Inexcusable delays and performance interference caused by the Agency technical personnel

Instructions:

The purpose of this exercise is to apply your knowledge to contract issues and problems. From your knowledge of procurement and information, read the case scenario and answer the questions following the case. Make sure to answer and address all the key elements of the questions. Be sure to identify any assumptions or conclusions made and include rationale to support your answers.

Case Information:

A contract was let in September 2010, to Performance Computer Corporation (PCC) for new software and software upgrades to an existing system that was undergoing major modifications.

When it issued the Request for Proposal (RFP), the Agency identified a need for software, but was still in the initial stages of system modification. User requirements and system specifications were not fully developed for any of the proposed modifications. However, the Agency and its technical representatives, feeling confident about what had been developed, elected to proceed since current year money was expiring and need to be committed, and the senior manager was eager to complete the upgrade effort.

The Agency did not advertise, but gave RFPs to three firms who had had contracts in the past. Since PCC had performed other work on the system being modified, it was selected and awarded a fixed price contract for $445,150, with a delivery schedule of fifteen months. The contract required phased delivery of the new software. However, there were no Agency approvals contained in the contract terms, which precluded the contractor from starting a new phase of the project, even though a previous phase may not be complete. Procedures were written to control changes in the scope of work and the programming language was specified in the statement of work. Satisfactory performance by the contractor was described in the contract terms as “the system must demonstrate effectiveness, be automated wherever possible and be flexible…” No acceptance testing procedures were included. In addition, no quality criteria were defined for the required system performance or software documentation.

Contract delivery dates, scope of work and costs were revised several times, but the contractor was still unable to meet the revised schedule or deliver an acceptable product to the Agency. The contractor claimed that its inability to meet the delivery schedule was due to:

• Extensive changes from the negotiated baseline requested by the Agency
• Inexcusable delays and performance interference caused by the Agency technical personnel
• Delays by Agency personnel in reviewing products for approval

In response to these allegations, the Agency admitted some of the changes were not clearly identified in the contract and others were clearly outside the scope of work. The Agency also admitted that the reviews were not timely, but maintained that poor quality of the documentation delivered by PCC was the cause. The Agency denied that its technical personnel interfered with PCC’s performance.

The contractor also claimed difficulty in understanding the software systems desired because of undefined system requirements and poorly described performance criteria in the contract, and that user requirements were never adequately defined or frozen. In addition, the contractor provided system concepts for two of the systems, and working with current system users, reviewed available system documentation and developed user requirements based on responses to user questionnaires. The contractor then used this information to develop the general design criteria, which the Agency rejected several times for not meeting its requirements. At the same time the Agency rejected the proposed designs, it also added some new requirements to the specifications and some clarifications to the existing descriptions and specifications. These changes delayed the completion schedules, increased contract costs and caused the Agency and the contractor to disagree about whether the new requirements were included in the original scope of work.

Two years, thirteen contract modifications and an additional $560,000 later, the Agency was faced with a very weighty program management decision. The contract value was now $1,105,150, the contract was several months away from any sort of delivery and the contractor was requesting additional funds to continue. The contracting officer, who had grown intensely frustrated with PCC’s lack of progress, maintained that the only solution was to terminate the fixed-price contract for default and assess a penalty against PCC for failure to deliver a usable software package.

Questions:

1. Given the difficult situation identified in this case, describe what you see as factors that contributed to the problems encountered by both parties.

2. Also identify the phase(s) in the contracting process where these factors originated and describe what actions could have been taken in each of the phases identified to prevent these problems from occurring.

3. What kind of claims and/or equitable adjustments is the Agency open to? What kind of case does the contractor have?

4. What sort of solution do you recommend to solve the issues – is termination the only solution?

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