Taking advantage of the hidden gold in the new FAR 15

The new Federal Acquisition Regulation Part l5 which deals with large full-and-open competition procurements went into effect New Year's Day. A number of changes included in the FAR 15 rewrite already have received considerable attention such as the more aggressive standard for eliminating proposals from the competitive range and the emphasis on more open communications between vendors and the government throughout the procurement cycle. Now it's time to call attention to those important features that so far have escaped the spotlight.

One change actually appears in FAR 11— the part of the FAR that describes agency needs— but also appears in the Federal Register promulgation of the final FAR 15 rule. The new FAR 11.801 states that products "may be evaluated under comparable in-use conditions without a further test plan. The results of such tests or emonstrations may be used to rate the proposal." This means that if an agency is buying commercial off-the shelf products it need not use stilted expensive "live-test demonstrations." Instead the agency may simply install— or have the vendor install— equipment at the location where it will actually be used allow the intended users to try it out for some period of time and use their reports of their likes and dislikes as part of the evaluation process for source selection.

This idea grew out of a Federal Aviation Administration procurement conducted as a pilot authorized by the Federal Acquisition Streamlining Act. The FAA was buying machines for recording ground-to-air conversations and as part of the source selection the agency let air traffic controllers use vendor-provided equipment in real-life conditions. This new provision will not only save money but also provide a level of realism no formal test protocol can.

A second change involves deregulating the way the government negotiates with vendors in the competitive range. The basic structure of source selection involves the government receiving and evaluating proposals choosing a "short list" of vendors in the competitive range and then engaging in discussions with those vendors before making the final award. Traditionally however the discussion" phase was a highly regulated minuet bearing surprisingly little relationship to what normal people would do when negotiating with companies they're thinking of doing business with.

Previously FAR l5 stated that during discussions the government was to "advise the offeror of deficiencies in its proposal so the offeror is given an opportunity to satisfy the government's requirements" and "attempt to resolve any uncertainties concerning the technical proposal and other terms and conditions of the proposal." This language along with language on "technical leveling " was interpreted as prohibiting the government from seeking to get the vendor during discussions to give the government a better deal on product features or terms and conditions as long as the vendor had met the mandatory minimum requirements and was not "deficient." So for example if the request for proposals stated that the mandatory minimum warranty was one year the government could not seek during discussions to get the vendor to provide a two-year warranty— even if the RFP had specifically stated that vendors would get "extra credit" for providing a warranty over the mandatory minimum. So instead of normal negotiations traditional discussions consisted of the government providing vendors with a list of clarification requests and deficiency reports for them to respond to.

The FAR rewrite replaces the minuet with some rock 'n' roll. It states in l5.306(d) that discussions "may include bargaining" applying "to price schedule technical requirements type of contract or other terms of a proposed contract." Then it specifically adds in l5.306(d)(3) that the government may "in situations where the solicitation stated that evaluation credit would be given for technical solutions exceeding any mandatory minimums negotiate with offerors for increased performance beyond any mandatory minimums and the government may suggest to offerors that have exceeded any mandatory minimums...that their proposals would be more competitive if the excesses were removed and the offered price decreased." In other words welcome to the real world!

The last hidden nugget involves an innovative way to use a new procedure that the rewrite calls an "advisory multistep process." Once called "two-phase source selection " this process involves doing an advisory down-select to a smaller group of potential bidders early during source selection. It is advisory because as a matter of law vendors cannot be excluded before the government has evaluated a full proposal.

The multiple-step technique has rightly been touted as a major streamliner in situations where the government expects many bidders. However I believe there is a creative use of the multiple-phase technique that as yet has hardly been tried. As the government moves toward performance-based contracting especially in the context of outsourcing or business process reengineering of in-house functions it will seek more and more to get vendors to commit to achieving improved results from government business processes. But it is often unrealistic to expect vendors to make such commitments unless they know more about the "as-is" business process than they learn from the traditional procurement process. Therefore it is a good idea to undertake a "due diligence" exercise whereby interested vendors get a chance to do some serious kicking of the tires about how the government organizes the function in question before the RFP goes out. But such due diligence is difficult if l0 or l5 vendors are going to participate. The multiple-phase procedure makes it possible to limit the field doing the due diligence.

I hope all this whets peoples' appetites for a thorough reading of the new FAR 15. Have lunch sometime soon with the contracting folks you work with and make sure you're taking advantage of the new rules.

-- Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.

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