contract law

[Eubulides <paraconsistent@xxxxxxxxxxx>]

Law Aims to Change Acquisitions
Defense Agencies to Mimic Private Firms in Buying Services

By Anitha Reddy
Washington Post Staff Writer
Monday, November 24, 2003; Page E07


The defense authorization bill, which President Bush is expected to sign
today, includes a provision designed to improve federal acquisitions by
allowing agencies to more closely emulate the way private companies
purchase services.

The new law will create a chief acquisition officer at major agencies and
increase training for federal workers who manage contracts. It will also
give government officials more flexibility in the way they write contracts
and in the kinds of services they can buy through a streamlined bid
process.

The new contracting rules, known as the Services Acquisition Reform Act,
were introduced by Rep. Thomas M. Davis III (R-Va.) and later included in
the defense authorization bill.

Over the past decade, the government has tried to reform its contracting
process in an attempt to buy goods and services more quickly and cheaply.
Last year, the government spent $135 billion on services alone.

"This is just one more piece in the legislative progression starting back
in the mid-1990s which has made the government marketplace increasingly
commercial," said James A. Kane, president of Federal Sources Inc., a
consulting firm that serves government contractors.

Government contractors say one of the most significant changes is that the
law expands the list of products and services that can be bought through
an expedited process to include a number of services, including management
consulting, translation services and software development.

Under the current process, civil agencies have to go through a more
complicated bid process for those services. It can take months to award a
contract because officials must consider proposals from any company.

But the new law says that because those services are sold to the public in
sufficient quantities, price competition will prevent the government from
being gouged and therefore the longer evaluation process is not needed.

One of the most disputed items in the law was the provision expanding the
use of "time and materials" contracts, in which the government pays the
cost of supplies and hourly labor rates.

Some government officials warned that, without proper oversight, this type
of contract could lead to ballooning costs.

"People have feared project creep," said Stephen Ward, director of global
government affairs for Electronic Data Systems Corp. But Ward said the new
contracting rules placed ceilings on the total value of time and materials
contracts to allay concerns of over-spending. He said the compromise will
allow the government to more easily buy services from professionals, such
as lawyers or consultants, who typically charge by the hour.

Ward said the reforms also would make certain projects more attractive to
a systems integrator like EDS. "There are times when there is too much
risk to sign up to a firm fixed-price contract," Ward said, because a
company may be stuck with the bill as costs grow beyond the value of the
contract.

Kane, the consultant, said EDS may have benefited if its contract for the
Navy-Marine Corps intranet, a vast network connecting the two military
branches, had been awarded under the new law. EDS officials have said the
company discovered after it won the contract that it had underestimated
the amount of work required to eliminate existing computer systems and
link others, and it has not made a profit on the $7 billion contract.

EDS officials declined to comment on how the new law might have affected
the Navy-Marine contract.

The law also furthers the government's recent shift toward
"performance-based" contracts, instructing agencies to try to use such
contracts when awarding services contracts worth less than $25 million. In
such contracts, which are relatively new, the government describes its
problem and invites companies to come up with solutions.

In the past, the government would develop a solution and invite companies
to bid on implementing the government's design. Proponents of this change
say it will allow the government to take advantage of private companies'
creativity and expertise.

"I think vendors would appreciate the performance-based approach to
contracting because it allows them the flexibility to achieve cost
savings," said Payton Smith, a federal-market analyst at research firm
Input.