The times they are a-changin’
Today is a new day. Gone are the days where the U.S. government dominates the dollars spent to create significant technological innovation. In 2017, Amazon and Google combined to spend over $38.2 billion for research and development, which is an increase of $9 billion from 2016.1 This may seem significantly lower than the $58.3 billion invested by the Department of Defense (DoD), or the $133 billion spent by the entire federal government, however, it is important to consider that overall business investment in research and development in the United States accounted for $347.7 billion.2 In fact, business research and development investment has been outpacing government investment since 1981 and is skyrocketing while government spending has flattened.3 To compound matters, U.S. rivals like China have increased research and development spending over seventy percent in the last five years and some believe that their spending will surpass the United States this year.4 This presents a dilemma for the U.S. government: how to maintain an advantage on potential adversaries without dominating research and development investment?
To stay ahead of our adversaries, the government must continuously communicate with industry to understand the current “state of the art” technology or current innovation and use it to help inform requirements in order to maximize DoD capability and readiness.5 In support of that effort, the government must limit its reliance on “tribal knowledge”6 and use market research to inform requirement development. It must also take adequate measures to ensure that communication with industry and market research do nothing to reduce the competitive field of offerors, impair the acquisition timeline, or result in avoidable protests while taking every opportunity to communicate with industry and learn of its innovation.
Limiting Reliance on “Tribal Knowledge”
Tribal knowledge is sometimes known as the collective wisdom and capabilities of the people within a group. It can be great for keeping a competitive edge. As long as the collective group of people you are using for a specific purpose know more than everyone else and can somehow harness that knowledge to stay ahead in the development of that knowledge, there are few issues. Unfortunately, we live in an era where more people have access to information and technology which results in more sources of innovation than ever before. As such, the potential for significant innovation and development from outside of the government is higher than ever.
These “changin’ times” require a paradigm shift that recognizes and incorporates the fact that private industry is a source of significant innovation that will give the U.S. government advantage over their adversaries. Accordingly, it is imperative that government organizations stay informed of industry innovation and harness its benefits.
The Importance of Staying Informed of Innovation
Defining mission requirements based on the limits of tribal knowledge can be problematic. If innovation is occurring outside of your organization, then your organization is probably lagging behind these advancements. Thus, you must stay informed of the innovation to acquire or use its benefits to articulate or define a command or agency requirement.
Granted, many government requirements require little outside knowledge such as: custodial services, general construction, dining facility service, and, sometimes, security services. However, even among these types of repetitive requirements, an organization can utilize innovative business practices or processes that revolutionize how the government can or should now look at their requirements and define them. The benefits are only amplified in more complex areas of the technology sector.
Government personnel can employ many methods of staying informed of innovation: attending conferences, symposiums, working groups; following recent research and periodicals discussing relevant advances in the area of interest; and continuous market research or communication with the marketplace. Any combination of methods can help inform an agency requirement and help the U.S. Government maintain a competitive advantage over its adversaries.
Communication with Industry: A Permissible Exercise of Authority
Current acquisition statutes, policies, and regulations are more permissive than most believe. In fact, “if a specific [acquisition] strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the [Federal Acquisition Regulation (FAR)], nor prohibited by law (statute or case law), Executive order, or other regulation, that strategy, practice, policy or procedure is a permissible exercise of authority.”7 This broad authority applies to the entire procurement process: requirement development, acquisition planning, contract administration, closeout, and—the focus of this article—market research and communication.
Generally, one can view market research in two phases. Phase one is the continuous research the government might do to stay informed or learn about the “state of the art” of technology, services, or industry. This helps inform requirement owners so that they can define requirements to maximize the current state of innovation in their area of need. Once a requirement is defined, it passes to a contracting activity to “acquire” the good or service, starting phase two: FAR based market research.8
Though somewhat time consuming, phase two market research at the contracting activity is controlled, predictable, and effective. It allows vendors seeking to do business with the government the opportunity to identify requirements and submit proposals or bids. Unfortunately, outside innovators—the target market—are not familiar with the defense acquisition system and unaware of its requirements.9 This amplifies the need to have significant outreach and communication to both our normal vendors who already do business with the government and to those outside innovators who now develop technology that the government needs.
Common Issues with Vendor Communication
Communication between government and industry will always amplify concerns of bid protests and resulting acquisition delays, or even worse, disqualification of sources. While valid concerns, the benefits of communication with industry and market research overwhelmingly outweigh them. In fact, if government officials can avoid the pitfalls identified below, most issues associated with vendor communication will be minimized, and the government will enjoy all of the benefits associated with leveraging commercial innovation.
Creating an Appearance of Favoritism
When one vendor has unique access to government officials or information, it routinely causes a perception of favoritism. There is no requirement that you meet or communicate with all vendors while learning about a particular product or service. However, it is important that you communicate with at least some industry players to learn about current offerings.
Ethical rules and the Competition in Contracting Act (10 U.S.C. § 2304), prohibit preferential treatment of one vendor over another. In fact, even creating an appearance that an agency is giving preferential treatment to a certain vendor can cause delay and unnecessary complications to the acquisition process.
Office Calls from “Friends” and Former Commanders
One of the most common methods that industry uses to maintain access to commanders and organizational leaders is to hire former commanders and organizational leaders to lead a business venture in the sector where they had previous experience. Many of the subordinates of the former commander will ascend to positions of power and some will hold similar leadership assignments which opens the door for the former commander or organizational leader to provide insight, advice, and counsel. At a minimum, this linkage helps maintain a relationship between the government organization and the former organizational leader or commander.
All too often, these relationships and others that develop naturally over the course of someone’s prior service act as a segue to schedule an “office call” to visit a friend. During the “friendly” visit, the conversation turns to the new job of the former senior leader and offerings that would have made his time at the command better or help the Army in some way or the conversation turns to existing contracts and how they are performing. At best, the conversation has turned to some form of industry communication/market research. At worst, the conversation has transitioned to contract administration, modification, or requirement development which is best conducted by contracting activities rather than requiring activities and their senior leaders. Regardless, at this point there are at least two issues with which to grapple: (1) doing business or communicating with government officials during the one year cooling off period, and (2) the need for the command to drive requirements rather than industry.
The first issue relates to the risk of influencing the government immediately after leaving government service. Certain Senior Government Officials10 who leave service are required to observe a one year cooling off period before doing business or communicating back with government officials with the intent to influence the government on behalf of any entity other than the government.11 This helps prevent former government officials from immediately trying to influence the government after leaving its ranks. It has the added benefit of avoiding the obvious conflict of interest that would arise from the associated job search and organizational requirements development process.
The second issue relates to government driving its requirements rather than potential vendors. While many potential vendors are well intentioned, they are in the business of selling their products and services rather than identifying government requirements and finding the most efficient use of command (tax payer) funds. Commanders and other organizational leaders should be more informed of the true state of their requirement and better situated to determine how to satisfy such a requirement. Accordingly, government requirements are managed and driven by government agencies and personnel.
Revealing Too Much Information About Existing Requirements
While still a form of favoritism, giving too much information about government requirements to a single vendor gives them an unfair competitive advantage over their competition. Once discovered, it will often end in a protest.12 When vendor interaction substantially involves potential contract terms and conditions it is a good idea to include a contracting officer.13 The contracting officer will be able to navigate any concerns in this area and is the appropriate government official to discuss the intricacies of the Defense Acquisition System and government contracts. This is especially true during the post-solicitation phase of the government acquisition process.
Most communication, before the government issues a solicitation, should be about what the company can offer rather than what the government needs. Focusing questions on the company, its offerings, and capabilities, ability to modify existing goods or services, and unique characteristics will help a requiring activity define future or existing requirements.
It is when the conversation turns to existing requirements that communication may be inappropriate. A good example of this is when industry gets too involved in requirement development and starts to offer written products that the government uses to define its requirement, such as, a performance work statement. Relinquishing too much control to industry to define requirements is normally counterproductive. Only the government and government officials should decide what the government needs and how it’s delivered, not potential vendors. Other potential offerors would most likely view this as an unfair competitive advantage which can delay the acquisition through bid protests or other litigation.
Discussing Ongoing Litigation or Competitions
Contract litigation’s posture, progress, and ultimate resolution principally involves the contracting activity and the servicing litigation unit. Communication between the contracting activity and contract holder is limited to protect the government litigation position and ultimately help the government protect its interests. Statements made by leaders in the requiring organization, whether accurate or not, can be attributed to the government as a whole and undermine its position and litigation posture. As such, when normal market research or vendor communication approaches the subject of ongoing litigation, it should stop immediately to avoid complicating an already complex and expensive litigation process.
Similarly, it is easy for normal market research or industry communication to turn to the subject of ongoing competitions. This is especially prevalent when the government communicates with companies who cater to government agencies. However, once a requirement is publicized through the government point of entry,14 the dialog with potential offerors and the government is controlled to ensure all offerors have the same information from which to base their offers. One potential offeror having more information than other potential offerors can result in a competitive advantage which the government acquisition system is designed to avoid.
The government can avoid giving a competitive advantage to a potential offeror by using formal communication methods that are outlined in the FAR. These methods include pre-solicitation conferences, sources sought synopsis, and industry days. All of these help shape government requirements and reduce uncertainty in the offeror. The government also communicates with potential offerors through “exchanges,”15 which help clarify offers, or even “discussions,” to help improve proposals.16 Using these communication techniques helps ensure information is accurate, controlled, and available to all eligible offerors.
Changes to Ongoing Contracts and Unauthorized Commitments
When organizational leaders speak with contract holders there is always a risk of contract holders believing they received direction to change their performance under a contract. Changes to government contracts should only be done by a contracting officer. Contracting officers are designated in writing17 and possess authority to obligate the government through the Defense Acquisition System. Obligations created by other than designated contracting officers result in unauthorized commitments (UACs) that require a time-consuming ratification process that is eventually approved by a contracting officer.18
Unfortunately, it is common for contract holders and their representatives to request meetings with organizational leaders outside of the contracting activity because contract holders know that the organizational leader (commander) normally drives the requirements process. They decide what is important and what is not, and how resources will be allocated. As such, contractors seek out every opportunity to talk to organizational leaders about mission requirements and sometimes leave those meetings believing (rightly or wrongly) that the government has made changes to an existing contract or given direction to start additional work. This complicates the contract administration process, usually costs additional money, and results in requests for equitable adjustments19 or UACs. Having a contracting officer present for such conversations or meetings can avert these problems. Therefore, it is important to include contracting officers or the appropriate contracting activity personnel in any discussion about ongoing contracts.
Gifts from industry representatives always pose problems. First, they create an appearance of impropriety. When a government representative receives something of value from a company representative who holds a government contract or who is seeking or may seek a government contract it appears that they are trying to gain favor or advantage in a competition. This contradicts the full and open default competitive standard that the Competition and Contracting Act mandates20 and it undermines public trust in our procurement system. Though gifts are generally prohibited there is an exception that allows those less than $20 per source or occasion and do not exceed $50 in a calendar year.21 Nevertheless, it is normally best to decline such gifts to avoid possible negative appearances.
Receiving Unsolicited Proposals22
The U.S. Government encourages submission of new and innovative ideas in response to Broad Agency Announcements, Small Business Innovation Research topics, Small Business Technology Transfer Research topics, Program Research and Development Announcements, or any other government-initiated solicitation or program. When new and innovative ideas do not fall under these publicized programs, they may be submitted as unsolicited proposals.23
Unsolicited proposals are sometimes submitted to senior leaders or contracting activities during or after an office call. The government is to handle these proposals in accordance with agency procedures to control receipt, evaluation, and disposition of the proposal while also controlling reproduction of material identified by the offeror as subject to disclosure restrictions.24 Using this process protects the government and avoids unnecessary complaints about industry developing government requirements and possible favoritism.
Despite potential risks to the acquisition process, it is necessary to communicate with innovators in industry. The government no longer monopolizes investment in research and development. Instead, investment in research and development and its resulting innovation are being realized by other governments and private industry alike. As a consequence, it is more important than ever for government representatives to communicate with industry. The benefits of communication with industry are profound. It helps the government harness innovation to shape its requirements. It helps the government define requirements in such a way as to realize the benefits of innovation. It helps the government become more efficient with time and money by using industry-generated innovation rather than its own resources to develop requirements. It also helps the government utilize technology/innovation on the battlefield or in support of the battle to maintain a competitive edge on our adversaries. All of these benefits significantly outweigh potential issues, especially taking into account that most issues can be negated or resolved through consideration of the points above, thoughtful guidance and advice of counsel, and avoiding appearances of favoritism. TAL
1. Rani Molla, Amazon spent nearly $23 billion on R&D last year- more than any other U.S. company, Vox (Apr. 9, 2018, 11:36 AM), https://www.vox.com/2018/4/9/17204004/amazon-research-development-rd.
2. U.S. R&D: Slow Growth and Opportunities, R&D Magazine, https://digital.rdmag.com/researchanddevelopment/2017_global_r_d_funding_forecast?pg=7#pg7Winter 2017 (last visited Feb. 19, 2019).
3. Ana Maria Santacreu, R&D Business Spending Up, Government Spending Flat, Federal Reserve Bank of St. Louis (May 14, 2018), https://www.stlouisfed.org/on-the-economy/2018/may/rd-business-spending-up-government-spending-flat.
4. National Science Board Statement on Global Research and Development (R&D) Investments NSB-2018-9, National Science Foundation, https://www.nsf.gov/news/news_images.jsp?cntn_id=244465&org=NSF (last visited Feb. 19, 2019).
5. On 4 April 2011, the Office of the Undersecretary of Defense, Acquisition, Technology, and Logistics directed agencies to develop vendor communication plans in an effort to promote responsible and constructive exchanges with industry. Memorandum from Dir. Def. Procurement and Acquisition Policy to Deputy Assistant Sec’y of the Army (Procurement) et. al, subject: “Myth-Busting”: Addressing Misconceptions to Improve communication with Industry during he Acquisition Process (04 April 2011). In response to this memo, the Department of Defense (DoD) issued a Vendor Communication Plan encourages agency officials to engage in more frequent information exchanges with vendors, particularly during the pre-solicitation phase, for high dollar, more complex procurements, so long as sensitive or proprietary information is protected on behalf of the government and vendors alike. U.S. Dep’t of Def., Vendor Communication Plan, https://www.acq.osd.mil/dpap/dars/pgi/docs/DoD_Vendor_Communication_Plan.pdf.
6. Tribal knowledge, Definitions.Net, https://www.definitions.net/definition/Tribal+knowledge (last visited Feb. 19, 2019).
7. Federal Acquisition Regulation 1.102(d) (2017) [hereinafter FAR].
8. The Federal Acquisition Regulation (FAR) defines market research as “collecting and analyzing information about capabilities within the market to satisfy agency needs.” FAR 2.101.
9. The Army Futures Command (AFC) has developed pilot programs to find “outside innovators” and bring them in contact with “experienced insiders” who can help navigate the complex Pentagon and acquisition process. The AFC has developed an Army Applications Laboratory (AAL) to bring innovators to people in the Army with the money and authority to turn their ideas into reality. Sydney Freedberg Jr., Army Futures Command Wants YOU (To Innovate), Breaking Defense (Oct. 23, 2018), https://breakingdefense.com/2018/10/army-futures-command-wants-you-to-innovate/.
10. Commissioned Officer in the pay grade of 0-7 and above, employed in a position where basic pay is equal to or greater than 86.5% of the rate of basic pay for a Level II of the Executive Schedule, or other position defined 18 U.S.C. § 207(c)(2).
11. 18 U.S.C. § 207(c)(2).
12. A bid protest is a challenge to the award or proposed award of a contract for the procurement of goods and services or a challenge to the terms of a solicitation for such a contract.
13. FAR 15.201(f).
14. FedBizOps is the recognized point of entry to publicize government requirements. It can be located at https://www.fbo.gov/.
15. FAR 15.306(a).
16. Discussions are communications between offerors and the government after a competitive range is set. FAR 15.306(d). Requirements can be awarded with or without discussions. This is controlled by the contracting activity, but can be included in most FAR Part 15–Contracting by Negotiation acquisitions. Requests for proposals are required to contain language that gives notice of the government’s intent to either hold discussions or not. 10 U.S.C. § 2305(a)(2)(B)(ii)(I) and 41 U.S.C. § 3306(b)(2)(B)(i).
17. Contracting officers are appointed by agency heads or their designees in writing. Their appointment letter shall give clear instructions regarding the limits of their authority. FAR 1.602-1(b) & FAR 1.603-1.
18. FAR 1.602-3.
19. A Request for Equitable Adjustment (REA) is “anything but a ‘routine request for payment.’ It is a remedy payable only when unforeseen or unintended circumstances, such as government modification of the contract, differing site conditions, defective or late-delivered government property or issuance of a stop work order, cause an increase in contract performance costs.” Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995).
20. Competition in Contracting Act of 1984 (CICA), 10 U.S.C. § 2304; 41 U.S.C. § 403.
21. 5 C.F.R. § 2635.204(a).
22. Advertising material, commercial item offers, or contributions, or routine correspondence on technical issues are not unsolicited proposals. FAR 15.6-3(b).
23. FAR 15.602.
24. FAR 15.606; Army Federal Acquisition Regulation Supplement (AFARS) 5115.606; U.S. Dep’t of Army, Pam. 70-3, Army Acquisition Procedures (17 Sept. 2018).