History of Government Contracting James F Nagle Oles

History of Government Contracting James F. Nagle Oles Morrison Rinker & Baker LLP www. oles. com

Government Does Not Trust Contractors • Washington – “Murderers of our cause” • Lincoln – Contractors should “have their devilish heads shot off” • Merchants of Death – The 1930 s Creekmore 2

Government Does Not Trust Its Own Employees • Honesty • Ability to Avoid Appearance of Evil • Ability to Do the Job Correctly Creekmore 3

The Evolution of Procurement Statutes • From Nothing • To Sporadic Broad Statutes Rarely Enforced • To Numerous and Ever Increasing Laws Creekmore 4

French and Indian War • British system (Commissary General, Quartermaster General, etc. ) • Not so much contracts but broad delegations of authority • Cost plus a percentage of cost Creekmore 5

American Revolution • All of today’s problems – Shortages of supply and labor (exemptions for artisans) – Cash flow problems – Fraud Creekmore 6

Theft and Fraud • “The people at home are destroying the Army by their conduct much faster than Howe and all his army can possibly do by fighting us. ” • Impressment and privateering Creekmore 7

“The matter I allude to, is the exorbitant price exacted by merchants and venders of goods, for every necessary they dispose of. I am sensible the trouble and risk in importing, give the adventurers a right to a generous price, and that such, from the motives of policy, should be paid; but yet, I cannot conceive, that they, in direct violation of every principle of generosity, of reason and of justice, should be allowed, if it is possible to restrain 'em, to avail themselves of the difficulties of the times, and to amass fortunes upon the public ruin. ” George Washington to the President of the Continental Congress, August 16, 1777. Creekmore 8

Return of the Contract System • Robert Morris appointed Superintendent of Finance • Soliciting competitive proposals • June 30, 1781, first RFP advertised • Selection made on essentially best value in terms of price and time Creekmore 9

The Young Republic • • Demobilization Peace time Army contracting Mail contracting Purveyor of public supplies Creekmore 10

Start of the Arms Industry • Eli Whitney’s contract • Other industrial pioneers and a quasi-public arms system • Standardization and Interchangeability • “Close enough for government work” • Importance of Factory Workers Creekmore 11

The Civil War • CHAOS – Unprepared – Low Quality – Fraud • Innovations in weapons – Repeating Rifles – The ironclads • Congress acts to reform the system Creekmore 12

• “A horse that can last a month may in certain cases be worth his weight in silver. ” Montgomery C. Meigs, Quartermaster General, Union Army Creekmore 13

False Claims Act of 1863 • • • Rampant Fraud Abraham Lincoln Act Criminal and Civil Penalties Court Martial? Qui Tam Creekmore 14

• “Let any man propose a new provision of law stated to be intended to restrain contractors or officers and it goes through with little examination. ” Montgomery C. Meigs, Quartermaster General, Union Army Creekmore 15

1865 -1900 • Demobilization and the rise of consumerism • Building the fleet • The Spanish American War Creekmore 16

Contracting Enters the 20 th Century: 1900 -1914 • • Contracting becomes centralized again The birth of aviation The Navy versus the steel industry The Mexican border campaign Creekmore 17

World War I • Industrial mobilization for the war • Chaos and correction – – – Setting prices The priority system Contracting adapts to war Labor standards Terrible Results Creekmore 18

WWI Reform • October 23, 1918 Modern Version of False Statements Act • Ban on CPPC Creekmore 19

"Sure we paid. . . We would have paid horse prices for sheep if sheep could have pulled artillery. . . It's all right now to say we bought too much vinegar or too many cold chisels, but we saved the civilization of the world. . Hell and Maria, we weren't trying to keep a set of books. We were trying to win a war. " Brigadier General Charles G. Dawes, General Purchasing Agent of the Army Expeditionary Force, testifying before Congress, 1921. Creekmore 20

The Inter-War Period • Airmail – Start of the airlines • The military between the Wars – Panic versus: – Anti-contractor sentiment – the merchants of death • The Vinson-Trammel Act • The Army hearings Creekmore 21

Socioeconomic Statutes and Goals • • • Contracting for the Civilian Conservation Corps Hoover Dam Buy American Wage Laws Miller Act Creekmore 22

The Mobilization Begins • The rules slowly change • Early mobilization organizations Creekmore 23

World War II • Initial chaos • More government powers – – Price controls New methods of contracting Standard forms Incentive contracts • Cost contracts – Reviewing contractors’ costs • Renegotiation Creekmore 24

Contracting 1945 -1953 • • The Armed Services Procurement Regulation Civilian Procurement After the War The Korean War Defense Production Act of 1950 Creekmore 25

Contracting 1953 -1980 • Rise of the Defense Industry • Anti-Fraud Measures – TINA Creekmore 26

Mc. Namara • DCAS • ASPR • Profit Creekmore 27

The Modern Era: Sea of Paperwork • Commission on Government Procurement • The age of lawyers and litigation Creekmore 28

1986 • • Congress Plugs TINA Congress Plugs the FCA DOD Voluntary Disclosure Program Anti-Kickback Act Creekmore 29

Unplanned Result of Increased Paperwork and Criminalization • Contractors Leave or Don’t Enter Market • Higher Prices Creekmore 30

Reform – 1993 -Present • • • Section 800 Panel National Performance Review Quest for Commercial Contracting The Federal Acquisition Streamlining Act Clinger-Cohen Act Creekmore 31

Government Contracting Becomes Pervasive and Invasive • Pervasive – Size – Flow Downs to Subcontractors • Invasive – Audits – Cost Rules – Socio-Economic Creekmore 32

Government Contracting Strives to Be More Nimble • Post 9/11 and Katrina • FAR Part 18 Creekmore 33