Governmental Contracting Lessons

Glass suppliers to the United States military have long known the challenges surrounding contracting for public entity supply. Each year, a new National Defense Authorization Act, or NDAA, approves policies and goals for supplying items to the military, and 2024 is no different. While the rules are specific to one kind of supply agreement, with a careful eye, the processes and goals can provide strategies for daily use at every level of the glazing industry.

Flexibility and scalability

The NDAA divides itself into sections that address different goals or processes. Section 809 directs a pilot program to implement an “anything-as-a-service” computing model, which is directed at having computer hardware and software available on-demand to respond to the needs of a specific project, without large-term capital expenditures.

Glazing companies need flexibility and scalability as well. The specifications of a product, project or market segment can require capabilities that do not warrant a large capital cost to meet those needs. Outsourcing and temporary skilled-labor agreements can allow glaziers to compete in broader markets. Being prepared to address labor and material scaling on demand can provide opportunities and capabilities so that stretch projects are within reach.

Supplier representations

Various sections of the NDAA prevent the Department of Defense from contracting with firms that provide services to certain adversarial countries and groups. Vendors and contracting parties must prepare country of origin disclosure and representations to meet this section. Violations or misrepresentations of those disclosures can result in contractual and criminal penalties.

Supplier representations are essential to glazing companies at multiple levels. Lifecycle and EPD representations prove crucial to LEED and contractual environmental goals. Material quality and compliance with ASTM methods for sealants, coatings, or strength can impact real-world product performance. Contracting strategies that ensure material compliance with representation, and address responsibility for failures, can provide crucial protections.

Specific temporary market conditions

Section 824 of the NDAA provides temporary measures to address the impact of inflation. This time-limited provision establishes a process to seek modification or reimbursement of costs due solely to economic inflation. Notably, however, there are no appropriations in the NDAA. So, while the process is spelled out, no monies are currently specified for that process.

From a project-contracting perspective, there are two takeaways from this section. Forward thinking at the time of contracting can anticipate particular market challenges, and setting out expected or process accommodations for those challenges can avoid later disputes. However, the absence of a remedy—here, money for the adjustment—makes the process less than ideal. Project modifications need a defined process and a meaningful remedy to have true value and protection.

Fixed-cost adjustment factors

Section 826 allows for the modification of a fixed-price contract. Where a contract price is set, the NDAA will allow certain Economic Price Adjustment terms—upward or downward—based on changes in price, labor or materials. These terms are intended to help address the inherent flexibility in those three market contingencies.

The ability to revisit a contract’s value during performance can protect both the owner and the trade. Volatility in market conditions often can make the ultimate performance of an agreement disastrous for one side or the other. Contracting for general adjustments—as opposed to specific triggers like inflation—can provide protection where unanticipated costs effectively negate performance value.

Buy American Act

The term “Made in America” holds value and is essential in government contracting. Section 835 requires that manufactured articles in a major defense acquisition program meet domestic content requirements. With scaling, date-tiered obligations, the NDAA mandates that materials be made domestically—ultimately requiring that by Jan. 1, 2029, no less than 75% of the cost of a manufactured component must be within the U.S.

Knowing where materials are made can be challenging in the current economy. The effort to identify cost-component-based calculations is also challenging. It takes work to confirm these factors, document them, and prove compliance when challenged. This is true for “Made in America” or any market-facing representation about product compliance, performance or conditions. Early steps to develop the evidence necessary to back up these representations can lead to confident contracting and allow more opportunities.

Loser pays

One item in the original 2024 NDAA draft that didn’t make it to the final enactment was a requirement that the loser of government bid contests pay the legal fees of both sides. In regular government contracting contests, each side is responsible for their own legal fees, which remains so in the current NDAA. The stated reasons for the condition’s removal were that the number of these challenges is relatively small and, ultimately, the term was not needed.
In trade contracting, however, prevailing party clauses and legal fee shifting are essential terms.

Questions surrounding who pays in the event of a contest or claim can lead to bet-the-company decisions regarding litigation. Addressing the scope of fee-shifting provisions at the time of contracting is a crucial risk management and mitigation task.

Governmental contracting can be challenging, and the NDAA’s requirements are varied and complex. Even so, the concepts and ideas reflected in these processes have applications well beyond public entity supply and can realize value for suppliers and trades in all markets.