What is "Challenge-Based Acquisition (ChBA)?

Challenge-Based Acquisition (ChBA) is the concept where Government agencies present a need (the challenge) and potential providers are free to propose innovative solutions that fill that need.

Henry Ford once said, "If I had asked people what they wanted, they would have said 'faster horses'". But suppose that Henry Ford had heard, "I want to get to my destination  faster and with comfort and affordability". In that case, the users would have issued a concrete mission challenge - get there faster and with comfort - rather than a specified solution - a faster horse. Government acquisition tends to not think in terms of mission challenges but in terms of tighter specifications to define solutions.

ChBA is appropriate in situations where the Government's need us urgent and time critical, where no traditional solution seems viable, or where emerging technologies have the potential to provide non-traditional solutions. It may not represent a good approach for large, multi-year major system acquisitions however.

Mitre Corporation, a Federally Funded Research and Development Center (FFRDC) through the Defense Department and other Agencies publishes a ChBA handbook (now in its fourth edition) giving guidance on how agencies can and should implement ChBA. Mitre concludes that while FAR (Federal Acquisition Regulations) authorizes a broad range of approaches that support ChBA, agencies often do not take full advantage of these existing flexibilities. Some agency officials  may be reluctant to engage in innovative acquisition approaches out of fear of protests or binding the agency in an unauthorized manner. Others within the acquisition workforce may be unaware of alternative acquisition approaches that may be utilized under the current FAR. The "handbook" includes an analysis of how FAR supports the ChBA process.

There is certainly increased interest within the acquisition community on ChBA processes. It pays to be innovative.

Additional Inflation-Related Acquisition Thresholds to be Increased

Last week, we reported on the proposed increase in the TINA (Truth-in-Negotiation Act) threshold from $700 thousand to $750 thousand - an inflation related adjustment. That same proposal included many other inflation related thresholds requiring changes to 91 different sections of FAR (Federal Acquisition Regulations). Most of these changes relate to internal Government procedures but a few will be of interest to Government contractors.

Micro-Purchase Threshold. Micro-purchases are acquisitions of supplies and services where the Government uses simplified acquisition procedures, the aggregate amount of which does not exceed the micro-purchase threshold. That threshold will increase from $3,000 to $3,500 under the new rules. The simplified acquisition procedures for micro-purchases are covered in FAR 13.2 and generally means the Government will use commercial purchase cards. The use of these procedures do not require provisions or clauses.

Subcontracting Plans. Any contractor receiving a contract for more than the simplified acquisition threshold (currently $150 thousand) must agree that small business, veteran-owned small business, service disabled veteran-owned small business, HUBZone small business, small disadvantaged businesses, and women-owned small business concerns will have the maximum practicable opportunity to participate in contract performance consistent with efficient performance. When the contract exceeds $650,000, the contractor is required to submit a formal "subcontracting plan". Under the proposed rule, the threshold for the formal subcontracting plan will increase from $650 thousand to $700 thousand.

Reporting Executive Compensation and First-Tier Subcontract Awards. FAR 4.14 (and FAR 52.204-10) requires contractors to report subcontract award data and the total compensation of the five most highly compensated executives of the contractor and subcontractor. This applies to all contracts exceeding $25,000. Failure to comply is a reportable condition in the performance rating system. Under the proposed rule, the threshold for reporting will increase from $25,000 to $30,000. The subcontract award information is publicly available at usaspending.gov. Compensation data is not publicly available.

DoD Inspector General Rips Missile Defense For Disregarding DCAA Audit

In what could be construed a sad commentary on how contracting officers value the input of DCAA (Defense Contract Audit Agency) when negotiating contracts, the DoD-IG (Inspector General) released an audit report last week criticizing the Missile Defense Agency (MDA) for awarding a $1 billion contract without an audit.

The IG undertook the audit as a result of a hotline call, probably from someone within DCAA who took umbrage with MDA's actions. It wasn't as if MDA had failed to request an audit - they dutifully requested DCAA to audit the contractors proposal. But they didn't wait for the audit before concluding negotiations. As a result of failing to wait for DCAA input, the IG estimated that MDA could have negotiated a significantly lower contract price and saved "millions of dollars in reduced contract fees".

During the course of the audit, DCAA had requested additional time to issue its final report because it wanted to include the results of an assist audit of a major subcontractor. MDA granted a one month extension even though it knew the revised audit due date was beyond its deadline for negotiating the contract. MDA didn't bother to inform DCAA as to the negotiation deadline. Neither did MDA notify DCAA that the scope of the contract had been cut in half due to budget constraints. So DCAA was going merrily on its way auditing a proposal that was already obsolete and ultimately useless because it was timed to be issued after contract negotiation.

It was pretty obvious that MDA didn't care about an audit nor did they value DCAA enough to even inform the Agency of the negotiation deadline or that the proposed scope of work had been cut in half. What did they intend to do with the audit results - paper their files? It would seem that MDA has not bought in to DCAA's vision statement: "Dedicated professionals working together to deliver top-quality audit services to support the Department and the warfighter, and to protect the taxpayer's interest."

What were the recommendations and corrective actions as a result of the IG review? More training! (Training solves every ill, no?) The IG was happy with that corrective action.

You can read the full IG report here.

Emerging Government Contracting Policy and Practice Issues

One of the presentations at this year's West Government Contracts Year in Review Conference - Covering 2009 was a presentation by Steven L.Schooner (George Washington University Law School) and David Berteau (Center for Strategic and International Studies) on Emerging Policy and PRactice Issues. A reprint of the conference brief can be downloaded and read here.

This paper, presented at the West Government Contracts Year in Review Conference (covering 2009), attempts to identify the key trends and issues for 2010 in U.S. federal procurement. In large part, the paper focuses upon the challenges inherited by the Obama administration and its efforts during its first year in office. Among other things, the paper suggests that the administration charted a course of what it perceived as bold action – most dramatically, touting "savings" and accountability, while permitting special interests to distract focus from value for money and customer satisfaction. Accordingly, at least to date, the Obama administration's procurement policies lack a cohesive theme, suggest a reactive rather than proactive approach, strongly indicate a special interest bias, and, at best, have sent mixed messages at a critical juncture. (March 2010).