Seaport-e Under Fire

Navy Systems Commands, including Naval Air Systems Command (NAVAIR), headquartered at Patuxent River Naval Air Station, have run afoul of Federal Acquisition Regulations and Department of Defense Acquisition regulations with the use of the Seaport-e contract vehicle, according to a report by the Department of Defense Inspector General (IG) issued earlier this month.

By not following the Concepts of Operations issued by the Seaport-e program manager, the Inspector General found that NAVAIR and other agencies restricted competition, performed inadequate market research, improperly set-aside some work for small businesses, failed to enact measurable quality standards for contract performance, and failed to control the scope of contracts across functional areas, effectively using some task orders as indefinite- delivery/indefinite-quantity (IDIQ) contracts.

The IG's report further identifies a possible contradiction in the Federal Acquisition Regulation (FAR) that may require legislation to clarify, regarding the use of small-business set asides under IDIQ contracts.

Naval Sea Systems Command (NAVSEA), the contracting authority and administrative office for the Seaport-e contract, through the Seaport-e program manager, issues and maintains a “Concept of Operations” document (CONOPS) promulgated throughout the ordering agencies via the Seaport-e web-portal and a bi-weekly meeting of a council comprising representatives from each command.

The Seaport-e program manager holds no authority to direct the individual agencies’ contracts officers or Deputies of Small Business in the use of the contract for competing and awarding task orders. Ordering agencies pay an annual fee for participation in the Seaport-e program, use of the portal, contract administration services, and the minimum award guarantees for prime contract awardees. There is no penalty for deviating from the CONOPS.

NAVAIR under microscope

The IG studied 133 task orders across all ordering agencies, including 17 from NAVAIR, and determined that 39, valued at nearly $500-million, were awarded without fair competition. Of the 17 NAVAIR task orders examined during the year-long audit, the IG found 7 were set-aside improperly and 15 did not follow quality assurance requirements.

Not enough time to bid

The report stated the length of time task orders were open for bidding and the number of bids received indicated a lack of competitive environment and a violation of Seaport-e CONOPS. The audit found one task order valued at $2.3-million open to bidders for only 6 days.  That solicitation received only one bid – from the incumbent contractor. Another $56-million order was open for only 19 days.

The Seaport-e CONOPS states orders between $1-50-million should be open for 11-24 days, and orders over $50-million remain open for at least 25 days. This guideline is designed to insure contractors have a fair opportunity to bid on task orders so the government may realize the “best value” from the resulting award.

Small business set-asides illegal?

Further, the report finds some task-orders were improperly set-aside for small business without adequate market research and possibly against FAR regulations. FAR 19.502-2(b) states: “the contracting officer shall set aside any acquisition over $100,000 when there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns.” The report cites a recent protest of an NAVAIR task-order award by Delex Systems, Incorporated, a small business prime contractor on Seaport-e, which leaned heavily on that FAR clause. The protest was upheld by the GAO.

The IG however, determined a contradicting section of the FAR (16.505(b)) to apply, which requires the contracting offices to provide each contractor a fair opportunity to be considered for each order exceeding $3,000 issued under multiple-award IDIQ. This regulation would seem to prohibit any small business set-asides under IDIQs.

The IG report recommends evaluation of the need for revision of the FAR to clarify this issue.

“Weaknesses” in contracting workforce

The report found significant deficiencies in the application of performance-based contracting principles in the task orders reviewed. In cases where task orders were written to be performance-based, the metrics used to measure contractor performance were negligible to non-existent, and in some cases copied from other contracts without relevance to the statements of work. Additionally, the report charges inadequate or non-existent methods for quality surveillance, poor information assurance standards, and failure to identify a Contracting Officer’s Representative (COR) to monitor work performed.

The report cites lack of training of contracting officers writing the task orders, insufficient understanding of performance-based contracting practices, and inadequate oversight to standardize and enforce CONOPS at each ordering agency.

Some task orders were used as IDIQs in and of themselves, the report claims -- “undefinitized” orders across multiple functional areas that left details to later-issued “technical instructions” that then acted as task orders. This is directly contrary to CONOPS which states “No undefinitized task orders are allowed” and would seem to indicate a lack of understanding of the purpose of the contract.

Seaport-e Program Manager Disagrees

The Seaport-e program manager’s response to the findings is included, and states that although the Seaport-e program office maintains the Seaport-e portal, awards the base contracts, and negotiates changes to the ordering system, it does not hold authority to enforce guidelines at ordering agencies using the contract.

The Seaport-e program manager further disagreed with the charges of restricted competition, citing multifarious methods for market research that may not be evident from the data reviewed by the auditors, such as advanced planning, industry days, and standardized work packages.

The Seaport-e program manager does plan to update CONOPS in response to some elements of the report, and to disseminate the revised document to ordering agencies.  Additionally, the Seaport-e office will provide training resources on performance-based contracting via the Seaport-e portal and will require a COR be identified for every task order issued. The portal enhancements are to be complete by December, 2009.

It’s not enough for the IG though, who wants to see authoritative oversight of Seaport-e to assure compliance with CONOPS and the FAR. The Deputy Undersecretary of the Navy (Acquisition and Logistics Management) has until June 8, 2009 to respond to the IG with a plan of action and milestones to address every recommendation in the report.

Iona Moon will continue to gather information on these issues and developments as they impact the NAVAIR small business community. We will provide updates as they are available, including any responses from the NAVAIR Deputy for Small Business, and command leadership.

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Iona Moon is a full-service business development and management consultancy with extensive experience with Seaport-e, having won the base contract and several task orders for 23 companies over the past four years.

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