United States. Congress. House. Committee on Small.

The abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 online

. (page 18 of 20)
Online LibraryUnited States. Congress. House. Committee on SmallThe abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 18 of 20)
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198



JAN VEYERS. Kansas JOHN J. LaFALCE. New Yon*

Cm**"

Congress of the lUnited States

House of KeprcsCTitanoes

HHthCongruB

Committtt on (Small BusintBs

iw "Ragbum t\am Gffict Building

Walmgton. BC mn-nn

February 6, 1996



Mr. William H. Campbell
Chief Financial Officer
U.S. Coast Guard
2100 Second Street, SW
Washington, DC 20593

Dear Mr. Campbell:

Thank you for appearing before the Committee on Small
Business during our hearing on December 13, 1995. Now that the
holidays are behind us and the budget debate has subsided I would
appreciate your response to a few written questions prior to the
closing of the hearing record. The questions will help round out
the hearing record and your cooperation is greatly appreciated.

I hope that the Committee can have your responses to the
enclosed questions within the next two weeks. I sincerely
appreciate your cooperation with the Committee's oversight
efforts and, of course, I know you are quite busy. Therefore, if
you have any problems in responding within two weeks please
contact Charles Rowe, Committee Counsel, at (202) 226 - 2227.

Thank you again for your assistance in this matter. I look
forward to reading your responses.



Sincerely,
^flan Meyers



199

Further questions for Mr. Campbell, US Coast Guard



1) Why did your two contracting professionals, who both thought that the
appropriate SIC code was 7373, ask an untrained SB A 8(a) opportunity
specialist her opinion of the appropriate SIC code classification?

2) Has a Coast Guard contracting official ever deferred to an SBA BOS in
this fashion before? If so, please provide the Committee with the award
dates, descriptions, and value of any contracts between 1989-1995 which
involved such a determination by an SBA Business Opportunity Specialist.

a) Is this an appropriate procurement practice?

3) Why didn't the Coast Guard's offer letter to SBA state that other 8(a)
firms had been contacted or that TAMSCO had self-marketed the contract?

4) Was the integration project so unique that only TAMSCO could have
performed it?

5) Why did Coast Guard contracting personnel insist that TAMSCO be
involved in this project, even if a teaming arrangement had to be set up?

6) (a) What are advantages/shortcuts of the 8(a) compared to contracts
offered under "normal" procurement rules? (b) Do such advantages exist
under any other type of procurement, or are they unique to the 8(a)
program? (c) Could these advantages allow some contracting officers or
firms to abuse this program?

7) Why didn't the Coast Guard use fully burdened labor rates when
determining the value of this contract? The current Commandant of the
Coast Guard asked that question prior to the issuance of the investigative
report. He wanted it clarified in the report. Would please explain why
those rates were not fully burdened?



200



8) Prior to the acceptance of this contract by SBA as a sole source contract
for TAMSCO, the Coast Guard sent drafts of the Statement of Work to
TAMSCO. If the SBA had decided the contract was to be competed
wouldn't this have been a violation of the Procurement Integrity Act?
How did Coast Guard personnel know that this contract would not be
competed?

10) Please provide a copy of the Dept. of Transportation Form 5080 that
was completed for this contract.



201



U S. Department ItKkWMM Commandant 21 00 Second St S W

Of Transportation i£Z&&KWr Unrted S,a,es Coa3t Guafd Washington, DC 20593-0001

ImCmMW Statt Symbol G-CC

United States /MS^F Phone (202) 366-4280

Coast Guard /j| Br

5730



The Honorable Jan Meyers
House of Representatives
Washington, DC 20515-0315

Dear Mrs. Meyers:

This is in response to your letter of February 6, 1996,
requesting the U.S. Coast Guard's response to written questions
from the Committee on Small Business. Enclosed please find the
list of your questions and our corresponding answers as well as
other supporting documents.

We would like to thank you for the opportunity to assist the
Committee on Small Business and trust that the information
provided herein will help round out the hearing record. If we
can be of further assistance, please do not hesitate to contact
me.

Sincerely,
r-

I

r/ICHAtl CRYE
■ U.S tOAGT GUARD
- . -y ru'FF fiC' ^PP^'ONAL AND
Encl: (1) Questions and Corresponding. ^ns'^eprs

(2) SIC 4813 Clarification " '' "° * "

(3) Guidelines for Determining Appropriate SIC Code for

8(a) Requirement Offerings

(4) Legal Opinion Sheet

(5) Statement of Work Release to 8(a) Firms

(6) Small and Small Disadvantaged Business Labor Surplus

Form




202



ANSWERS TO QUESTIONS

1. Why did your two contracting professionals, who both thought
that the appropriate SIC code was 7373, ask an untrained SBA 8(a)
opportunity specialist her opinion of the appropriate SIC code
classification?

Initially, the Coast Guard Contracting Officer and Contract
Specialist were of the opinion that 7373 was a proper SIC code
for the integration project. This was prior to receipt of the
final Statement of Work (SOW). After further analysis, including
consultation with SBA (as described in detail in the answer to
Question 2), and review of SBA Notice No. 8000-2356, entitled
"SIC 4813 Clarification" (Enclosure (2)), effective 7/5/89, the
Contracting Officer determined 4813 to be the appropriate SIC
code for this acquisition. Note that previous and ongoing
confusion with SIC code 4813 is what prompted the SBA to clarify
use of this code in an SBA Notice.

2 . Has a Coast Guard contracting official ever deferred to an
SBA BOS in this fashion before? If so, please provide the
Committee with the award dates, descriptions, and value of any
contracts between 1989-1995 which involved such a determination
by an SBA Business Opportunity Specialist. a) Is this an
appropriate procurement practice?

The Coast Guard considers the Small Business Administration to be
a partner in this unique contracting process. While there is no
doubt that the Contracting Officer has the responsibility for
identifying the SIC Code, the SBA (our partner), prior to
accepting a requirement into the 8(a) program, must verify the
appropriateness of the SIC code. This is outlined in SBA Notice
8000-293, 10/12/89, entitled "Determining the Appropriate SIC
Code for 8(a) Requirement Offerings" (Enclosure (3)) which is an
appendix to the Transportation Acquisition Manual Part 1219.

Given this guidance, while we do not defer decision making to the
SBA, it is our policy to do everything possible to work with the
SBA in advance and plan our 8(a) requirements in such a manner
that there are no surprises or lengthy delays in the acquisition
process. For example, the enclosed SBA guidance states, "An 8(a)
offering should be reviewed as soon as received to determine the
appropriateness of the SIC Code so that the procurement process
will not be delayed in case of a disagreement." We take this
guidance seriously and take it one step further by making it our
policy to contact the SBA's Business Opportunity Specialist
before the offering letter is sent. In this manner, we have been
able to anticipate any problems, not just SIC Code issues, with
the potential 8(a) requirement and solve them prior to offering
the requirement.

Ms. Dani Wildason, the Small and Disadvantaged Business
Utilization Specialist (SADBUS) appointed to the Contract Support
Division at Coast Guard Headquarters states that, during her



203



tenure (since May 1992), virtually all 8(a) offerings have taken
place only after she has contacted the SBA BOS and discussed the
potential offering. The nature of this communication varies
depending on the requirement and the SBA office's workload. Such
upfront communications with the SBA fosters our partnership and
is considered an appropriate and necessary practice. Not only is
the recommended 8(a) firm discussed, but the SIC code identity is
agreed upon, along with any potential timeline problems. The
fact that, in this particular instance, the assigned Contract
Specialist elected to forward a draft Statement of Work to the
SBA BOS for an opinion is in concert with this policy.

3. Why didn't the Coast Guard's offer to SBA state that other
8(a) firms had been contacted or that TAMSCO had self -marketed
the contract?

At Coast Guard Headquarters, the SADBUS is responsible for
preparation of the offering letter based on the information given
to her by the Contract Specialist. Although Ms. Wildason had
given the capability statements of Advanced Information
Technology Systems (AINS) and PROSOFT to the technical office
months earlier to review, she was not aware of any actual
contacts made to the firms regarding this requirement. If these
or any other firms had expressly marketed this requirement, it
should have been annotated on the offering letter; however, this
information was not made available. It should be noted that
identifying other firms is informational only and has had, in our
experience, no bearing on the selection of the recommended firm.

In addition, it should be noted that TAMSCO did not self-market
this requirement. In accordance with 13 CFR 124.100
(Definitions), self marketing of a requirement occurs when an
8(a) firm identifies a requirement that has not been committed to
the 8(a) program and, through its marketing efforts causes the
procuring agency to offer that specific requirement to the 8(a)
program on its behalf. This requirement had already been
identified by the Coast Guard as an acquisition targeted
specifically for the 8(a) program; therefore, while TAMSCO may
have marketed a requirement known to be planned for the 8(a)
program, self -marketing did not occur.

4. Was the integration project so unique that only TAMSCO could
have performed it?

The integration project was not so unique that only TAMSCO could
have performed it. However, given that the minimum guaranteed
value of the project was estimated to be under the threshold for
competitive 8(a) procurement, there was no statutory or internal
requirement to consider other contractors. Based on their
extensive experience with the Coast Guard's Aviation Computerized
Maintenance System (ACMS), selection of TAMSCO was determined to
be in the best interest of the government based on technical and
cost considerations.



204



5 . Why did Coast Guard contracting personnel insist that TAMSCO
be involved in this project, even if a teaming arrangement had to
be set up?

Coast Guard contracting personnel (Contracting Officer and
Contract Specialist) did not insist that TAMSCO be involved in
this project. However, it is incumbent on the Contracting
Officer and technical office to ensure that the best contractor
is selected considering both technical and cost factors. Given
TAMSCO' s solid past performance on other requirements for the
Coast Guard aeronautical engineering office and their intimate
knowledge of ACMS, they were determined to be the best contractor
for the integration project.

A teaming arrangement between TAMSCO and another 8(a) company was
initially discussed with the Coast Guard technical office when
7373 was thought to be the proper SIC code for the integration
project. TAMSCO had already graduated from SIC code 7373, and
one way to ensure their expertise was not lost for the
integration project was for them to team with another 8(a)
contractor still eligible under SIC code 7373. Subsequently, the
final SOW was provided by the technical office to the Contract
Specialist and 4813 was determined to be the appropriate SIC
code. Therefore, the issue of a teaming arrangement became moot.

6. (a) What are advantages/shortcuts of the 8(a) compared to
contracts offered under "normal" procurement rules? (b) Do such
advantages exist under any other type of procurement, or are they
unique to the 8(a) program? (c) Could these advantages allow
some contracting officers or firms to abuse this program?

(a) First, for 8(a) competitive procurements, there are no
"advantages" compared to other contracts. The total lead time is
the same, if not longer, than any other type of competition.
However, for 8(a) sole sources (under the competitive threshold),
the SBA markets this program's advantages as follows: Technical
office may meet with prospective firms and talk in general terms
about upcoming requirements, technical offices may conduct
informal assessments of firm's capabilities to perform a specific
requirement, and there is no requirement to synopsize in the
Commerce Business Daily (savings of 15 days). The advantages
realized are time savings and the opportunity to meet face to
face with and select specific contractors.

(b) It is our belief that the 8(a) program advantages are
unique. We are unaware of any other program like it.

(c) Potentially; however. Coast Guard Headquarters has
established policies and procedures that precludes the
contracting staff from abusing the 8(a) program. In addition,
our SADBUS meets with and counsels firms as to our policies
regarding marketing practices.

7. Why didn't the Coast Guard use fully burdened labor rates
when determining the value of this contract? The current



205



Commandant of the Coast Guard asked that question prior to the
issuance of the investigative report. He wanted it clarified in
the report. Would [you] please explain why those rates were not
fully burdened?

The independent government cost estimate was for a minimum
guaranteed amount of $2.7M and a maximum ceiling amount of
$12. 8M. Both the minimum and maximum government estimates were
predicated on the use of fully burdened ( inclusive of G&A,
overhead and profit/fee) labor rates. The final negotiated
contract was awarded with a minimum guaranteed amount of $2.2M
and a maximum ceiling of $14. 1M. Both the minimum and maximum
negotiated amounts included fully burdened ( inclusive of G&A,
overhead and profit/ fee) labor rates. The contract file contains
documentation that fully supports the above facts. It is,
therefore, unclear where the information you relied upon to
question the use of fully burdened labor rates originated.

8 . Prior to the acceptance of this contract by SBA as a sole
source contract for TAMSCO, the Coast Guard sent drafts of the
Statement of Work to TAMSCO. If the SBA had decided the contract
was to be competed wouldn ' t this have been a violation of the
Procurement Integrity Act? How did Coast Guard personnel know
that this contract would not be competed?

The following is specifically related to the issue of releasing
draft/actual Statements of Work to 8(a) firms. This issue was
brought up by the previous SADBUS, Ms. Ashley Lewis, in March,
1992. New to the position of SADBUS, she noted that Statements
of Work were regularly given to 8(a) firms planned to be selected
for particular requirements. While it is a practice commonly
found at many agencies, Ms. Lewis wanted to clarify issues that
concerned her. She requested and received a legal opinion from
then Chief of Procurement Law, Mr. Thomas Mason, Jr. This
written dialogue is provided as Enclosure (4). In short,
Mr. Mason determined that this practice was not a violation of
Procurement Integrity and could continue; however, several months
later (September 1992), new information was provided to Mr. Mason
that changed the initial guidance.

While reviewing an 8(a) search letter from the SBA's Richmond
District Office, the new SADBUS, Ms. Wildason, noticed one
sentence stating that the agency may not release the Statement of
Work to any 8(a) firm participating in an informal assessment.
Upon investigation, she was referred to 13 CFR 124.308(g) and an
obscure sentence informing agencies that no 8(a) firms were to be
given a Statement of Work in advance. Recognizing this as
directly conflicting with current guidance, Mr. Mason rescinded
his earlier guidance in a memorandum dated September 21, 1992
(Enclosure (5)). He also noted that the rescission was in an
effort to comply with the SBA's regulations; however, it was
still not considered to be an violation of Procurement Integrity.

While it was not the policy when the subject requirement was
initiated, the current policy of Coast Guard Headquarters



206



prohibits releasing Statements of Work to 8(a) firms in advance.

This information is provided in training sessions to both
contracting and technical personnel.

Coast Guard contracting personnel rely on the fully developed
Independent Government Cost Estimate (base period and options) in
order to determine whether an 8(a) requirement is above or below
the established competitive threshold. Under the guidance
provided in 13 CFR 124.311 titled 8(a) Competition (effective
until last summer), the guaranteed minimum for the subject
requirement was under the competitive threshold; therefore, the
requirement was eligible for a sole source 8(a).

9. Note: There was no question 9.

10. Please provide a copy of the Dept. of Transportation Form
5080 that was completed for this contract.

A copy of the DOT Form 5080 is provided as Enclosure (6).



207



SMALL.. BUSINESS AtHTKISTRXTIUM



ara'.i/msbco:
aoo's/msb-:oc
^xxcn ma.- acfr:



notice ;.c.

6000-256

EFFECTIVE
7/5/89



S-3JECT: SIC


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Online LibraryUnited States. Congress. House. Committee on SmallThe abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 18 of 20)