Yesterday, a contracting officer told a contractor to decrease its price by 10% "for sequestration related cuts, without any changes to contractual services levels." Yes, believe it or not, one of our government employees, with a warrant, who is supposed to be the conscience of our system, asked a contractor to provide the same level of service for 10% less money. This is unconscionable behavior. Sequestration may cause a reduction in services and therefore the price of those services. But it is strikingly unfair and unjust (the meaning of unconscionable) to require a contractor to provide the same services for less money. Naturally, the contractor did not agree but offered to provide reduced services for a reduced price. That sounds reasonable.
Unconscionability doesn't get talked about much. The Armed Services Board of Contract Appeals (ASBCA) occasionally uses the term to describe egregious government behavior, usually in the context of the failure to cooperate or communicate or where the government seeks to impose drastic contractual penalties. The Uniform Commercial Code (UCC) uses the term to describe strikingly unfair behavior in the commercial marketplace.
We believe that contracting officers are indeed the conscience of the procurement system. Or, they should be. FAR 1.602-2, dealing with the responsibilities of contracting officers, states at sub paragraph (b) that the responsibility of the contracting officer is to "ensure that contractors receive impartial, fair and equitable treatment." The duty of good faith and fair dealing falls most heavily upon the shoulders of contracting officers and that duty is implied in all phases of government contract activity.
Sequestration is here and budget constraints are here to stay forever. But Congress did not intend to place the burden on contractors to provide the same services for less money. That is not sequestration. That is unconscionable manipulation. And, if combined with the threat of termination, it is unconscionable extortion.
We expect more from the people to whom we entrust the warrant to act on our behalf in spending our taxpayer money. Yes, we want them to spend it wisely. But we do not expect them to drive contractors from the marketplace we depend upon because they are not treated impartially, fairly and equitably. The point of this piece is that it is not enough to be fair. Contracting officers are the conscience of the system and must avoid unconscionable behavior, especially in times of severe budget constraints.
bill@spriggslawgroup.com www.spriggslawgroup.com
You are correct that a Contracting Officer is wrong for expecting a reduction for no consideration in return. That is basics of contract formation. I do feel it is a little irresponsible to comment on the actions of one contracting officer as representative of the government. It would be equally irresponsible for a government employee to base the actions of all contractors on one dishonest contractor.
ReplyDeleteFairness in Government contracting seems to be a one way street where the government is expected to act above reproach, whereas an unscrupulous dealing by a contractor is "the nature of business". I know of more instances where the government contracting officer erred incorrectly on the side of the contractor (usually forgiving non-performance without recompense), than the dealings of a mistaken CO asking for a 10% discount for no reduction. Perhaps this was just an underhanded negotiation tactic to get the contractor to negotiate more fairly. Who knows, I don't have the facts, but it's definitely not representative of the Government as a whole. *This opinion is my own and not of the US government as a whole.
This will play out over and over again as Government CO's are placed under more political pressure than ever. Only the strongest and largest contractor's will be able to demand/negotiate fair treatment - but even that will be a farce because the competition has no conscience and will go after your dollars if stand up for yourself! The public cries for "blood" (cost saving's) but they will eventually find that the slickness at their feet is their own...
ReplyDeleteBill, I am very grateful for your shared insight in this sequestration case. Indeed, you did not generalize but reported an interesting development that may or may not be localized in one misguided individual. The rest of the contracting community -- both sides of the table -- should have an interest in knowing this information, including your cogent response. There are bad actors all around, and some of them are carrying warrants, as this incident demonstrates. Many thanks for sharing!
ReplyDeleteGreat article! Another thought process from a dumb ol' redneck from Cowtown USA -- Perhaps, it was more a lack of sufficient training and supervision more than bullying. I've noticed a few COs who occasionally demonstrate such deficiencies ... nothing at the level of which you're stating ... but, there nonetheless. When it occurs, usually a phone call or, better yet, a personal visit to very politely explain how this violates FAR and / or like regulations may go a long way to alleviate hurt feelings, future contentious relationships, etc. Of course, it always helps if you have something in common like affiliation in the same professional organization (NCMA) or similar past experience. I was a government CO before military retirement in 2001 and I'm pretty sure I sometimes made a few "doozies" in that position. Unless one is absolutely sure otherwise ... giving the benefit of the doubt beats the alternatives almost every day.
ReplyDeleteCheers!!
The contracting officer is from a civilian (not DOD) agency and the contractor is a small 8(a) company. We weighed in to inform the contracting that his direction was a breach of the commercial item contract which contains, of course, a changes clause requiring mutual agreement on any change. We pointed out, however, that we would entertain a negotiation of reduced services for a reduced price. We've not heard back from the contracting officer. We'll let you know what he says.
DeleteThe fundamental flaw, the one which perpetuates our entire history, is that the CO did not communicate an objective and ask the Contractor how they might achieve it given the current environment. There are a myriad of legitimate ways that they could have worked a solution without burdening either party and enhancing the relationship. This adversarial attitude has hampered this community for over 50 years and it's culture not regulations which make it so. WE can do things better together than individually if we embrace the mindset that WE are working on the program.
ReplyDeleteAlthough unfair to generalize, I think it is fair to state that the capabilities and skills of the acquisition workforce continue to deteriorate at the expense of all involved. Was this a symptom? A CO who simply did not know better? Possibly.
ReplyDeleteHowever, I have seen to many instances of this behavior in just the last few years to think it is just an aberration. I absolutely agree with Harlan that the lack of communications and adversarial relationship between government and industry was also a contributory factor.
It is difficult to build relationships with those who have no interest in such, and who think they are right because they are the government procurement official. Let's face facts, is this happening to large companies?
Probably not...
This is too bad, but I'm not surprised and I fear this is only the beginning. The FAR is quite expansive, and there are many ways to accomplish the same thing in a legitimate manner.
ReplyDeleteWe as a profession need to talk about these issues because I'm not convinced that every misinformed CO is a bad actor anymore than I'm convinced that every contrator is a crook. Harlan is right - the system is designed to pit government against contractor.
As a former CO, DAU professor, and business man looking back at my own career all I can say is what that CO did was lame, unprofessional, and an instant case. He was obviously not seasoned, nor trained via long-term OJT as he should have been, and thus made the boo-boo that was not well thought out. He will learn. At least I hope so. BTW...great article.
ReplyDelete