6/3/20091

NCMA – History of Government Contracting

James F. NagleOles Morrison Rinker & Baker LLPwww.oles.comnagle@oles.com

6/3/20092

The Current System

Not designed to be efficientMandates corrective practices and National interests200 years of loophole closing

6/3/20093

Every Scandal/Major Problem Has a Reform

CriminalCivilContractualAdministrativeGovernment Contract Jurisprudence

6/3/20094

Criminal

High level of proofLimited corporate penalty

6/3/20095

Civil

Lower standardCorporate responsibility High damages

6/3/20096

The Evolution of Procurement Criminal Laws

From NothingTo Sporadic Broad Statutes Rarely EnforcedTo Numerous and Ever Increasing Laws

6/3/20097

Government Does Not Trust Contractors

Washington – “Murderers of our cause”Lincoln – Contractors should “have their devilish heads shot off”Merchants of Death– The 1930s

6/3/20098

Government Doesn’t Trust Its Own Employees

HonestyAbility to Avoid Appearance of Evil Ability to Do the Job Correctly

6/3/20099

Military Industrial Complex – a respect/hate relationship

Initially reverentialInitial complaintsCriticism over the skyrocketing cost

6/3/200910

Search for Proper Risk Allocation

Correct Contract FormProper ClausesProper PriceSpeed v. Quality v. Price v. Competition

6/3/200911

What Is the Best Relationship With the Contractor?

Completely Arms’ LengthLong Time Nurturing RelationshipOr Any Relationship at all?

6/3/200912

Competition

Congress loves competitionIt’s hindered by too much paperworkIt’s the first thing scrapped in an emergency

6/3/200913

Finding the Right Balance

If too lax, fraud aboundsIf too constrictive, process becomes– Slower– More expensive– Less competitive

6/3/200914

“The matter I allude to, is the exorbitant price exacted by merchants and venders of goods, for every necessary they dispose of. I am sensible the trouble and risk in importing, give the adventurers a right to a generous price, and that such, from the motives of policy, should be paid; but yet, I cannot conceive, that they, in direct violation of every principle of generosity, of reason and of justice, should be allowed, if it is possible to restrain 'em, to avail themselves of the difficulties of the times, and to amass fortunes upon the public ruin.”

George Washington to the President of the Continental Congress, August 16, 1777.

6/3/200915

“Every man acquainted with publick business must allow that it cannot be carried on, for a variety of reasons, with that economy which prevails in private affairs.”

General Phillip Schuyler, August 1776

6/3/200916

Start of the Arms Industry

Eli Whitney’s contractOther industrial pioneers and a quasi-public arms systemStandardization and Interchangeability Importance of Factory Workers“Close enough for government work”

6/3/200917

The Civil War

Domestic production and procurementForeign purchases Innovations in weaponsThe ironclads Congress acts to reform the system

6/3/200918

“A horse that can last a month may in certain cases be worth his weight in silver.”Montgomery C. Meigs, Quartermaster General, Union Army

6/3/200919

False Claims Act of 1863

Rampant FraudAbraham Lincoln Act – Informer ActCriminal and Civil PenaltiesCourt Martial?Qui Tam

6/3/200920

Contracting 1945-1953

The Armed Services Procurement RegulationCivilian Procurement After the WarThe Korean War

6/3/200921

Government Role in the Marketplace Changes

Small-Sporadically and Suddenly LargeHuge, ConsistentMonopsonyWhether Companies Want to Deal with the United States

6/3/200922

Market Place Changes

Specialized Government Contractors Services IndustryConsolidation

6/3/200923

The Modern Era: Sea of Paperwork

Commission on Government ProcurementThe age of lawyers and litigation

6/3/200924

The Modern Age: 1980s-Present

1983-1989 Huge amounts, big scandals, fearsome remedies– The Competition in Contracting Act– The Packard Commission– Operation Ill Wind – Criminalization– Intensive Congressional management

6/3/200925

$400 Hammer Scandals

Make or Buy PlansIntegrity of Unit Prices ClauseUnbalanced BiddingChanges in IPNo Restrictions on Subcontractor SalesGovernment Failures– Excessive Requirements– Purchases Through Prime

6/3/200926

1989-1993 – The Pendulum Swings

Procurement budget shrinksPaperworkService contracts predominate

6/3/200927

Unplanned Result of Increased Paperwork and Criminalization

Contractors Leave or Don’t Enter MarketHigher Prices

6/3/200928

Reform – 1993-Present

Section 800 PanelNational Performance ReviewQuest for Commercial ContractingThe Federal Acquisition Streamlining ActClinger-Cohen Act