How DCMA Works as an Institution

In the past posts, I have stated that in my opinion DCMA institutionally supports a defective management and supervisory structure that encourages its personnel, specifically the ACOs, to abuse small businesses and lower contract values by as much as possible. This attitude seems to be entrenched in every aspect of how DCMA conducts business, including their legal department. This is critical to comprehending how DCMA works since, universally, attorneys have an obligation, as so-called officers of the court, not to knowingly advocate a position that they know is wrong. Yet, DCMA attorneys seem to be rather fine with knowingly advocating an erroneous position.

So what makes me say this?

Since this matter started, we have twice provided the DCMA attorney sufficient proof that our ACO, Mr. Craig Studley, made a significant error in determining how much money Quimba was paid on the contract in question in 2004. First proof was a signed statement from me, stating how much we actually were paid. The second piece of proof was a statement we obtained from the officials at the Defense Finance and Accounting Service (DFAS) that confirmed my statement. In short, there is no doubt that ACO Studley made a mistake – and if an ACO can’t even get the “how much” part right, it stands to reason that he never actually paid any attention to any documents provided by us, including detailed correspondance.

You would think that with so much overwhelming proof as the statement by another branch of the DoD, the DCMA attorney would be inclined, if not required, to stop pushing along the legal path. You’d think that but you’d be wrong. In fact, a couple of days after we provided the DCMA attorny with my signed statement, she filed a motion (with ASBCA) to dismiss our complaint on jurisdictional grounds. Curiosuly, at the time she filed her motion, we had only filed our notice of intent to file and the actual complaint was not filed yet. The message this clearly sent me was that she was not at all interested in right or wrong. She saw a potential technicality she could exploit and she was going to exploit it.

There is a good chance that her motion will be granted and we will have to file a complaint with the Court of Federal Claims – making this even more expensive and arduous for Quimba EVEN BEFORE we are heard by a judge.

And that, my friends, is the best evidence of the kind of organization the DCMA leadership fosters.

People in this post:

Bob Dourandish – bob@quimba.com
Craig Studley – Craig.Studley@dcma.mil
Srikanti Schaffner, Esq., Srikanti.Schaffner@dcma.mil

Top Five Small Business Mistakes After Winning a Federal Government Award (part 1 of 5)

I have gotten a number suggestions via email asking to include Lessons Learned while I share our story. I think that is a terrific idea. I’ve put together five key lessons we learned and will interweave these lessons as we continue. Thanks for your suggestions, and reading our blog.

To provide context, let me note that for small businesses, particularly those still in the startup mode, winning a federal government contract (or grant) is cause for celebration. Because most federal awards are made on competitive basis, the win validates the company’s product, service, or research idea. Even more importantly, it brings in cash that could, theoretically anyway, put the company on the path to growth. Unfortunately, the win could also put your small company on a long and painful road to disappointment, even bankruptcy, leaving it, as well as its founders and directors open to significant abuse.

In my experience, small businesses in the government contracting industry tend to make five key mistakes. Sadly, I speak from direct experience.

Mistake Number 5: Rushing through the negotiation cycle
After being notified of selection, you will enter negotiation with a Procurement Contracting Officer (PCO). You need to understand that government employees do not operate under the same constraints, performance criteria, or incentives as is the norm in the private industry. Further, you’d be well-advised to keep in mind that, as a general rule, the government has forever to make a decision. This combination can create a frustratingly slow “negotiation” cycle for small businesses. You need to recognize that the negotiation pace is deliberate. It is designed to create a timing advantage for the government and the government will exploit it to squeeze you for every penny before the contract is signed. Most importantly, however, you need to accept this as a fair business practice.

In my experience, small businesses are far too anxious to “close the deal” and get the contract signed. As the result they end up cutting their own throat by accepting lower pricing (than what they bid) through terms, often with the government employee’s “guidance”. Our experience after winning our first SBIR Phase II award at Quimba serves as a very good case study.

Winning a Phase II award is a major accomplishment for any small business and, naturally, created a celebratory mood at Quimba. We just couldn’t wait to get started. However, when the Procurement Contracting Officer (PCO) reviewed our cost proposal, she objected that we had discounted our G&A and Overhead rates in order to bring the proposal under the congressionally mandated ceiling. That created a delay in the process. Eventually, she suggested that we use a different contracting vehicle, namely a Cost Sharing type contract. The catch? Cost Sharing contracts do not permit the contractor to receive a “fee” or profit. We, make that I, made the mistake of accepting the change. In making that decision I was primarily motivated by our cash flow problem. I therefore rationalized that we would leverage the award to win more contracts and make up for the loss of our profit on this one. As it turned out the award actually became a hindrance to any new contracts. We soon lost several bids because reviewers felt we had plenty of work at our staffing level and that additional awards represented a “delivery risk” to the government. In the meantime, since the fee component of a federal award is the only portion of the payment that the company has discretionary spending rights to, we did not, despite a very large contract, have the funds to hire sales staff or initiate any marketing programs to expand our business in the private sector.

Lesson Learned: We should have realized that the PCO would not factor in our best interest or needs when making her “suggestion.” We, again make that I, lost sight of the fact that the government and us were engaged in a zero-sum negotiation process. What we should have done is to renegotiate smaller deliverables and not to allow the PCO’s “guidance” take away our profit.