BIC contracts, regulatory freeze and the impact on the federal market

This column was originally published on Roger Waldron’s blog at The Coalition for Government Procurement and was republished here with permission from the author.

Anniversaries are a time of reflection, evaluation and motivation. These moments provide an opportunity for us to look back upon our successes, as well as our shortcomings, and make commitments to better ourselves as we progress forward. Nearly one year ago today, the Coalition submitted its members’ comments in response to the Office of Federal Procurement Policy’s (OFPP) draft Office of Management and Budget (OMB) Circular, Implementing Category Management for Common Goods and Services, (the draft circular). This week’s blog will look back upon the events of the past year and how these events may impact the circular and the Coalition member’s unaddressed comments.

Issued on Oct. 7, 2016, the circular sought to establish “key principles, and strategies and policies, roles and responsibilities, and metrics to measure success” for Category Management (CM) across the government. Best in Class (BIC) criteria for contracts was one of the key elements of CM set forth in the draft circular. The Coalition’s comments on the draft circular, addressed, among other items, the statutory authority and performance metrics for CM, the creation and use of BIC contracts, and CM data collection requirements. In addition, the Coalition submitted approximately 18 questions from industry for OFFP/OMB regarding the proposed CM implementation. To date, OFPP has not responded to the questions; nor has it issued a final circular. Nonetheless, it appears the implementation of CM continues through, in part, the ongoing designation of BIC contracts, as evidenced by the 27 BIC contracts designated to date.

This ongoing implementation is significant. In January 2017, the administration issued a memorandum entitled Regulatory Freeze Pending Review, which halted or postponed any new or proposed regulations, “[s]ubject to any exceptions the Director or Acting Director of the Office of Management and Budget (the “OMB Director”) allowed for emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.” In light of this memorandum, the continued implementation of BIC contracts is surprising because, in addition to the absence of a final circular, it is not readily apparent if the director of OMB has issued any exemption to the memo that would have allowed for the draft circular to be implemented.

Rather than identifying key criteria that lead to superior performance outcomes, the current BIC criteria focus on administrative process-related measures and data reporting that is imposed on contractors through initiatives like Transactional Data Reporting. Consequently, the “winners and losers” of the BIC contract selection process are being arbitrarily determined via an evaluation model that emphasizes government-unique processes, rather than contract performance characteristics that would drive best value mission support. Moreover, the current BIC criteria, as provided by the draft circular, makes no provision for the inclusion of industry input. Nor is it transparent regarding how BIC designations are made beyond the publication of the BIC criteria. The Coalition continues to believe that any selection of a BIC contract should include input from across the spectrum of stakeholders, including industry.

In addition, as currently constructed, the draft circular overemphasizes pricing at the expense of Total Acquisition Cost (TAC). Specifically, the draft circular does not require documented savings covering behavioral and/or administrative savings against defined baseline metrics. Indeed, it appears that BIC savings are predominantly measured based on a comparison of contract level pricing to task/delivery order and/or Blanket Purchase Agreement (BPA) pricing. As the Coalition has noted, this approach is a false measure, as prices at the contract level are based on different terms than those at the order level.

In particular, the price at the order level reflects a response to a firm business commitment from an agency customer. This fact is especially significant in the case of services, where agency-specific requirements drive the technical approach and pricing. It is for this reason that Multiple Award IDIQ contracts, including the GSA Schedules, are structured, to seek competition at the order/BPA level for agency-specific requirements. Consequently, it is not apparent how the government would compare savings on one multiple award IDIQ with another when selecting a BIC contract vehicle.

The foregoing covers just some of the member questions about BIC contracts that have gone unanswered since the Coalition’s comments were submitted on the draft circular nearly one year ago. Given the lack of OFPP feedback on industry’s questions and comments on the draft circular and the absence of a final circular, it would be prudent for the government to pause and re-engage the procurement community on the approach to category management and efforts to reduce contract duplication. The Coalition offers its support to facilitate a robust dialogue across the procurement community on strategies to enhance best value procurement outcomes for customer agencies and the American people.

Roger Waldron is the president of the Coalition for Government Procurement, and host of Off the Shelf on Federal News Radio.

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