Speeding with the FAR
Ignorance of the Federal Acquisition Regulation (FAR) is a greater barrier to government innovation than the FAR itself.
To help foster greater innovation, speed, and effectiveness in federal contracting efforts, the following pages present selected excerpts (emphasis added) from the FAR and DoD Instruction 5000.02. Accompanying each excerpt is a brief commentary on potential ways to interpret and implement these regulations, as well as summaries of the underlying principles.
This document is not a comprehensive overview of the entire body of federal acquisition policy and regulation. Instead, it aims to highlight specific portions from two key regulations which describe the simplifications, agilities, flexibilities, and alternatives available to acquisition professionals.
Note that this is not an official opinion and does not constitute legal or contractual advice. Instead, this informal analysis provides an easy starting point for further discussion. The goal is to equip program managers, engineers, and other acquisition practitioners from government and industry alike with an accessible quick reference guide to some of the more useful and empowering portions of federal acquisition policy.
FAR 1.102-2(b)(2) FAR System Performance Standards
(2) The System must provide uniformity where it contributes to efficiency or where fairness or predictability is essential. The System should also, however, encourage innovation, and local adaptation where uniformity is not essential. –FAR 1.102-2(b)(2)
In this introductory statement, the FAR makes it clear that “the System” is in place to encourage innovation and variation – not just tolerate or allow it. It goes on to acknowledge that uniformity in how we interpret, implement, or execute the FAR’s guidance is occasionally necessary in the name of efficiency, fairness, or predictability, but the intent is for the FAR to adapt to local needs, not the other way around. This little gem is often under-emphasized and overlooked, but the message and authority embedded in this opening section of the FAR is pretty powerful. It sets the foundation for how the FAR should be interpreted and applied. The FAR is supposed to foster efficiency, fairness, and predictability, as well as innovation and adaptability to different contexts. These are not mutually exclusive objectives. In fact, adapting to local needs actually makes the FAR fairer and more efficient.
In contrast, insisting that each federal agency (or each division within any given agency) behave exactly like every other agency or division tends to drive inefficiency into the process. And that is not what the FAR says to do.
FAR 13.003 Preference for Simplified Acquisition Procedures
(a) Agencies shall use simplified acquisition procedures to the maximum extent practicable for all purchases of supplies or services not exceeding the simplified acquisition threshold. –FAR 13.003 Policy
Despite its reputation for complexity—or perhaps because of it—the FAR actually contains an explicit preference for using simplified procedures. These simpler approaches do not merely exist. They are actually the preferred default and should be used “to the maximum extent practicable.” Go ahead and take a moment to let that sink in.
The underlying principle—that simpler procedures are available, effective, and preferred—is an important one to keep in mind. Extremely high levels of process complexity are neither inevitable nor desirable, and are certainly not required by the FAR.
Acquisition programs are full of opportunities and decision points where people get to choose between simple and complex alternatives. These alternatives are often stark and obvious, but while the FAR has an expressed preference for simplicity, many people feel compelled to adopt the more complicated approach due to organizational inertia or “the way we always do it around here.” This is not necessary, and acquisition professionals who opt for a simpler approach should know they do so with the full support of the FAR.
FAR 15.306(d)(4) Source Selection - Discussions
This section encourages the government to “suggest to offerors that have exceeded any mandatory minimums (in ways that are not integral to the design), that their proposals would be more competitive if the excesses were removed and the offered price decreased.” –FAR 15.306(d)(4)
In yet another statement favoring simplicity, this FAR paragraph addresses the pre-award/source selection phase of activity. When evaluating an over-engineered proposal or one that exceeds minimums unnecessarily, the government’s source selection team, after establishing a competitive range and entering into discussions, is encouraged to provide direct feedback to the offeror and to suggest that their proposal would be more competitive if it was scaled down.
Source selection teams should neither scoff at nor pursue an expensive, over-engineered proposal that aims to deliver a Haute Coutoure solution to an every-day requirement. Instead, the FAR makes it clear that it is in the government’s best interest to provide feedback to such offerors and to invite them to simplify their proposals.
The underlying principle is that an over-reaching proposal drives up cost and reduces the quality of the award competition. This is important for government and industry personnel alike to understand. The other principle is that the government is free to tell offerors how to make their proposals more competitive, even in the early phase of the source selection. In fact, the FAR encourages them to do so.
This communication between evaluators and offerors needs to be accomplished in accordance with the overall guidelines for source selection communications and should not be used to give anyone an unfair advantage (see the remainder of FAR 15.306), but the objective of these discussions, as explained in 15.306(d)(2) “… is to maximize the Government’s ability to obtain best value …” In order to obtain best value, the government can invite offerors to remove excesses from within their proposals. This allows each offeror to put their best foot forward and fosters genuine competition between the best of breed from all contenders.
FAR 16.505(b)(1) Fair Opportunity under Multiple-Award Contracts
The contracting officer may exercise broad discretion in developing appropriate order placement procedures. The contracting officer should keep submission requirements to a minimum. Contracting officers may use streamlined procedures, including oral presentations….”- FAR 16.505(b)(1)(ii)
Multiple-award contracts are often the most difficult contracts to award in the federal government. They are extremely competitive, highly contentious, lengthy to solicit and award, and intensive to manage once awarded. On the other hand, this upfront cost and burden of awarding a multiple-award contract is supposed to pay-off downstream due to the faster and more streamlined processes to award orders off the multiple award vehicle. Multiple award contracts are supposed to reduce the government and contractors time and burden once the vehicle has been awarded. That’s because at the contract-level, pricing and terms and conditions have been pre-negotiated and competition is now limited to only the pre-vetted pool of qualified contractors that have been granted a multiple-award contract. So the time to prepare, propose, negotiate, and award a order off the contract should be faster and easier.
According to FAR 16.505(b)(1)(i), once a multiple-award contract has been awarded, the contracting officer must provide each awardee a fair opportunity to be considered for each order exceeding $3,500. The FAR provides the contracting officer broad discretion in how to place orders and determine what constitutes a fair opportunity to compete for orders. However, in practice, many contracting organizations treat the ordering process as a “second competition” using full-blown source selection evaluation procedures and requesting extensive, time-consuming proposals from vendors that have already proven their qualifications and past-performance track record. The FAR states that submission requirements should be kept to a minimum, but that hasn’t stopped many organizations for asking for lengthy proposals and using practices that can stretch a source selection beyond several months.
In most cases, the ordering process for multiple award contracts can be greatly streamlined. For example, the FAR encourages the use of oral presentations versus written technical proposals that take longer to prepare and evaluate. Even a video-based “You Tube” oral proposal can be used to provide details about the technical approach and staffing plan without added travel costs and the burden to coordinate schedules so that everyone can be at the same place at same time.
Fair opportunity does not mean that the government has to use rigorous source selection criteria or evaluation processes. It only means that it has to level the playing field and give all the awardees on the multiple-award contract an equal chance to bid for any orders issued off the vehicle. Furthermore, orders that are under $10 million are not protestable ($25 million for DoD, NASA, and US Coast Guard). Too often we let the fear and risk of protest that is present for a multiple-award contract drive the same behaviors and rigor for an order, that does not have the same risk of protest.
FAR 18.101 Available Acquisition Flexibilities
The FAR includes many acquisition flexibilities that are available to the contracting officer when certain conditions are met. These acquisition flexibilities do not require an emergency declaration or designation of contingency operation. –FAR 18.101
In addition to having a preference for simplicity, the FAR is also strongly in favor of flexibility. The previous sentence may come as a surprise to people who have only seen the FAR subjected to strict interpretations, but the regulation makes it quite clear that flexibilities are indeed present, available, and preferred.
The FAR does not intend these flexibilities to be seldom-used contingencies or reluctantly authorized departures from the norm. Instead, it explicitly encourages their use as a matter of course. It is worth noting that while many of these flexibilities are described in Part 18 (Emergency Acquisitions), their use is not limited to formally declared emergencies or other special occasions. In fact, they are available to any contracting officer when “certain conditions” are met.
The remainder of Sub-Part 18.1 identifies a number of specific flexibilities relevant to various situations and explains those conditions.
FAR 35.002 Research & Development Contracting, General
The contracting process shall be used to encourage the best sources from the scientific and industrial community to become involved in the program and must provide an environment in which the work can be pursued with reasonable flexibility and minimum administrative burden. –35.002
Here we again see the FAR expressing a preference for flexibility, but now we see the added emphasis on reducing the administrative burden. It may be fair to say the FAR is the very definition of “administrative burden;” we should also recognize that the FAR goes to considerable length to minimize and reduce the administrative burden on acquisition programs.
While this particular quote is from the FAR’s R&D subpart, variations on that phrase are found in several other places throughout the regulation (for example, Subpart 16.202-1—Fixed-Price Contracts, or 4.1200 – Representations and Certifications). The general principle of reducing the administrative burden can be applied quite broadly.
Therefore, any enterprising acquisition professionals who seek to reduce the administrative burden for their particular project will find the FAR is on their side. Attempts to maintain or increase the burden, on the other hand, are actually contrary to the FAR’s direction.
FAR 35.008 Evaluation for award.
(a) Generally, an R&D contract should be awarded to that organization, including any educational institution, that proposes the best ideas or concepts and has the highest competence in the specific field of science or technology involved. However, an award should not be made to obtain capabilities that exceed those needed for successful performance of the work. –35.008
This section echoes FAR 15.306(d)(4) in its preference for a restrained approach to contract award. That is, an offeror whose proposed solution exceeds the government’s need should not be viewed more favorably than an offeror whose proposed solution merely meets the need. Again, this is an important principle for government and industry alike to understand.
The basic principle is that the government should avoid paying a premium for capabilities it does not really require. Source selection decisions should not chase after the latest shiny object, which tends to cost more and take longer, but instead should take a more restrained approach.
This subpart brings to mind the proverbial 70% solution, widely held up as preferable to the 100% alternative. The reason 70% beats 100% is that the more modest solution tends to cost considerably less, tends to be available much sooner, and tends to be a better fit with actual needs. The so-called 100% solution, in contrast, tends to be overkill, late-to-need, and overpriced.
The Department of Defense is quite specific on this topic. A memo signed on January 23, 2013 by ADM James Winnefeld, the vice chairman of the Joint Chiefs of Staff and chairman of the Joint Requirements Oversight Council, encourages program managers to request requirement relief whenever requirements (specifically Key Performance Parameters, or KPPs) “appear out of line with an appropriate cost-benefit analysis.” The memo, titled Key Performance Parameter Relief, states:
KPP relief should be considered especially appropriate in cases where significant cost savings may be achieved with marginal impact to operational capability (i.e., spending 15 percent of a program’s budget to get the last 3 percent of KPP performance)…
This is essentially identical to the principle in FAR 35.008. If the last 3 percent of capability is not really necessary and is consuming a disproportionate amount of the resources, then a more modest approach is clearly called for.
FAR 39.103 Modular contracting.
Modular contracting is intended to reduce program risk and to incentivize contractor performance while meeting the government’s need for timely access to rapidly changing technology. Consistent with the agency’s information technology architecture, agencies should, to the maximum extent practicable, use modular contracting to acquire major systems (see 2.101) of information technology. Agencies may also use modular contracting to acquire non-major systems of information technology. –39.103
The concept of modular contracting involves dividing large efforts into a series of smaller efforts. This can be done more often than it is done, and the FAR establishes an explicit preference for modular contracting.
While major information technology systems often appear monolithic and indivisible, a closer inspection often reveals hidden seams and opportunities to chunk, divide, and sub-divide the effort. The FAR could not be clearer in its preference for reducing large IT systems into a series of smaller systems.
The specific application of modular contracting in the FAR is for information technology, but the practice can often be applied on non-IT systems as well. Not every program can be developed using this method, but modular contracting is clearly the default, preferred approach.
Organizations that want to use a non-modular approach to deliver a big, expensive, complex system should be required to justify their preference and gain special authorization. Those that want to break a large effort into a modular series of smaller projects can look to this section of the FAR for support and should know they are doing precisely what they should be doing.
This has significant implications for the proponents of Agile methodologies in particular, because many of the benefits described in the box below speak directly to Agile practices.
(b) When using modular contracting, an acquisition of a system of information technology may be divided into several smaller acquisition increments that—
(1) Are easier to manage individually than would be possible in one comprehensive acquisition;
(2) Address complex information technology objectives incrementally in order to enhance the likelihood of achieving workable systems or solutions for attainment of those objectives;
(3) Provide for delivery, implementation, and testing of workable systems or solutions in discrete increments, each of which comprises a system or solution that is not dependent on any subsequent increment in order to perform its principal functions;
(4) Provide an opportunity for subsequent increments to take advantage of any evolution in technology or needs that occur during implementation and use of the earlier increments; and
(5) Reduce risk of potential adverse consequences on the overall project by isolating and avoiding custom-designed components of the system.
Having established the benefits of modularizing large IT systems, the FAR goes on to explain how to define each module and to illuminate what these increments should look like:
(c) The characteristics of an increment may vary depending upon the type of information technology being acquired and the nature of the system being developed. The following factors may be considered:
(1) To promote compatibility, the information technology acquired through modular contracting for each increment should comply with common or commercially acceptable information technology standards when available and appropriate, and shall conform to the agency’s master information technology architecture.
(2) The performance requirements of each increment should be consistent with the performance requirements of the completed, overall system within which the information technology will function and should address interface requirements with succeeding increments.
The key to successful modular design, in IT or other categories, is to have a well-defined architecture, complete with standard interfaces. The design should drive the contracting strategy, not the other way around. A modular, open-systems concept helps prevent optimization of a part at the expense of the whole, and ensures that new modules are compatible with the existing modules. And it is precisely what the FAR proposes.
The formal systems engineering principle of “high cohesion, low coupling” applies here as well. This principle ensures that changes to one module do not cause complexity-adding ripples throughout the rest of the system, and helps to reduce the cost, delay, and complexity of upgrading or replacing older modules.
Finally, this section addresses the importance of ensuring the performance requirements of each part are consistent with the performance of the whole. Mismatched performance can produce a fragile architecture rather than a robust one, as one segment produces more information than another can accommodate, or one piece operates at a slower rhythm than the rest.
(d) For each increment, contracting officers shall choose an appropriate contracting technique that facilitates the acquisition of subsequent increments. Pursuant to Parts 16 and 17 of the FAR, contracting officers shall select the contract type and method appropriate to the circumstances (e.g., indefinite delivery, indefinite quantity contracts, single contract with options, successive contracts, multiple awards, task order contracts).
Contract(s) shall be structured to ensure that the Government is not required to procure additional increments.
This section is yet another FAR paean to flexibility. It points out that contracting officers have a number of contract types and methods to choose from. It lists them. It then encourages adopting and structuring the contract in such a way as to ensure the government maintains the flexibility to stop procurement between each increment. That is, the contract structure should provide the opportunity—but not the obligation—to proceed from one module to the next.
Maintaining this opportunity is a simple matter of including the appropriate contract clause. The idea of modularity means the overall effort is severable. While the initial plan may envision a series of 10 increments, we may discover that the requirement is satisfied after only 6 or 7. In such cases, we can declare success and call it a day. This is just one of the many benefits of the modular approach.
(e) To avoid obsolescence, a modular contract for information technology should, to the maximum extent practicable, be awarded within 180 days after the date on which the solicitation is issued. If award cannot be made within 180 days, agencies should consider cancellation of the solicitation in accordance with 14.209 or 15.206(e). To the maximum extent practicable, deliveries under the contract should be scheduled to occur within 18 months after issuance of the solicitation.
Information technology is changing at a terrific pace, and it shows no signs of slowing down. Accordingly, the FAR encourages setting firm deadlines for both contract award and solution delivery to reduce the likelihood of pointlessly delivering yesterday’s technology tomorrow. In fact, the FAR suggests that delays justify cancellation. If we cannot do it in 180 days, we should not do it.
Actions You Can Take
- Actually read the FAR. Realize that many constraints are myths. Understand the FAR actually encourages simplicity and innovation. Embrace it.
- Have meaningful, upfront, early, and engaged dialogue with the contracting office. Decisions made early in a program have lasting impacts several years down the line. Understand how decisions today may impact your contracting strategy in the future.
- The program and contracting office should work together as a united front as much as possible. There are many obstacles and challenges that will stand in the way of doing something new, innovative, and bold.
- Design should lead contracting, not the other way around. And if you find yourself in a situation where the opposite is your reality, you need to work as a team to reverse course because something has fundamentally gone wrong along the process.
- Continue to explore, understand, and sometimes press the boundaries of your organizations’ interpretation of the FAR. It takes time, effort, and repetition to change habits and culture.