We told you about FAPIIS (Federal Awardee Performance and Integrity Information System) last September, when FAR Case 2008-027 (implementing § 827 of the FY 2009 Defense Authorization Act) was published as a proposed rule.  We called it “past performance information on steroids” and said it was “a significant proposed rule that may affect the ability of certain contractors to receive Federal contract or grant awards.”  On March 23, 2010 the FAR Councils issued the final FAPIIS rule, which can be found here.

Summary of the final rule:

FAPIIS is intended to significantly enhance the scope of information available to contracting officers as they evaluate the integrity and performance of prospective contractors. In addition to providing one-stop access to EPLS and PPIRS, FAPIIS will also include contracting officers' non-responsibility determinations (i.e., agency assessments that prospective contractors do not meet requisite responsibility standards to perform for the Government), contract terminations for default or cause, agency defective pricing determinations, administrative agreements entered into by suspension and debarment officials to resolve a suspension or debarment, and contractor self-reporting of criminal convictions, civil liability, and adverse administrative actions. The system will collect this information, on an ongoing basis, from existing systems within the Government (i.e., EPLS and PPIRS), contracting officers (for determinations of non-responsibility and contract terminations), suspension and debarment officials (for information on administrative agreements), and contractors (for information related to criminal, civil, and administrative proceedings).

We’re not going to reiterate all the aspects of this fairly complex rule.  You can click the link to our original article to get the gist, or click the link to the final rule to get all the details.  Instead, we’re going to focus on the FAR Councils’ promulgating comments, where they disposition the public comments received.  Here are some (but not all) of the Councils’ comments.

• The Councils seek to ensure that FAPIIS provides contracting officers with efficient and effective access to the information they need to evaluate the business ethics and quality of prospective contractors competing for Federal contracts. To achieve this goal, the Councils have taken a phased approach to the implementation of FAPIIS, focusing first on the information specifically identified by Congress in section 872(c) of the FY 2009 NDAA. … Going forward, this approach will allow the Councils to carefully consider policy and procedural issues as new sources of information are identified pursuant to section 872(b) and (c)(6).  For the next phase of FAPIIS, the Councils and OMB are carefully considering a proposed rule that would build on several suggestions made by the public and augment reporting by: (1) lowering the threshold for covered actions that trigger FAPIIS reporting from $500,000 to the simplified acquisition threshold and (2) expanding the current scope of reporting to include other violations of laws, as opposed to violations only in the context of Federal contracts. This information can further enhance the utility of FAPIIS and give contracting officers a fuller picture of a contractor's history of compliance.  However, a number of the other above-described suggestions for expansion raised concerns for the Councils. For example: Requiring the collection of information on all proceedings, regardless of outcome, could potentially create instances where negative judgments on contractors' responsibility are made regardless of the outcome of the referenced proceedings. If information regarding yet-to-be-concluded proceedings were allowed, negative perceptions could unfairly influence contracting officers to find a contractor non-responsible, even in situations that later end with the contractor being exonerated. The Councils are strongly committed to helping contracting officials avoid these types of situations.  Incorporating all the information from ORCA is inappropriate. Much of the information in this system is not designed to support contracting officers in making responsibility determinations.  Extending the archival period (for retaining information beyond five years) is also inappropriate as this period was created for auditing purposes, not for use by contracting officers in making responsibility determinations.

• The Councils appreciate the need to ensure that information included in FAPIIS will contribute to the stated purpose of the database and that appropriate training is provided to help contracting officers in their use of this information. The Councils did not agree, however, that significant revisions were warranted based on the requested refinements. In particular, the collection of information on administrative agreements entered into to resolve a suspension or debarment is required by section 872, so it must be included in the system. Regarding the concern raised with the definition of ``covered person,'' the existing requirement at FAR 52.209-5 includes certification regarding both the offeror and the principals. Additionally, since the FAPIIS requirement for information does not relate to all offenses by the principals, but only to those that relate to the performance of a Federal contract or grant, this information should be available to the offeror.  As further clarification, the Councils have removed an inconsistency within the definition of ``principal'' between the stated meaning (person within the business entity) and one of the examples (head of a subsidiary). A subsidiary is not generally within the business entity, but is a separate and distinct legal entity. Therefore, the Councils have removed ``head of a subsidiary'' from the list of examples in the definitions of ``principal'' throughout the FAR, because it can imply a meaning broader than the stated definition. Deletion of this example should not result in any change of meaning, since this is just an example, and the definition clearly states that principals are persons within the business entity.

• … the Administrator of GSA shall develop policies to require the timely and accurate input of information into the database. To this end, the Councils will work with the FAPIIS Program Manager, the Federal Acquisition Institute (FAI), and the Defense Acquisition University (DAU) to develop guidance for contracting officials and SDOs on proper input, accuracy, and timeliness of data into FAPIIS. In addition, the Councils have added a requirement to the rule similar to that at FAR 4.604 for data entry into the Federal Procurement Data System, stating that the contracting officers and SDOs are responsible for the timely submission and sufficiency of the data. There is no single entity that can be held accountable because the information in FAPIIS comes from various sources. However, each system to which FAPIIS connects has its own guidelines for timeliness and accountability and separate initiatives are being pursued to strengthen these systems. For example, OFPP's memorandum of July 29, 2009, Improving the Use of Contractor Performance Information … requires the submission of report cards to the Past Performance Information Retrieval System (PPIRS). PPIRS has a standard format for supplying all the report card information collected from the Federal agencies to authorized Government users for use in source selection decisions, and the Government is working to improve compliance by Federal agencies in reporting this data and the quality of the information entered into PPIRS. In improving the compliance and quality of the data, over time, the accuracy of the data should improve. In the meantime, the Councils have added a requirement for timeliness and accountability for the Government personnel who will be entering data directly into the database. With respect to contractors, there are a range of penalties available to the Government for non-compliance with the requirements of a contract, such as determination of non-responsibility, termination for default, or suspension or debarment.

• FAPIIS will provide access to data on active suspensions and debarments, even if the suspension or debarment was imposed more than five years ago. FAPIIS will also provide access to data on expired suspensions and debarments for five years after the expiration date. To access records after this period, agencies would need to utilize the Excluded Parties List System's archives. With respect to the $10 million threshold, the Councils concur that additional clarification is needed to capture the value of modifications when calculating the total value of all current, active contracts and grants. The language in the final rule has been refined to clarify that offerors must consider the total value of the contracts and grants including all priced options and modifications.

• The Councils appreciate the importance of helping contracting officials obtain the skill and aptitude necessary to discern the relevance and weight to be given the information reviewed.  The Councils believe that training, rather than more specific standards in the regulations, is a better way to achieve this goal. The Councils will work with FAI and DAU to develop guidance and training for contracting officials on the proper use of the information contained in FAPIIS, and the type of information that would warrant submission to agency SDOs.

• The Councils recognize that some of the data in the database may not be relevant when determining present responsibility and are committed to avoiding situations of unjustified determinations of non-responsibility. Without the language, contracting officers may think they are required to utilize outdated information that has no bearing on a contractor's present responsibility. The statement does not, as one commenter suggested, limit a contracting officer from considering any information that can be appropriately considered and that is relevant. In light of the comments, the Councils have clarified the explanation for the caution by stating that FAPIIS may contain information on any of the offeror's previous contracts and therefore may contain information relating to contractors for products or services that are completely different from those being acquired. The Councils have also added cross references to FAR 15.305(a)(2) as a reminder of relevance requirements in the consideration of past performance.

• In the final rule, FAR section 9.104-6 focuses just on responsibility determinations. For past performance evaluations, the contracting officer is referred to FAR section 15.305(a)(2), which addresses how to evaluate the relevance of data and clearly states that this evaluation is separate from the responsibility determination required under subpart 9.1. The final rule also incorporates use of FAPIIS into the procedures addressing agency evaluations of contractor performance in FAR 42.1503 since there may be information in FAPIIS, such as terminations for default or cause and defective pricing assessments, that is not in PPIRS but still may be appropriately used, along with the information in PPIRS to evaluate an offeror's performance.

• The proposed language, which has been retained without change in the final rule, requires contracting officers to notify, prior to proceeding with award, the agency official responsible for initiating debarment or suspension action in accordance with agency procedures. This notification process closely tracks that already established in FAR 9.104-5 for situations where an offeror provides an affirmative response on its responsibility certification and therefore should not create undue additional delay. In addition, no changes have been made to procedures currently used to ensure an opportunity for the offeror to provide its input where responsibility is in question. The final rule follows the current practice for providing offerors with an opportunity to explain their responsibility if the contracting officer obtains relevant information from FAPIIS that could lead to a non-responsibility determination. Similarly, the rule makes no changes to the due process obligations associated with suspension or debarment actions.

• The Councils disagree with the arguments set forth to oppose application of the rule to commercial item and COTS acquisitions. An exemption for commercial item and COTS acquisitions would exclude a significant portion of Federal contractors, thereby undermining an overarching public policy to achieve greater integrity and performance quality in contracting that this law is intended to further. There also does not appear to be any unique burden that would undermine access to the commercial marketplace. The requirement for contractors to submit information into FAPIIS applies to those contractors with active Federal contracts and grants totaling more than $10 million at the time of proposal submission, and contractors with this level of activity generally should be equipped to collect and update the information in the system. The commenter even acknowledged that there is a reasonable likelihood a contractor offering a commercial item or COTS item may already be covered by the reporting requirement by virtue of past awards for other than commercial items and COTS.  … The required determinations have been made and, consistent with these determinations, the final rule has been promulgated to cover acquisitions of commercial items and COTS.

• The Councils have incorporated the business rules that impact the contractor into a new clause addressing updates of information regarding responsibility matters: (1) The Contractor will receive notification when the Government posts new information to the Contractor's record. (2) Only Government personnel and authorized users conducting business on behalf of the Government can view system information, with the exception that a Contractor can view its own information. Public requests for information will be handled under the Freedom of Information Act procedures including, where appropriate, procedures promulgated under E.O. 12600. (3) The Contractor will have an opportunity to post comments regarding information that has been posted by the Government. The contractor comments will be retained as long as the associated information is retained, i.e., for a total period of six years. Contractor comments will remain a part of the record unless the Contractor revises them.

• The Councils acknowledge the concern regarding standardization of the collection of all past performance data in general. As mentioned above, the Federal Government is making strides to improve the collection of past performance information required by FAR subpart 42.15. This includes the memorandum issued by the Office of Federal Procurement Policy (OFPP) on July 29, 2009, which required the submission of report cards to the Past Performance Information Retrieval System (PPIRS). PPIRS has a standard format for report card information, and provides that information to all authorized Government users for use in source selection decisions. We are working to improve compliance with the requirement to submit data to this system and to improve the quality of the data submitted. As these efforts proceed, the accuracy of the data should improve.

There you have it.  FAPIIS is now in play and contractors will have to deal with it.

We have posted numerous articles on the sad soap-opera saga of the US Air Force’s attempt to contract for its next generation aerial tanker.  Our latest article, discussing the current Request for Proposals (RFP) and its Section M evaluation criteria, can be found here.  In that same article, we concurred with the Northrop Grumman (NOC) analysis (insofar as we understood it from published accounts) that the EADS/NOC team essentially had zero chance of winning its competition with Boeing, that the evaluation scheme was, in essence, a “lowest-price, technically acceptable” (LPTA) instead of a true “best-value trade-off”.  A best-value trade-off would have permitted the evaluators to trade a higher price for more military capability.  Instead, the RFP called for the offerors to be evaluated against pass/fail “Mission Capabilities” subfactors (including such areas as Program Management and Past Performance).  If each offeror passed the Mission Capabilities subfactors, then the lowest price won.  Period.

(Sure there were 93 “non-mandatory technical requirements” that might have helped the EADS/NOC team, but those factors would not be evaluated unless the offerors’ prices were within one percent of each other.  In such circumstances, the 93 other factors would be used as a tie-breaker. The chances of the offerors’ prices being within one percent of each other, given that Boeing was proposing a significantly lighter plane?  Effectively zero.)

So NOC walked, and it looked like a good decision to us.  But that left EADS with no US partner and, apparently, no chance of bidding.  Boeing to win be default.  But hold on a second.  First, reports emerged that the Air Force was considering a delay in the RFP deadline, in order to give EADS a chance to find another partner and to submit a bid without Northrop Grumman.  Next, according to this report, the Pentagon “indicated it would welcome” a bid from EADS.  The Financial Times article noted that EADS might need more time than the Defense Department would offer, reporting—

EADS executives were due yesterday to meet Pentagon officials to discuss the terms of any bid extension. ‘It has got to be more than just another 30 days," said a person close to the situation.

One report stated that EADS was asking for a 90-day extension to the deadline, in order to line up a new partner.

Now it gets weird.  We have been pessimistic about this competition for months.  We thought nothing could surprise us.  But never would we have predicted this bizarre turn of events. Never.

According to this Wall Street Journal article, a Russian aircraft firm (United Aircraft) is planning to bid on the contract, offering its Ilyushin-96 widebody jetliner, which would be called the Il-98.  According to the article—

The planes would be largely built in Russia, and assembled in the U.S., this person says. United Aircraft will partner with a ‘small U.S. defense contractor,’ which will be renamed United Aircraft Corp. America Inc., this person said, declining to name that contractor.

According to this article on Wikipedia, each Il-96 has a unit cost of $40 to $50 million.  Figure a 50% increase to meet military specs and you’re looking at an offer of roughly $75 million per plane.  Boeing’s KC-767 reportedly will have a unit cost of $130 to $150 million.  Think about that for a moment.

Assuming Russia can pass the Mission Capabilities subfactors, there is no way Boeing can come in with the low bid.  The US Air Force seems to have shot itself in the proverbial foot with its flawed evaluation methodology. 

We have written before about Russia’s recent defense activity, both on the import and export side.  It would be bitingly ironic if Russia ended up as the Air Force’s tanker contractor, because it wanted to skew award to the low bidder and damn the consequences.  Well this is one possible consequence that we hope does not come to pass.

Be careful what you wish for, DOD.  Because you may not like what you get.