Gregory L. DaviesACC-APG, Chief of Staff

27 June 2012NCMA Luncheon

Trends In Contracting

UNCLASSIFIED

Overview

• Look Back ( in Order to Look Forward) Recent NDAA Acquisition Impacts & Other Contracting

Policies

• Future Budgets• CPARS• Service Contracting

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• OSD Better Buying Power• Summary/Way Ahead

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Background

UNCLASSIFIED 3

Executive Director/PARCMr. Bryon J. Young

Chief of StaffGregory L. DaviesAssociate Director C4ISR Associate Director SCRT

Civilian Deputy to the Executive Director

Mr. Steven R. Bryant

UNCLASSIFIED

Contracting Operations Division

Enterprise Resources Division

Technology, Logistics, and Security Division

Legal

Sm Bus

Comp Adv

Sm Bus

Legal

Comp Adv

HCAC4ISR

MG Ferrell

HCASCRT

Mr. Ormond

ACC-APG

StrategicInitiatives

HCA ACC(Former NCR-CC)

Dr. Lowman

DIVISIONS(APG A, B, C, E,

Ft. Belvoir, Tobyhanna,

Ft. Huachuca)

DIVISIONS(APG D, Installation, Edgewood, Adelphi,

Durham, Natick, Denver)

ACC-APG

PARC Authority -

TAO

Military Deputy to the Executive Director

TBD

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Addresses Gansler Findings:

• Changed the way DOD drafts requirements definition

• Contingency program managementcontingency contracting

• Training for personnel outside the acquisition workforce (CORs)

• Joint training for acquisition professionals

Also:• Rewrite of DODI 500.02

2008 National Defense Authorization Act

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• Increase the stature, quantity, and career development of the Army’s contracting personnel

• Restructure organization and restore responsibility

• Provide training and tools for contracting workforce

• Obtain legislative, regulatory, and policy assistance

Gansler Recommendations

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“Contracting, from requirements definition to contract management, is not an Army Core Competence. The Army has excellent, dedicated people; but they are understaffed, overworked, under-trained, under-supported and, most important, under-valued.”

Jacques S. Gansler

... Catalyst for change, blue print for action

UNCLASSIFIED

M

• Allowed protests on task orders >$10M under IDIQ contracts

• Required KOs to post sole source J&As on FBO

• OMB contract reviews: (1) Maximizing the use of competition

(2) Improving practices for selecting contract types(3) Strengthening the acquisition workforce(4) Clarifying when functions should be performed by federal employees and when contractors may be appropriately considered.

Also: Weapon System Acquisition Reform Act 2009

2009-10 National Defense Authorization Act

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M

• Required an assessment on service contracts

• Continued the “Commission on Wartime Contracting”

• Extended Protests of TO/DOs >$10M to 2016

• Requested a way to “Improve Contractor Business Systems” Acct, Estimating, Purchasing, EVM,

Property Results in “new” DFARS Clause

252.242.7005 (Feb 2012)

2011 National Defense Authorization Act

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M

• Requires contractor past performance info available on databases for source selections CPARS

• Attempts to hold labor rates & OHs for Contracts >$10M to FY10 levels For both FY12 & 13

• Caps spending on services contracts at FY10 levels

• Holds compensation expense to “senior executives” (To $693,951)

2012 National Defense Authorization Act

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Budget Overview

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Budgets: Deficits Do Matter• Sequestration: Everyone agrees it’s a bad idea!

• Budget Control Act 2011 cuts $1 Trillion over next 10 yrs and

• Created the Super Committee (Aug 2011)

• DoD will trim $450B in next 10 years • Sequestration Plan would saddle DoD with

additional $500B in cuts• Entire sequestration plan is $1.2 Trillion

• “ …defense is going to have to bear their share of the burden” and “I don’t think there is the stomach over there to stop the sequester.” Sen. Harry Reid (D-NV)

The Outcome is UncertaintyUnclassified 11

Budgets: Deficit Do Matter (cont)

• Presidential Budget (PB) request for FY13 = $525.5B FY 12 was $554B, so FY 13 is a 5% decrease

• Sequestration would cut add’l $1.2 Trillion over next 10 yrs

• Sequestration Plan would saddle DoD w/ add’l $500B in cuts

• Sequestration will cut $55B of “discretionary” DOD money in Jan 13 !

• Approx $54.7B per year for DOD next ten years

"Our national debt is our biggest national security threat“ Admiral Mike MullenUnclassified 12

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ACC-APG RDECOM/SCRT

Actions $ObligatedFY05 14,500 $3.4BFY06 15,100 $4BFY07 16,500 $6.1BFY08 23,500 $6.3BFY09 23,000 $6.9BFY10 22,000 $7.2B

ACC-APG CECOM/C4ISR

Actions $ObligatedFY05 14,000 $8BFY06 16,000 $11.5BFY07 17,000 $12BFY08 25,000 $14.5BFY09 24,000 $15BFY10 22,000 $14B

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ACC-APG Actions/Obligations

FY11 Combined TotalsApprox. 48.5K Actions & >$18B Obligated

22% Awarded to Small Businesses

(=$2.9B)74% of Actions

Competed

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FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY130

10,000

20,000

30,000

40,000

50,000

60,000

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$11.4

$15.5

$18.1

$20.8$21.9

$21.2

$18

ACC-APG Dollars (in Bs)& Actions (FY 05 to FY 11)

Actions Obligated

ACTIONS

CPARSContractor Performance Assessment

Reporting System

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Regulatory RequirementsFAR 42.1502 & 42.1503: Agencies Shall Prepare an Evaluation of Contractor Performance and Submit to Past Performance Information Retrieval System (PPIRS)

FAR 15.304: Past Performance Shall be Evaluated in All Source Selections for Negotiated Competitive Acquisitions

Federal Acquisition Regulation (FAR)

CPARS Shall be Used to Prepare Contractor Performance Evaluations

PPIRS Shall be Used as a Source of Past Performance Information in Source Selections

AcquisitionRegulation Supplements

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Gov’t Source Selection Officials

Past Performance Process Overview

Contractor Representative

Gov’t Program Manager/Contracting Officer

Contractor SeniorManagement

PPIRSCPARS

• Pre-Decisional in Nature

• Protected Throughout Life Cycle

• Accessible By: Government Personnel with Need to Know Contractor who is Subject of Evaluation

• May Not Be Transmitted Via Email

• Retained for 3 Years After Contract Completion in PPIRS

Treated as Source Selection Information IAW FAR 3.104

CPAR Assessments

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UNCLASSIFIED 20

Reporting Frequency

ContractYear 1

Interim Report

ContractYear 2

Interim Report

ContractYear 3

Final Report

Addendum ReportContractYear 3.5

Perform Accuracy

Check

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CPARS WorkflowContract

Registration

Enter ProposedRatings

Validate ProposedRatings

Review ContractorComments

Reviewing OfficialComments

Automated:Focal Point

Manual:Focal Point

Contract Data EntryAssessing Official

Assessing Official Rep

ContractorComments

1. Focal Point Assigns Users

2. Contract is registered

Service Contracting

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• DoD’s procurement Spend is $400B• 51% of contracts are for services• Exponential growth in service contracts last

ten years

FY 1990 FY 2000 FY2010$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

400.00%

450.00%

500.00%

$42.8$53.0

$200.0

24.00%

377.36%

Svcs Spend % Change

Optimization of Army Services Implementation Plan

• Secretary of Army Signed off on Svcs Plan September 2011• “Commands should treat services as programs, not contracts.”• Mandates DA savings on service contracts of $11.4B over 12-

16 POM Savings Breakdown: OCO = $6.75B and Base = $4.65B

• Establishes a Portfolio Management Approach to service contracts

Est MFIPTs ( Multi Functional IPTs) like a JPM for Service Contracts RA = Requiring Activity Portfolio Managers CA = Contracting Agency

• PEOs must establish a Command Services Executive (CSE) CSE must be designated in writing and must be a SES or GO

• Established DASA(S) to monitor and manage Army service spend

DASA(S) will review & approve Service Acq Strategies >$250M <$500M Courtesy copies of all other SAS (>$10M) are to be sent to DASA(S)

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UNCLASSIFIED

How to Achieve Savings on Service Contracts

• Reduce 1 bid contracts FY 11 ACC-APG policy encourages 30 days to maximize quotes If RFP out for less than 30 day and only receive one quote, it

must be posted again for 30 days to maximize competition

• Reduce/eliminate Time & Materials (T&M) and Labor Hour Contracts

Need a D&F signed by PARC for T&M/LH contractso If T&M >$100M HCA must sign D&F

• Reduce Contracting Fees/Ask for Discounts• Use Incentive Based Contracts• Limit Periods of Performance (POP)

ACC-APG policy limits service contracts to not more than 36 months

• Contractors: Propose lower hours and tell us how you will be efficient

• TOs Under IDIQs Designed to be Faster Method of Awarding OrdersECBC MSC

o $485M Cap/20 ContractorsR2-3G

o $16.4B cap/ Managed by a Program Office in Bldg. 6001/18 ContractorsS3

o $19B Cap/7 Contractors/Obligated $13B to date/ 2500 to 3000 actions/year• Multiple Award is Preferred• Single Awards IDIQs Required AAE to sign/Approve a D&F over $103M• Must Do Market Research• Best Business Practice: Better to establish 5 year order periods instead of base

and options

• Contractors: Above IDIQs will be consolidated & recompeted in FY 14 for a FY 15 award

• New MAC IDIQ for Chem/Bio is active W911QY-12-R-0020 (Due 7/20/12) ($495M)

Task Orders (TOs) Under IDIQs

Ashton Carter OSD Better Buying Power Initiatives

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OSD Better Buying Power InitiativesFive Key Initiatives

Reduce Non-Productive Processes and Bureaucracy

Target Affordability and Control Cost Growth

Incentivize Productivity & Innovation in Industry

Promote Real Competition

Improve Tradecraft in Acquisition of Services

OSD’s Implementation Directive for Better Buying Power (3 Nov 10)

UNCLASSIFIED

What This Means to You

•More frequent and more thorough market research will be conducted;• We will be reaching out to the small business community on

a more frequent basis, and our expectations of teaming with you will be greater;

• Cost-type contracts are increasing, requiring businesses to have approved purchasing systems that can track costs; suggest creating a relationship with DCMA and DCAA;

• What may have been business as usual is evolving into the need for greater efficiencies; highlight these in your proposals;

• Government scrutiny of indirect costs will be greater;• Government oversight on service contracts will be

enhanced.

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UNCLASSIFIED

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Trends in the Acquisition and Contracting Next 1-5 Years• DOD Cuts on the Horizon• Emphasis on “Affordability” and “Productivity” in

Defense Spending – Driven by Dr. Carter• Consolidate Common Items (Both Supplies and

Services) Leverage Volume Discounts

• Multiple Award IDIQ Contracts “Fair Opportunity”/Best Value Awards

• A Two Step Competition Process

• Cut Service Contracts by 10% for “each of the next three yrs”

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Trends in DOD Acquisition & Contracting Next 1-5 Years• Small Business Plans Will be a Weighted Part of the Evaluation for Award For Both Large and Small Businesses

• Expect More/Better Oversight Trying to Avoid Cost Over Runs

• Fewer Time and Material (T&M) Contracts More Firm-fixed Price, When They Make Sense “Greater Consideration” for using FPIF/CPIF

• More Emphasis On “Performance” Based Contracting You Will See More PWS vs. SOW Quality Assurance Surveillance Plans (QASPs) Incorporated

Into PWS for Services

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Trends in the Acquisition & Contracting

• We’ll be in a Post War Environment Soon• Deficit Spending is Out of Favor• No Appetite for Cost Growth• Latest Mantra: “Do More Without More”

What’s Needed From Industry in This Environment:1. Lower Cost Systems, esp. in Production and

Sustainment2. Demonstrate “Should Cost” in your Proposals

Share your cost lowering ideas with the PM Provide both “Will Cost” and “Should Cost” in Proposals

3. Be Lean, Stress Quality and Efficiencies Lower overheads

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