Tag Archives: Government Regulations

Pentagon Leaders Skirting Major Defense Acquisition Program (MDAP) Controls Required by Law

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Dodging the Formal Acquisition Process

The Abrams M1A2 SEPv3 Battle Tank. (Photo: U.S. Army)

“THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”

“The 2018 National Defense Authorization Act provides $650 million to upgrade 29 M1A2s to the new configuration. That means we will be spending $22 million to upgrade a $6 million vehicle.

What makes this particularly curious is that at the same time the Army is dodging the MDAP process with the tank upgrade program, the Hercules tank recovery vehicle upgrade program is going through the MDAP process. That means the wrecker will receive greater scrutiny than the weapon it is meant to recover.”


“When Army leaders decided they needed an upgraded version of the Abrams tank, they wanted to get it without enduring what they consider to be a cumbersome formal acquisition process. Any program of this scale would ordinarily be classified as a Major Defense Acquisition Program (MDAP) and be subject to the oversight reviews and regulations that status entails. To avoid this, Army leaders claimed a major modernization effort to a weapon central to their very identity was a mere design tweak, and managed the project through the far less rigorous Engineering Change Proposal process. This is a problem. The MDAP process may be cumbersome, but its intended purpose is to ensure the Pentagon properly evaluates its needs and then enters into programs that will properly meet them. It is also meant to exert the kind of pressure necessary to keep costs under control. While the system is indisputably flawed (the F-35 is an MDAP), the services should not be permitted to simply ignore the laws. Doing so will almost certainly result in weapons of dubious combat value and more cost overruns.

In performing such a maneuver to avoid the toughest of the acquisitions process, the Army is hardly alone. All of the services are increasingly resorting to similar schemes for other high-profile programs. The danger to the taxpayers, to say nothing of the men and women who will have to take these systems into combat one day, is that these complex and expensive weapons systems aren’t subjected the kind of outside scrutiny necessary to ensure the services are purchasing suitable and effective equipment.

Acquisition Reform

Hardly a year goes by without some effort to modernize the Pentagon’s weapons buying process. Senator John McCain (R-AZ) succeeded in pushing into law a provision to split the Pentagon’s office of Acquisition, Technology & Logistics into at least two offices. The long-time chairman of the Senate Armed Services Committee believes this will allow the separate undersecretaries to focus more on their particular offices. The new office of Research and Engineering will focus on innovation while the Acquisition and Sustainment office deals with basic business functions associated with buying and maintaining new weapons. House Armed Services Committee chairman, Representative Mac Thornberry (R-TX), has introduced legislation meant to streamline the process for the past three years. The latest version would allow the services to purchase more items through commercial marketplaces. Previous similar efforts, such as when the Pentagon attempted to change the definition of commercial items to avoid the competitive bidding process, proved problematic. Earlier efforts were geared towards improving program business models and reducing the process’s reports and paperwork. Congress also effectively outsourced acquisition reform to the defense industry when it created the “Section 809 Panel” as part of the FY 2016 National Defense Authorization Act to make recommendations to streamline the way the Pentagon buys weapons. This panel is comprised of several members with deep ties to the defense industry and is the subject of a concerted lobbying effort by the contracting community.

The effectiveness of such efforts is not yet clear, but that might not matter. The usual result of most such efforts is an even more sluggish process—it is a rare problem that can’t be made worse with the addition of more bureaucracy.

Why the Military-Industrial-Congressional Complex Wants to Avoid the MDAP Process

From the perspective of the Pentagon, the defense contractors, and their allies on Capitol Hill, there are advantages in procuring weapon systems through means other than the formal acquisition process. The acquisition process is so complicated and involved that the Department of Defense created the Defense Acquisition University in 1991 to educate personnel on navigating various aspects of the process. A full explanation of the process would fill volumes, but even the basics provide a glimpse into the complexity of the process.

A Major Defense Acquisition Program goes through three separate phases. At the end of each phase, a program goes through a review process to determine whether it has met the criteria to move onto the next phase. These transitions are called “milestones.”

A project begins when the services identify a new military need, or what is known as a capability. This is done through the Joint Capabilities Integration and Development System. This process figures out whether a new weapon system is actually needed to fill the perceived capability gap or if a change in tactics or some other non-material solution can get the job done. This work is reviewed by the Joint Requirements Oversight Council. If they determine a new weapon system is needed, then it goes through the Material Solution Analysis Phase.

A program has to achieve 40 milestone requirements just to pass Milestone A into the second major phase of a program, the Technology Maturation & Risk Reduction Phase. These 40 requirements includes conducting an Analysis of Alternatives, which is a comparison of other weapons that could potentially fill the same need; an Independent Cost Estimate, which helps decision-makers decide if the weapon is something they can afford to pursue (or what tradeoffs should be made if it’s not); and developing a Test and Evaluation Master Plan, which is essential to establish clear testing benchmarks to evaluate how the new weapon system performs in combat. While plenty of redundancy exists within the process, it is meant to protect the interests of both the warfighters and taxpayers. The Government Accountability Office has noted the importance of following through with these steps as part of a knowledge-based process. If the services don’t do so, they create situations where programs “carry technology, design, and production risks into subsequent phases of the acquisition process that could result in cost growth or schedule delays.”

Ideally, multiple contractors will build prototypes that will then be tested as part of a competition to see which design performs the intended mission better. The most successful programs begin this way, with the Lightweight Fighter Program (F-16) and the A-X Program (A-10) being the most notable examples.

The awarding of a contract for the winning design marks Milestone B, and the program passes into the Engineering & Manufacturing Development Phase. The prime and sub-contractors then finalize the development of the system and begin manufacturing enough production-representative goods to complete the Initial Operational Test & Evaluation process.

The successful completion of the realistic combat and live-fire testing phase marks Milestone C, and the program proceeds to full-scale production and deployment to the troops.

Throughout this process, there are numerous review and decision points. This includes a review by the Defense Acquisition Board, which is made up of the Vice Chairman of the Joint Chiefs of Staff, Secretaries of the Military Departments, four undersecretaries of defense, the Director of Operational Test & Evaluation, and others.

Case Study: The Army’s New Tank

The Army commissioned General Dynamics to design an upgraded version of the M1A2 Abrams tank in 2015. The first of what is expected to be 1,500 upgraded versions of the Army’s Abrams tanks rolled off the assembly line at the Lima, Ohio, factory on October 4, 2017. The choice of contractors for the project was hardly a surprise as the Abrams tank is a General Dynamics product. That is not to suggest that another contractor could not perform the work. Other contractors like BAE Systems also build armored vehicles and their component systems. By designating the project as an Engineering Change Proposal, however, the Army had little need to open it to a competitive bidding process as “most ECPs occur in a sole source environment.”

To the casual observer, the Army’s newest tank looks very much like the existing tanks. The M1A2 SEPv3 is still essentially an Abrams tank on the outside. However, the vehicle is quite different on the inside. It sports a new suite of communications gear called the Joint Tactical Radio System, which is supposed to fully integrate the vehicle into the Army’s command and control network. To provide the necessary electricity to power all of the new electronics and conserve fuel in situations where the crew does not need to run the gas-turbine engine, an improved generator has been added inside the hull.

The tank uses the same M256 smooth-bore cannon as the existing M1A1 tanks, but the breach in this variant has been modified to use the Ammunition DataLink to be compatible with the advanced multi-purpose round. This allows the tank’s gunner to send a signal to the round right before it is fired, setting its detonation mode to one of three different settings. It can detonate on impact, detonate on a delay for obstacle reduction, or airburst. This single round replaces four existing rounds, reducing the logistical burden of the armored forces, which is always a great concern.

In response to the threat posed by IEDs, the new tank includes a Counter Remote Controlled Improvised Explosive Device electronic warfare package. Should all of that fail, or when enemy fighters use simpler low-tech command-wired IEDs (which they will), the tank also boasts additional armor protection.

These are not insignificant changes. They add significantly to an already extremely heavy tank. As someone who spent ten years operating in tanks, I can tell you this is a significant problem. The Abrams tank is already too heavy for most of the world’s bridges. This restricts the number of avenues a unit can take to reach an objective, making it much easier for the enemy to predict the unit’s movements. It also increases the logistics burden because a heavier tank requires more fuel.

Sources within the Army say the new variant is too heavy for the Army’s fleet of Heavy Equipment Transport vehicles. The Army relies on these vehicles to transport the tanks across long distances to conserve fuel and to reduce wear and tear on the tanks.

They also do not come cheaply. The 2018 National Defense Authorization Act provides $650 million to upgrade 29 M1A2s to the new configuration. That means we will be spending $22 million to upgrade a $6 million vehicle.

What makes this particularly curious is that at the same time the Army is dodging the MDAP process with the tank upgrade program, the Hercules tank recovery vehicle upgrade program is going through the MDAP process. That means the wrecker will receive greater scrutiny than the weapon it is meant to recover.

Case Study: F-35 Follow On Modernization

F-35A's touch down at RAF Fairford

An Airman with the Air Combat Command F-35A Heritage Flight team marshals an F-35A Lightning II to its parking spot on the flightline at Royal Air Force Fairford, England, June 30, 2016. The team flew to England for the Royal International Air Tattoo. (Photo: U.S. Air Force / Tech. Sgt. Jarad A. Denton)

The F-35 program is being managed through the regular MDAP process, but officials are now working furiously behind the scenes to prevent the next phase of it from following the same path. No one is quite sure what the latest incarnation of the F-35 will be able to do when the program completes the development and testing process, but that isn’t stopping officials from seeking funds for upgrades to the aircraft. They are continuing to develop a list of needed capabilities for the newer version, called Block 4.

The Pentagon estimates the cost just for the initial phase of the modernization program—the research, development, test and evaluation (RDT&E) phase—to be more than $3.9 billion through 2022. The Government Accountability Office correctly points out that this “would exceed the statutory and regulatory thresholds for what constitutes a major defense acquisitions program (MDAP), and would make it more expensive than many of the other MDAPs already in DOD’s portfolio.”

The F-35 Joint Program Office has strenuously resisted efforts to create a separate MDAP for the Block 4 modernization citing time and money concerns. The Joint Program Office wants to run the modernization program as part of the original contract from 2001. By dodging the MDAP process for this effort, the program would avoid many of the processes meant to ensure proper Congressional oversight. The program would not, for example, have to go through a Milestone B review, which would establish an acquisition program cost baseline and require regular reports to Congress about the program’s cost and performance progress.

Such a move also means the program would not be subject to the provisions of the Nunn-McCurdy amendment which establishes unit cost growth thresholds. This would require the Pentagon to notify Congress if the program’s unit cost grows by 25 percent and calls for the program’s cancellation if the cost grows by more than 50 percent. This, unfortunately, does not happen very often because the law includes a waiver provision that allows the Secretary of Defense to certify that the program is critical to national security and should be continued. Only one program, the Armed Reconnaissance Helicopter, has been cancelled as a direct result of a Nunn-McCurdy breach.

Case Study: The B-21 Raider

B-21

(Photo: US Air Force)

The biggest ticket item currently attempting to dodge public scrutiny is the Air Force’s newest bomber, the B-21 Raider. This program is being managed by the Air Force’s Rapid Capabilities Office, a secretive group that is conveniently not subject to many of the regulations Congress imposes upon most acquisition programs.

According the Air Force’s Rapid Capabilities Office website, this outfit has a key advantage the regular acquisition office does not:

“waivers to and deviations from any encumbering practices, procedures, policies, directives or regulations may be granted in order to ensure the timely accomplishment of the mission within applicable statutory guidance.”

The Air Force has been extremely cagey about releasing cost information about the new bomber. During the bid process, service leaders announced a $550 million per aircraft target cost. So far, Air Force leaders have refused to publicly releasethe value of the B-21’s development contract with Northrop Grumman. The stated reason for the secrecy about cost is that a potential adversary could derive information about the size, weight, and range. Apparently no one will be able to determine any of that information from the artist’s rendering of the new bomber, or from the list of subcontractors Air Force officials publicly announced.

Conclusion

The MDAP process is complex and does often fail to produce weapons that do what they are expected to do or come anywhere close to meeting the original cost expectations. The process is long over-due for a comprehensive streamlining effort. But even though the process is deeply flawed, the protections it includes were put there to protect the interests of the troops and the taxpayers. Just because the services find the process inconvenient, doesn’t justify their efforts to dodge the oversight mechanisms provided by federal law.

Unless Congress arrests this disturbing trend, the services are likely to continue to use these schemes to bypass the rules and regulations put in place to protect both the troops and the taxpayers. The people’s interests are served only when everyone involved in the process of buying new weapons have the correct information at the beginning. As Tom Christie, former Director, Operational Test and Evaluation wrote:

“Upfront realistic cost estimates and technical risk assessments, developed by independent organizations outside the chain of command for major programs, should inform Defense Acquisition Executives.  The requirement for those assessments to be independent, not performed by organizations already controlled by the existing self-interests sections of the bureaucracy is essential.”

It is understandable that the services want to speed up the process of fielding new weapon systems. While there are many flaws in the current acquisition system, it is not the root of the problem. Service leaders and their partners (and far too often future colleagues) in the defense industry keep pursuing unrealistic programs and Congress keeps voting for them. Dodging the current acquisition regulations will not fix that problem, but it will make it easier for all involved to hide the bad results from the people paying for them, but presumably not from those who would suffer the consequences if a weapon were to fail in combat.”

http://www.pogo.org/straus/issues/weapons/2018/dodging-the-formal-acquisition-process.html

 

 

 

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Federal Acquisition Regulations We Love To Hate

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Regulations We Love to Hate

“DEFENSE NEWS”

“The Federal Acquisition Regulation (FAR), which governs how the federal government buys goods and services, is a 2,000-page document.

According to a 2017 analysis by Deloitte, over two-thirds of all federal regulations on the books have never been updated since they were created.”


“The sheer number of laws, regulations, and policies that apply to the defense acquisition process is staggering. The Federal Acquisition Regulation (FAR), which governs how the federal government buys goods and services, is a 2,000-page document. On top of that is the 1,500-page Defense Federal Acquisition Regulation Supplement (DFARS), which applies specifically to purchases by the Department of Defense (DoD). In addition to all those regulations are federal statutes and DoD internal policies that govern the acquisition process. For contracting officers, that means determining the applicability of hundreds of regulations, in addition to hundreds of laws and policies, to make a purchase.

Many of these laws, regulations, and policies are outdated, but no one has taken the time to remove or update them.

While each outdated regulation alone may not be a significant problem, in the aggregate those regulations can pose an enormous administrative burden. Many in the defense acquisition workforce have argued that assessing and complying with the large number of regulations slows down the acquisition process, wasting time, money, and energy that could be better spent elsewhere. Additionally, the complexity and cost of compliance creates a barrier to entry for small businesses that may wish to engage in business with DoD but cannot afford the lawyers and compliance officers necessary for the job.

Repealing or amending outdated provisions that bog down the acquisition process is long overdue. The Section 809 Panel, a congressionally mandated panel to streamline and improve the defense acquisition process, is currently taking on the task of identifying and eliminating these outdated provisions. One bold approach that the panel is taking for this endeavor is its “50 Worst!” campaign, which solicits public input on the 50 worst laws, regulations, and policies that impede the acquisition process. The panel has already made some recommendations to begin this effort earlier this year.

Take for instance the FAR clause that encourages contractor policies to ban texting while driving, which must be included in every solicitation, contract, and subcontract over the micro-purchase threshold. This FAR clause resulted from an executive order that was issued in 2009 when the iPhone was only two years old and just a handful of states banned texting while driving. Today, 47 States, D.C., Puerto Rico, Guam, and the U.S. Virgin Islands have these bans, and DoD has prohibited the use of cell phones while driving on all military installations, making this FAR clause unnecessary. This example is just one of the many outdated regulations that are duplicative of existing law or policy, add paperwork, and need to be removed.

The panel has also made recommendations to amend outdated laws, which Congress recently adopted, and the president signed into law in the FY 2018 National Defense Authorization Act (NDAA). One of the panel recommendations adopted by Congress was to amend a 2005 law that sought to increase circulation of the dollar coin. Among the requirements in that law was that business operations conducted by a federal agency that involve coins or currency must be capable of accepting and dispensing dollar coins. In practice, however, the dollar coin has not been widely circulated even with this law in place, and the cost of this requirement has exceeded the benefit. In the FY 2018 NDAA, Congress creates an exception to the dollar coin requirement for business operations conducted under a contract with a federal agency.

Another one of the panel’s adopted recommendations was to amend a law that establishes 20 years as the maximum length for DoD fuel storage contracts. The 20-year limit was originally enacted in 1956, and since then, fuel storage technology has dramatically improved. Modern fuel storage technology is now capable of operating for up to 30 years without interruption. However, because of the 20‐year contract limit, contractors were expected to dismantle fuel storage infrastructure when their contracts terminated, potentially disrupting fuel services and wasting government resources. Congress addresses this concern in the FY 2018 NDAA by extending the maximum length for fuel storage contracts to 30 years to reflect technological advances.

In addition to its activities to review the defense acquisition process at large, the panel is aiming for simple changes that could, in the aggregate, have a significant benefit by allowing contractors and contracting officers to focus on the mission first, instead of navigating through outdated laws, regulations, and policies. The dollar coin requirement and the fuel storage contract limit are examples of laws that clearly needed to be updated and were recognized by Congress as such. The panel is seeking similar examples through its “50 Worst!” campaign. Public input and support is vital for this endeavor. Without input from those in the acquisition workforce who deal with the process every day, the panel may not be able to capture all of the challenges involved.

The panel wants to hear your ideas on how to make the defense acquisition process better. The panel can be reached through its website, through social media, or by email at Sec809@dau.mil”

https://www.defensenews.com/acquisition/regulations/2017/12/18/thats-the-worst-acquisition-regulations-we-love-to-hate/?dn-trending

 

 

 

DCAA Audits And Small Business Job Cost Accounting Systems

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DCAA Audits

‘Small Business Federal Government Contracting (Smalltofeds)” By Ken Larson

 

“Introduction

Small Businesses typically have a learning experience growing into government contracting. Part of that process is undergoing reviews by the Defense Contract Audit Agency (DCAA). It takes knowledge of the requirements and strategic focus to set up the type of business processes required for accommodating government contract job cost accounting and fit those processes into the way your company does business.

DCAA or other agency representatives do not approve job cost accounting software packages. They approve contractor job cost accounting practices in compliance with Federal Cost Accounting Standards (CAS). If you are a small business, you are probably going to come under modified CAS Coverage that you can read about at the following link:

Cost Accounting Standards Compliance

Perhaps you have already examined the above background, but I would encourage you to review it again in connection with planning for your business system. Perhaps you have discovered that CAS compliant job cost accounting effects your estimating structure, your long range planning for indirect rates, as well as your general ledger, overhead and G&A structure. You may have discovered as well that DCAA wants to see your government contracts accounted for in a separate cost center from your commercial work and that there are certain unallowable costs that cannot be charged directly or indirectly to government contracts.

Proposal AuditsProposal audits are performed by DCAA on your cost proposal at the request of the Procurement Contracting Officer (PCO) and verify your direct and indirect rates against your long range plan, your labor category pricing, contingent hire agreements, vendor quotes, subcontractor proposals and all other data related to the cost volume of the proposal. Results go to the PCO. Arithmetic checks are made. No opinion is offered on the merit of the pricing, only that it has been documented in a long-range plan or a vendor or subcontractor quote and it is accurate.

Progress Billing Audits under Firm Fixed Price ContractsThis type of audit is on live data from your billing system. It is triggered by your submitting a progress payment under a firm, fixed price contract. Progress payments can be allowed in long-running firm, fixed price contracts that are front-end loaded with material and labor investment and have lengthy schedules for delivering the end product.

The DCAA Auditor will get the audit request from the contracting activity and will ask to examine the complete set of job cost records in your accounting system for incurred cost on the fixed price contract and tie those records out to the progress payment requested amount (usually 85-90% of the incurred cost to date – they hold some billed amount in retention). Records audited are at the time card and expense report level, as well as purchase orders, travel vouchers and any other transactions that are booked and billed in your accounting system to the fixed price contract. They will want to see the time cards and other documents and will trace them back through the system.

If you do not have a progress billing clause in your firm, fixed price contract, it is unlikely you will be audited. The contracting activity or the Defense Finance Accounting System (DFAS) will simply compare the final amount you bill to the firm, fixed price amount in your contract and pay if the item or service has been accepted and delivered. (Usually a sign-off by the PCO, Contracting Officer’s Technical Representative (COTR) or a DD Form 250 signed by a government inspector on product deliveries)

Cost Plus and T&M Contract Billing AuditsBilling audits are performed by DCAA, again at the request of the contracting activity. The auditor will go into all actual cost records submitted with your billing. Cost plus and T&M billings must have all the billing detail behind them or they will not be paid. The detail must be at the transaction level and the audit is identical to the one discussed above for progress payments.

Incurred Cost Audits (Often referred to as “Rate” audits)These audits are conducted when you are closing out contracts with the government and they have been billed at provisional rates, or the government needs to establish that you are billing accurately from a rate standpoint. If the contract is fixed price with progress payments, cost plus or T&M in nature and has been billed over a long period, particularly if it has crossed more than one government fiscal year, then a system-wide incurred cost audit will be necessary to verify the rates that were charged to the government and determine the difference between the provisional rate billed and the actual rate incurred (where applicable).

In addition it is periodically necessary for the government to establish that no unallowable costs have found their way into government contract billings.

The government allows provisional billing rates for the convenience of the contractor based on his long-range plan and mix of business. The government holds a retention amount on each billing and then at closeout determines with the contractor through an incurred cost audit the final amount due on the contract, releases the retention accordingly, and the contract can then be closed if all other obligations have been completed. At closeout the government pays the final bill.
A rate audit determines the compliance of the job cost system if it occurs while the contract is in process. If an incurred cost audit occurs on contract closeout actions, results will directly impact final contract billing approval and amounts.

Job Cost Accounting Software
My experience with job cost accounting software tools is that complete packages are pretty expensive. COTS accounting packages such as Quick Books do not provide job cost accounting. I have installed JAMIS, which is the ‘Cadillac’, DELTEK, which is the ‘Fairlane 500’, and SYMPAQ, which is the ‘Volkswagen’. They are all expensive, even for single user licenses. You can go to these and other product sites on the web and examine their capabilities:

Deltek

Sympaq

JAMIS

Here are some products especially designed for small business:

ERP-GOV is a new product that appears to be economical and fairly high quality:

ERP.GOV

ICAT is an add-on tool for Quick Books that some small companies are using:

ICAT

PROCAS is an offline and online, on-demand approach that is relatively new and shows promise:

PROCAS

All of the above suppliers are used to long sales cycles and competing against each other. They will do remote demos for you and bend over backwards to show you their products. You can learn much about government contract job cost accounting just by taking the time to go through a demo. For companies whose direct job cost records are growing fast, these tools offer the utility to manage data volume and efficiently handle requirements such as changes to existing records driven by rate changes, fiscal period closing or contract closeout.

Growing Your Job Cost System
Many small companies doing government work start out with a rudimentary direct job cost accounting software package such as Peach Tree or the add-on tool for Quick Books mentioned above and crutch it with manually maintained records on spreadsheets for indirect cost allocation, time keeping, expense reporting, purchasing and supplier commitments. There is nothing wrong with such an approach as long as you can supply job cost (individual contract) records complying with modified CAS Coverage and demonstrate such things as:

Time Cards and time keeping process by worker and labor category by contract or indirect cost pool

Expense Reports and expense report process by worker by contract or indirect cost pool

Purchase Orders with job cost accounting data traceable thru invoices to contacts or indirect cost pools after payment

Overhead Allocations in a Government-unique cost center to individual contracts at month end based on individual contract direct labor cost

G&A Allocations in a Government-unique cost center to individual contracts at month end based on individual contract total cost

A semi-manual approach gets burdensome as the company grows and the number of accounting transactions at the direct and indirect cost level increase in volume.

If you do not have a good job cost software, I recommend you begin looking for one and plan strategically to implement it if progress billings and service contracting to include time and material and cost plus contracts are in your future. Implementing a government compliant job cost system is a sensitive matter and must be planned. I was never able to pull it off in a small company in any less than a year with some delicate timing, particularly during cut-over from the old system to the new.

As companies grow and get involved in larger programs they come under full CAS Coverage that requires a disclosure statement and considerably more controls on the structure of the business system. You can read about full CAS coverage at the link contained in the introduction to this article.

Summary

If you have the investment budget available, you may wish to consider the job cost accounting system software suppliers I mentioned above and compete them against each other for a price. Installing one of these packages is critical from an accounting period standpoint. I recommend a new year starting point and running in parallel on your old system for at least a quarter.Keep in mind that DCAA does not approve COTS job cost accounting system software. Buying the software will not make you “DCAA Compliant” or “CAS Compliant” That objective is achieved through careful process development, specific to your company, utilizing software as a tool to operate your own unique business processes. Your processes will include long range planning, pricing, job cost accounting, indirect cost allocation, time-keeping, expense reporting, purchasing and commitments and billing – all geared to accurate job cost records at the individual contract level.

To the extent that you cannot demonstrate the above features to DCAA when they audit your business you CAN demonstrate that you are aware of the necessity to set these things up, lay out your plan to do so, and specify a time frame within which DCAA can expect to see you complete your compliant government contract pricing and accounting structure.

I have found that DCAA auditors are reasonable people who understand small companies must grow into government business systems. Showing them your accounting structure and your business system plans will display knowledge they will appreciate and assure them you understand the requirements, even if you cannot demonstrate all the processes at the point in time that the government initially audits your company.

Chapters 45 and 51 through 53 of my Book, “Small Business Federal Government Contracting” provides further detail and examples on establishing CAS-Compliant small business planning, pricing and job cost accounting. The book is free as a download in the right margin of this site in the “Box Net” cube.

http://www.smalltofeds.com/2008/02/dcaa-audits-and-small-business-job-cost.html

ABOUT THE AUTHOR:

Ken Fluther - Copy - Copy

Micro Mentor Volunteer Counselor Ken Larson assists many small businesses with their planning and operations processes. Small business owners or prospective owners locate through a background search capability at Micro Mentor.   Ken is a Veteran of 2 tours in the US Army Vietnam and has over 40 years in the Defense Industrial Complex. He spent over 30 years in federal government program and contract management and 10 years in small business consulting. Ken receives many inquiries from small companies wishing to enter or enhance their position in federal government contracting. Volunteer time, books, articles, and resources are 100% free. 

Agency Progress Lacking on Federal Information Technology Acquisition Reform Act (FITARA)

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FITARA

“THE PROJECT ON GOVERNMENT OVERSIGHT”

“Only 4 of the 24 federal agencies GAO reviewed (the Departments of Commerce, Energy, Homeland Security, and Transportation) had clearly defined processes and policies for certification by the CIO.

By establishing incremental development as the standard, FITARA increases the likelihood that potential problems in projects will be caught and corrected sooner, ensuring less waste.”


“This week the Government Accountability Office (GAO) released a report on federal agencies’ implementation of information technology (IT) reforms that require closer oversight from Chief Information Officers (CIOs) of their respective agency’s software development projects.

In response to years of major waste and mismanagement of IT investments, about which the Project On Government Oversight has previously reported, the federal government passed the Federal Information Technology Acquisition Reform Act (FITARA) as part of the National Defense Authorization Act for fiscal year 2015.

The bill also calls on the Office of Management and Budget (OMB) to require an agency’s Chief Information Officer (CIO) to certify major investments are being incrementally developed and to clearly report on the certification process.

In the past, agencies have invested years and millions—or even billions—of taxpayer dollars into a project just to cancel it or end up with a system that performs well below projected productivity. The GAO report points to examples such as the 2012 cancelation of the billion-dollar Department of Defense (DoD) Expeditionary Combat Support System after DoD had spent more than five years on the project, and the Farm Service Agency’s endeavor to replace aging hardware and software applications that, ten years and $423 million dollars later, only delivered about 20 percent of planned functionality.

Since 2015 the management of IT acquisitions and operations has been on GAO’s “high-risk list,” a list of agencies and areas that have a higher potential for fraud, waste, abuse, and mismanagement. This “high risk” classification highlights the importance of properly implementing FITARA reporting and certification standards to foster accountability and transparency.

While FITARA is a step in the right direction, there is still a ways to go. This week’s GAO report shed light on the implementation of FITARA reforms: only 4 of the 24 federal agencies GAO reviewed (the Departments of Commerce, Energy, Homeland Security, and Transportation) had clearly defined processes and policies for certification by the CIO. Eleven agencies had policies that were not clear or detailed enough, and 9 had no policy at all. Furthermore, as of August 2016, across the participating agencies only 62 percent of investments were certified by the CIO.

The GAO report implies this outcome is at least partially because of a lack of clarity in OMB guidelines for how agencies should report CIO certifications. GAO emphasizes the “critical” nature of “a clear and consistent approach for agencies to follow.” OMB has responded to GAO’s concerns by issuing a new guidance this year for fiscal year 2019 with more specific guidelines. GAO felt the updated guidance was a “key improvement” and a “positive step.”

For fiscal year 2017, federal agencies were budgeted to spend over $89 billion on IT, including more than $43 billion on major investments. It is important that agencies and OMB work together to effectively implement FITARA reforms to make sure this money is well spent.”

http://www.pogo.org/blog/2017/11/some-agencies-yet-to-implement-it-oversight-reforms-gao-reports.html

 

Know Your Options for Government Contract Disputes and Appeals

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study points dot blogspot dot com

Image:  Study Points. Blogspot.com

REQUESTS FOR EQUITABLE ADJUSTMENT (REA)

ALTERNATIVE DISPUTE RESOLUTION (ADR)

CLAIMS

“SMALLTOFEDS”  By Ken Larson

“INTRODUCTION

The Federal Acquisition Regulation (FAR) contains provisions for contractors and the government to resolve contract disputes.  The disputes often arise due to events during performance, many times surfacing weaknesses in the original contract work definition, technical parameters, schedule factors or related terms and conditions that can lead to change implications effecting cost, schedule and delivery.

In short, when the understanding the parties thought they had at negotiation and execution of the contract is in dispute, there must be a resolution.
These conditions open the baseline of the contract to further clarification and negotiation. The FAR recognizes that a fair and equitable process is necessary to settle disputes and re-establish a mutually agreeable contract baseline.

GENERAL CONSIDERATIONS

Contract baseline management has been discussed previously in the following article:

Contract Baseline Management

The above article offers six (6) rules of thumb:

  1. KNOW – The contract value and its ceiling amount
  2. KNOW – The incurred cost to date and commitments
  3. KNOW – The scope of work and whether or not your current efforts are supporting it or some other objectives
  4. KNOW – The estimated cost at completion based on where you are at today
  5. KNOW – Your customer and who among the customer population is prone to direct out of scope effort.
  6. KNOW – WHEN TO SAY “NO” to “Scope Creep” and say it officially in writing to the contracting officer specified in your contract.

The remainder of this article will discuss the three most common processes that contract disputes undergo when the baseline is in dispute and selecting the best method considering the circumstances that exist on the contract.

REQUESTS FOR EQUITABLE ADJUSTMENT (REA)

An REA is most often the first and the least formal step undertaken by a contractor when there has been a clear and recognizable departure from the contract baseline in terms of events that warrant cost, schedule, technical performance or terms and conditions parameter modification.  It does not start the formal claims process under FAR with associated interest implications.

Submitted in the form of a proposal for contract change, the REA cites the “Before and After” conditions of the contract baseline and the details regarding the delta.  Implicit in the submission are actual cost records, documents regarding government actions and guidance, an estimate of the new baseline impact in terms of cost, schedule or technical modifications to the agreement and a request for contract change.

The government agency may approve or deny the proposal, further negotiate the details with the contractor and may or may not modify the contact.  The following article is an excellent guide to use and preparation of REA’s:

Difference Between REA’s and Claims

ALTERNATIVE DISPUTE RESOLUTION (ADR)

ADR takes advance planning on the part of the government agency and the contractor.  Not every government contracting office chooses to place an ADR clause in contacts they execute.  Not every contractor is willing to accept one at contract award.

ADR is intended to be an alternative to the REA and formal claims process, whereby the government and the contractor agree in advance to place an ADR clause in the contract and subject any dispute that arises to the ADR process for resolution.

Below is a quote from the FAR on the use of ADR:

33.214  Alternative dispute resolution (ADR)

(a) The objective of using ADR procedures is to increase the opportunity for relatively inexpensive and expeditious resolution of issues in controversy. Essential elements of ADR include—

(1) Existence of an issue in controversy;

(2) A voluntary election by both parties to participate in the ADR process;

(3) An agreement on alternative procedures and terms to be used in lieu of formal litigation; and

(4) Participation in the process by officials of both parties who have the authority to resolve the issue in controversy.

(b) If the contracting officer rejects a contractor’s request for ADR proceedings, the contracting officer shall provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. 572(b) or such other specific reasons that ADR procedures are inappropriate for the resolution of the dispute. In any case where a contractor rejects a request of an agency for ADR proceedings, the contractor shall inform the agency in writing of the contractor’s specific reasons for rejecting the request.

(c) ADR procedures may be used at any time that the contracting officer has authority to resolve the issue in controversy. If a claim has been submitted, ADR procedures may be applied to all or a portion of the claim. When ADR procedures are used subsequent to the issuance of a contracting officer’s final decision, their use does not alter any of the time limitations or procedural requirements for filing an appeal of the contracting officer’s final decision and does not constitute a reconsideration of the final decision.

(d) When appropriate, a neutral person may be used to facilitate resolution of the issue in controversy using the procedures chosen by the parties.

(e) The confidentiality of ADR proceedings shall be protected consistent with 5 U.S.C. 574.

(f)(1) A solicitation shall not require arbitration as a condition of award, unless arbitration is otherwise required by law. Contracting officers should have flexibility to select the appropriate ADR procedure to resolve the issues in controversy as they arise.

(2) An agreement to use arbitration shall be in writing and shall specify a maximum award that may be issued by the arbitrator, as well as any other conditions limiting the range of possible outcomes.

(g) Binding arbitration, as an ADR procedure, may be agreed to only as specified in agency guidelines. Such guidelines shall provide advice on the appropriate use of binding arbitration and when an agency has authority to settle an issue in controversy through binding arbitration.”

CONTRACT CLAIMS

A formal contract claim is a significant step in the relationship with your customer.  It acknowledges that the REA and ADR (if applicable to the contract) processes have not been effective in resolving the dispute and refers the matter to a formal claim which has the potential for adjudication.  It also starts the interest clock in terms of government payment liability in the event the agency loses the claim during adjudication.

Below are the major clauses regarding formal contact claims and the certifications by the contractor that apply.  They have significant legal implications.

Claims and Certifications

SUMMARY

When contract disputes or the potential for claims and appeals arise it is best to view each instance uniquely in deciding which of the three avenues discussed in this article may be appropriate.

Contract disputes are serious matters. In the event the impact to the company from a risk perspective is substantial, it is best to involve a law firm that specializes in government contract claims for advice on how to proceed. ”

Smalltofeds – Disputes and Appeals


ABOUT THE AUTHOR:

Ken Fluther - Copy - Copy

Micro Mentor Volunteer Counselor Ken Larson assists many small businesses with their planning and operations processes. Small business owners or prospective owners locate through a background search capability at Micro Mentor.   Ken is a Veteran of 2 tours in the US Army Vietnam and has over 40 years in the Defense Industrial Complex. He spent over 30 years in federal government program and contract management and 10 years in small business consulting. Ken receives many inquiries from small companies wishing to enter or enhance their position in federal government contracting. Volunteer time, books, articles, and resources are 100% free through Small to Feds maintained exclusively for small business.

Techniques for Small Business Product/Services Development in Government Contracting

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Image:  Getentrepreneurial.com

“SMALLTOFEDS” By Ken Larson

“INTRODUCTION

This article will suggest approaches in developing a product or service to the point where it can be marketed in the small business federal government contracting venue. Individuals usually succeed at such an endeavor by forming a company, separating it from their personal assets and then developing the company and its product(s)/service(s); even if it is only a one-person operation at the start.

There are techniques for small business to gain government participation in growing an idea into a company. Small Business Innovative Research and Technology Transfer (SBIR/STTR) programs in major federal agencies seek concepts that can be funded and developed into products the government needs. Here are some examples:

DOD SBIR/STTR Small Business Portal

National Institute of Health SBIR/STTR

Service contracting is another form of gaining entrance into the market, creating opportunities for introducing products by selling skilled labor under a government agency service contract or prime contractor teaming arrangement.

A GSA schedule affords a platform for products and services, but sales must have been achieved historically in the commercial or government markets before applying because GSA relies heavily the most recent 2-year pricing data in negotiating a schedule.

The government contracting product and services venue is competitive and requirements by federal agencies are often bundled into larger systems procurements. Therefore, it is necessary first to position a small enterprise and its product offerings before tapping the federal market for development support.

GENERAL OVERVIEW

Product entrepreneurs all face the same challenges. Those who succeed recognize they need to visualize themselves in the product development business, structuring an enterprise, generating a business plan, protecting intellectual property and then seeking industry partners and investors to bring the product to market.

In the process, copyrights, patents and royalty issues may come into play and development and distribution agreements are formed. Pricing is finalized based on cost and expense projections and competitive factors unique to the company as negotiation results are achieved with industry teaming partners, developers, manufacturers and distributors.

Financing is always a factor and can be achieved through loans or investors with a good business plan. The remainder of this article will address the basic elements of a framework within which to succeed with your product development for federal government contracting.

BUSINESS STRUCTURE

For the majority of individuals who are starting single person or no more than 2 or 3 person operations, a Limited Liability Company (LLC) registered with the state and with the federal government is recommended.

It will separate personal assets from company assets and protect them. When product or services sales begin generating revenue an LLC has many tax advantages. It can be registered as Sub Chapter ‘S’ for tax purposes and revenue and the expenses can be passed through to personal tax returns, paying no taxes as a company. The double taxation issue prevalent with many of the other types of incorporation is avoided with a Sub chapter “S” LLC. An LLC assists in limits your personal liability for debt and court judgments that may not fall in your favor.

Representing the business as a company allows pursuing financing as an enterprise. You can think of a creative name for your LLC and you can complete the articles of incorporation necessary to bring your enterprise into existence. The term, “LLC” must conclude the name of your company if you decide to form such an organization.

Instructions for registering in your state and federally with the IRS are available at your state web site and at the IRS site. You will receive tax and employer identification numbers by registering your business.

PROTECTING INTELLECTUAL PROPERTY

Patents and copyrights for your idea may ultimately protect you to a degree but the government agencies granting them have no enforcement arm so you must discover a violation yourself, retain a lawyer, bring a court proceeding against a violator and then hope to recover your costs and a reasonable settlement if you win.

The U.S. Patent System

Therefore, most of my clients use non-disclosure agreements (NDA’s) in dealing with other companies. Teaming is a practical fact of life in pursuing the larger federal government contracts.

You can download an NDA from the “References” Box Net Cube at the right margin of this site. Fill in the blanks as appropriate for a given exchange with outside individuals and companies. Before you meet to disclose details with a potential teaming company or investor, for instance, ask them to sign the document with you up front, put a serial number on it and reference the serial number and the agreement and date on any written materials you give to them.

After the meeting draft a short letter, documenting the minutes of the meeting, what was discussed and stating that the verbal disclosures and materials in the meeting are subject to the agreement and reference the agreement by number and date. Put an acknowledgment line on the letter and ask them to return a signed copy to you. This confirms their receipt of your proprietary information and their agreement to protect it in accordance with the NDA.

There are certain exceptions with regard to individuals or companies you may be dealing with on investing where you may not choose to use an NDA. Some Angel and Capital Investors are sensitive about being asked to sign them. You will have to trade their objections off against the value they represent to your company and conduct your risk analysis on a case-by-case basis.

For detail information asserting rights in technical data and software to government agencies and protecting intellectual property with other companies please see the following article:

Protecting Intellecutal Property

BUSINESS PLANNING

Visit the SBA website on business planning. There are major topics in the business planning process which, when addressed in a plan, will insure the success of your enterprise and assist you in determining and supporting the amount of funding you need. Such topics as marketing, advertising, competitor analysis and financing are covered there. You will find a presentation and examples that you can follow in improving your plan or in generating a plan if you do not have one. The link to the site is below:

Writing a Business Plan

Articles on strategic planning and developing your marketing plan are also at the “References” Box Net Cube at this site. They address evolving an operations vision for your enterprise showing its potential to present to a banker or to an investor.

Here is a site with free business plan samples:

Business Plan Samples

It may assist you in visualizing your own business growth to look at an example of how someone else addressed a given topic. I have learned from having worked with many new business owners that it is best to have you examine the material and continue your plan, contacting me with issues and questions as they occur.

THINGS TO THINK ABOUT WHILE PLANNING

Locate teaming companies to further the objective that they would market your product as part of their offerings with your company licensing and sharing in the proceeds.

A business plan and the guidance above for its generation is the road map for developing ideas, laying out how to expand the sales of your product and researching your market to do so. It will also assist in developing pricing to considering the direct costs of product development, service implementation and distribution as well as the indirect costs of the enterprise itself (operating expenses).must be considered and financed.

A negotiation position for a given product will be driven by certain strategic factors:

1. Does a developer or teaming partner have a strong but realistic incentive to actively make the product a part of the marketplace?

2. Does market research indicate the idea will have strong sales volume once it is developed and distributed?

3. How much will a prospective teaming partner or investor have to invest in the product to get it to market? Does the product require testing?

4. Which is the better deal? Is it better to receive a 7% royalty on $5,000 worth of sales or a 1% royalty on $500,000 of sales? Even though 1% does not sound too impressive, of course it’s the better choice in this example.

A negotiation position should be based on support by for the argument that a concept will experience a certain level of sales and the royalty should be based on a % of estimated end user volume sales, discounted for the investment that the developer and distributor must make to get it to market.

The royalty should be outside of the distributor cost breakdown and the end user cost breakdown. It is simply a deductive factor the manufacturer will have to introduce into their profit equation after the costs have been tabulated. They should not view royalties as a cost factor; they should view them as a share of the profit on the total estimated sales.

Chances of succeeding with a negotiation with a developer and/or distributor are increased by showing understand the prospective market for the product and drawing some comparisons between the product and other similar successful products.

Naturally there will be some give and take with the other side about estimated costs to get the product to market. Be forthright in acknowledging their investment but also support a position with some research and comparative data on the product potential.

Lastly, settle on a % of the end user sales volume based on an estimate to which is agreed with the other party and insures that the purchase agreement for royalties entitles the agreed upon % on all future sales.

FINANCING

The SBA assists prospective business owners in completing sound business plans, which can then be presented to a banker in applying for financial assistance.

In the event that 2 banking institutions deny a loan application, a candidate can apply to the SBA for a loan guarantee that may assist in achieving a loan, since it would back up the application to a bank.

Loan officers are interested in a business plan to get a view of the business future and place a value on products and services based on the market, the competition, the sales projections, costs, expenses and profit expectations. The link to the SBA loan guarantee program is below:

SBA Loans and Grants

Veterans have access to small business loans via the Patriot express program:

Patriot Express Program

ANGEL AND CAPITAL INVESTORS

Angel and private investors have two prominent characteristics:

(A) They want a high return on investment (ROI)

(B) They typically want a great deal of control of the operation.

According to the Colorado Capital Alliance, surveys of angel investors show that:

1. Angels are seeking companies with high growth potential, proven management and sufficient information about the company, its management team, and its market to be able to assess a company’s value.

2. On average, Angels expect 10 to 15 percent above of the S&P 500 return on equity.

3. Typically, Angels invest in companies seeking between $50,000 and $1,000,000.

4. Angels generally prefer to finance manufacturing or product-oriented ventures, especially in the high-tech fields.

5. On average, Angels are 47 years old, have a postgraduate degree, and management experience in an entrepreneurial venture.

An angel investor may ask for at least ten to twenty times return in just five years. For many angel investors, it’s not just about the money; they want to actively participate in developing your business. They want to act as a mentor and sometimes even to take an active role in managing the company. This often translates into the angel investor having a seat on the company Board of Directors.

Angels are also highly interested in an exit strategy from for a full return on their investment in your business. The closest thing to it is an astute business plan that calls out the specifics of potential ROI, based on sound planning and analysis and addresses the following as possible exit strategies. Remember, investors are very aware that an exit strategy cannot be guaranteed. But they can be offered more than the wishful thinking that an IPO will occur in three years.

It is always good to have a lawyer involved in complex documents or in the development of documents. This will further protect a concept. A lawyer does not necessarily have to be present during the exchanges with prospective companies, but a lawyer review and comment on documents before they are signed.

SUMMARY

This article has conveyed preliminary steps for the small business in product development for the federal marketplace.

It should be noted that much of the process discussed in this article is the same for the commercial product development and a certain amount of commercial success is usually achieved before selling products in the government contracting venue. The exception to that rule is in highly technical product pursuits where the government is funding advanced development.

To consider non-profit grants and direct government contract funding potential please see the following article:

Grants Vs, Direct Government Contracts

Once a company is formed, a product platform established and a position to market a useful product to the federal government is achieved, please see the following articles at this site in developing a marketing plan

Registering Your Business For Government Grants and Contracts

Multiple Front Marketing

Should You Consider Small Business Governement Contracting?

Small Business Teaming

With careful structuring, planning and marketing, a product with potential can find its place in federal government contracting.”

Smalltofeds – Techniques for Product Development

ABOUT THE AUTHOR:

Ken Portrait

Ken Larson has over 40 years in the Military Industrial Complex. He is a veteran of 2 tours in the US Army Vietnam. Subsequently Ken spent over 30 years in federal government program and contract management and 10 years in small business consulting. As a Micro Mentor Volunteer Counselor, he assists many small businesses with their planning and operations processes. 

Military Kills Recruiting Contracts for Hundreds of Immigrant Recruits

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Thirty-seven service members from 22 different countries take the Oath of Allegiance during a naturalization ceremony held at Bagram Air Field, Afghanistan on July 4, 2013. (Army/Sgt. Anita VanderMolen)  

“WASHINGTON POST”

“Many of these enlistees have waited years to join a troubled recruitment program designed to attract highly skilled immigrants into the service in exchange for fast-track citizenship.

U.S. Army recruiters have abruptly canceled enlistment contracts for hundreds of foreign-born military recruits since last week, upending their lives and potentially exposing many to deportation, according to several affected recruits and former military officials familiar with their situation.

Now recruits and experts say that recruiters are shedding their contracts to free themselves from an onerous enlistment process, which includes extensive background investigations, to focus on individuals who can more quickly enlist and thus satisfy strict recruitment targets.

Margaret Stock, a retired Army officer who led creation of the immigration recruitment program, told The Washington Post that she has received dozens of frantic messages from recruits this week, with many more reporting similar action in Facebook groups. She said hundreds could be affected.

“It’s a dumpster fire ruining people’s lives. The magnitude of incompetence is beyond belief,” she said. “We have a war going on. We need these people.”

The nationwide disruption comes at a time when President Trump navigates a political minefield, working with Democrats on the fate of “dreamers” — undocumented immigrants brought to the country as children — while continuing to stoke his anti-immigrant base. It was not immediately clear whether Pentagon officials have taken hard-line immigration stances from the White House as a signal to ramp down support for its foreign-born recruitment program.

Stock said a recruiter told her there was pressure from the recruiting command to release foreign-born recruits, with one directive suggesting they had until Sept. 14 to cut them loose without counting against their recruiting targets, an accounting quirk known as “loss forgiveness.”

The recruiter told Stock that the Army Reserve is struggling to meet its numbers before the fiscal year closes Sept. 30 and that canceling on resource-intensive recruits is attractive to some recruiters, she said.

On Friday, the Pentagon denied ordering a mass cancellation of immigrant recruit contracts and said there were no incentives to do so. Officials said that recent directives to recruiters were meant to reiterate that immigrant recruits must be separated within two years of enlistment unless they “opt in” for an additional year.

But some recruits among half a dozen interviewed for this article said they were not approaching that two-year limit when their contracts were canceled, sowing confusion about the reason they were cut loose. The Pentagon declined to address whether messages to recruiters contained language that could have been misinterpreted.

Lola Mamadzhanova, who immigrated to the United States from Kyrgyzstan in 2009, said she heard that Army recruiters in Evanston, Ill., texted immigrant recruits last week asking whether they still wanted to enlist, with an unusual condition: They had 10 minutes to respond. She never received the text message.

“The recruiters did some dirty trick just to get me out so I won’t be trouble anymore,” Mamadzhanova, 27, told The Post on Thursday. Her active-duty contract was canceled Sept. 7, according to a separation document obtained by The Post that said she “declined to enlist.” She later learned the recruiters used a wrong number to text her.

The senior recruiter at Mamadzhanova’s station contacted by The Post declined to comment and called Mamadzhanova seven minutes afterward to reverse previous guidance, saying her unlawful immigration status was the reason she was released. She enlisted in December 2015, which puts her three months outside the two-year limit.

Mamadzhanova was assured by other recruiters that her status would not be an issue and that she would ship for training soon after her immigration status slipped, around her enlistment date. Mamadzhanova, who is fluent in Russian, said the shifting and unclear rules have blindsided her.

“Joining the Army was a dream of mine since America has treated me so well,” she said. She applied for asylum in April, joining other recruits who have sought asylum or fled.

Some anti-immigration sentiment has swirled in the Pentagon for years, former staffers have said, with personnel and security officials from the Obama administration larding the immigrant recruiting process with additional security checks for visa holders already vetted by the Departments of State and Homeland Security.

“Immigrant recruits are already screened far more than any other recruits we have,” Naomi Verdugo, a former senior recruiting official for the Army at the Pentagon, told The Post.

“It seems like overkill, but there seems to be a sense that no matter what background check you do, it’s never enough,” she said. Verdugo, along with Stock, helped implement the recruitment program.

One Indian immigrant, a Harvard graduate and early recruit who is now a Special Forces soldier, was called back to undertake the updated security checks, she said.

“Even though you’re in the Army, even though you’re naturalized, these policies say ‘we’re not going to treat you like any other soldier,’” Verdugo said of the concerns over immigrants held by some at the Pentagon.

Internal Pentagon documents obtained by The Post have said the immigrant recruitment program, formally known as the Military Accessions Vital to National Interest (MAVNI) program, was suspended last fall after the clearance process was paralyzed and officials voiced concern over foreign infiltrators, though it remains unclear whether any threats have ever materialized.

Experts say the relatively small number of recruits in the MAVNI program possess skills with outsize value, such as foreign languages highly sought by Special Operations Command. The program has rotated 10,400 troops into the military, mostly the Army, since its inception in 2009.

Although the military says it benefits from these recruits, they can generate a disproportionate amount of work for recruiters who must navigate regulations and shifting policies. The layered security checks can add months or years to the enlistment process, frustrating recruiters who must meet strictly enforced goals by quickly processing recruits.

In a summer memo, the Pentagon listed 2,400 foreign recruits with signed contracts who are drilling in reserve units but have not been naturalized and have not gone to basic training. About 1,600 others are waiting to clear background checks before active duty service, the Pentagon said.

The document acknowledges 1,000 of those troops waited so long that they are no longer in legal status and could be exposed to deportation. That number probably has climbed since the memo was drafted in May or June. Lawmakers have asked Trump and Defense Secretary Jim Mattis to intervene on behalf of those recruits.

Sens. Kamala D. Harris (D-Calif.) and Richard J. Durbin (D-Ill.) filed an amendment in the defense authorization bill Tuesday to retain MAVNI recruits until their lengthy background investigations are finished.

“These brave men & women enlisted & the Administration turns its back on them,” Harris tweeted Friday. “We must pass Sen. Durbin’s & my bill to protect these recruits.”

During July 19 testimony in a lawsuit filed by recruits who said the federal government unlawfully delayed their naturalizations, Justice Department attorney Colin Kisor assured a district court in Washington that recruits would see their contracts canceled only if “derogatory” information was found in extensive background investigations.

Mamadzhanova and others said their screenings, which take months to complete, have begun recently and could not have returned results.

Meanwhile, confusion reigned for recruits in multiple states.

At one office in Illinois, a senior recruiter restored a contract less than two hours after The Post inquired about a case. In Texas, a recruiter did the same 12 minutes after a call seeking to confirm whether a recruit’s contract was canceled.

An immigrant recruit who came to the United States in 2006 and enlisted in Virginia said her contract was canceled Tuesday after she had waited for two years, just as her legal immigration status expired. She asked to opt-in for another year, but her contract was dissolved days later, she said.

Recruiters had assured her, saying her contract was a shield from federal immigration authorities, she said. She spoke on the condition of anonymity for fear of retribution.

She now fears deportation to her native Indonesia, which strips native-born people of citizenship if they enlist in a foreign military or pledge loyalty to another country, as she has done.

“I feel devastated,” she said. “The Army was my only hope.”

GAO to Agencies: Stop Using Social Security Numbers

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Social Security for Everything

“FEDERAL TIMES”

“Federal agencies continue to over-collect, over-use and over-display Social Security numbers, leading to the an unnecessarily high risk of identity theft.

That’s the latest from the U.S. Government Accountability Office. In a recent report GAO declares that a decade’s worth of effort to pare the use of SSNs in government has had only “limited success.

While all 24 agencies covered by the Chief Financial Officers (CFO) Act have developed plans to the reduce the use of SSNs, they have been hampered in implementing those plans.

Agencies cited statutes and regulations mandating SSN collection. They told inspectors that SSNs often are necessary in interactions with other federal entities, and that technological constraints within agency systems and processes have hampered their efforts to reduce the use of the identifier. “Further, poor planning by agencies and ineffective monitoring by OMB have also limited efforts to reduce SSN use,” GAO notes.

The report comes at a time when Congressional overseers have focused their scrutiny on the apparent over-use of SSNs in government. This spring the House Ways and Means Social Security Subcommittee and the Oversight and Government Reform Information Technology Subcommittee held a joint hearing on the subject.

“Our SSNs are connected to so many personal aspects of our lives — from our Social Security benefits and finances, to our medical histories and education,” said the hearing’s chair, Rep. Tom Rice (R-SC). “This hearing is about making sure that SSNs are only used when necessary and that the federal government is doing what it can and what it should to make sure that when SSNs are used and collected, they are kept safe.”

Some federal entities have taken action. GAO points to the Department of Defense, which has replaced SSNs on its identity cards. Nonetheless, use of SSNs is widespread. Of the 24 CFO Act agencies, 22 use the identifier for employee benefits and services; 17 use it for law enforcement; 16 for statistical and research purposes; 13 for tax purpose and 12 for other uses.

The fix should come from OMB, which could set standards for how the rest of government handles SSNs.”

https://www.federaltimes.com/federal-oversight/watchdogs/2017/08/30/gao-to-agencies-stop-using-social-security-numbers-for-everything/

Pentagon To Unveil New Acquisition Structure

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Pentagon Reorganization

“DEFENSE NEWS”

“The Pentagon is scheduled to deliver its new acquisition structure to Congress,  a major step toward redesigning how the building researches and procures equipment.

The 2017 National Defense Authorization Act instructed the Pentagon to devolve the undersecretary of acquisition, technology and logistics, or AT&L, into two separate jobs: undersecretary for acquisition and sustainment, or A&S; and a new undersecretary for research and engineering, or R&E, essentially a chief technology officer.

Those changes are expected to be in place by Feb. 1, 2018.

Congress purposefully allowed time for the Department of Defense to come up with its own road map on how the split should occur, which the department is supposed to deliver to Capitol Hill on Aug 1[2017].

Sources say there were discussions about delaying that delivery, in order to allow newly installed Deputy Secretary of Defense Patrick Shanahan a chance to weigh in. However, all indications are that the department intends to hit its Tuesday deadline.

It is important to note that this report will not be the final say in the issue. Its purpose is to inform Congress of how the department will split the duties of AT&L and the broad organizational strategy, but does not need to detail the nuts and bolts of currently shared services. That also means that Shanahan and Ellen Lord, the longtime Textron executive-turned-AT&L nominee who may be confirmed this week, will have a chance to continue to give input going forward.

An interim, two-page memo to Congress was delivered March 1, which contained few details about how the building is approaching the question of devolving AT&L into the new offices.

Congress, meanwhile, is trying to balance out how to give senior leaders a chance to weigh in and making sure the DoD meets the Feb. 1 deadline. And while the report will be happily received in Congress, there is skepticism about what the DoD will actually deliver and how closely it will hew to Congress’ vision of how the new structure should look.

Bill Greenwalt, a longtime defense acquisition expert who spent two years as a staffer on the Senate Armed Services Committee where he had a central role crafting McCain’s acquisition changes, emphasized that the Pentagon’s thoughts are recommendations and that Congress will have final say.

“I think it will be a back and forth between the Congress and administration in terms of how to make this work,” he told Defense News. “The key thing for Congress is R&E should be driving innovation. A&S should be providing the oversight structure. The boxes shouldn’t be transferred around, it should be a cultural shift.”

SCO, DIUx likely folded under R&E

While the majority of the changes to the AT&L structure will entail a reshuffling of offices already under central control, there are two notable offices that may be brought in house, whether they desire it or not.

The Strategic Capabilities Office, or SCO, and the Defense Innovation Unit Experimental, or DIUx, were two pet projects of former Secretary of Defense Ash Carter. The SCO is focused on finding innovative solutions to near-term challenges, while DIUx is charged with creating ties between the DoD and the commercial technology sector.

Notably, both offices have existed as quasi-independent entities. DIUx actually started as a report inside the AT&L structure before being relaunched a year ago following a lack of progress in its mission; it then became a direct report to Carter. The SCO, meanwhile, was created by Carter during his time as deputy secretary of defense and was formally introduced to the world by Carter during the fiscal 2017 budget rollout.

With Carter gone and Congress seeking to improve innovation inside the building, there is pressure from the Hill to see those groups folded into the new R&E portfolio. In a May 18 interview, Mary Miller, acting assistant secretary of defense for research and engineering, said SCO and DIUx “would naturally fit in the USDR&E, that’s the intent.”

“If we set this undersecretary up as we believe we will, as we’re hoping this turns out to be and it will be a select-in to this whole new culture we’re establishing, we don’t need to have special groups that were set up just to be different, because that will be the undersecretary mission,” Miller said during the interview.

Greenwalt said that if the Pentagon crafts the R&E spot “right,” groups like DIUx, SCO, the various rapid capabilities offices and perhaps the Defense Advanced Research Projects Agency should all fall under its control.

When it was pointed out to him that regardless what the Pentagon says, Congress could step in and demand those groups fall under R&E’s control, Greenwalt smiled. “Right. That’s the back and forth,” he said. ”We’ll have to see how it works.”

Greenwalt isn’t the only one who thinks those outside groups should come inside. Frank Kendall, whose tenure of four-plus years as AT&L ended with the Obama administration, believes that for the R&E spot to work, it must include all the research groups scattered around the department.

“It would have basic research, 6.1, 6.2 and 6.3, it would have DARPA, it would have SCO and DIUx, it would have the existing office that does experimentation,” Kendall said in April, adding that he had provided that recommendation to Deputy Secretary of Defense Bob Work.

Andrew Hunter, an analyst with the Center for Strategic and International Studies, noted that the Senate clearly has been leaning toward putting SCO, DIUx and DARPA into the R&E portfolio. But that may be an imperfect fit, he warned.

“DARPA, by mandate, deals with that leap-ahead tech, 6.1, 6.2, 6.3 work, research that is early stage. Once it gets to prototypes, that’s no longer DARPA territory. SCO is on the other end,” Hunter said. “Both have a fit in the R&E position. But it seems the department is heading towards having R&E have more of an early stage focus, so they might come to a different answer.”

Leadership questions

While the future of the R&E office is uncertain, the A&S job appears to be more stable — in part because its leadership seems intact.

Lord, the former Textron executive, has already gone through a confirmation hearing for the AT&L job, during which she reaffirmed she would be sliding over to A&S once the AT&L office goes away in February.

The Senate’s version of this year’s defense authorization bill would require Lord to be reconfirmed for the A&S job, but given how little headwind she faced in her confirmation hearing, the assumption is she would easily be reconfirmed for the new title.

Which brings up the question of who her counterpart would be. It is understandable that no names have been put forth for the job, as the White House and Pentagon have been focused on filling existing roles, plus the R&E job does not exist. But waiting too long to put forth a nominee could have “risk,” Hunter said.

“You might not be able to get the quality person you want because of how it is cast. The earlier you name a person, the more they have a chance to shape the structure of the office,” he added. “However you slice the piece, what used to be one really powerful job is now two jobs, each of which is slightly less powerful — so how appealing are they for someone who wants to put their stamp on the future?”

http://www.defensenews.com/pentagon/2017/07/31/pentagon-to-unveil-new-acquisition-structure-on-aug-1/

 

 

 

Senate Attempt to Reduce Contract Protests Ignores Root Cause

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Protests Myislandcity dot net

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“WASHINGTON TECHNOLOGY” By Stan Soloway

“There are things that can be done to reduce the negative effects and frequency of protests. And they start with enhanced transparency—before, during and after award.

The current Senate proposal fails to consider protests in the context of the broader procurement regime and its innumerable government-unique requirements.”


“When it comes to federal procurement, the frequency and expectation of protests has had a palpable, costly, and sometimes deleterious effect on the process and those competing in it. Most companies now add an extra six to 12 months to their revenue projections in order to account for possible protests.

There is good reason to believe (including surveys) that “low price/technically acceptable” (LPTA) procurement strategies are, with some frequency, driven by a desire to avoid protests, since protesting such procurements is near impossible.

And, of course, there have been cases where incumbents, having lost a re-competition, submit a protest and, as a result, effectively get a contract extension while the protest is decided.

All of these represent unintended and undesirable impacts of the protest process. As a result, many have believed for some time that significant remedial action is needed. This includes the Senate Armed Services Committee, which, for the second year in a row, has included provisions in the defense authorization bill that would require losing protestors to reimburse the government for the costs of a protest when none of the plaintiff’s allegations are sustained.

The legislation would also require the withholding of all profits from incumbent contractors who lose a recompetition and file a protest. The funds would only then be released if some portion of the protest is sustained. If it is fully rejected, the money would be paid to the company that won the competition over which the protest was filed.

Some, including my friend and former federal procurement administrator Steve Kelman would go even further. He has at times argued we should consider doing away with protests altogether since no such equivalent exists in the commercial sector. Unfortunately, sympathetic as I am to the issues driving these views, we are putting the cart before the horse.

First and foremost, we have to remember that protests exist principally to ensure that the outcome of a procurement is in the best interests of the taxpayer. Hence, when mistakes are made, it is in the government’s, and taxpayer’s, interest to take corrective action.

Second, the federal acquisition regulation makes clear that all bidders on a federal procurement must be treated fairly. To the extent the government fails to follow its own rules or stated procurement strategy, remediation is required. There is no such requirement in the commercial world.

Third, even if a protest is dismissed in its entirety one cannot make the leap to assuming nefarious intent on the part of the protestor. That’s like saying everyone who loses a lawsuit was being frivolous in filing it. Obviously that’s not always the case.

For these reasons, and more, the Senate language is the wrong answer. But that does not mean a problem doesn’t exist and that some meaningful action is not possible. Quite the contrary.

Ironically, the proposed legislation includes a crucial part of the answer. In addition to the provisions cited above, it would also mandate quality, detailed debriefings for all significant procurements.

We learned in the 1990s that good debriefings result in far fewer protests. In fact, the data is clear that many companies use the protest process as a means of discovery; of trying to understand why they lost a given competition. In the years immediately following the added emphasis on debriefings, the number of protests dropped significantly.

As but one good example, the IRS had a policy of sharing in a debriefing all information that might otherwise be released during a formal protest (with appropriate redactions). And they executed numerous, significant procurements without a single protest. To its credit, the Senate committee would require that the IRS’s debriefing policy become the norm.

The bill would also require release of the government’s internal, written source selection criteria, which could and should be done anyway. Taken together, these two important steps toward greater transparency could have a very substantial effect. It should also be noted that the IRS was also particularly good in its pre-award communications to bidders, which undoubtedly also facilitated effective and credible competitions. Yet, such communications remain all too inconsistent.

Assigning motive is always a slippery slope. And much of what we think we know remains based on presumption rather than good data. Thus, it would also be helpful if there were better data on the frequency and nature of incumbent protests. How often are they actually sustained, in whole or in part? Is it possible to measure the frequency with which incumbents file protests focused on issues that, while valid, are so minor they would not result in a changed outcome?

Yes, it could reduce the number of protests. But it might well do so for the wrong reasons and based on the wrong assumptions.”

https://washingtontechnology.com/articles/2017/07/25/insights-soloway-bid-protests.aspx

About the Author:

Stan Soloway

Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.