Congress should protect competition, save Section 876

When awarding government contracts, actual pricing will always beat hypothetical pricing. Yet most multiple award task and delivery order contracts are awarded based on hypothetical pricing. To change this, Section 876, Increasing Competition at the Task Order Level, was passed in 2018 as part of the National Defense Authorization Act for Fiscal 2019. As the then administrator of the General Services Administration, I know the agency worked closely with Congress to pass Section 876. Unfortunately, a recent Court of Federal Claims decision severely limited the applicability of Section 876, making it useless for contracts like Polaris and Oasis-Plus. Congress should act quickly to fix Section 876 so that multiple award contracts focus on meaningful competition, getting the best solution for the government at the best price and reducing administrative burdens on small contractors and contracting officers.

With Section 876, the goal was to make sure that contractors with the best technical ability win spots on these multiple award contracts, and to push for vigorous price competition at the task order level. This approach allows contracting officers to focus on getting the best solution for the government, but it also delivered savings — contractors wouldn’t have to prepare, nor contracting officers evaluate, thousands of lines of data that isn’t meaningful to the work performed or the prices actually paid.

Why would the government ask for meaningless data? Given that governmentwide acquisition contracts (GWACs) and other multiple award contracts (MACs) need to be flexible enough to accommodate 10 years of orders and up to 15 years of performance on technologies not yet existing, contracting agencies must take an “everything but the kitchen sink” approach to labor categories. This includes anything that may conceivably be needed as the government’s needs shift over time. Many of these labor categories may never be used, but even for those that are used, the actual prices are only negotiated at the time of the task order, when there is a concrete requirement from the ordering agency. However, voluminous amounts of cost and pricing data are still required at the time of initial offer.

The burden is immense — the Alliant 2 GWAC required the submission and evaluation of direct labor rates, fringe rates, overhead, general and administrative (G&A) and profits for 124 different labor categories with price escalations over a 15-year period. This information had to be provided for onsite and offsite work — this is 4,960 different figures. This also affects small business contracts — OASIS SB required small businesses to provide the same level of detail for 104 different labor categories, or 4,160 different price points.

If this data were being put to meaningful use, perhaps this approach would make sense, but without actual requirements, the data collected is hypothetical pricing. Assume a technically superior Vendor A charges $25 more per hour than Vendor B for a journeyman analyst. Without a concrete statement of work, we don’t know how many hours each vendor will take to complete the work, so we don’t know which offeror will charge less. Vendor B’s lower hourly rate could quickly be erased if it needs more hours to perform the same work or can’t perform to the same technical level. However, Vendor A’s perceived higher price may keep it from getting a seat on a contract, even if it would ultimately cost less and deliver a better result.

This isn’t to argue against cost and price data, or competitions. Rather, given that each matters most when we have a concrete requirement, the emphasis should instead be on using the fair opportunity provisions required in MACs to ensure spirited task order competitions.

GSA’s Polaris small business GWAC attempted to leverage Section 876, but a protestor successfully challenged this use, arguing the provision only applied to time and materials and labor-hour task orders, not cost-reimbursement, incentive or firm-fixed price task orders. While I disagree with the Court of Federal Claim’s logic — all three ultimately assess price and limit costs at the task order level based on the price of services — debating the decision will not solve the problem: Large MACs, including OASIS-Plus and Alliant 3 must again require volumes of cost and pricing data that are ultimately of dubious value. Small businesses must spend time and money developing and delivering information. Companies that specialize in putting together these pricing tables for bidders are the real winners here, while taxpayers are losing opportunities for innovation and cost savings.

As it pursues its legislative agenda, Congress can save Section 876 with a simple clarification that the authority extends to any services contract where pricing will be thoroughly competed prior to awarding each task order. This could easily be accomplished as an amendment to the NDAA. Such an act would support true competition. A failure to act will harm small businesses and stifle innovation.

Emily Murphy is a senior fellow with the Center for Government Contracting at George Mason University and consults with government contractors. Murphy also served as the administrator of the General Services Administration and as a senior staff member for the House Armed Services and Small Business committees.

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