FAR Out Contracting

A contract designation meant for government purchases of mundane "off-the-shelf" items like desktop computers is being used and abused in the mammoth $127 billion US Army Future Combat Systems modernization program, according to Senator John McCain.

Federal Acquisition Regulation Part 12 was intended to streamline the process of procuring commercially-available items by reducing financial accountability and oversight.  The thinking behind FAR 12 was that the government wouldn't need to have strict oversight since market forces would ensure the price is right.  Yet what if these items aren't available on the market, but are acquired as commercial items?

That's the point McCain was trying to make in this exchange last week regarding Future Combat Systems (FCS involves a wide-range of new weapon programs):

"Tell me, Mr. Secretary, where might I be able to purchase such a vehicle commercially?"

"It's not -- it's certainly not off the shelf," [Army Secretary Francis Harvey] Harvey replied. "Senator, you know that. It's a very heavy technology development program."

"I really think we’re going to have to change this designation," answered McCain. [hat tip to Defense Tech for the quotes]

With cost estimates for FCS ballooning, among other problems, the program needs more oversight.  FAR 12 isn't delivering the goods in this regard.  However, this is a problem that goes beyond FCS and is increasingly endemic in government contracting. 

The controversial C-130J contract threatened with cuts is another "commercial" acquisition, despite the fact that none of the "commercial" versions of the C-130J have ever sold.  It's per plane cost is roughly five times the cost of the C-130B in inflation-adjusted dollars. And when Lockheed proposed the C-130J deal, the Air Force balked.  The GAO summarized that original Air Force opposition to the deal was "due to cost, schedule, and technical risks."  Also, the Air Force concluded that Lockheed's unsolicited proposal was improper because "the proposal was not unique and innovative as prescribed in the Federal Acquisition Regulation for unsolicited proposals. Hence, even if the proposal was acceptable, it would not qualify for an exception to full and open competition."

Another contract designation abused to evade oversight and financial accountability is called "other transactions."  This designation has been used with the dubious and expensive missile defense program. 

The Pentagon Inspector General and the GAO slammed "other transactions" in 1999 and 2000.  It should be time for review of commercial acquisition contract use.  More importantly, it's time to reverse the trend of weakened government ability to see how it spends taxpayer money.

Comments

[Susan Hughes]

Senator McCain is absolutely correct in his assessment of what is occurring in the name of commercial-item purchasing. Specifically, huge programs that do not qualify as commercial items, i. e. do not qualify as ready-made items that are of a type sold to the general public, are being acquired using the provisions of FAR 12. Senator McCain is also absolutely correct in asserting that the pricing of these programs is then not subject to audit or to the cost accounting standards.

I believe that the abuse of commercial-item purchasing is a huge fraud perpetrated on the American taxpayer and one that continues unabated and unpunished. In this regard, please see my article entitled "A Victim's Guide to Abuse in the Federal Purchase Program" by going to www.weholdthesetruths.org. Once you access the site, use the search key to search for "A Victim's Guide."

Sincerely,

Susan Hughes
President
Individual Development Associates, Inc.
www.ida-inc.biz