Sole Source - The Voice of Experience

One of the most interesting subjects in government contracting is sole source. Sole source is so interesting because, it is fairly well defined, has very few court cases, and it is clear as to what is proper (only one firm can perform), but most of the involved parties do not understand how to handle sole source properly. Here are some vignettes regarding sole source.

Most vendors have no idea as to how to engineer a sole source. Most salesmen have no interest in the rules. It is my belief, after over 40 years in this business, that about 80% of sole sources would not survive in court. In IT and other high tech areas, contracting officials do little more than guess as to what is proper. Sometimes agencies act outrageously. NASA sent me a sole source for approval when I was working under the Brooks Law at GSA for some Univac disk drives. Their paper work said only Univac made such a device. I could name three other firms without pulling a reference work. Needless to say, I have been involved in at least two cases on behalf of clients where the government shot their own foot. One was the Navy and one was Treasury. In each case, we told the agency we were a sole source. We all know you can seldom believe anything the sales guy says. They didn't. They issued the RFP and got one bid. Ours. In the Navy case we raised our price by $500k for the inconvenience of having to bid.

But perhaps the two most indelible cases were a Treasury and an Air Force job. In both of these cases, the government wasted literally millions of dollars, and this was caused by contracting people's arrogance and technical people's ignorance. The techies did not understand their own problem. We did. The contracting people thought they were skilled to the point they could buy anything. In fact, they weren't.

In the Air Force case, my client had some very complex software that cost more than $50 million and took ten years to develop and which had been fine-tuned in actual operation for more than a decade. We were the incumbent vendor in a large AF account and were billing about $10 million per year. This was one of those rare cases where the software was so efficient and valuable that it was cheap at any price.

Suppose I could sell you a little button to install in your car and if you pushed it before a trip your fuel efficiency would double? Suppose I made it for $3 and sold it for $25 or $75 or $575. No matter the price, you would still be saving money, especially as the price of fuel rose. This illustrates in a hypothetical way what this software would do. But the AF got mad at us and felt they were being ripped off. And we weren't cheap but it worked beautifully. So they started a 5-year program to dump us out and get someone else. First, they tried to use another product. It did not do the job.

Then they went to a GSA requirements contract and hired a systems integrator. After spending more than our cost - about $2 million - they gave up and did a T for C. Then they did another RFP and hired a bigger systems firm and spent even more and it fell further behind schedule etc.

The last time I talked to the client, the AF was still mad and trying to dump them. In the next attempt, if they get it free, they will be behind the cost comparison for at least a decade.

The Treasury story is similar but worse. After going through the recompetition process, hiring a large, super sized systems firm, seeing this firm throw up its hands after the expenditure of several million and issuing a T for C, they now, 8 or 9 years later, are still doing business with the original firm on a sole source basis.

Sometimes it is not easy to tell when you really have a sole source or your really don't. And agencies, traditionally, seldom seek outside expert opinion.

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