Acquisition Reform

Here's a headline from a 1962 issue of Aviation Week and Space Technology:

"Defense to Speed Development, Cut Costs: Services ordered to revamp research, procurement procedures to reduce lead time and avoid overruns"

And so it goes.

We don't get reforms as the word is defined. We get what they think is better in the form of legislation which makes now sense or when it does, goes against business logic.

Vern Edwards said:

Here's a headline from a 1962 issue of Aviation Week and Space Technology:

"Defense to Speed Development, Cut Costs: Services ordered to revamp research, procurement procedures to reduce lead time and avoid overruns"

And so it goes.

First, that's really funny and I would love to see a copy of that article.

Second, when did you become Kurt Vonnegut?

Oh, from time to time.

@here_2_helpI just sent the article to you.

Vern Edwards said:

@here_2_helpI just sent the article to you.

Thank you, sir. I was both horrified and grimly amused at how much the 1962 DoD policy changes paralleled -- or, perhaps more accurately, mimicked -- recent DoD policy imperatives. It is nearly 60 years later and, quite literally, nothing has changed.

I don't think something in 1962 can mimic something in 2021. I think it's the other way 'round. 😎

Vern Edwards said:

I don't think something in 1962 can mimic something in 2021. I think it's the other way 'round. 😎

Corrected by Vern.

And so it goes.

Rickover

Speaking of 1962 era acquisition policies, I performed this Google search the other day: “Did Hyman Rickover advocate the Truth in Negotiations Act ? “

I remember that one of my 1981 USACE “Negotiating Construction Contracts” class instructors told us that Admiral Rickover had been instrumental in development of TINA due to his legendary battles with the Nuclear Navy industry. My instructor was a retired, prominent USACE,  contract negotiator. He was a GS-18 at the time of his retirement. I remember him emphasizing that one of the intents was to provide an administrative procedure within the contract to recover defective pricing amounts. This was intended to avoid the government having to prove intent, which is necessary to establish criminal fraud, false statements or false claims.

The search produced many articles. Here are three interesting examples:

https://www.energy.gov/sites/default/files/2018/04/f50/DuncanRickoverandtheNuclearNavyComplete_1.pdf

https://www.nybooks.com/articles/1982/03/18/advice-from-admiral-rickover/

https://www.gao.gov/assets/plrd-83-37.pdf

P.S., Two of my friends had been assigned to Navy Nuclear subs, one as a Ships Captain on a Boomer and the other as an enlisted nuclear reactor/propulsion specialist on an Attack sub. My Former Captain friend has told me about his personal Rickover selection interview, as described in some of the Google search results.

Extremely interesting stuff, plus provides some perspective to the Congressional interest and concerns  during 1962 timeframe that led to TINA.

I can see why TINA could have originally been intended to provide an administrative alternative to criminal prosecution or lawsuits. It was the height of the Cold War. It would not make sense to go to great lengths to criminally prosecute the Defense Industry in order to be able to fairly negotiate contracts and Mods. . They were critical to the Nation’s Defense.

joel hoffman said:

I remember that one of my 1981 USACE “Negotiating Construction Contracts” class instructors told us that Admiral Rickover had been instrumental in development of TINA due to his legendary battles with the Nuclear Navy industry.

Rickover was not instrumental in the enactment of TINA, which happened in 1962, following the lead of the Air Force in 1959. TINA was a response to DOD's emphasis on the use of incentive contracts. The GAO and Congressman Carl Vinson were instrumental in the enactment of TINA.

See Roback, "Truth in Negotiating: The Legislative Background of P.L. 87-653," Public Contract Law Journal, (July 1968).

Rickover was instrumental in the creation of the Cost Accounting Standards Board, 1968 - 1970.

See Pownall, "An Empirical Analysis of the Regulation of the Defense Contracting Industry: The Cost Accounting Standards Board," Journal of Accounting Research, (Autumn 1986).

joel hoffman said:

I can see why TINA could have originally been intended to provide an administrative alternative to criminal prosecution or lawsuits. It was the height of the Cold War. It would not make sense to go to great lengths to criminally prosecute the Defense Industry in order to be able to fairly negotiate contracts and Mods. . They were critical to the Nation’s Defense.

That's not correct. Among other things, TINA is not an "administrative" remedy and it was not intended to be an alternative to criminal prosecution. It is strictly a contractual remedy unless a false claim in involved. Defective pricing might be entirely inadvertent.

Vern Edwards said:

That's not correct. Among other things, TINA is not an "administrative" remedy and it was not intended to be an alternative to criminal prosecution. It is a strictly a contractual remedy unless a false claim in involved.

My choice of words was incorrect. it is a contractual remedy. I said it was an administrative remedy.

However, the government does not have to prove that there is a false claim to obtain the contractual remedy. I also discovered that the FCA was substantially amended in 1986 to make it easier for the government to recover funds lost through fraud than it was in 1962. The contractor doesn’t have to act with a specific intent to defraud in order to be liable, as long as the submission was “knowing”. The definition of “knowing” was clarified to not require a specific intent to defraud.

And I read that the FCA is not a criminal statute. I also read that as it was originally enacted in 1863, defendants could be subject to both criminal and civil  actions under the law. https://www.bafirm.com/2019/03/false-claims-act-also-known-lincolns-law-progress/

I’m certainly not a lawyer. But the current FCA isn’t the same FCA as it was in 1981 , 1863 or 1962 either. 

See:https://fcaexpert.com/articles/fca-faq.html

Vern Edwards said:

Rickover was not instrumental in the enactment of TINA, which happened in 1962, following the lead of the Air Force in 1959. TINA was a response to DOD's emphasis on the use of incentive contracts. The GAO and Congressman Carl Vinson were instrumental in the enactment of TINA.

See Roback, "Truth in Negotiating: The Legislative Background of P.L. 87-653," Public Contract Law Journal, (July 1968).

Rickover was instrumental in the creation of the Cost Accounting Standards Board, 1968 - 1970.

See Pownall, "An Empirical Analysis of the Regulation of the Defense Contracting Industry: The Cost Accounting Standards Board," Journal of Accounting Research, (Autumn 1986).

Thanks, Vern. I read earlier today about Admiral Rickover’s testimony in 1962 to Carl Vinson’s committee or subcommittee in support of enactment of TINA legislation but can’t find that article now. At any rate, my memory and/or my instructors memory were apparently inaccurate concerning the extent of his involvement in Enacting TINA.

I will have to visit my lawyer friend’s office to read your cited references. I no longer have direct access to the law library.

@joel hoffmanI can email the articles to you, but you'll have to send me your email address through Bob. Don't type it here.

Vern Edwards said:

@joel hoffmanI can email the articles to you, but you'll have to send me your email address through Bob. Don't type it here.

Ok, thanks, Vern

On May 12, I ran across this excerpt from the March 18, 1982 issue of The New York Review:

“Advice from Admiral Rickover

“Admiral Hyman G. Rickover

However, I couldn’t locate it again until this evening. Plus, one must subscribe to the New York Review in order to be able to read the entire article.

“Following is a substantial part of Admiral Hyman Rickover’s prepared statement to the Joint Economic Committee of Congress on January 28. He testified before the committee shortly after meeting with the Secretary of the Navy who told him, as Admiral Rickover put it, that “he wanted my termination with the Navy within three to six months.”

“Excerpts from Admiral Rickover’s testimony follow the text of his statement.

“…How to promote greater efficiency and economy in the Defense Department? As you know, I have testified often before congressional committees, including yours, on various aspects of this problem. In some cases, Congress implemented my recommendations for reforms. Eventually, however, defense contractor lobbyists have generally learned how to get around them or have them rescinded.

“Former Congressman Chet Holifield, working with the House Armed Services Committee, was instrumental in enacting the Truth-In-Negotiations Act of 1962. I assisted him in that venture. Today there are still contractors that are not in compliance with the act”...

@joel hoffmanI just sent you the two articles I cited above.

On 5/19/2021 at 12:56 AM, joel hoffman said:

“Former Congressman Chet Holifield, working with the House Armed Services Committee, was instrumental in enacting the Truth-In-Negotiations Act of 1962. I assisted him in that venture. Today there are still contractors that are not in compliance with the act”...

Joel:

I did extensive research on P. L. 87-653 and even remember Carl Vinson getting one of those new fangled color TVs on the floor of the House for his 50th anniversary serving in the House.  I think that might have been before the transistor.  I read the article from the New York Review and I was surprised at the quote.  Rickover may have attended a hearing or so but he was not a significant factor in P. L. 87-653.  I also read interviews with Chet Hollifield and he showed little interest in P. L. 87-653 or its passage.  Even when he was specifically asked about it. 

During 1965, Hollifield was busy with the Hollifield Hearings during which he beat GAO up so that it would curtail its contract pricing audits and not request refunds from contractors that overpriced contracts.  There was some talk about the Hollifield Hearings among the press such as:  Drew Pearson wrote that Hollifield was "strangely found on the side of luxurious shuffleboard courts, table tennis facilities, a scenic mall, out-door dining rooms for [a federal contractor] all paid for by the taxpayer."

The driving force behind P. L. 87-653 was Carl Vinson, not Chet Hollifield.  Maybe that is why Carl Vinson has his own aircraft carrier.  I don't know.  I believe the hearings discussing the fixed-price incentive contracts that were involved in P. L. 87-653 were televised.  The contracts may have been with Ford or GM.  I can't remember that.  In the 1970's, Hollifield did sponsor and was the Vice Chair of The Commission on Government Procurement.

Vern correctly mentioned that GAO played a sifnificant role in P. L 87-653.  Here is a prepared statement by GAO's General Councel in 1968.

bob7947 said:

Maybe that is why Carl Vinson has his own aircraft carrier.  I don't know.

Vinson got an aircraft carrier because he was a huge advocate of funding for the Navy (and Marine Corps). He was called "The Father of the Two-Ocean Navy."

Good article about him at Wikipedia: https://en.wikipedia.org/wiki/Carl_Vinson

When I was doing my research in GAO's microfiche room that I mentioned above, another name kept popping up.  It was Edward Hébert.  He is mentioned in Robert Keller's statement that I linked above.  That statement is why I remembered him.

I had pounds and pounds of microfiche paper to support my research on 87-653 but it no longer exists.  I had the same for FPASA and that is gone too.

Bob, the article that I sent you about history of the GAO audits between 1937 and 1975 and “voluntary refunds of excessive profits” as virtually the only contractual vehicle before TINA, short of proving fraud or false statements, etc. was really interesting.

Yes it is Joel.  I have a hard cover book by a GAO historian that includes the Hollifield hearings which were held in 1965.  I looked at the book a bit.  Hollifield's Hearing was an ambush.  At the end of the hearing, 2 GAO individuals had a chance to speak and be criticized.  Before them was a small army of people from DoD and DoD contractors that aired their complaints against GAO.  The 2 GAO individuals tried to provide answers at the table but after a while, I'm sure they realized they were only there to take a beating. 

The real problem may have been the writing of the Hollifield report on the hearing.  GAO claimed that the report was filled with errors and falsehoods.  It probably was.  That's all part of an ambush. 

I joined the General Procurement Group of the Procurement and Systems Acquisition Division in 1972 after I completed my training assignemnts in GAO's Civil Division.  The General Procurement Group did contract pricing reports.

Before the Hollifield hearing the contract pricing reports were done and then dent sent to the Department of Justice for action with contractors names.  That built up a lot of resentment from contractors.

After Hollified, GAO's pricing reports, if they found anything, were sent to DoD with a recommendation that the contracting officer take action, if he/she sees fit.  If that is not exactly the way we did it, it is close.

I remember asking why were we doing pricing reports.  The answer was so they know we were still in that business.  I think the pricing reports ended in the 1970s.

Yeah, I couldn’t read the whole report in detail, so skimmed part of it. I always wondered by the clauses give “GAO” the right to review contractor’s files but not us or DCAA. I didn’t realize that GAO did audits. I think they were post pricing  price reports or audits weren’t they? And it looked like if the contractors made “too much “ profit, somebody would request - quite publicly naming  (to embarrass ?) the firm and ask for a refund.

Is that the way it worked? 
I think the audit program was cancelled in 1975 but am going sailing so can’t reread it now.

On 5/20/2021 at 3:24 PM, bob7947 said:

I have a hard cover book by a GAO historian that includes the Hollifield hearings which were held in 1965.

Are the hearings you're talking about, "HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, HOUSE OF REPRESENTATIVES; Comptroller General Reports to Congress on Audits of Defense Contracts," May - July 1965? About 1,000 pages?

In his opening remarks Holifield (one "l") said:

Quote

Opinions and judgments in such fields may differ and these may be honest differences. Is the GAO, as some Government and industry parties believe, enforcing its own standards of procurement on Government and industry without authority of law or without the benefit of the intimate technical and business experience which resides in the parties to the procurement process ? Is there developing a basic clash of procurement philosophies between GAO and DOD ?

Hearings, p. 3.

Perhaps it is noteworthy that DCAA was created in 1965, giving DOD its own audit service.

After some reflection I am now of the opinion that no significant acquisition reform can or will come about unless there is first significant statutory reform and significant judicial reform. Too many bureaucratic rules are driven by statutes. (Vern already noted two statutes that he believes should go. To his list I would add the ADA.) Further, recent decisions at the ASBCA and Court of Federal Claims have led me to think that those forums are no longer serving their intended purposes. I would replace them with a Court of Chancery equivalent that is empowered to hear disputes without regard to the protections provided by sovereign immunity, which I believe to be a concept that has no place in American democracy.

Comptroller General Reports to Congress on Audits of Defense Contracts:  

The above is the online hearings from Google.   I don't know how long ot runs but that is it.  It was several days long.

I tried it and was able to get to 70 pages so maybe all 1,000 pages are available.

here_2_help said:

After some reflection I am now of the opinion that no significant acquisition reform can or will come about unless there is first significant statutory reform and significant judicial reform. Too many bureaucratic rules are driven by statutes. (Vern already noted two statutes that he believes should go. To his list I would add the ADA.) Further, recent decisions at the ASBCA and Court of Federal Claims have led me to think that those forums are no longer serving their intended purposes. I would replace them with a Court of Chancery equivalent that is empowered to hear disputes without regard to the protections provided by sovereign immunity, which I believe to be a concept that has no place in American democracy.

I wrote a small piece many years ago about creating a House and Senate committee to straighten out contracting legislation and then provide them only with oversight of the contracting process.  It could be done but it has absolutely no chance.

What is possible but highly unlikely is eliminating the courts from the protest and dispute system.  I would limit the hearing of protests to the Comptroller General and disputes to an entity similar to the boards.  Once you involve the courts you open the process to appeals. No appeals, once and done!

bob7947 said:

I wrote a small piece many years ago about creating a House and Senate committee to straighten out contracting legislation and then provide them only with oversight of the contracting process.  It could be done but it has absolutely no chance.

What is possible but highly unlikely is eliminating the courts from the protest and dispute system.  I would limit the hearing of protests to the Comptroller General and disputes to an entity similar to the boards.  Once you involve the courts you open the process to appeals. No appeals, once and done!

Well, I'm not advocating bringing back Wunderlich, if that's what you're saying.

I'm looking at 41 USC 7105(g)(1) and comparing it to reality.

Quote

(g) Decisions.—An agency board shall—

(1) to the fullest extent practicable provide informal, expeditious, and inexpensive resolution of disputes;

(2) issue a decision in writing or take other appropriate action on each appeal submitted; and

(3) mail or otherwise furnish a copy of the decision to the contractor and the contracting officer.

Emphasis added, of course.

H2H:

I'm just advocating getting rid of some layers of review.  In the case of a dispute the Boards begin the process.  For example, lets' take a civilian dispute from the Treasury--PACIFIC COAST COMMUNITY SERVICES, INC..

But first, let's look at some congressional perfections that made it into law.

Quote

§7104. Contractor's right of appeal from decision by contracting officer

(a) Appeal to Agency Board.—A contractor, within 90 days from the date of receipt of a contracting officer's decision under section 7103 of this title, may appeal the decision to an agency board as provided in section 7105 of this title.

(b) Bringing an Action De Novo in Federal Court.—

(1) In general.—Except as provided in paragraph (2), and in lieu of appealing the decision of a contracting officer under section 7103 of this title to an agency board, a contractor may bring an action directly on the claim in the United States Court of Federal Claims, notwithstanding any contract provision, regulation, or rule of law to the contrary.

Now, the law provides a choice of venues--a Board or the Court.  PACIFIC COAST COMMUNITY SERVICES, INC. went to the the Gourt of Federal Claims.  After the dispute rolled around the Court trying to find a judge, the Court of Federal Claims issued an opinion on 10/1/19.   Of course, the contractor filed an appeal to the Court of Appeals for the Federal Circuit.  The appeals court issued its opinion/decision of April 30, 2021.  We can safely say that the case rolled around the court system for over two years.

Whenever congress says something like

Quote

someone or something should—

(1) to the fullest extent practicable provide informal, expeditious, and inexpensive resolution of disputes;

and then allows the issue to go to court, they're just kidding.

Now, let's mention a protest that recently made the news and now is in the court system.   Oracle America, Inc., B-416657, B-416657.2, B-416657.3, B-416657.4, Nov 14, 2018. DoD is almost ready the throw the JEDI in the trash.

My presentation has flaws but an unhappy bidder, offeror or contractor can get more than one bite at the apple.  It can devour the orchard.  I believe the Courts should be eliminated fron the protest and dispute process.  A bidder or offeror should get one shot at a protest and that ends with a GAO decision.  Likewise, a contractor  should get one shot at resolving a dispute and that ends with a board of contract appeals.  It will save bidders, offerors, contractors and the government time and money.

HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, HOUSE OF REPRESENTATIVES; Comptroller General Reports to Congress on Audits of Defense Contracts

Available for download at Google Books. Just search for the title. More than 1,000 pages. Very large file.

See below

here_2_help said:

Well, I'm not advocating bringing back Wunderlich, if that's what you're saying.

I'm looking at 41 USC 7105(g)(1) and comparing it to reality.

Emphasis added, of course.

For disputes, facilitated or mediated, non-binding Alternate Dispute Resolution is available with the USACE.

Google Search: “USACE Alternate Dispute Resolution”

See also from the above search, this overview of ADR for USACE: https://usace.contentdm.oclc.org/digital/collection/p16021coll2/id/3883/

Ralph Nash has been involved in some of these actions.

I’ll add that, if KO’s or their attorneys were familiar with case law, there would be less litigation, in my opinion.

During a couple of my assignments, part of my job was to review REA’s, brewing and ripened disputes and claims, from as much independent perspective as possible. This was done in coordination with Office of Counsel and the KO.

We would advise the ACO, KO or - if appropriate- also the contractor,  of our opinion, as appropriate for the circumstance. When providing an opinion of no merit- for unripened  claims- we advised the contractor of its right to submit a claim.

If you think that this wouldn’t reduce the number of litigated claims, I’d argue with you. We had numerous REA’s which never were ripened to formal claims. The biggest one that I was involved in, including negotiating a settlement, was one submitted as a $167,000,000 REA, settled as a wrap up mod for about $65,000,000.

Numerous others were dropped by contractors or settled as mods.

P.S. Correspondence regarding matters unripened to formal claims were signed as COR.

bob7947 said:

Now, let's mention a protest that recently made the news and now is in the court system.   Oracle America, Inc., B-416657, B-416657.2, B-416657.3, B-416657.4, Nov 14, 2018. DoD is almost ready the throw the JEDI in the trash.

Actually, there are two JEDI protests.

Oracle protested the single-award acquisition strategy and asserted conflict of interest in 2018. It lost at the Court of Federal Claims and at the Federal Circuit. It has now appealed to the Supreme Court in a 169-page petition. The petition is pending.

Amazon protested the award to Microspft at the Court of Federal Claims in November 2019. The court issued a preliminary injunction in February 2020, and denied a government motion to dismiss in April 2021. That protest is still underway at the COFC.

We don't need foreign enemies to hold up important defense programs; we have IT companies and the court system.

This is all because Congress is still pursuing 19th Century contracting policies. God help us, because our government cannot function without contracts and contractors and Congress cannot get its act together about anything.

joel hoffman said:

For disputes, facilitated or mediated, non-binding Alternate Dispute Resolution is available with the USACE.

I'm struggling to understand why any contractor would waste its time with "non-binding" ADR that USACE could ignore and still force litigation.

here_2_help said:

I'm struggling to understand why any contractor would waste its time with "non-binding" ADR that USACE could ignore and still force litigation.

I believe that the program has been pretty successful. It’s non-binding on either party.

So you would prefer binding arbitration similar to that which is forced upon consumers by car dealers and many many retailers, insurance companies, banks and other commercial entities..?

Edit:  https://newconversations.net/pdf/usarmy-corps-of-engineers-96-ADR-P-5.pdf

“Overview of Alternative Dispute Resolution (ADR): A handbook for Corps managers

Sub-collectionAlternative Dispute Resolution Series

Organizational authorUnited States. Army. Corps of Engineers
Institute for Water Resources (U.S.)

Personal authorCreighton, Jim
Delli Priscoli, Jerome

Report type Technical report
Pamphlet

Publisher[US Army Corps of Engineers]

Date published1996-07

Date digitized2019

Subject Dispute resolution (Law)
Mediation

Report number 96-ADR-P-5

Report series Alternative dispute resolution series. Pamphlet

Notes This guide provides an overview of the basic concepts behind alternative dispute resolution (ADR). It describes the range of ADR techniques available to managers in the U.S. Army Corps of Engineers, from dispute prevention processes (e.g. Partnering), to unassisted procedures (information exchanges meetings, interest-based negotiation), to third-party assistance (facilitation, mediation, fact-finding, mini-trial, disputes review board, and non-binding arbitration), and third-party decision making. The document defines ADR and its benefits and illustrates through case studies how the Corps has used ADR techniques. The guide also provides a framework for choosing an ADR technique. In addition, it includes policy and legal mandates for the use of ADR, a glossary or terms, list of resources, and a lengthy bibliography of ADR references.”

I don’t know if the report is still relatively current. It discussed the ADR Act of 1990 (expired) and Executive Orders of 1991 (Bush, Sr.) and 1995 (Clinton). The Act and EO’s limit the use of binding arbitration to things like internal government Labor Relations.

Any way, there are numerous links found through this search:

“usace Alternate Dispute Resolution”