Vern,

That is essentially the argument that my friend passed along to me. Evidently, DoD has given this some thought.

I'm not sure that the logic is air tight and crystal clear.

I do know that the question of what consitutes and "agency" for a particular purpose is a subtle question best left to smart lawyers.

Frankly, the PCO level Economy Act D&F is a pro forma peice of paper of no great importance. The "offloading" issues that you have mentioned are of great importance.

I think this is some history that is very likely to repeat unless we are all very careful.

Eric

By Vern Edwards on Thursday, June 22, 2000 - 05:21 pm:

Eric:

My Navy friend could not find any written DOD guidance to the effect that the Economy Act does not apply to interservice transactions. He said that he checked at ASN and that no one there knew of any such guidance.

FAR 17.500(a) provides a clue to the solution to our mystery. It says, "The Economy Act also provides authority for placement of orders between major organizational units within an agency; procedures for such intra-agency transactions are addressed in agency regulations." Underlining added.

For DOD, the procedures are in DODI 4000.19, Interservice and Intragovernmental Support, dated April 9, 1995. That document prescribes procedures different than those in FAR 17.503 thru 17.505 for the acquisition of interservice support. For example, instead of the D&F required by FAR 17.503, a DOD department must complete DD Form 1144 to get interservice contracting support from another DOD department.

DODI 4000.19 is hard to find. I couldn't find it in the Deskbook, but did find it at an Army site after searching at www.northernlight.com. I assume that it (or a later version) is still in effect, since it is mentioned in several DOD documents, including DFARS 217.500.

By Eric Ottinger on Thursday, June 22, 2000 - 04:00 pm:

Vern,

Actually a friend whispered something in my ear. I've read it and I think you would need a lawyer and a lot of background information to read this language and conclude that the Economy Act doesn't apply. Since I don’t think it will settle the argument here without more background information, I chose not to pass it along.

At the risk of splitting a hair, it may be correct that (1) MIPR’d requirements are under the Economy Act in some fashion and (2) we are not required to do a D&F. That is, there may be some kind of exemption or waiver in there somewhere.

In any case, I would not advise a working 1102 to ignore what seems plain in the FAR Supplements.

Eric

By Vern Edwards on Thursday, June 22, 2000 - 03:37 pm:

Eric and John:

I just spoke with a Navy friend who says he's almost certain that the Economy Act does not apply within DOD. He has promised to get me a cite. If he does, I'll let you know.

By Vern Edwards on Thursday, June 22, 2000 - 03:25 pm:

Eric and John:

Take a look at the GAO's letter to the Secretaries of the Army and the Air Force in the Valenzuela matter: B-277979, January 26, 1998.

In those letters the GAO complains about a procurement in which the Air Force bought O&M services through an Army contract. The protest decision attached to the letters makes it clear that the Air Force bought the services pursuant to the Economy Act: "Pursuant to the Economy Act, 31 U.S.C. § 1535 (1994), the Air Force requested the services under a Military Interdepartmental Purchase Request dated May 28, which authorized the transfer of Air Force funds in the amount of $40,000 for this purpose." Underlining added.

In complaining to the Secretary of the Air Force about the fact that the Air Force did not comply with the Small Business Act, the GAO said, "The fact that the purchase was being made through an Economy Act transaction did not exempt the agency from complying with the [Small Business] Act."

In addition, the GAO complained to the Secretary of the Army that the Army's contract violated CICA because the statement of work in the Army contract was too broad, and told the Secretary of the Air Force: "Because the Economy Act generally permits agencies to procure services under another agency's contract without full and open competition only where that contract was awarded in compliance with CICA, the Air Force acted improperly in using the Army contract here."

DFARS 217.500 may be misleading to the extent that it seems to indicate that the Economy Act applies only to purchases "made for DOD by another agency." It appears that this language simply implements Public Law 105-261, Section 814, which ordered DOD to strengthen its controls over Economy Act purchases from non-DOD agencies. The law was passed in response to complaints by some Congressmen about DOD's abuses of the Economy Act, which described in the GAO report that I cited in an earlier message in this thread. It seems that the DFARS is just emphasizing the fact that the Economy Act applies to all purchases for DOD by another agency, not just some, and refers the reader to DODI 4000.19, Interservice and Intragovernmental Support, which makes that clear.

When DFARS 217.500 is read in conjunction with the text of the Economy Act itself, FAR Subpart 17.5, and P.L. 105-261, Sec. 814, it seems clear that the Economy Act does apply to transactions among the military services and defense agencies, as well as to transactions between one of them and a non-DOD agency. In any event, that's what the GAO seems to think, and that's what the Air Force seems to have thought when it ordered services through the Army in the Valenzuela matter.

The way the DFARS and DODI 4000.19 are written, it is not surprising that we are having this discussion. But I could not find any DOD document that explicitly states that the Economy Act does not apply when one DOD departments or agency buys supplies or services through a contract awarded by another. Absent such clear language, and in light of the plain language of the statute and the FAR and the facts and findings recited by the GAO in the Valenzuela matter, I must conclude that the Economy Act applies when a DOD department or agency acquires supplies or services through a contract awarded by a different DOD department or agency.

If anyone knows of official guidance to the contrary, please let me know.

By Eric Ottinger on Thursday, June 22, 2000 - 11:18 am:

John,

I can’t really argue with your logic (or Vern’s). The agency Sups clearly seem to regard the D&F for an Economy Act contracting action OUTSIDE of DoD as THE Economy Act D&F.

For instance—

Army 53.9008 Format for an Economy Act Determination and Findings

“ECONOMY ACT DETERMINATION AND FINDINGS

1. I have reviewed the requirement for (description of supply or service) that (requiring activity) proposed to place with (Government agency/corporation outside of DoD) as an interagency order under the Economy Act. My review resulted in the following findings: …”


If a worker bee in DoD wants to do extra D&F’s on the theory that everyone in DoD but he/she and the experts on the Water Cooler have it wrong, I wouldn’t discourage them.

However, I should note that what constitutes an “Agency” for the purpose of a particular statute is a slippery matter, best left to the lawyers. Pending better guidance, I would assume that the people who drafted the Agency Sups got it right.

Eric

By John Ford on Thursday, June 22, 2000 - 10:38 am:

Eric, your quote only goes to procedures for placing an order outside DoD. It does not address the applicability of the Economy Act to orders between DoD components. In this regard, for purposes of the Economy Act, an agency is defined as a "department, agency, or instrumentality of the United states Government." See, 31 U.S.C. 101. The Department of the Army and the Department of the Navy qualify as separate agencies under that definition.

By bob antonio on Wednesday, June 21, 2000 - 07:46 pm:

All:

To my knowledge, this is the most significant audit report on abuses of The Economy Act.

http://www.dodig.osd.mil/audit2/90-085.pdf

It is a DoD IG report 90-085, 6/19/90. It identifies the abuses between DoD and DOE's National Laboratories. It is a 37-page .pdf document and takes some time to download if you are using a 50 k modem.

If I remember accurately, they were using the Labs to circumvent CICA.

I was aware of the application of the Economy Act when the servicing agency directly provides the service or supplies to the ordering agency, in lieu of using commercial contracts.
I didn't realize it also applied when the servicing agency provides the service or supplies through a contract with commercial sources on behalf of the ordering agency. Interesting!

From the GAO Report that Vern referenced:
"The Economy Act, as amended (31 U.S.C. 1535), authorizes the head of an agency to place an order with another agency for goods or services
if, among other requirements, a decision is made that the items or services cannot be obtained by contract as conveniently or cheaply from a commercial enterprise. The interagency ordering practice authorized by the Economy Act, sometimes referred to as "contract off-loading," can save the government duplicative effort and costs
when appropriately used. Examples of appropriate use may include circumstances of one agency already having a contract for goods and
services similar to those needed by another agency, or an agency having unique capabilities or expertise that qualify it to enter into
or administer a contract." Happy Sails! Joel

By joel hoffman on Wednesday, June 21, 2000 - 05:55 pm:

The GAO report can be found at

"http://frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.21&filename=ns96010
.txt&directory=/diskb/wais/data/gao" Happy Sails!

By Eric Ottinger on Wednesday, June 21, 2000 - 04:55 pm:

John,

A little research in the Deskbook gave me the following. This should clarify the issue.

5317.503-90 -- Air Force Determination Requirements.

"(a) The decision by an Air Force activity to place an interagency order under the Economy Act with an agency OUTSIDE the DOD, instead of contracting directly with a private source, shall be documented in a written Determination and Findings. The requiring activity shall prepare the D&F for approval at a level no lower than SES/Flag/General Officer in the requesting activity’s chain of command. ..."


Eric

By John Ford on Wednesday, June 21, 2000 - 04:07 pm:

Vern, you are correct that the Economy Act does apply to transactions between DoD components.
I think there is a little nuance to your definition of "offloading." That is it is the improper shifting of contract work from one agency to another under the Economy Act. I have not read the particular GAO report you cite, so I don't know if it references the Navy "offloading" submarine research to the TVA. This type of activity received much attention from Congress, and I believe there were some laws enacted to prevent this from happening again, although I am not certain on this point.

By Vern Edwards on Tuesday, June 20, 2000 - 01:34 pm:

Eric:

I'm not sure about the application of the Economy Act (31 U.S.C. 1535) to transactions among departments within DOD.

The FAR says it applies to to a purchase in which one "agency" buys something for another "agency." The Act itself says, at 31 U.S.C. 1535(a): "The head of an agency or major organizational unit within an agency may place an order with a major organizational unit within the same agency or another agency for goods or services," and goes on to state criteria similar to those stated in FAR 17.503. The reference to "major organizational unit within an agency" would seem to refer to the Army and the Navy within DOD, but I don't know.

The DFARS talks about purchases for "DOD" by another agency, which certainly could be read to indicate that Army-Navy transactions are not covered. I frankly don't know if that's the way it's supposed to be interpreted or not. The statute seems to preclude that interpretation, but again, I don't know.

Vern

By Eric Ottinger on Tuesday, June 20, 2000 - 12:20 pm:

Vern,

I believe the Economy Act only comes into play if the work goes from one agency to another. For instance from DoD to DOE. A purchase that moved from one DoD office to another DoD office (i.e. from the Army to the Navy) would not involve the Economy Act.

In the FAR, Economy Act D&F’s require only PCO approval. About ten years ago the Secretary of Defense decided to tighten this up, and a high level signature is required for an Economy Act action in DoD. Secretary Perry evidently viewed this as a sensitive issue which required high level attention.

Eric

By Vern Edwards on Monday, June 19, 2000 - 03:23 pm:

"Off-loading" in the unofficial term for what agencies do when they place orders with other agencies pursuant to the authority of the Economy Act. The regulations for use of the Economy Act are in FAR Subpart 17.5.

For a discussion of some of the issues regarding off-loading, see the following GAO report: GAO/NSIAD-96-10, Interagency Contracting: Controls Over Economy Act Orders Being Strengthened, October 1995. You can get a copy of the report via the Web by searching the GAO reports at the Government Printing Office website, http://www.gpo.gov.

Cheryl, please refine your question. Do you mean to transfer a contract for administration, to transfer a pending procurement or what? The answer depends on the type of action.... THANKS!

By Cheryl Greenfield on Monday, June 19, 2000 - 03:11 pm:

I am looking for information on "off-loading" procurement actions to another agency. If anyone has any information on policies and procedures regarding "off-loading", please provide some insight.  Thanks