In the complex world of government contracting, it is important to ensure that all processes and practices meet standards for transparency and appropriate use of resources and funds. One of the largest projects in modern history for the U.S. Army Corps of Engineers is utilizing a unique process to not only ensure compliance and transparency, but also to reduce the time required for completion of a national priority.
Task Force Barrier is utilizing a unique contracting solution to meet an aggressive timeline to upgrade the U.S. border barrier system. Beginning this past April, the Corps directed Task Force Barrier with the epic task to oversee construction of the comprehensive barrier system to secure America’s Southern border. The scope of work, the amount of money involved and shortened timelines created a need to find innovative strategies to execute this mission to meet the commander’s intent.
On Feb. 15, 2019, President Donald Trump authorized $2.5 billion to replace the existing border barrier. These funds became available to the Corps in April, giving it the ability to start the contracting process. This funding is DoD counternarcotics funding, which expires within the fiscal year authorized.
Leaning Forward
The new replacement panels are approximately 30 feet high and replace multiple styles of existing barriers. This new border barrier system includes not only the barrier panels, but also roadway access, lighting, cameras, power and other technologies. The majority of existing barriers only prevent vehicles from crossing into the U.S.; they do not stop pedestrians from crossing. The major hurdle in this process was a short timeline to obligate—spend under contract—the $2.5 billion appropriated for construction of 129 miles of the fully installed border barrier system. Further complicating the process was that the project was divided into six contracts, all of which had to go through the contracting process and be fully obligated before the funds expired at the end of the fiscal year, Sept. 30. An additional impediment was a U.S. court injunction that stopped work for about a month.
Leveraging Tools
To make up for lost time, Task Force Barrier utilized an “undefinitized contract action” as the acquisition tool of choice. While such actions are not new, they are rarely utilized on such a large mission scope. In an undefinitized contract action, the party initiating the contract is the “owner.” In Task Force Barrier’s case, the owner is the U.S. Army Corps of Engineers. The Corps selects a single contractor, known as the sole source, from a list of approved contractors.
The complete scope of work and the “not to exceed price” for the project are provided to the contractor. After acceptance, up to 50% of the total value of the contract funds are obligated and the contractor begins planning, scheduling, purchasing materials, staging crews and equipment, preparing the site for construction, and performing other related tasks. With the undefinitized contract action, the Corps and the contractor independently developed detailed cost estimates before they began final price negotiation. In the case of government projects, the cost estimate is an individual government estimate. The estimate is a critical document, as it clearly and completely defines the purpose and scope of work. The contractor will give their own price with a detailed explanation of how they arrived at their costs.
If the estimates are close, both parties work to an agreed price and the contract is finalized in a process called “bilateral definitization.” This type of obligation is the preferred method for both parties. If the prices are significantly different and the parties cannot reach an agreement, the contract can reach “unilateral definitization.” In that case, the Corps rejects the contractor’s price, and pays only their cost estimate. The contractor can litigate in court for any costs they believe are owed above the unilateral definitization price. This requires them to document in court how they arrived at their cost estimate. The entire time, both sides perform due diligence and construction is underway.
The first step in conducting the undefinitized contract action was identifying the highest priority locations for the replacement barrier systems. Task Force Barrier’s mission was to contract the work for these locations.
The next step was to identify the areas to replace the barriers and divide them into packages. After creating these packages, Task Force Barrier utilized the undefinitized contract action process to turn these packages into fully definitized contracts.
Breaking It Down
To illustrate this process, imagine a snowstorm is coming within two weeks. Your house desperately needs a new roof. Since time is limited, you engage in the undefinitized contract action process to replace the roof. Your first step is to pick a contractor that has an excellent reputation for roofing in your area. You give them the contract to replace the roof and tell them not to exceed $40,000; this number is a rough guess of what you think the roof replacement will be.
After accepting the undefinitized contract action contract, the contractor drafts the design for the new roof, purchases roofing materials, gets their staff ready, stages equipment at your home and starts removing the dilapidated roof. You and the contractor separately work out estimates for the actual cost of the roof replacement. You look up acceptable rates of labor in your area, confirm what other homeowners of similar sized homes paid to have their roofs replaced, and consider other applicable factors to come up with your price. The contractor starts their estimate by reviewing the particulars of the job, comparing this to other jobs they have done of similar size, and takes into account any additional factors.
Let’s say in this case, once the roof is removed, a few rafters are found to be rotted and in need of replacement. Neither party knew about this before the contract was initiated. The contractor adds this additional work to their cost estimate. While all these other activities are going on, the roofing crew is at work.
Now you and the contractor sit down with your cost estimates to find an agreeable price. The first step in this negotiation is sharing the cost estimates. Your research indicated a price of $33,000 is acceptable for the job. The contractor’s cost estimate is for $38,000. The contractor points out the additional cost for the rafter replacement. This extra work adds $2,000 to the job. You agree to this additional cost and update your cost estimate to $35,000. At this point, you and the contractor negotiate how to handle the $3,000 difference in the estimate.
In this case, the two of you agree on the price of $36,500 and finalize the contract under the bilateral definitization process. Once the roof replacement is completed, you pay the remaining price and your contract is complete.
The undefinitized contract action process allowed you to get a new roof installed on your house in a fraction of the time normally required for a traditional bidding process. More important, your home is safe and warm when the snow starts to fall.
While the intention of the above illustration was to explain how undefinitized contract actions work, Task Force Barrier is effectively obligating $2.5 billion for the emergency replacement of the border barrier system. Contracting is just a small part of this epic program.