentives that limit its use to appropriate exceptional cases."

To which the Administration stated (note Section 827 was the predecessor to 829 by my read) 

"Section 826 would unnecessarily constrain flexibility to tailor contract types for a given requirement. It also creates a complex financial transaction process that, to be auditable, will require extremely burdensome procedures. The Administration also objects to section 827, which would require higher level approval for the use of other than fixed-price contracts. This requirement is unnecessary and would result in the Department experiencing increased costs in situations where a cost-type contract would have been more appropriate. Acquisition officials and contracting officers should have the full range of contract types available to structure business arrangements that achieve a reasonable balance of risk between the Government and the contractor, while providing the contractor with the greatest incentive for efficient and economical performance. There is extensive history that demonstrates conclusively that fixed-price development is not in the Government or industry's interest in many circumstances."

Now I am no expert but the statement by the committee sounds like lobbying interest impact to me.

Thanks, Carl.

Carl:

You are using the wrong section of the Senate bill.  You must start with the conference report, as I did, and work down.  The only legislative history for Section 829 appears in what I posted.  Your post should not be used for anything.  It has no bearing on the discussion.

Joel:

The law is the law.  You must read the words of the law and go no farther.  Every year that I do the NDAA, I post caveats on using the legislative history.  You will see legislative history used, at times, by judges and administrative law judges (or whatever they want to call themselves now).  They can do that until someone higher up the chain hammers them.

At GAO, from time to time, we might have cautiously added a reference to congressional intent.  At the end of my career, the General Counsel at the time, took the position that he would not recognize any references to congressional intent below the Conference Report for any law.  He was the head lawyer and he got his way.

You are reading between the lines of the conference and senate reports.  There is nothing in either of them to support your belief.  Just be thankful that the $5 million in the Senate Report was changed in conference to $50 million.

bob7947 said:

Carl:

You are using the wrong section of the Senate bill.  You must start with the conference report and work down.  The only legislative history for Section 829 appears in what I posted.  Your post should not be used for anything.

Bob - Paint me confused.   I found the same wording here....https://www.congress.gov/114/crpt/srpt255/CRPT-114srpt255.pdf..... but chose the reference used because it was less to wade through.  Is not this Report legislative history?  It states that it is to "accompany S.2943" Likewise your posted reference uses the same "Section 827".  Help me understand why my post "should not be used for anything?"

Bob - Never mind.   In a re-read I understand the comments related to Section 826  and those you used are to 827.   With this said it would seem that concerns and reasoning for 826 do relate to 827 as well.

Oh well, the NDAA is what it is regardless of why it is.

Carl:

When you do a legislative history, you begin at the end and work to the beginning with the actual supporting source documents.  For example, CICA was passed in 1984.  However, Lawton Chiles was pushing for it as early as 1977.  I know, I started in 1984 and worked back to 1977.  Then you build your history.  By the time you are done, you know everything there is to know about that public law.  You know more than any congress or any congressman, congresswoman or senator.  So what do you have with that.  Well, nothing really.  You are still stuck with the writing in the law.  

I had to do legislative histories for each law that I encountered in an audit.  It was a lot of fun.  I had to do them for the Armed Services Procurement Act, Federal Property and Administrative Services Act (yeah, DoD put the screws to GSA before it was born), the Truth in Negotiations Act, CICA, the one for 95-507, etc.  I was in the 7th floor law library so much that the lawyers thought I was a lawyer.  I would ask the librarian for the background on a public law and the librarian wheeled the folders out in carts.

It's very frustrating, you know more than anyone about a public law, but you cannot use it.  

The NDAA for 2017 was signed into law on 12/23/2016.  The document you are copying from is a CRS document dated  7/13/2016.  You didn't start with the NDAA for 2017 because it wasn't enacted yet.

Start here.  You can see the Public Law number, the conference report number, the senate report number, and the house report number.  We're talking about Sec. 829. Preference for fixed-price contracts.  Click the link.  On the left is the section in the public law.  On the right is the explanation from the Conference Report.  It begins with:

Quote

The Senate bill contained a provision (sec. 827)

There was no provision in the House bill.  However, the Senate Bill was amended in conference.  The House conferees may or may not have worked with the Senate conferees on the revision and what you are seeing on the left is the final agreed-to section of law.  I would stop here on any explanation because of the changes in conference.  However, if you want to take a chance, I would go to section 827 of the Senate report and compare section 827 of the Senate bill to section 829 of the public law to see what the changes were.  If the changes were not dramatic, I would go to the bottom of the report and find the explanation for Section 827.  I already provided that.  If you really want to wonder why section 827 was in the Senate bill, you can begin when it was first introduced.  You can find that by the NDAA work that I do.  Was there a section 827 when it was introduced?  If not, go to the floor amendments listed for the Senate bill.  Check each one to see if it was provided by an amendment.  If it was by amendment, check the congressional record.  The sponsor of that amendment might explain about his/her concern.  It may have been based on a Senate hearing.  Search for the Senate hearing.  See if the amendement's sponsor says something during the hearing.  The sponsor may have added a press release on his/her home page.

OK, you found something.  Now, you know.  So what? You're still limited by the words of the Public Law.  Since the conference report was approved by the House and the Senate, you can use that explanation in an argument.  Beyond that, you are jumping off a cliff with an umbrella.  Expect to hit the ground----hard.

bob7947 said:

Carl:.......

Thanks Bob