Change You Can Procure With?

President-elect Obama has promised change. What should be expected in the area of government contracts?

According to an LA Times report, President-elect Obama has promised to reduce spending by $40 billion by using fewer contractors, "seek[ing] better deals with leveraging the government's buying power." This approach-- promising more exclusivity in exchange for deeper bulk discounts-- is analogous to the approach taken in the private sector by warehouse stores, such as Sam's Club and Costco:

A typical Costco store stocks 4,000 types of items, including perhaps just four toothpaste brands, while a Wal-Mart typically stocks more than 100,000 types of items and may carry 60 sizes and brands of toothpastes. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze deeper and deeper bulk discounts from suppliers.

But what effect would this "Costco approach" have on other policy aims? The LA Times reports that Obama's adoption of such a strategy would result in a "potential thicket of conflicting policy issues," such as the government's preferences for small businesses.

What else might be on the horizon?

Obama's transition website, change.gov, promises more oversight, more procurement officers, and an end to most no-bid contracts.

Obama's plans for defense contracting include developing a strategy for "determining when contracting makes sense, rather than continually handing off governmental jobs to well-connected companies." Obama's transition website also pledged to "rebuild[] our contract officer corps" and to order the Department of Justice "to prioritize prosecutions that will punish and deter fraud, waste, and abuse." The transition site promises elsewhere that nearly all contract orders over $25,000 be competitively awarded.

Now and future SecDef Robert Gates agreed that reform should be a top priority.

The transition website gives no indication as to how many new contracting workers would be required, but the LA Times reports that some specialists are estimating tens of thousands, if not a hundred thousand, new contract-related jobs. As of 2006, the Times reports, just over 58,000 federal officials worked in contract-related jobs specifications.

Obama's transition site also promises to streamline government procurement:

Streamline Government Procurement: Barack Obama will implement the GAO's recommendations to reduce erroneous federal payments, reduce procurement costs with purchase cards, and implement better management of surplus federal property. These initiatives will save $4.5 billion a year.

The GAO recommendations the site refers to appear to be GAO-08-160, the GAO's report to the Committee on Oversight and Government Reform, which recommended that the Office of Federal Procurement Policy "develop and oversight strategy or plan with milestones and reporting requirements."

Performance evaluation challenge allowed to proceed

The Court of Federal Claims denied the government's Motion to Dismiss for Lack of Subject Matter Jurisdiction in a suit against an agency for an allegedly baseless negative performance evaluation.

In recent years, government procurement has moved away from simply awarding a contract to the lowest bidder. Rather, contracting officer rely more and more on a contractor's past performance with other agencies. Thus, a negative performance evaluation can seriously damage a contractor's ability to obtain future work from the government.

The Court's decision-- and another decision on a 12(b)(1) motion a month prior-- potentially open the door for similar suits by subcontractors. In both cases, however, the Court required that there must first be a request by the contractor to the contracting officer challenging the evaluation and explaining why the evaluation should be changed. Only a denial or refusal to act on this claim is sufficient to pass SMJ muster in the Court of Federal Claims.

The case is Todd Construction Co. v. U.S.

Fed Circuit approves bundling

The Federal Circuit rejected a bid protest by a challenger seeking to perform only the hardware aspect of a hardware/software maintenance contract.

Holding that "[p]rocurement officials have substantial discretion to determine which proposal represents the best value for the government," the Federal Circuit found that the U.S. Naval Oceanographic Office had a rational basis for having both the hardware and software on its supercomputers maintained by the same company.

The case is CHE Consulting, Inc. v. United States.

Sovereign acts doctrine precludes delay damages

The Federal Circuit rejected a building contractor's request for delay damages caused by the government's barring access to the site following 9/11.

The contractor was constructing an Army Ranger regimental headquarters facility in Fort Benning, Ga., when the 9/11 attacks occurred. Because the Ranger commander found that the contractor's employees and subcontractors were in a unique position to view the comings and goings of Ranger personnel, who were in preparation for deployment to Afghanistan, the commander barred the contractor's access to the worksite for 43 days.

The contractor sought delay damages, but the ASBCA and Federal Circuit both found that the Army's exclusion of the contractor constituted a sovereign act relating to the government's warmaking powers, thus barring delay damages.

The case is Conner Bros. Construction v. Geren.