Exploring permissible exercises of authority to innovatively purchase products and services.

There’s a common maxim in federal contracting: “If the rules don’t say I can’t do it, then I can.” This “choose your own adventure” attitude comes directly from the Federal Acquisition Regulation (FAR):

In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority.[1]

Unfortunately, the ability to pursue these “permissible exercises of authority” (PEAs), while specifically allowed by the FAR, are not always accepted by the powers that be. During my tenure as a contracting officer at TSA, our leaders supported us and our new ideas, which allowed one of my colleagues to design and administer the first award-term contract[2] our agency had ever done. The point is, with the proper top cover, you are both allowed and encouraged under the FAR to stretch acquisition boundaries.

Today, the appetite for experimentation is growing, and there’s never been a better time to get creative with contracting authorities—especially in the areas of requirements development and market research.

PEAs for Requirements Development

The acquisition process starts with requirements development—and it can end there too. A poorly developed requirement will derail even the best-laid acquisition strategy, yet there’s always pressure to expedite this phase and develop requirements in a vacuum. This is where PEAs come in.

Citizen Science and Crowdsourcing

For requirements development, wouldn’t you like to know how real people interact with a prospective website, app, or service portal to discover what works well and what doesn’t? Tapping collective knowledge to define problems affecting the citizenry is good government—and it’s a completely permissible exercise, thanks to the 2016 Crowdsourcing and Citizen Science Act.[3] This law states there’s nothing to prevent acquisition and program professionals from engaging the public to address societal needs and help define the requirements for innovative solutions.

How does this figure into requirements development? With technology and software development, observing human behavior and interaction is essential in determining how people will likely use the technology, which helps determine what to buy.

Citizen science[4] can inform your team. Volunteers can participate in Q&A sessions, data collection, and even in developing low-cost, open-source software code.

Crowdsourcing can engage even more people through open calls for voluntary assistance. A classic example is the U.S. Geological Survey’s “Did You Feel It?” project, which sources feedback from volunteers to supplement its conventional earthquake sensor network.

Broad Agency Announcements

If you’re struggling to find innovative solutions, consider hiring scientific or technical experts through a broad agency announcement (BAA). With an innovative technology or service, the requirements development process creates essential learnings that improve efficiency and outcomes in the development phase, so rather than pay an expert just to develop the requirement, you can use a BAA to leave the option open for them to build the solution as well.

BAAs are a permissible method of developing a general requirements document without prohibiting the awardee from participating in a follow-on solicitation due to organizational conflicts of interest (OCI). Some of you probably are flipping to FAR Subpart 9.5 in disbelief. But, in fact, any requirements, designs, product visions, or feature sets developed from the BAA deliverable could most certainly be acquired from that same awardee in a subsequent acquisition, despite what you might think about OCIs.

An OCI could prevent the creator of a requirements document or specification from competing for an eventual contract opportunity under two subsections of FAR Subpart 9.5. Subsection 9.505-1 covers one, providing systems engineering and technical direction. Subsection 9.505-2 covers another: preparing specifications or work statements.

The systems engineering and technical direction barrier may easily be avoided by keeping the scope of the BAA vague and open-ended—a precedent set by the Department of Homeland Security’s Long-Range BAA.[5] Subparagraph 9.505-2(a)(1)(ii) gives some coverage by stating contractors can help the government “prepare, refine, or coordinate specifications,” as long as the assistance is supervised and controlled by government representatives. However, the power of this PEA comes from Subparagraph 9.505-2(a)(3), pertaining to development work.

With development work, it is normal to favor firms that have done advanced work in the field, even if some of the work is financed by the government (e.g., through a BAA for developing a general requirement, problem statement, or product vision) and thus creates an unavoidable competitive advantage. Here, the FAR simply declares that benefits of this “unavoidable competitive advantage” outweigh the impact on competition.

P-EAsing the Rules

Laws are laws and you should not break them. However, if you avoid a rule entirely, that’s not breaking it—that’s just good contracting. Some of my favorite PEAs completely circumvent a process or procedure by leaving it off the playing field. If you’re into hacking the bureaucracy, these PEAs are your flavor.

Multiphased, Incrementally Funded “Pilot” Contracts

For agencies that appreciate the need for iterative development and recognize that next-generation technologies can be built without a fully defined end state, it helps to have a way to buy them without complex requirements and upfront funding. Some agencies, especially in the Department of Defense (DOD), can leverage innovation funding through other transactions (OTs)[6] and commercial solutions openings (CSO)[7]  to achieve this type of iterative development. However, other agencies lack these authorities, and thus must be more creative.

One example comes from the Internal Revenue Service (IRS). The contracting pros at IRS simply created their own approach to buying innovative solutions in an OT-like manner through Pilot IRS, which combines authorities from FAR Parts 12 and 13 to create a phased, incremental funding vehicle that circumvents fiscal rules associated with severability, antideficiency, and bona fide need concerns. By avoiding these rules entirely, Pilot IRS can test new technologies through a rapid, iterative process that rewards excellent performance with subsequent incremental contracts.

A multiphased approach like this is crucial for software development and digital solutions, which rely on testing, feedback from users, and lessons from live use to reveal what works and what doesn’t. Traditionally, however, federal appropriations law doesn’t take kindly to projects that require incremental funding—e.g., officials are prohibited from creating or authorizing an obligation in excess of the funds available to cover the price of the contract[8] and must be mindful about contracts that cross fiscal years.[9]

The IRS deployed an “agile funding mechanism” to navigate the red tape—and only managed to do so via strong support and involvement from agency leadership. First, Pilot IRS established a $7 million ceiling for each contract award to stay under the simplified acquisition threshold for commercial items, which enabled the contracting team to use FAR Part 12 and 13 flexibilities in designing its solicitation—including intentionally vague requirements (goals, really) to allow offerors to propose unique solutions without facing formal source-selection headaches. Then, to avoid the prohibition on incremental funding for nonseverable services, it classified each of four phases as a new technology test, meaning that standalone functionality could be gleaned from each incrementally funded award.

PEAs for Market Research

Market research is crucial to requirements definition and good contracting outcomes, but many contracting folks avoid engaging with industry for fear of disclosing source-selection information or opening themselves to protest. The truth is there’s nothing you can do to prevent a protest, so don’t make your opportunity suffer for it.

The Federal Acquisition Institute (FAI)’s “Periodic Table of Acquisition Innovations”[10] has an entire column of market research PEAs. Here are a few of my favorites:

  • Include your independent government cost estimate (IGE) in the solicitation—Seriously, do it. There’s no rule against it. If you’re dealing with restriction, however, rebrand the IGE as an “affordability” clause. The “Periodic Table” even has text written up for you to use.
  • Meet with potential offerors one-on-one—Call them. Video chat. You’ll be amazed at how much you can learn when you give a vendor 15 minutes of your time. If, however, you fear you’ve divulged something that may provide a competitive advantage, you’re in the clear if you’re in the pre-solicitation phase, but if not then here’s a catchall PEA: Write what you divulged into your eventual requirement or solicitation to level the playing field.
  • Host a webinar instead of a request for information or draft solicitation—In an open and interactive forum, you’ll receive valuable feedback about your acquisition strategy and the requirements you intend to solicit. This is much better than the traditional Q&A process, which demands a lot of time and results in duplicate questions.

 

Alternate Solicitation and Award PEAs

Not sure if you want to use an RFP or an RFQ? How about neither? Prize competitions—such as challenges, Shark Tank[11]–style presentations, and innovation workshops—encourage a diverse set of traditional and nontraditional government contractors to develop, test, and improve solutions without committing the government to complex source selection or long-term development.

My first experience with alternative solicitations came as an industry participant in the U.S. Digital Service’s Digital Information Technology Acquisition Program (DITAP), which began as a challenge issued by the Office of Federal Procurement Policy and is now a mature offering acquired through traditional procurement channels. As a current instructor and proponent of the program, I’ve had the pleasure of learning new PEAs from DITAP participants and alums, which include the following.

  • Comparative Evaluation of Offers

    One of the first source selection lessons I learned as a contracting professional is that offers are judged by the evaluation criteria stated in the contract, not against each other. This is an important principle for fairness and competition that works great for well-defined requirements.

    However, when we buy innovation or software development, we don’t want to overprescribe the solution, but if we don’t prescribe the solution, it’s difficult to create evaluation criteria to independently judge each offeror’s proposal. In these cases, it’s better to compare proposals against each other and select the offeror that demonstrates the strongest understanding of the problem to be solved and offers the solution with the greatest potential to solve it.

    Enter comparative evaluations—codified at FAR 13.106-2(b)(3), but otherwise poorly defined elsewhere in federal acquisition. The term comparative evaluations was added to the FAR in 1997 “without any explanation in the final rule or in the previous proposed and interim rules.”[12] The lack of specificity provides a great opportunity to make “comparative evaluations” work for acquisition of innovative, purposefully nonprescriptive requirements. If you’re looking for some top cover, you’ll find it in FAI’s “Periodic Table,” but remember: Comparative evaluations may only be used for requirements acquired using FAR Part 12 or 13 acquisition procedures (which can extend their utility for certain Subpart 8.4 and Section 16.505 procurements).

    With these buying procedures, you have a good bit of runway. Instead of assigning evaluation ratings, you can compare one offeror to another based on evaluation criteria defined however you’d like. Therefore, comparative evaluations allow you to choose the offeror that, based on your judgement, presents the best solution among all offers received.

  • Non-Part 15 Advisory Multistep Evaluation

Have you ever read a vendor’s proposal and knew right away it had no chance of winning? That’s real time and effort spent on a quixotic quest, and not just for the vendor—your source selection team still must evaluate the hopeless bid. What if you could give offerors an idea of their chances of winning before they expend any further resources?

Enter the multistep advisory technique, used with great success in the Department of Veterans Affairs (VA) VA.gov modernization solicitation.[13] The VA used two PEAs in this acquisition strategy:

  • The advisory multistep process, adapted from FAR 15.202[14]; and
  • The issuance of confidence ratings.

The VA.gov team created an “uber PEA” that helps industry make better bid-and-proposal decisions, while reducing the amount of work for the VA technical evaluation team.

The acquisition strategy used a two-phase evaluation process. In Phase 1, offerors received a confidence rating (“high,” “moderate,” “limited,” or “no confidence”) based on three case studies and artifacts demonstrating their competencies and capabilities to perform the work. This confidence rating helped offerors make conscious, informed decisions about their odds of winning a contract through the second phase, which was a traditional technical evaluation.[15]

This two-phase process helps ensure only companies with the best opportunity to succeed move to the technical evaluation stage. This is especially good for small- and medium-size companies that don’t have a bottomless bid-and-proposal budget. It also helps source selection teams with finite bandwidth for considering proposals.

You might be thinking: “But the advisory multistep process is a formal source-selection technique, so how can I use it for a buy that’s not governed by FAR Part 15?”[16] As long as you are buying commercial items, there is no restriction, thanks to the guidance at FAR 12.102(b), which enables contracting officers to use commercial item procedures in conjunction with any of the procedures prescribed in FAR Parts 13, 14, and 15.

This is what’s known in syllogistic reasoning as a “major premise.” When you want to create a business case for a nontraditional technique, a syllogism will help you plow through the approval process by presenting a clear, legally sufficient, and precise justification for your PEA.

After identifying the major premise, you’ll need an additional premise (i.e., a “minor premise”) to ultimately arrive at a conclusion. In this instance, the conclusion is that you can use FAR Part 12 procedures for your acquisition. Does your requirement meet one of the definitions of a commercial item in FAR 2.101? If so, there’s your minor premise. You can confidently and legally conclude that an advisory multistep process, codified at FAR 15.202, can be used in your commercial services acquisition using FAR Part 12 procedures. (Refer to FIGURE 1.)

Conclusion

As a federal acquisition professional, you are vested with the unique authority to obligate the government and spend our hard-earned tax dollars. This stewardship is an honor and a privilege, but also a great responsibility.

If you’re struggling to innovate with nontraditional methods, know this: PEAs are not just okay, but encouraged by the FAR. So, the next time someone in your approval chain says you can’t do it that way, open the FAR and build your business case for innovation. CM

Frank McNally

  • Director of Learning & Content Development, Public Spend Forum.

      https://govshop.publicspendforum.net/

Endnotes


[1] FAR 1.102(d) (emphasis added).

[2] I.e., a form of nonmonetary contract incentive that offers contractors an opportunity to be awarded additional periods of performance for achieving certain performance measures laid out in the contract. Read the final rule in Federal Register Volume 82, Number 141, available at https://www.govinfo.gov/content/pkg/FR-2017-07-25/html/2017-15520.htm.

[3] 15 USC 3724.

[4] To learn more about crowdsourcing and citizen science, visit https://www.citizenscience.gov/about/#.

[5] The DHS Long-Range BAA is a “standing, open invitation to the scientific and technical communities to fund pioneering research and development projects” with the purpose of advancing and applying scientific and technical knowledge to advance DHS operations. As opposed to a traditional BAA with specific subject matter requirements, this DHS version covers a wide range of subjects and is short on details “by design” to enable the agency to “contemplate proposals for original research that fall outside the scope of its more narrowly defined BAAs.” (See https://www.dhs.gov/science-and-technology/st-lrbaa.) (Hat tip to the Science and Technology Directorate for cooking it up.)

[6] See, e.g., “Other Transactions Guide,” available at https://aaf.dau.edu/aaf/ot-guide/.

[7] See, e.g., Defense Commercial Solutions Opening (CSO) Pilot Program, available at https://aaf.dau.edu/aaf/contracting-cone/defense-cso/#:~:text=The%20Defense%20Commercial%20Solutions%20Opening,or%20provide%20potential%20technological%20advances.

[8] FAR 32.702.

[9] FAR 32.703-3.

[10] Available at https://www.fai.gov/periodic-table/.

[11] Copyright Sony Pictures Television Inc.

[12] As discussed on this WIFCON Forum (short for Where in Federal Contracting?) thread from March 2017: http://www.wifcon.com/discussion/index.php?/topic/3904-comparative-evaluations-of-offers-under-far-13/.

[13] Read the entire VA.gov Modernization case study at the TechFAR Hub, available at https://techfarhub.cio.gov/learning-center/case-studies/VA-gov-modernization-comparative-analysis.

[14] Section 15.202 describes the Advisory multistep process.

[15] Regardless of the assigned confidence rating, an offeror can proceed to Phase 2, but the author’s background interviews suggest that companies seldom stay in the running when they get a low confidence rating.

[16] FAR Part 15 is traditionally used for contracting by negotiation and is a more formal method of source selection.