At one time it was lavatory assemblies. Now it’s soap dispensers. But the Defense Department seems to have a proclivity for adding making military specifications to otherwise commercial items. My next guest says it’s time for a snap-to back to a commercial item preference. Federal sales and marketing consultant Larry Allen joined the Federal Drive with Tom Temin to discuss more.

Interview transcript:

Larry Allen Tom, this one really made me think back to the days of parachute pants and members only jackets. We have the Department of Defense taking this time, Boeing, to task for overcharging for a soap dispenser, something like 80 times what a commercial soap dispenser would cost. But predictably, Boeing shot back saying, look, it’s not the same soap dispenser. There’s an actual military specification or mil-spec for this soap dispenser. So it may look like the soap dispenser you get at Target or wherever, but it has its own features. And that got me thinking, Tom, just lately I’ve heard a lot of anecdotal evidence from contractors saying, the government says it wants commercial, but by the time it ends up getting the solution it really wants, sometimes it looks a little bit like commercial, sometimes it doesn’t really look very much like its commercial counterpart at all. And that’s not just to done the government, Tom, I think both sides like that specialization, because with the specialization comes potentially more money and reduced competition. But we’re getting away from the commercial item preference that we’ve had for almost all of the last 30 years, one that served the government well. And that’s what I’m writing about. I think it’s time for us to take a time out and look back to see what the benefits were of this. Before we go back to where we were in the 80s, where, the vice president asked to go on TV and talk about the number of shards of glass that an ashtray can break into.

Tom Temin Yes, I remember that one. That was the National Partnership for the Reinvention of Government and the famous ashtray specification. But is there anything industry can do if, say, for a soap dispenser, I guess this is aboard an aircraft and commercial aircraft and I presume military aircraft are pressurized nowadays. So whatever works on United Airlines is going to work on the C-17. Can’t industry say you don’t have to do it this way?

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Larry Allen Well, in fact, I think industry should go back at least once to its customer and say, We don’t think you need this. Let me show you what you can get for much, much less that is going to fulfill well over 95% of your needs, particularly in the case of a soap dispenser. But you go beyond that and you look at things like commercial software, where there’s a tendency on both the government and contractors part to add specialized features to that software. Maybe you have a slightly different supply chain for the one that goes to the government than you do for your commercial one. Both sides like that specialization. Everybody likes to think that their mission is different from the other person’s and that they need something slightly different from what the Army has, if you’re in the Navy and if you’re in the Air Force, you think that the Navy standard doesn’t quite measure up to yours. And the result is we get these things that may look like a commercial item and start off as a commercial item, but they end up not really being commercial. And it’s difficult for industry to be the policeman because they want to be responsive to their government customer. However, I do think industry has a role in saying, Hey, wait, this is not necessarily the best use of budgets. Let’s find a way to make the commercial solution work so that we’re saving everybody some money here and conducting a faster acquisition.

Tom Temin And in commercial items, though, is there also the possibility that the government defaults to its own specs because some subcomponent might come from a prohibited nation just to get back to the soap dispenser idea. It could be assembled in Abilene, Kansas or something. But the spring that makes the plunger pop back could be from China or the plunger assembly. I’m just making this up. But could that be part of the reason sometimes?

Larry Allen I definitely think so, Tom. I think, we found this and of course, we’re using soap dispensers as kind of a straw man. But when you start getting into technology and software and hardware and sensitive solutions, this is absolutely an issue that increasingly comes into play. We have things like Section 889 A and B rules. We have a semiconductor rule that would limit the sources of semiconductors making its way through the regulatory process. Right now we have CMMC that talks about cybersecurity requirements, even for commercial item suppliers. So you can see just right there, there are three things that are front page right now that really cause the government to change up the commercial item and requires contractors to make tweaks to it as well.

Tom Temin We’re speaking with Larry Allen, president of Allen Federal Business Partners. And you’re also writing this week about the Small Business Administration. It’s got a proposal to have the rule of two on IDIQ contracts, which is kind of breaking new ground.

Larry Allen Breaking new ground is probably the least of it, Tom. But, yes, this could be a rule that has a very substantial impact on the usability and efficacy of multiple award indefinite delivery, indefinite quantity contracts in IDIQs. Sometimes we call those (GWACS) that’s a subset of those. But this is the general type of contract we’re talking about. And what the SBA is saying is that unless an exception applies, if you have two or more small businesses on that contract vehicle that are capable of meeting the government’s needs, you’re going to have to set that aside for small businesses, just as you would if it were an open market order. But one of the key differences, Tom, is that in the open market, you have the rule of two applies only to purchases up to the simplified acquisition threshold or $250,000. We don’t have that in this proposed rule. There’s a lot in this proposed rule to look at. On the surface, you may think, well, what’s wrong with giving small businesses more exposure to government market? Well, I’m all in favor of that. But if you think about it just a little bit, you have to say, well, wait a minute, this rule could actually end up hurting more small businesses than it helps if it takes away opportunities from the vast majority of small firms that do business as subcontractors. So I think this is something that’s going to have to have some careful scrutiny.

Tom Temin And what about those IDIQs where there the whole thing is set aside for small business?

Larry Allen Well, that’s an interesting point. Again, on the surface, you think, well, that’s really great. We’re even going to trump this up more. But in reality, if you’ve got open acquisition programs that are now more or less on the same footing as the small business IDIQ, the investment you as a small business made in obtaining that IDIQ potentially could go down, it could go down a little or it could go down a lot depending on how government customers want to buy. So you spent a lot of R&D money, a lot of Biden proposal money to get on this small business contract vehicle. And now it’s not as special as you thought it was going to be. That not only hurts your ability to do business, but it potentially hurts the valuation of your small business overall if you’re seeking to sell it.

Tom Temin Right. So what is your opinion of what people should say then? Because there is a deadline to comment on this rule, which is Christmas Eve, of course.

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Larry Allen The FAR council’s coming down the chimney right along with Santa. There’s a graphic for you. But I think that there ought to be a compromise here somewhere, Tom. I think if you’re applying the rule of two in the open market up to a certain threshold, and you really want to apply the rule of two here, make it consistent so if you’ve got a cap it somewhere, don’t make it open ended so that you’re taking away the opportunities for small business subcontractors to do work through large business primes in all situations. Also, don’t get the government into a situation where the default is to award even a large task order to a small business, and then we’ve got some performance issues. That serves neither the government nor the small business well. So I think we have to think this one through and see if there’s some compromise language that we might be able to arrive at.

Tom Temin And this all comes in the context of the possibility of the simplified acquisition threshold itself going up substantially.

Larry Allen Right. And you look at it, there are bills in both the House and Senate that would raise the simplified acquisition threshold. So, I mean, generally speaking, I’m in favor of we haven’t seen that raise, Tom, since the mid 1990s of water under the bridge since then. It’s probably time to look at increasing the simplified acquisition threshold overall.

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