The Coalition for Government Procurement

On December 4, 2014, Anne Rung, Administrator of Federal Procurement Policy, Office of Federal Procurement  Policy (OFPP) at the Office of Management and Budget (OMB) issued a memorandum for all Chief Acquisition Officers and Senior Procurement Executives entitled “Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation and Increase Savings.”   The memorandum sets forth the Administrator’s vision for improving performance outcomes of the procurement system.  Although there are concerns across the procurement community regarding the viability of government-wide adoption of “Category Management,” there is much in the memorandum that has the potential to foster improvement in the procurement system.  In particular, the focus on the acquisition workforce and building stronger vendor relationships is welcomed.

It is a timely and encouraging memorandum.  Timely, as across the procurement community there is a growing consensus that the procurement system must be modified or “reformed” to increase efficiency and effectiveness in delivering best value outcomes to support customer agency missions.  Encouraging, as the approach reflects much of what the Coalition for Common Sense in Government Procurement (the Coalition) has called for over the last three years:

  • Embrace simplification in processes and procedures
  • Put “commercial” back in commercial item contracting
  • Conduct a retrospective review of procurement regulations
  • Embrace robust dialogue between government and industry
  • Reduce contract duplication
  • Address barriers to entry and promote innovation
  • Incorporate “materials” (i.e. ODCs) capability in Multiple Award Schedule (MAS) contracts
  • Improve the negotiation software licensing in MAS contracts
  • Reform MAS pricing policy

These themes are reflected throughout the “FAR & Beyond” Blogs and in our white papers and policy statements addressing key procurement trends, issues and challenges.  Here is a list of links to some relevant FAR & Beyond blogs and/or Coalition policy documents:

The December 4th memorandum includes common sense procurement themes that Coalition members support.  Here is a sampling:

  • “Simplifying the Federal Contracting space is critical to driving greater innovation and creatively and improved performance.” See Page 1 of the Memorandum.
  • … [U}nnecessary duplication imposes significant costs on contractors and agencies.” See Page 2 of the Memorandum.
  • “Early, frequent, and constructive engagement with industry leads to better outcomes.” See Page 4 of the Memorandum.
  • “[G]reater attention must be paid to regulations relating to procurements of commercial products and services, as the Government is typically not a market driver in these cases and the burden of Government-unique practices and reporting requirements can be particularly problematic, especially for small business . . .” See Page 5 of the Memorandum.

The December 4th memorandum highlights the results of the Open Dialogue stating in part that “[t]he Open Dialogue, which drew nearly 500 participants, was an important first step in helping agency managers to better understand both industry concerns and the processes and practices that will better enable companies to consistently do their best work and delivery optimal value to the taxpayer.”  See Page 6 of the Memorandum. The memorandum instructs GSA to identify steps to reduce burdens and barriers to entry for contractors and to improve the efficiency and effectiveness of the MAS program, including steps to improve the acquisition of materials (i.e. ODCs) and negotiation of end-user licensing agreements.

As you recall, the Coalition submitted a set of recommendations to the Open Dialogue.  Seven Coalition recommendations made the top ten in votes from the public.  We look forward to working with OFPP, GSA, the FAR Council and the entire procurement community on making these recommendations a reality!

Roger Waldron

President

 

For this week’s comment I wanted to share with you a blog post first published on the Federal Times’ Acquisition Blog (www.federaltimes.com). The post highlights the government’s challenge to employ sound data management policies specifically, with regard to price.

Driving the federal government towards a Low Price Regardless (LPR) contracting model

As part of the Federal Strategic Sourcing Initiative (FSSI), the Office of Management and Budget and the General Services Administration have created a Prices Paid Portal. The goal of the Prices Paid tool is to reduce total cost of ownership for goods and services by providing greater visibility on the prices agencies have paid for them.

The Prices Paid Portal is part of an ongoing effort to collect transactional data across the government. The challenge in managing pricing data is to ensure it is used to identify contracting strategies and/or terms (like volume commitments) that increase competition and deliver greater value to the American people. Unfortunately, current data management practices will likely reduce competition and value over the long term.

Sound management of pricing and procurement data requires discipline, sophistication, and, most significantly, an understanding of markets and how companies respond to competitive dynamics. Moreover, price alone is incomplete data. In order to effectively understand pricing, one must have access to and understand the underlying terms and conditions, contract commitments, market and economic forces that drive pricing. Price is only one data point in determining “total cost of ownership.” An accurate measure of “total cost of ownership” includes much more than just price. It also includes acquisition cost (i.e. how much did it cost to conduct the procurement), operational costs, maintenance costs, and disposal costs. The emphasis solely on prices paid data ignores these fundamental cost elements.

To date, the experiences with FSSI and GSA regarding the prices paid data is that of an agency seeking to drive down prices “at all costs.” It is the implementation of a new Low Price Regardless (LPR) model—(i.e. give us the lowest reported price regardless of the associated terms and conditions, volume commitments, market and economic conditions). For example, GSA is using historical, horizontal price comparisons to drive down pricing in the Multiple Award Schedules (MAS). Price comparisons that too often ignore differing terms and conditions, commitment and market conditions—even ignoring such basic price drivers as unit of issue!! It is LPR on steroids.

This LPR model is fundamentally inconsistent with the Federal Acquisition Regulation (FAR). FAR guidance on fair and reasonable price determinations looks first to adequate price competition—and direct competition takes place at the order level under the MAS program as it does under contracts like NASA SEWP, NIH CIO-SP3, OASIS, Alliant, and any other multiple award IDIQ contract. Significantly, FAR guidance regarding comparison of proposed prices to historical prices paid directly contradicts the LPR model. The FAR provides that any prior price must be adjusted to account for materially differing terms and conditions, quantities and market and economic factors!

Will the prices paid portal include sufficient information for contracting officers to comply with the above guidance? Are contracting officers sufficiently trained to identify, understand and reasonably consider and adjust prior prices based on materially different terms, quantities, and market and economic factors?

The LPR model has grave implications for the federal government. Traditional commercial firms, already burdened by the voluminous and costly government-unique requirements, are reexamining their commitment to the federal market. These firms are already dealing with LPR. It is a recipe for long term contraction of the supply chain. Supplier suppression will drive innovative commercial firms out of the federal market. It will reduce opportunities for small businesses. It will reduce access to best value products, services and solutions to support agency missions on behalf of the American people.

LPR and supplier suppression are driving the federal market towards a limited subset of firms that are willing to do business with the federal government. It reminds me of the late 1980’s and early 1990’s when I entered government service. At that time GSA more often than not dealt with a limited number of contractors whose only focus was the federal market. In terms of quality, performance and value—the products and services these firms provided were not comparable to similar products and services available in the commercial market. It took the Federal Acquisition Streamlining Act to bring the quality and best value of the commercial marketplace to the federal government. Unless the federal government rethinks its current approach to price and value, we will continue to move towards a procurement system with limited commercial competition, value, performance and innovation.

Roger Waldron

President

Two key events this week represent opportunities for improving the GSA Schedules program that are not being leveraged.

First, today, November 21, 2014, is the due date for comments on GSAR Case 2013-G502.  Among other things, this GSAR case includes 35 clauses that are being added to the GSAR—clauses that were previously implemented through internal Federal Acquisition Service (FAS) guidance.  In addition, the prescriptions for seven clauses are being updated and six clauses previously removed from the GSAR are being reinstated.

The GSAR case could be an opportunity to reduce regulation by engaging in a Myth-Busters dialogue with MAS contractors regarding the costs and benefits of various FAS provisions.  That dialogue has not occurred.  Although GSA’s effort to increase transparency regarding the use of FAS clauses is laudable, thus far, from an industry perspective the work product is disappointing.  The Federal Register states that the proposed changes are not significant.  Further, the annual reporting burden for the information collection requirements contained in the proposed clauses are significantly understated—again reflecting GSA’s view that these changes are purely administrative in nature.  Many of these clauses, however, include very significant provisions that should be subject to greater explanation and disclosure by GSA before being incorporated into regulation—even if the proposed clauses have been previously used by GSA pursuant to internal guidance. We urge GSA to engage in a dialogue with industry to assess the impact of the proposed rule on the MAS schedule program and how the rule could be used to enhance MAS contracting.  We further suggest that GSA reissue the proposed rule in smaller, more discrete segments to facilitate the transparency that the agency seeks and ultimately result in a more effective, streamlined commercial acquisition process.  The GSAR case could be a model for actually reducing regulation in partnership with industry. The Coalition looks forward to working with GSA to achieve that objective.

The second event that took place this week was the IT Schedule Industry Day focusing on cloud computing and the proposed new Cloud SIN for IT Schedule 70.  Industry truly appreciates the transparency and engagement displayed by the IT Center and its leadership.  Industry also appreciates and supports the efforts to create a “Cloud SIN.” This approach has great potential for improving government-wide acquisition of cloud services through IT Schedule 70.  IT Schedule 70’s issuance of a draft terms and conditions for the new SIN is also a positive step towards working with industry to improve cloud service offerings through the MAS program.

At the same time, it appears that the current pricing policies and Price Reduction Clause (PRC) will apply to the cloud offerings.  Variable, dynamic pricing models associated with Cloud offerings are difficult to reconcile with a static oversight tool like the PRC.  This issue is broader than IT Schedule 70.  Much public comment has been made regarding the government’s goal of increasing access to commercial innovation—especially in information technology.  Cloud services provide such an opportunity—it will be an opportunity missed if GSA continues to apply outdated pricing policies to a 21st century commercial marketplace.  The Coalition will be commenting on the draft terms and conditions for the cloud SIN.

Roger Waldron

President

 

Thank you to all our members for your support of the 35th Anniversary Celebration/EIP Honors and Fall 2014 Training Conference! 

The 35th Anniversary Celebration and Excellence in Partnership Honors could not have been possible without the sustained, strong support of our members and continued efforts to bring common sense to government procurement.  Of course, a special Coalition thanks to all our speakers sponsors, and attendees. The participation from our speakers and moderators this year ensured that both events were a fantastic success while the generous support of our sponsors helped make these Myth-Busters events possible.

The Coalition would like to thank the Keynote speakers, Cory Gritter and Carl Salzano, for their moving discussion on the importance of supporting our veterans as they transition to civilian life, as well as the immense value that veterans bring to the public and private sectors.

In addition, the Coalition would like to thank the winners of the Gala’s silent auction, whose generosity raised more than $10,000 for the Coalition for Government Procurement Endowed Scholarship Fund. Veterans concentrating their studies in the field of U.S. government procurement and pursuing a law or master’s degree at the George Washington University will be eligible for financial support through the scholarship fund.

Thank you to everyone who participated in, attended, and sponsored our 2014 Fall Training Conference, “35 Years in Government Procurement: Looking Back and Moving Forward”. The conference brought together procurement leaders from across government and industry for a “Myth Busters” dialogue honoring the past, but more importantly, focusing on the procurement system of the future.  During the conference, acquisition leaders engaged in a thoughtful dialogue about current and future programs, which is critical for a procurement system that delivers best value mission support for customer agencies and the American people.

The Coalition would like to extend a special thank you to our general session speakers and moderators at the conference—

  • Keynote speaker: The Honorable Thomas Davis, Director of Government Relations at Deloitte
  • Shay Assad, Department of Defense
  • Emile Monette, GSA
  • Brad Medairy, Booz Allen Hamilton
  • Jon Boyens, National Institute of Standards & Technology
  • Elizabeth Ferrell, McKenna Long & Aldridge
  • Steve Schooner, George Washington University Law School
  • Mathew Blum, Office of Federal Procurement Policy
  • Jeffrey Koses, GSA
  • Mike Pullen, CGI
  • Lunch speaker: Alan Estevez, Principal Deputy Under Secretary of Defense for Acquisition, Technology and Logistics, Department of Defense

The Coalition would also like to thank all of the participants in the afternoon Myth-Busters breakout session panels, especially the following federal agencies:

  • GSA
  • Office of Personnel Management
  • NASA
  • National Institutes of Health
  • Defense Logistics Agency
  • United States Air Force
  • Department of Defense
  • Department of Homeland Security
  • Department of the Treasury
  • Department of Veterans Affairs

On behalf of the Coalition for Government Procurement, and all the attendees, thanks again to all of our sponsors and speakers!

Finally, thank you to our staff, Carolyn, Aubrey, Denise, Matt, Roy, Rob, and our interns Sean and Justin, for all their hard work in putting these wonderful events together.  Outstanding!!!  And Justin, your rendition of the National Anthem made us all proud of our country and set a great patriotic tone for the 35th Anniversary Celebration and EIP Honors banquet!

FULL Sponsor List

 

As you know, in honor of our 35th Anniversary, the Coalition for Government Procurement (the Coalition) has established an endowed scholarship fund  that will benefit veterans wishing to pursue a career in federal acquisition.  Veterans concentrating their studies in the field of U.S. Government procurement and pursuing a law or master’s degree at the George Washington University (GWU) will be eligible to receive financial support from the scholarship fund.  Our goal in establishing this scholarship is to support the two fundamental pillars of the Coalition—common sense in government procurement and support for our veterans.  Through the scholarship we are supporting the development of the acquisition workforce while also supporting our veterans as they transition to the civilian workforce!

On Saturday October 25th, on behalf of the Coalition, I attended the Fall Meeting of the Government Contracts Advisory Board of the GWU Law School.  During the course of the meeting I had the honor and privilege of officially presenting Steve Schooner, Nash & Cibinic Professor of Government Procurement Law and Co-Director of the Government Procurement Law Program, with a check for $25,000 as the first installment for the Coalition for Government Procurement Endowed Scholarship Fund.  This initial installment was the direct result of the generosity and support of our members through the Joseph P. Caggiano Memorial Golf Tournament held August 27, 2014.  This first installment is a wonderful start towards our goal of raising at least $100,000 over the next three years to ensure the endowment is self-sustaining.

Next Wednesday, November 5th, the Coalition will host the 35th Anniversary Celebration and Excellence in Partnership Honors at the Ronald Reagan Building in Washington DC.  We are extremely excited about the Coalition’ 35th Anniversary Celebration and Excellence in Partnership Honors—the Honorees can be found here.  At the same time, we are thrilled be able to host a Silent Auction to support the endowed scholarship fund benefitting veterans.   Proceeds from the silent auction will go directly to the scholarship fund and mark its further growth towards our goal!  I encourage you to come out and support common sense in government procurement and our veterans!

The list of items available at the silent auction can be found here.  I look forward to seeing you there.

Roger Waldron

President

On behalf of the Coalition for Government Procurement’s Board of Directors and Board of Advisors we are truly excited to be hosting our 35th Anniversary Celebration, Excellence in Partnership Honors and the 2014 Fall Conference!  The 2014 Fall Training Conference: “35 Years in Government Procurement: Looking Back and Moving Forward” brings together procurement leaders from across government and industry for a “Myth Busters” dialogue honoring the past, but more importantly, focusing on the procurement system of the future.  Engaging, thoughtful dialogue among and between government and industry procurement leaders is critical in striving towards a procurement system that delivers best value mission support for customer agencies and the American people.

Luncheon DoD Speaker Announced!

Mr. Alan Estevez, Principal Deputy Under Secretary of Defense for Acquisition Technology and Logistics

The Coalition is excited to announce that Mr. Alan Estevez, Principal Deputy Under Secretary of Defense for Acquisition Technology and Logistics, will be the Luncheon Keynote Speaker for the 2014 Fall Training Conference.  In his leadership role, Mr. Estevez develops and implements strategies, policies and programs that increase the Department’s warfighting capabilities, management efficiency, and buying power in support of the warfighter.  Mr. Estevez will be addressing better buying power and the role of commercial contractors in supporting the warfighter.

The Honorable Tom Davis, Director, Government Relations for Deloitte will kick off the day providing his insights regarding the post-election dynamic and what it means for the budget and procurement.  Underscoring the 2014 Fall Training Conference’s focus on the evolving state of the procurement system, Ms. Beth Cobert, Deputy Director for Management, Office of Management and Budget, will provide her thoughts on Managing the Federal Government for Future Excellence.

Competing in the FY2015 Federal Market

Understanding the changing federal marketplace is vital for firms competing for agency requirements and delivering best value products, services and solutions for the American people.  The Coalition is extremely pleased to bring acquisition leaders from the Department of Defense, the Air Force, Department of Homeland Security, GSA, OMB, NASA, Department of Veterans Affairs, and the Department of the Treasury together for a cross cutting, Myth-Busters dialogue.  As such, the 2014 Fall Training Conference provides a wonderful opportunity for firms to learn more about key procurement programs, operations, and initiatives like Better Buying Power, the Federal Strategic Sourcing Initiative (FSSI), GSA Schedules, OASIS, NASA SEWP, NIH CIO-SP3, and the Human Capital and Training Solutions (HCaTS).   There also will be sessions focusing on cybersecurity, electronic platforms (FEDMALL to GSA Advantage!) and innovation in federal procurement!   Simply put, the 2014 Fall Training Conference is a “can’t miss” opportunity to learn more about the policies, procedures and programs shaping the future of the federal procurement marketplace.

For more information on the agenda and to register please click here!

We look forward to seeing you there!

Roger Waldron

President

View from RJO

By Robert S. Metzger and Mark J. Linderman[i]

Reproduced with permission from Federal Contracts Report 102 FCR 376 (Sept. 23, 2014). Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bna.com>

Enterprise IT implementation projects fail too often in public implementation with costly results to public sponsors as well as to systems integrators and software providers.  Enormous amounts can be expended without achieving intended purposes and costly litigation can follow.  Recent examples include:

  • On July 22, 2014, a Senate investigations report accused the Air Force of wasting $1.1 billion in a failed effort, between 2004 and 2012, to implement the Expeditionary Combat Support System (ECCS), intended to replace unconnected logistics systems with a fully integrated system.[1]
  • On August 22, 2014, the State of Oregon brought suit against Oracle over its failure to provide a Health Information Exchange (HIX) and alleged breach of contract, fraud, racketeering and false claims.[2]  Oregon claims that it spent $240 million “for a health insurance exchange that never worked as promised” and for modernization of the state’s social services technology that “never got off the ground.”[3]
  • On November 3, 2013, the State of California terminated its contract with SAP for a new, integrated state payroll system, intended for 240,000 employees, and subsequently brought suit against SAP seeking more than $50 million in damages.[4]
  • On October 15, 2009, the State of Indiana terminated its $1.3 billion welfare modernization contract with IBM for cause and sued IBM seeking damages of more than $170 million.  In 2012, a trial court ruled for IBM, finding that default was not justified where there was “substantial performance.”[5]  An appellate court reversed this finding on February 13, 2014, concluding that IBM failed to fulfill the essential purposes of the contract.  The Supreme Court of Indiana has agreed to decide the matter.[6]

Failed IT systems mean that important government purposes go unmet and large amounts of public funds are wasted.  Contractors may incur losses amounting to tens or even hundreds of millions of dollars.  When large claims are filed or a customer terminates an IT project for default, litigation may result that costs further millions.[7]  Such controversies are never satisfactory either for provider or customer.

There are no “uniform best practices” to avert controversy and guarantee project success.  However, certain measures of risk identification and risk management can help both customers and contractors.  We offer 10 recommendations that reflect our experience with federal and state public sector IT projects.  In this article, we focus on the acquisition phase which precedes contract award.

1)      Legacy systems must be understood

IT implementation projects often involve the deployment of enterprise resource planning (“ERP”) systems.[8]  These involve systems integration built upon core software.  The software typically is originated for commercial customers and evolves through successive iteration as experience is gained with each installation.  But the “out of the box” solution rarely fits the particular needs of a government customer.  There will be differences between the customer’s present (“as is”) system and the prospective (“to be”) system that the customer desires.  Customization of the ERP solution is needed to address this gap.  This requires careful attention to understand the legacy environment and to define objectives of the new system satisfactory for every stakeholder.

2)      The customer must have a clear vision of the re-engineered business process

Governments pursue modern ERP systems to eliminate separate, “stovepipe” legacy systems and to replace them with integrated systems that leverage common data sets and automate many discrete governmental functions.  In theory, an ERP system will reduce the government’s operating costs, make the work of the public workforce more fulfilling and productive, and improve the ability of government to deliver services and otherwise respond to the public.  At the same time, not all stakeholders in existing systems will readily agree to new systems that require changes to old ways.  Projects can fail if owners attempt to bend back new systems to mimic legacy practices.

3)      Realistic expectations are essential to project success

When a public sector customer defines its ERP objectives, these become the “requirements” for the “to be” system.  The public sector customer must have a clear vision of what it wants in the re-engineered business process.  It can be very difficult to objectively document requirements because the customer, at the beginning of a project, may not know whether they want to employ out-of-the-box functionality or whether customization is required.[9]  If the customer has unreasonable expectations, this will increase project failure risk because there may be no achievable “target” for the contractor to hit.  Absence of clear and achievable objectives is a recipe for extended periods of contract performance and for delay or changes claims – if not frustration of fundamental purpose.

4)      The customer must have support of its stakeholders

IT projects that seek “transformation” from legacy systems involve a high degree of interdependency.  The public customer knows best its legacy capabilities as well as business needs.  It controls existing data that must be converted and transformed to test and then operate the future system.  RFPs should recognize customer-side responsibilities and contracts must clearly state that the contractor’s obligations depend upon the customer’s timely performance of its obligations.  Often, one agency will act as lead or sponsor for a system to benefit many other agencies or departments.  The sponsor must have the ability to assure that stakeholders timely perform their assigned functions as well as authority to accept a system even if risk-averse shareholders are reluctant to commit.

5)      Confirm sufficient resources are present for customer-responsible actions

Complex IT projects truly are joint undertakings.  Functions such as data conversion and integration testing depend upon the time, commitment and expertise of customer-side personnel for whom this work, though critical, may be outside their regular duties.  Project personnel also are responsible for review and approval of incremental performance – and this work typically is on the “critical path” for project success.  If the customer does not commit sufficient trained personnel to hold up its end of the project, the result is costly program extension and disruption to the planned work.

6)      Be prepared to walk away if risks are transferred and not equitably shared

Careful review of an RFP or “model contract” will reveal when a government customer seeks to transfer excess performance, cost or schedule risk to the contractor.  Because project success depends upon mutual commitment and collaborative accomplishment, RFPs that shift too much risk to the contractor present high risk of failure both operationally and financially.  Such risks can become too great to justify a bid even if competitive circumstances permit pricing that takes some risk into account.

7)      Risk recognition must temper business capture objectives

Business capture organizations within contractors naturally see large IT projects as tempting opportunities.  This can produce pressure to take excess risks to secure the “win.” This is a mistake, especially for demanding “transformational” projects.  After the contract is signed, most of the leverage resides with the public purchaser.  Rarely can or will a government contractor abandon performance.  Recent history is filled with examples of IT projects gone bad where contractors spend tens of millions of dollars in delayed performance with little likelihood of full recovery.  A common problem is that of “concurrent delay,” because government customers are not likely to pay on claims unless the contractor can show that its claim is limited to delays and costs caused by customer-responsible actions.

8)      Evaluate the reasonableness of terms and conditions and their negotiability

It can be naïve and even reckless to assume that during performance the customer will act in good faith to resolve performance problems or by agreeing to contract changes.  Those responsible for the conduct of an acquisition are rarely the same people who preside over contract performance.  This places paramount importance upon the drafting details and on inclusion of commercially reasonable terms and conditions in the contractual documentation.  In state procurements, the public buyer may not be able or willing to negotiate any changes in material terms.  Over the years, failed IT projects sometimes produce claims against contractors seeking hundreds of millions of dollars.  Limitation of liability provisions and limitations on recoverable damages are essential to contain the potential exposure.

9)      It must be clear what constitutes “the Contract”

An IT implementation contract can run to thousands of pages, e.g., where the RFP and contractor’s proposal are among the contract documents.  Contractors must assure that critical obligations are stated clearly and should strive to avoid material inconsistencies at different levels of contractual documentation.  Special attention must be paid to priorities among objectives and (of course) the Order of Precedence clause.  Another key issue is how the contract treats assumptions that often accompany a contractor’s IT proposal.  These may address, for example, responsibilities of the customer, where requirements will be met “out of the box,” where customization is proposed, and how the contractor interprets key requirements.  Disputes often arise when the public customer refuses to agree that the contractor’s performance is governed by such assumptions.  Every effort should be made to be sure that those assumptions are recognized as part of the operative contract documents.

10)  The contract must establish how the adequacy of performance is determined

In the Indiana vs. IBM litigation, the trial court found that IBM was not in breach of the contract because of “substantial performance” and because the State realized many project benefits.  On appeal, however, IBM was found in “material breach” because the appellate court concluded that the fundamental purposes of the project had not been achieved to the State’s satisfaction.  The Supreme Court of Indiana will decide this issue.  It has potentially profound significance.  IT implementation contracts typically include time-sequenced iterative obligations, involving dozens or even hundreds of deliverables.  The customer’s receipt and review of in-process deliverables represent objective anddocumented events. Similarly, achievement of “Milestones” over the course of contract performance signifies progress in meeting contract objectives.  But disputes such as Indiana vs. IBM reveal that the public customer may insist that its subjective satisfaction at some overarching policy level is the legal measure of adequate performance.  At the very least, contractors must be warned to take all feasible measures to assure that any dispute over performance will recognize not just high level requirements but the documented satisfaction of contractual waypoints.

[1] “The Air Force’s Expeditionary Combat Support Systems (ECCS): A Cautionary Tale on the Need for Business Process Reengineering and Complying with Acquisition Best Practices,” Staff Report, Permanent Subcommittee on Investigations, U.S. Senate (July 7, 2014).

[2] Ellen Rosenblum vs. Oracle America, Inc., Case No. 14C 20043, Circ. Ct. of Oregon, County of Marion. Complaint available athttp://www.doj.state.or.us/releases/pdf/FINAL_Complaint_8_22_14.pdf

[3] Id., at 6.

[4] State Controller’s Office vs. SAP Public Services, Case No. 00154918, Super. Ct. of California, County of Sacramento.

[5] State of Indiana vs. International Business Machines, Case No. 49D10-1005-PL-021451, Super. Ct. of Marion County.  Findings of Fact, Conclusions of Law and Judgment for IBM, available athttp://www.in.gov/legislative/senate_democrats/files/blog/FinalOrdersignedJuly182012.pdf.

[6] State of Indiana vs. International Business Machines, No. 49A02-1211-PL-875, Ct. of Appeals of Indiana.  Opinion, available athttp://www.in.gov/judiciary/opinions/pdf/02131403nhv.pdf .

[7] The trial in Indiana vs. IBM lasted six weeks and the court heard 92 witnesses.  Before trial, the court considered 12 motions for summary judgment. Approximately 27,800 exhibits were submitted, totaling about 1 million pages of documents.

[8] ERP is defined by Gartner’s IT Glossary, at http://www.gartner.com/it-glossary/enterprise-resource-planning-erp/, as “the ability to deliver an integrated suite of business applications. ERP tools share a common process and data model, covering broad and deep operational end-to-end processes, such as those found in finance, HR, distribution, manufacturing, service and the supply chain.”

[9] An IT project typically includes a “blueprint” phase to further or fully define the requirements that are to be achieved during design and development.  The problem is even more acute in “agile” development projects where requirements tend to be stated at a very high level with planned, short-term “sprints” during performance to achieve narrowed understandings of desired functionality at completion.

[i] Robert S. Metzger is the head of the Washington, D.C. office of Rogers Joseph O’Donnell, P.C., and Mark J. Linderman is a Shareholder in the firm’s office in San Francisco, CA.  Rogers Joseph has focused upon public contracts matters for more than 30 years.

Healthcare Spotlight

By: Donna Lee Yesner, Partner, Morgan Lewis & Bockius LLP and Stephen E. Ruscus, Partner, Morgan Lewis & Bockius LLP

In the wake of the scandal over veteran wait time for health care at certain Department of Veterans Affairs (“VA”) medical facilities, Congress acted quickly to improve the care available to veterans, including access to providers outside the VA system.  On August 7, 2014, President Obama signed into law the Veterans Access, Choice, and Accountability Act of 2014 (“Veterans Choice Act”), which authorized veterans to obtain hospital care and medical services from non-VA providers and $10 billion to pay for such care.  Prior to the enactment of the Veterans Choice Act, the VA had voluntarily adopted a policy of paying for veterans’ medical care outside the VA system under certain circumstances; however, VA approval was required for these referrals.   By contrast, the new law gives veterans greater access to the hospital care and medical services to which they are entitled under section 17 of title 38 of the United States Code.

The Veterans Access, Choice and Accountability Act – Key Provisions

The new law applies to veterans who are:

  1.  enrolled in a patient enrollment system at the VA established under 38 U.S.C. 1705 and have contacted the VA seeking an initial appointment for the receipt of hospital care or medical services; and
  2. eligible for hospital care or medical services under 38 U.S.C. 1710(e)(1)(D) and have either
    1. unsuccessfully attempted to schedule an appointment at a VA medical facility within the Veterans Health Administration wait-time goals (posted on the internet),
    2. live more than 40 miles from the closest VA medical facility,
    3. reside in a state lacking a VA hospital, emergency care and surgical care or live more than 20 miles from such a medical facility, or
    4.  live 40 miles or less from a medical facility but must travel by boat, air or ferry to reach it or travel is otherwise burdensome due to geographic challenges.

A veteran who meets any of these conditions is referred to as an “eligible veteran.”

Section 101(a) of the Veterans Choice Act requires the VA to either place an eligible veteran on an electronic waiting list for hospital care or medical services at a VA facility or, at the veteran’s election, authorize care outside the VA through agreements authorized by the statute, or any other laws, from one of four categories of care providers.  Further, the VA must inform eligible veterans of the available care and ensure the electronic waiting list is accessible in order for veterans to determine the wait time and make an informed choice.  If an eligible veteran elects to receive medical care outside the VA, he or she may obtain care from any of the following entities that have entered into agreements with the VA as described in the statute:  1) any health care provider in the private sector, including any physician, that is participating in the Medicare program; 2) any federally-qualified health center as defined in 42 U.S.C. 1396d(1)(2)(B); 3) the Department of Defense, and 4) the Indian Health Service.   To avoid affirmative action program compliance issues, the law expressly prohibits the Department of Labor, Office of Federal Contract Compliance Programs from treating an entity that signs an agreement to furnish health care to veterans as a federal contractor or subcontractor.

When entering into participation agreements under section 101(d) of the Veterans Choice Act, the VA must negotiate rates for furnishing hospital care and medical services and reimburse the entities at the negotiated rates.  In general, negotiated rates may not exceed the rates paid by the Medicare program to providers of services and suppliers as defined in sections 1861(u) and  (d) of the Social Security Act for the same care or services.    However, the VA may negotiate higher rates for care or services furnished to veterans in highly rural areas.  The law prohibits providers from collecting more than the negotiated rate and from collecting a co-payment in excess of any amount that could be collected under chapter 17 of title 38 if the veteran received care from a VA provider.

Veterans must disclose whether they are covered under a health care plan other than Medicare, Medicaid, or Tricare.  If they are covered by another plan, that plan will be primarily responsible. , for hospital care and medical services for a non-service related disability, to the extent the plan covers the care furnished. The VA will be secondarily responsible.  The provider will be responsible for seeking reimbursement first from the primary payer.  Authority to pay for hospital care and medical services through non-VA providers – as either the primary or secondary payer – has been transferred from the Veterans Integrated Service Networks and VA medical centers to the Chief Business Office of the Veterans Health Administration.   Within 90 days after the August 7, 2014 enactment date, the VA must prescribe regulations for the implementation of a system for processing claims and paying bills for authorized care and services.

Impact of Expanded Care on Drug and Device Suppliers

Furnishing medical care to veterans through non-VA providers is a positive development for suppliers of drugs and medical devices as it should increase the utilization of their products.  For example, the VA may pay for products that are manufactured in countries that are not designated countries under the Trade Agreements Act (“TAA”) without a non-availability determination, because the TAA only applies to products acquired under a federal procurement contract, not products purchased by private sector health care providers through commercial channels.  At the same time, the law authorizing access to care outside the VA system raises questions regarding reimbursement of supplies, particularly pharmaceutical and biological products, which need to be resolved, perhaps through the claim processing system regulation.   For example, the law specifies that veterans may elect to receive medical services including supplies furnished incident to a medical service from Medicare providers.  It also contemplates that VA provider agreements will cover drugs and devices covered by Medicare Part B, cap the negotiated rate paid for such supplies at the Medicare rate, and follow procedures applicable to participation agreements under the Medicare program.  What is unclear is whether the VA will pay for any drug administered by a non-VA physician and covered by Medicare, or impose its own restrictive formulary on contract providers.

Prior to the Veterans Choice Act, any drugs paid for by the VA were subject to VA formulary requirements.  Not only would it be burdensome for non-VA providers to adhere to the VA formulary as a condition of reimbursement, physicians participating in the Medicare program may be unwilling to sign agreements to treat veterans if they cannot use the same products covered by Medicare and receive the same payment.  Similarly, military treatment facilities and federally-qualified health centers will want to be reimbursed for whatever supplies they use in treating all their patients, not just veterans.  If the VA formulary restrictions do not apply to drugs administered by non-VA physicians, manufacturers of non-formulary drugs may increase utilization of their drugs in the VA market.

Another area requiring clarification concerns prescriptions written by non-VA physicians.  Although the Veterans Choice Act authorizes VA payment for supplies furnished as medical services under the Medicare program, it does not provide a pharmacy benefit outside the VA system, and does not cover drugs dispensed by private sector pharmacies.  If veterans want the VA to pay for their prescriptions, the prescriptions must be dispensed by a VA pharmacy or the agency’s mail order pharmacy.   Before enactment of the new law, prescriptions written by non-VA physicians often could not be dispensed by VA pharmacies without a VA physician first seeing the patient and approving the prescription.  In those situations, a veteran still had to wait to schedule an appointment at a VA facility to get the medication.   Hopefully, the VA will not continue that practice under the new law.

It is unclear, however, whether the VA will still require veterans to make appointments with VA doctors in order to obtain certain prescriptions.  Requiring a veteran to wait weeks for a VA appointment or drive many miles to see a VA doctor in order to receive medication, which could be prescribed outside the VA and dispensed by the VA’s mail order pharmacy, is clearly contrary to the spirit of the law.  If the VA is concerned with the expense of a drug prescribed by a non-VA doctor, a requirement for electronic or telephonic consultation between the prescribing doctor and a VA doctor should suffice.   In addition, veterans will be issued Veterans Choice cards in order to process payment claims.  Thus, it would be relatively easy for a Pharmacy Benefit Manager to manage prescriptions written by authorized non-VA doctors and dispensed by the VA’s mail order pharmacy to Veterans Choice beneficiaries, including any prior authorization requirements.

Finally, it is worth noting that if veterans elect to be treated by DoD physicians, any drugs or devices furnished to veterans at a military treatment facility will be procured by DoD at contract prices available to DoD, including prices under Blanket Purchase Agreements.  Similarly, if veterans elect to be treated at federally-qualified health centers, as defined in section 1905(1)(2)(B) of the Social Security Act, drugs used to treat the veterans will be acquired at deeply discounted prices under pricing agreements authorized by section 340B of the Public Health Service Act.  Thus, the acquisition cost for these providers is well below the Medicare rate, which, for drugs, is generally based on the weighted average sales price for the drug, exclusive of federal sales.  The Veterans Choice Act caps the negotiated reimbursement rate paid non-VA providers for medical supplies at the Medicare rate; however, the statute  does not,  prohibit the VA from negotiating prices below this amount with providers that are beneficiaries of other federal contracts or pricing agreements and have much lower acquisition costs.  Accordingly, the VA could negotiate payment terms with DoD facilities or federally-qualified health centers consisting of a service fee plus the acquisition cost of the drug.

We are now approximately two and a half weeks away from the Coalition’s 35th Anniversary Celebration, Excellence in Partnership Honors and the 2014 Fall Conference.  On November 5th and 6th the Coalition will be hosting a Myth-Busters dialogue with government and industry.  The central themes will be fostering partnership between government and industry, supporting common sense in government procurement and creating professional opportunities for returning Veterans!  These three themes are central to a procurement system that delivers best value for the American people! I am looking forward to seeing all of you there!

Today, I am pleased to announce our 2014 Lifetime Acquisition Excellence Honorees:

 

Kathy Jocoy, Management Services Center, Post Award Acquisition Division Director, General Services Administration

In her role supporting GSA’s portfolio of professional services schedules Kathy’s leadership and management skills have made a best value difference in MOBIS, LOGWORLD, Environmental Services, PES and the Consolidated Schedules.  Kathy’s 37 years of commitment to excellence reflect the best in public service!

 

Steve Viar, Director, FEDSIM, General Services Administration

Steve Viar started with GSA in 1978!  He began his career in the FSS Tools Center; ultimately moving to FEDSIM in 1988 where he has served ever since.   An outstanding acquisition professional, Steve served as a contracting officer managing complex information technology procurements that made FEDSIM a “best in class” procurement organization recognized across the federal government. Steve now heads up FEDSIM, managing a staff of 135 who deliver best value solutions to customer agencies like DHS, DOD and FDIC every day.

 

Joanne Woytek, Program Manager, NASA SEWP, National Aeronautics and Space Agency

Joanne is the driving force and leader of one of the most successful information technology contract vehicles in the federal government.  NASA SEWP is recognized as a leader in providing customer focused, best value information technology products and services.  Under Joanne’s leadership, NASA SEWP now processes over 25,000 orders annually accounting for over $2.5 billion in customer agency purchases.  NASA SEWP is known throughout government and industry for its efficiency and effectiveness in supporting agency missions.

 

Jan Frye, Deputy Assistant Secretary, Office of Acquisition and Logistics,

Department of Veterans Affairs

Jan has a long and outstanding career in public service as an acquisition professional.  A retired Army Colonel, Jan served in senior acquisition and logistics positions throughout his 30 year career.  Among other Army posts, he served as Principal Assistant Responsible for Contracting in Eighth U.S. Army/US Forces Korea and as Deputy Principal Assistant Responsible for Contracting, U.S. Army Corps of Engineers.  Among his many military honors and decorations is the Legion of Merit.

At the Department of Veterans Affairs (VA), Jan currently leads one of largest acquisition and logistics operations in the Federal government. Not only he is responsible for implementation of department wide acquisition policies and procedures; he is also a driving force behind the VA Acquisition Academy located in Fredrick, Maryland.  Jan also serves as a member of the Committee for Purchase from People who are Blind or Severely Disabled, appointed by President Obama in October 2011.

 

Congratulations to our Lifetime Acquisition Excellence recipients!  The 2014 Excellence in Partnership Award winners for the remaining categories will be announced in next week’s Friday Flash.  We look forward to honoring all of the outstanding public servants/acquisition professionals on November 5th!

See you all there!

Roger Waldron

President

FAR and Beyond Blog 

It is an exciting time for the Coalition for Common Sense in Government Procurement! As you know, on the evening of November 5th the Coalition will begin its 2014 Fall Training Conference with Excellence in Partnership (EIP)  honors  & a 35th Anniversary Gala  at the Ronald Reagan Building.  The conference will continue on November 6th at the JW Marriott in Washington, DC.   We look forward to seeing you!  Please don’t delay registration.  Register by October 22nd!

Excellence in Partnership

The evening’s festivities will include our 15th Annual Excellence in Partnership (EIP) honors. The EIP honors acquisition officials who have made significant strides in promoting and utilizing government-wide contracting vehicles.  Awards will be given to individuals, organizations, and contractors involved in federal government procurement.

35th Anniversary – Supporting our Veterans

In honor of our 35thAnniversary, the Coalition, in partnership with The George Washington University, established the Coalition for Government Procurement Endowed Government Procurement Scholarship/Fellowship Fund.  The  fund will support qualified veterans pursuing a law or master’s degree with a concentration on US Government procurement.  This fund combines the two pillars of the Coalition: (1) Common sense acquisition policy, procedures and programs; and (2) Support for our veterans as they transition to civil life.

Guest speaker, Marine Corps Veteran Cory Gritter

The evening’s events will include a networking reception with dinner, and a conversation with Cory Gritter, a medically retired veteran of the United States Marine Corps and President of Gritter-Francona, Inc., a Service Disabled Veteran Owned Small Business that focuses on Information Technology and Cyber Security services.

Cory started his company in January of 2013 and has successfully grown it to 35 employees over the last 18 months. Cory coined the tag line “The Veteran Edge” for his company on the belief that the training and leadership skills veterans learn in their service is second to none.  He is the exemplar for determination, good attitude and work ethic and actively seeks out veterans to hire for his firm and is convinced that they will help him build a solid set of values upon which the company can grow and thrive.

In 2005 Cory fulfilled his lifelong dream of serving his country as a U.S. Marine.  In 2008 he was selected to attend the Marine Scout Sniper Basic course, where upon completion, he also attended the Urban Sniper course, graduating at the top of the class. Cory was deployed to Afghanistan in 2009 where he led an elite Scout Sniper team in ground combat operations.  During one of his missions he was severely wounded by an IED and evacuated to Walter Reed National Military Medical Center where he spent the next 3 ½ years in recovery and endured over 20 surgeries.

For the last year and a half of his recovery Cory worked with his Marine Corps leadership and participants from the Wounded Warrior Mentoring Program to prepare for his transition to civilian life.  He interned at the Pentagon under Headquarters Marine Corps (HQMC) Command, Control, Communications & Computers Cyber (C4 CY) and with U.S. Marine Corps Forces Cyberspace (MARFORCYBER) Marine Corps Network Operations and Security Center (MCNOSC) in Quantico, VA.  During that period Cory also interned with Booz Allen Hamilton’s Cyber Security Operations Center (CSOC), learning the skills necessary to be a successful cyber security professional.

Silent Auction

A silent auction benefitting the Coalition for Government Procurement Endowed Government Procurement Scholarship/Fellowship Fund will take place on this evening.  All proceeds of the auction will go to the fund.

We are gratified at the support we have received from across the procurement community for the creation of the fund and excited to be off to a great start with community support.  You too can help a veteran at The George Washington University by participating in the auction.

Here is a current list of the items donated for the silent auction:

  • Suite at the Verizon Center (18 seats + 3 parking passes) for February 3rd at 7:00 p.m. when the Caps play the Kings (Stanley Cup Champions) – donated by Lockheed Martin
  • Box Seats at Nationals Park – donated by Baker Tilly
  • Golf Lessons and a Foursome – donated by Whiskey Creek Golf Club
  • Patriotic Quilt – made and donated by Robin Klonarides of Raytheon
  • Football signed by Ron “Jaws” Jaworski and  Dick “Coach” Vermeil – donated by The Judge Group
  • NFL Football Helmet signed by Alfred Morris, Ahmad Bradshaw, Maurice Jones-Drew, Jason Witten, and 12 others  – donated by Berkeley Research Group and the NFL Players Association
  • 4 tickets for the Wizards vs Denver Nuggets game on 12/5 – donated by Federal News Radio
  • Six Award Winning Personal Finance books signed by author Ric Edelman – donated by Ric Edelman
  • Complimentary Night Stay at the Mayflower Renaissance Hotel – donated by Marriott
  • Complimentary Weekend Stay at The Liaison Capitol Hill PLUS Dinner for two at Art & Soul – donated by Affinia Hotel Collection
  • Coffee Table Book from the Degas/Cassatt and Rockwell exhibitions plus a canvas tote bag – donated by Booz Allen Hamilton
  • Russell Stover Chocolate Basket – donated by Russell Stover
  • Catered Chicken Taco Bar for 10 from Qdoba – donated by Qdoba
  • Tour and Tasting for 4 at RdV Vineyards in VA – donated by RdV

Fall Conference

The Fall Conference is an unparalleled opportunity to find out about current and future initiatives affecting contractors selling commercial items into the federal market. We have a great line up of speakers.  Click here to see the complete agenda.

Please register as soon as possible!

We look forward to your support on the evening of November 5th!!  It will be a special event supporting our nation’s veterans and acquisition excellence.  For logistical purposes, we do need to have a fairly accurate headcount for this two day event by October 22nd, so please don’t delay registration.  Contact Matt Cahill at 202-315-1054 or mcahill@thecgp.org if you have any questions, or click here to register!

 

Roger Waldron

President

Recent Posts

Categories

Archives

© Copyright 2005-2011| 1990 M Street NW, Ste 450 | Washington, DC 20036 | 202.331.0975
Site by Web Weaving.
Linked InFollow Us on FacebookJoin Us on TwitterView Our Flickr Pics!Subscribe to Our RSS Feed