FAR and Beyond Blog

This week the Coalition provided Defense Procurement and Acquisition Policy (DPAP) with “Myth-Busters” feedback regarding the policies, goals and objectives for Economy Act and non-Economy Act Interagency Acquisitions.  Our feedback can be found here.  As you know, DPAP is currently conducting a review of the rules and regulations governing interagency acquisition acquisitions across the Department.  A review that was prompted by recent statutory and regulatory changes to an already complex labyrinth of rules governing interagency acquisitions.  As currently structured, the complex rules governing interagency acquisitions make it unnecessarily difficult for customer agencies to leverage pre-existing government-wide contract vehicles and assisted services organizations to support mission needs.

For example the regulatory language at Federal Acquisition Regulation (FAR) 17.502-1 requires a written “determination of best procurement approach” by a customer agency prior to utilizing another agency to conduct an acquisition on its behalf (i.e. assisted services) and/or prior to placing an order against another agency’s IDIQ contract (includes all GWACs orders and MAC orders regardless of dollar value as well as Federal Supply Schedules (FSS) orders exceeding $500,000).  There is no similar requirement for open market procurements.  As such, the requirement for a “best procurement approach” determination for interagency acquisition creates a presumption in favor of open market procurements that fosters unnecessary contract duplication.  Contract duplication increases costs to customer agencies, contractors and ultimately the American taxpayer.  Duplicative open market contracts also dilute the government’s buying power.  Rebalancing FAR 17.502-1 to eliminate the presumption in favor of open market procurements is a great opportunity to reduce unnecessary contract duplication.

DPAP is to be commended for embarking on a review of the policies, procedures and rules governing the Department’s interagency acquisitions.  The Coalition’s feedback focuses on reducing unnecessary procedural burdens and streamlining the decision making process when using interagency acquisitions.  Government-wide contracting vehicles like the FSS program and the IT GWACs save time and money by providing a common platform for customer agencies to effectively compete and acquire solutions, services, and products to support mission needs.  Our feedback to DPAP regarding interagency acquisition is part of a continuing “Myth-Busters” dialogue with stakeholders across the procurement community.  It is a dialogue that seeks to improve the efficiency and effectiveness of the procurement system.

To that end, the Coalition has developed a list of “Government Procurement Practices that Add Costs without Enhancing Value.”  The list can be found here.   The list is a living document!   We look forward to your feedback and comments regarding the list as well as real examples of practices that increase costs without additional value.  Your feedback, comments and examples can be provided to me at rwaldron@thecgp.org.  We will use your input to periodically update and share the list across the procurement community.  Our goal is to foster a focused conversation that leads to improved procurement practices that save time, money and resources for government, the American people and contractors.

We look forward to your feedback!

Roger Waldron


This week’s FAR and Beyond is Thought No. Twelve of the Thirteen Thoughts for 2013: ”The $500 billion question: an open or closed federal procurement system?”  The answer to this question has profound, long term implications for customer agencies, contractors and the American people

A closed system is one that restricts the number of suppliers to encourage lower prices.  An open system encourages streamlined competition by a broad base of commercial contractors to generate fair and reasonable prices.   Why an Open Federal Procurement System?

An open system puts “commercial back in commercial item contracting.”    An open system eliminates government unique requirements where the costs outweigh the benefits to customer agencies and the American people.  An open system maintains and enhances the flexibility and efficiency of the GSA Multiple Award Schedule (MAS) program, the most successful commercial item contracting vehicle in government.  An open system leverages acquisition resources by eliminating unnecessary contract duplication which increases costs to government, industry and the American taxpayer.  At its core, an open federal procurement system eliminates barriers to entry and embraces competition and technological innovation driven through access to the commercial marketplace.

Consequences of a Closed System

A closed system favors government unique requirements over commercial practices.   A closed system favors “mandatory use” contracting programs that, by their very nature, limit access to the commercial marketplace.  A closed system fails to address contract duplication which increases costs and depletes bid and proposal funds for government and industry.  A closed system favors GSA’s proposed Demand Based Model that would eliminate continuous open seasons under the MAS program thereby limiting access to the commercial marketplace for customer agencies.   A closed system focuses solely on price rather than total acquisition cost and best value in measuring success.

The end result of increased barriers and transactional costs in a closed federal procurement system is a much more limited supply chain for customer agencies.  A limited supply chain reduces competition for commercial products, services and solutions.  A limited supply chain reduces access to commercial innovation and best value solutions that support customer agency missions.  There is broad consensus among acquisition professionals that increased access to the commercial marketplace streamlines processes and has saved money for the American taxpayer.   For that reason the Federal Acquisition Streamlining Act of 1994 created commercial item contracting as currently implemented at FAR Part 12.  Increasingly, however, doing business with the federal government has gotten more difficult for commercial firms.  Government unique clauses/requirements, including data collection and reporting requirements, are included in commercial item transactions—rendering the term “commercial item contracting” less and less relevant to the federal acquisition system.  These government unique requirements increase transactional costs that are ultimately passed on to the customer through higher prices and/or reduced competition.

Interestingly, some impacts of a closed acquisition system are starting to be reflected in the GSA Office Supply Schedule.   For almost 2 years now the schedule has been closed to new offers while at the same time GSA has been implementing FSSI BPAs for office supplies on a government wide basis.  Recently, GSA began planning for the next FSSI procurement for office supplies and sought industry feedback through an industry day held last month in New York City.  Currently, GSA is contemplating creating an entirely new set of IDIQ contracts, outside the MAS program, for the FSSI office supplies procurement rather utilizing the MAS program as the platform.  A key rationale for considering such an approach is that the schedule may no longer offer maximum competition for the next generation of FSSI because it has been closed since 2010.  If GSA chooses this path, the closing of the MAS schedule would result in a prolonged, costly open market procurement that duplicates what is already available via the MAS program.

The irony is that the American taxpayer cannot afford this duplication in the Federal space! The Coalition will continue a Myth-buster’s dialogue with others in the acquisition community to ensure that the procurement system remains open and leverages the commercial marketplace to provide cost efficient innovative services and solutions to agencies.  We look forward to working with GSA and other stakeholders to keep an open Federal procurement system that maximizes access to the latest innovation and opportunities for both small and large businesses.

Roger Waldron


On Monday the Coalition provided the Federal Acquisition Service’s (FAS’s) Office of Acquisition Management with our white paper“GSA Multiple Award Schedule Pricing: Recommendations to Embrace Regulatory and Commercial Market Changes.” The Coalition thanks all the members of the Pricing Working Group for their contributions to the white paper.  It truly was a team effort.  The Coalition also thanks the Office of Acquisition Management for its openness and interest in the issues, challenges and opportunities associated with reforming the Multiple Award Schedules (MAS) program’s outdated, anti-competitive pricing policies. As many of you know, the white paper effort was sparked by “Myth-Busters” discussions with the Office of Acquisition Management at our 2012 Spring Conference. The MAS program is a valuable tool for the acquisition of commercial services and products.  The current pricing policy is, however, fundamentally out of sync with the statutory and regulatory requirements for competition at the task order level.  Section 863 of the 2009 National Defense Authorization Act mandated robust competitive procedures for MAS task and/or delivery orders exceeding the simplified acquisition threshold ($150,000).  Congress recognized that competition at the task order level for agency specific requirements drives pricing under the MAS program.  Moreover, over the last decade GSA has been investing in e-tools to enhance transparency and competition at the task and delivery order level through the implementation and maintenance of eBuy (GSA’s online Request for Quotes tool).

The statutory and regulatory task/delivery order competition requirements and GSA’s investments in e-tools highlight a fundamental procurement truth—competitive pricing is driven by specific requirements and contract terms (e.g. statements of work and volume commitments).  Such requirements are articulated and communicated at the task order level—and the MAS program provides a government-wide commercial marketplace for competition for and acquisition of agency mission requirements.

Most importantly, the current MAS pricing policy, as applied to contracts, restricts competition in both the commercial and federal marketplace.  As explained in last week’s “FAR and Beyond” blog the treatment of subcontracts under federal prime contracts as commercial transactions for Price Reduction Clause (PRC) purposes restricts competition for agency customers and increases costs to the government and taxpayer.  In the same manner, based on the applicable contract terms, the PRC also restricts the ability of a MAS contractor to compete in the commercial marketplace.  It is truly time to ask whether it makes any procurement or economic sense for GSA to require that as a condition of having an MAS contract, a contractor must limit or otherwise restrict its competitive commercial activities and/or opportunities!!  Can we as a nation afford a MAS pricing policy that limits commercial commerce and harms small business concerns?  Reforming the MAS pricing policy can increase efficiencies, innovation and competition for all!  Please take the time to review the white paper!! ­­­­ It was a team effort.

Roger Waldron


The Labor Day weekend marks the end of summer and the beginning of fall and the school year.  The Coalition hopes that everyone had a wonderful summer!

This week also marks the beginning of a busy fall calendar for the Coalition.  At the center is our Fall Conference scheduled for October 30th at the Fairview Park Marriott.  We are looking forward to hearing from the Honorable Frank Kendall, Under Secretary of Defense (Acquisition, Technology & Logistics) and Major General Wendy Masiello, Deputy Assistant Secretary for Contracting, Office of the Assistant Secretary of the Air Force for Acquisition.  The Fall Conference agenda and listing of other confirmed speakers can be found here.

This first “Friday Flash” after Labor Day also marks the beginning of a new name for the “Comment of the Week.”  From this point forward the Friday Flash’s “Comment of the Week” will be referred to as the “FAR and Beyond” keeping in step with our internet presence via the “Far and Beyond” blog.   So with the marketing portion of this week’s “FAR and Beyond” done; it is now time to turn to an issue of significant policy interest regarding GSA’s Multiple Award Schedule (MAS) program.

The Federal Acquisition Service’s (FAS’s) treatment of subcontracts under federal prime contracts as a commercial transaction for Price Reduction Clause (PRC) purposes continues to raise significant procurement and economic policy concerns for customer agencies and MAS contractors.  At an operational level, FAS continues to insist that subcontracts under federal prime contracts be considered “commercial transactions” and subject to the PRC.   As the Coalition discussed in its “FAR and Beyond” blog of January 28, 2011 (yes—2011), this practice restricts competition for customer agency open market procurements.  As such, this FAS practice prevents agencies from achieving greater competition, obtaining lower prices, and securing better value for commercial services, solutions and products.  Ultimately, the practice increases total acquisition costs for the American people.

A year and a half later, FAS confirmed the Coalition’s concerns regarding the treatment of subcontracts under open market federal prime contracts. On September 7, 2012, FAS waived the application of the PRC for purposes of the Air Force’s open market procurement for commercial office furniture.  Under the Air Force’s proposed two-tier procurement strategy, furniture manufacturers are essentially subcontractors to small business dealer prime contractors located across the country.  The two-tier subcontract structure immediately raised concerns among manufacturers regarding the application of the PRC.  In sum, many in industry were concerned that by offering a price reduction as a subcontractor to a small business prime contractor in order to compete for an Air Force requirement, the PRC would be triggered under their MAS contracts.  This issue was subsequently raised in a Government Accountability Office (GAO) protest by Herman Miller.  However, the FAS waiver of the application of PRC for the Air Force procurement rendered the issue moot.  The Coalition also discussed the waiver of the PRC in its November 5, 2012 and April 3, 2013 “FAR and Beyond” blogs.

FAS’s class waiver of the PRC is unprecedented.  It validates the real, practical restriction on competition for customer agencies that is inherent in applying the PRC to subcontracts under federal prime contracts.   At the same time FAS continues the practice of treating subcontracts under federal prime contracts as commercial transactions for purposes of the PRC.   There is a profound disconnect between the waiver and current practice; a disconnect that costs customer agencies and the taxpayer.

On April 3, 2013, the Coalition wrote a letter to FAS regarding the significant procurement policy and public questions raised by the waiver of the PRC.  The letter and the Coalition’s position regarding the PRC can be found here.

To date the Coalition has not received a formal response to our letter.

Roger Waldron



On Wednesday the Coalition hosted the Joseph P. Caggiano Memorial Golf Tournament to benefit our wounded veterans.  Again this year the tournament was held at Whiskey Creek Golf Course in Ijamsville, Maryland.  Despite some intermittent rain through the early part of the round, it was a wonderful day!  The Coalition was honored to have several veterans attend and play as our guests.  We kicked off the day by presenting separate checks for $5,000 each to Hope for the Warriors and Operation Second Chance.


Roger Waldron with Operation Second Chance Representative

Over the last three years the Coalition has contributed over $30,000 to these two organizations.  Thank you to our title sponsor PwC!   Thank you to our Lunch & Reception sponsors, CohnReznick and Integrity Consulting!  Thank you to our Beverage Cart sponsors,   Baker Tilly and 3M!  Thank you as well to all the hole sponsors and contest sponsors and each of the golfers who purchased “mulligans,” a great “strategic sourcing” buy!   Without your collective commitment to supporting our veterans, the event would not have been possible.


L-3 and PWC players with Hope for the Warriors Representatives 

A special thank you to Paul and Mike Caggiano for attending and playing in the tournament.   Paul and Mike also presented the checks to Operation Second Chance and Hope for the Warriors.  Joe Caggiano, Paul’s son and Mike’s brother, was the driving force behind the Coalition’s charity efforts in support of wounded veterans.  The success of the tournament is largely due to all the great work Joe did in building up the event.  The golf tournament was a labor of love for him.  It is an honor and a privilege that the tournament is named in Joe Caggiano’s memory!  God Bless the Caggiano Family and all our veterans!

Finally, thank you to the Coalition staff and the staff at Whiskey Creek for making the tournament such a smooth-running success.  You made it look easy!

Happy Labor Day Weekend!

Roger Waldron, President

On August 22, 2013, GSA’s Federal Acquisition Service (FAS) posted a blog entitled “OASIS: What You Need to Know About GSA’s Plan to Reduce Contract Duplication.”

The blog correctly notes that OASIS can play a positive role in reducing contract duplication by delivering best value, cost effective service solutions for customer agencies.  At the same time, the blog’s focus on OASIS as an antidote for contract duplication also highlights the huge, unfilled potential of the GSA Schedules program to deliver best value service solutions to customer agencies and the American people.  The blog states that “OASIS takes the GSA Schedules to the next level by combining professional services and IT services into a single source for both commercial and noncommercial needs—and eliminating the unneeded duplication of contracts.”

Ironically, FAS has the opportunity and the authority to take the GSA Schedules program to the next level by incorporating “other direct costs” (“ODCs”) into GSA Schedule contracts.  By utilizing the vetted, FAR-based commercial item clauses for acquisition and reimbursement of ODCs, materials and indirect costs, FAS can further enhance customer agencies’ ability to efficiently and effectively acquire complete solutions to requirements under the GSA Schedules program.  Currently, the inability of customer agencies to include ODCs, materials and indirect costs on Schedule orders increases contract duplication thereby increasing costs and reducing efficiency for government and industry.  The increased costs of contract duplication hit small businesses particularly hard.

Over five years ago, FAR Clause 52.212-4 Alternate I authorizing ODCs on commercial item contracts, went through the formal rule-making process.  Currently FAR 52.212-4, Alternate I, is already in many GSA Schedule contracts but remains unavailable for use by customer agencies.  This current “ODC disconnect” between the GSA Schedules program and the FAR implementation of ODCs pushes agencies to find alternative solutions.   For example, the Department of State could conduct an open market procurement utilizing the commercial item clauses under FAR Part 12 for an IDIQ contract that provides for the inclusion of ODCs, materials and indirect costs for its requirements at the order level.  However, if the Department of State wanted to utilize GSA Schedules for a requirement that included ODCs, materials and/or indirect costs, it could not.  Contract duplication is the result.

The GSA Schedules program is the largest commercial item contracting program in government, accounting for approximately $40 billion in annual purchases by the federal government.  Professional services and IT services account for approximately half that number ($18-20 billion annually).  GSA has the opportunity to further leverage the program for customer agencies.  GSA has the statutory authority and responsibility for the policies and procedures governing the program.  The FAR-based commercial item clauses are there.  The market is ready.  The contractor community is motivated to work with GSA on this issue to ensure an effective, accountable solution that works for all.

It is time to take the GSA Schedules to the next level for customer agencies and the American people.  Let’s work together to enhance competition, increase efficiency and reduce contract duplication.  Let’s implement ODCs!

Roger Waldron


The weather has been incredible here in Washington DC!  It reminds me of August in Maine, no humidity, temperatures in the high 70’s or low 80’s during the day and in the 60’s at night.  Rather than typically draining August swelter, it has been invigorating, even energizing!  My boys especially appreciate the weather as they started football practice!

That energy is reflected in the Coalition’s August calendar!  This week the Coalition hosted the first in a two part series of webinars focusing on GSA’s e-tools.  Tim Dempsey, Systems Chief, MAS Program Office, Office of Acquisition Management at the Federal Acquisition Service (FAS) provided training on GSA Advantage! and e-Buy while Bill Gormley provided insight into the key role GSA’s e-tools play in the competitive federal procurement marketplace.  This webinar series is especially timely given that everyone is affected by the end of fiscal year crunch.  As the clock ticks in the 4th quarter of the fiscal year, streamlined acquisition through GSA’s e-tools have become vital to agencies seeking to quickly and effectively acquire needed products and services.

The first e-tools webinar was a great success.  And, as a result of feedback from the participants, the second e-tools webinar will be expanded from an hour to an hour and a half!  The second webinar in the series will be on Thursday, August 22 at 12:30 so there is still plenty of time to sign up.

Also this week, the Coalition hosted a Myth-Busters Roundtable conversation with Joe Jordan, Administrator for Federal Procurement Policy, Office of Federal Procurement Policy, Office of Management and Budget.  The conversation focused on contract duplication, strategic sourcing strategies, and how the government can buy smarter.  The Coalition thanks Administrator Jordan for his time and willingness to engage in a dialogue around the key challenges and opportunities facing the entire procurement community.  Myth-Busters dialogues that promote the exchange of ideas between government and the private sector provide the opportunity to deliver best value to customer agencies and the taxpayer through a more efficient and effective procurement system.   The Coalition remains committed to a positive Myth-Busters dialogue!

On August 28, the Coalition will be hosting the Joseph P. Caggiano Memorial Charity Golf Tournament at Whiskey Creek Golf Course.  The event benefits wounded veterans and we will have a number of veterans participating in the event.  We look forward to honoring Joe through our support of those who have served and sacrificed for our freedom and safety.  Our veterans and the organizations that support them, Hope for the Warriors and Operation Second Chance, need your help so support the cause through one of our many sponsorships.

Looking ahead to the fall, our Fall Conference is shaping up nicely.  We are gratified with the positive Myth-Busters response from across government affirming participation in the conference! To see our confirmed speakers so far, visit http://thecgp.org/event/fall-training-conference-the-new-federal-market.

Finally, a reminder, the Coalition is accepting nominations for the Excellence in Partnership Awards that will be presented during the conference.  For information about the awards and to submit a nomination, please click here.

I can’t believe I am saying this in August but I hope you all are having the same weather we are here in DC!  Have a great weekend!

Roger Waldron


On Wednesday, August 28, the Coalition will be hosting the Joseph P. Caggiano Memorial Golf Tournament Supporting Wounded Veterans at the Whisky Creek Golf Course.  Quite simply, it is one of the highlights of the Coalition calendar each year.  It provides a wonderful opportunity for the government contractor community to give back to our veterans.  Over the last two years, our golf tournament has raised over $25,000 to support wounded veterans through Hope for the Warriors and Operation Second Chance.  As noted in the Friday Flash article below, Hope for the Warriors and Operation Second Chance are two organizations that are providing support for our returning veterans as they transition to civil life.

The transition to civilian life can be especially daunting for war veterans who have suffered physical and/or mental injury.  And the need continues to grow.  Over the next three to five years, it is estimated that more than one million veterans will re-enter civilian life.  That’s why your support is still needed and deeply appreciated.  We must never forget those who have served, sacrificed and protected our freedoms.

The driving force behind the success of the Coalition’s golf tournament over the last two years was Joe Caggiano.  Joe worked tirelessly to recruit sponsors and players.  He brought a passion and commitment to the cause that was infectious!  As a Navy veteran himself, he understood the challenges our service men and women face upon re-entering the civilian world.  He wanted to make sure the Coalition was doing its part to our veterans.   He succeeded!

Joe also truly enjoyed the tournament’s fellowship and camaraderie among all the participants from across the procurement community.  As Joe said to me during the course of last year’s event, “Roger, this is what it is all about!”.   Indeed, Joe was right on!

It is an honor and privilege that our tournament bears his name.  The Coalition thanks the Caggiano family for its support.

Please click here for information on remaining sponsorships and to register to play.

Thank you for your support and we will see you on the 28th!

Roger Waldron



[1] The famous Veterans or Remembrance Day quote from the Argentinian writer, Jose Narosky.

Legal CornerGuest Bloggers: Tom Barletta, Partner, Steptoe & Johnson LLP; Fred Geldon, Senior Counsel, Steptoe & Johnson LLP;  & Mike Navarre, Special Counsel, Steptoe & Johnson LLP 


Recent events demonstrate that government investigators and prosecutors are taking more seriously the ethical regulations that govern gratuities.  Cases in point:


  • On April 25, 2013, the U.S. Department of Justice issued a press release announcing that a Bureau of Prisons (BOP) employee had pled guilty to a charge of receiving unlawful gratuities.  The BOP employee, a supervisory traffic management specialist in the BOP Relocation Services section, was responsible for giving relocating BOP employees a list of approved movers and then referring their move to agents of the chosen carrier.  While performing these duties the employee received spa and salon gift cards in the amount of $1,007 and $790 from one carrier’s agent, as well as free moving services from moving companies.  The BOP employee was subsequently assessed a fine of $1,500 and placed on probation for 18 months.
  • On June 5, 2013, the Washington Post reported that the Internal Revenue Service (IRS) had placed two managers on administrative leave for accepting free food and other gifts in violation of government ethics rules.  These violations were discovered during an audit of a years-old conference, at which the managers “allegedly held an after-hours party in their private hotel suites.”  It apparently was not clear who gave the managers the food, worth $1,162.  Acting Commissioner Danny Werfel said in a statement to the Post that the IRS has started the process of firing the managers.


The basic rules applicable to government employees regarding gratuities are set forth in the Standards of Ethical Conduct for Employees of the Executive Branch (“Standards”), which are codified at 5 C.F.R. § 2635.  The Standards generally prohibit federal government employees from accepting gifts [1] from “prohibited sources,” a category that includes, among others, contractors (and employees of contractors) doing business with or seeking to do business with the federal government employee’s agency.  5 C.F.R. §§ 2635.102(k), 2635.203(d).

There are some exceptions, however.  For example, under the Standards, federal employees may accept, even from “prohibited sources,” items worth $20 or less, as long as the total value of the gifts from the same source is not more than $50 in a single calendar year (calculated by including a contractor and its employees as a single source).  5 C.F.R. § 2635.204(a).  The Standards also include other limited exceptions, such as gifts motivated by family relationships.

The size of the gratuities in the two recent examples discussed above far exceeds these thresholds.  In the case prosecuted by the Justice Department, however, the amount at issue was significantly less than amounts usually cited in large corruption cases, and demonstrates that even these (relatively) small violations are attracting the attention of auditors, investigators, and prosecutors.

Although the Standards apply only to government employees who receive gratuities rather than to contractor employees who offer gratuities, contractors can face potential liability in relation to gratuities as well.

The federal criminal gratuities statute, 18 U.S.C. § 201, provides for fines or imprisonment for anyone who, for example, directly or indirectly gives, offers, or promises anything of value to any public official, former public official, or person selected to be a public official, for or because of any official act performed or to be performed by such public official, former public official or person selected to be a public official.

18 U.S.C. § 201(c)(1)(A).

Unlike a bribe, an illegal gratuity does not require an intent to influence; rather, the illegal gratuity only need be given “for or because of” an official act.  An illegal gratuity “may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken.”  United States v. Sun-Diamond Growers of California, 526 U.S. 398, 404-405 (1999).  There must, however, be a connection, i.e., the government must prove “a link between a thing of value conferred upon a public official and a specific ‘official act’ for or because of which it was given.”[2]  Id. at 414.

The risk to contractors is heightened, however, because the line between an acceptable gift and an illegal gratuity is nuanced.    For example, in  United States v. Hoffmann, 556 F.3d 871, 877 (8th Cir. 2009), the court rejected the defendant’s contention that the Government had failed to prove that he violated the gratuities statute because he did not reasonably believe that the government employee would take an official action and because the government employee never did so.  Rather, the court upheld the conviction finding that a “reasonable juror could conclude” that the contractor gave the government project manager a set of golf clubs “to . . . reward future performance.”

The risk to contractors is demonstrated by yet another recent Justice Department announcement in a whistleblower “qui tam” case that included gratuities allegations.  On March 7, 2013, DOJ announced that three CIA contractors (American Systems Corporation, Anixter International Inc., and Corning Cable Systems LLC) had agreed to pay $3 million to settle allegations they violated the False Claims Act and Anti-Kickback Act.  The announcement included allegations[3]  that in pursuit of a 2009 contract the companies had provided gratuities (meals, entertainment, gifts, and tickets to sporting and other events) to CIA employees.

Prohibitions on gratuities applicable to contractors are also incorporated into various FAR provisions.  For example, FAR 52.203-13(b)(3) (Contractor Code of Business Ethics and Conduct) requires that contractors “timely disclose, in writing, to the agency Office of the Inspector General, with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed . . . [a] violation of Federal criminal law involving . . . gratuity violations found in Title 18 U.S.C.”  In addition, FAR 52.203-3(a) allows the government to terminate a contract if a contractor or contractor employee “[o]ffered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and [i]ntended, by the gratuity, to obtain a contract or favorable treatment under a contract.”  The government also may recover damages and/or suspend or debar a contractor from federal contracting for violations of this clause.  See FAR 3.204(c).

Finally, in addition to potential criminal penalties and suspension and debarment, providing gratuities to government employees can also result in other adverse effects for a contractor, such as negative past performance ratings that could affect current and future business.

In sum, to maintain healthy relationships with their government customers and to protect government employees and themselves from potential liability, contractors should understand the laws and regulations applicable to gratuities to government employees, have a clear policy regarding gratuities (which, for many contractors includes a prohibition on giving gratuities) and provide appropriate education and training to their employees.

Of course, contractors should also be aware of laws and prohibitions that apply in related contexts, including anti-kickback laws that prohibit certain improper payments between prime contractors and subcontractors, the Foreign Corrupt Practices Act, which prohibits certain types of payments to foreign officials, and laws and regulations that regulate payments that can be made to members of Congress and staff.

[1] “Gifts” include entertainment, favors, discounts, hospitality, transportation, and other things of value.  5 C.F.R. § 2635.203(b).

[2] The Court in Sun-Diamond also rejected the Government’s contention that the illegal gratuities statute is violated by providing a gift to an official because he is in a position (i) to act favorably at some unknown future time, or (ii) to “build a reservoir of goodwill that might ultimately affect one or more of a multitude of unspecified acts.” Sun-Diamond, at 405.

[3] The Justice Department also alleged that the companies improperly received source selection information from a CIA employee to whom they had provided gratuities.

This week marks the beginning of the local football season with high schools and youth leagues beginning camps and tryouts—and YES, the Green Bay Packers are “in camp” too!  As such it is appropriate to focus on Thought No. 11 of the Thirteen Thoughts for 2013: Requirements Development—the blocking and tackling of federal procurement.  Just as blocking and tackling are the foundation for winning football, requirements development is the foundation for best value procurement outcomes.  Focusing on requirements development can achieve significant savings and performance improvement for the federal government.  As the Department of Homeland Security (DHS) has stated in its guide on developing Operational Requirements Documents:

Research conclusively shows that the foremost reason why programs or projects do not succeed is due to the lack of detailed requirements at the initiation of a program or project.  Efforts invested up front to develop a clear understanding of the requirements pays dividends in the positive outcome of programs—not to mention the savings in both time and money in corrective actions taken to get a program back on track (if it is even possible!).

See page 6 of “Developing Operational Requirements: A Guide to the Cost-Effective and Efficient Communication of Needs”, Version 2.0, November 2008, Department of Homeland Security. [www.dhs.gov/xlibrary/assets/Developing_Operational_Requirements_Guides.pdf]

The Office of Federal Procurement Policy’s (OFPP’s) Myth-Busters campaign grew out of a concern that, in particular, during the requirements development phase, the lack of communication between government and industry was increasing the risk of successful procurement outcomes across the federal enterprise. The February 2, 2011 OFPP Myth-Busters memo states in the first paragraph, “[a]ccess to current market information is critical for agency program managers as they define requirements and for contracting officers as they develop acquisition strategies, seek opportunities for small business, and negotiate contract terms.”  OFPP is to be credited with recognizing the need to improve communication around requirements development and acting on that need.

The DHS statement regarding requirements development is a fundamental procurement truth regardless of whether the procurement involves a complex weapons system or the strategic sourcing of commercial products and/or services.  The key to increasing competition and achieving savings is the clear, concise and consistent communication of requirements.   That is why the current federal strategic sourcing initiative (FSSI) strategy should be reexamined.  The current use of government-wide Blanket Purchase Agreements fails to take advantage of agency specific requirements.  Simply put, GSA is not the holder of customer agency mission requirements.  Customer agencies control, understand, and manage their budget profile, ordering and volume patterns, functional requirements, and delivery parameters.  The current use of generic, government-wide strategic sourcing BPAs limits the ability of customer agencies to strategically tailor their requirements based on their budget profiles, ordering and delivery patterns and volume commitments.  These generic, government-wide FSSI BPAs represent vertical contract duplication, limit competition, negatively impact small business and threaten the long term commercial supplier base.

A strategic sourcing approach that focuses on establishing agency specific BPAs under GSA’s Multiple Award Schedule (MAS) program would achieve significant savings across the federal enterprise while maintaining competition, providing greater opportunities for small business and ensuring a robust long term commercial supply chain.  The Coalition’s BPA Best Practices provides a blueprint for the effective use of BPAs by customer agencies to achieve savings.

GSA has a vital role to play in strategic sourcing.  The MAS value proposition is powerful:  customer agencies can quickly, efficiently and effectively achieve best market pricing through competition for specific requirements at the task/delivery order level.   Customer agencies should be empowered to establish MAS BPAs and/or orders based on their specific requirements and not forced to use generic, government-wide BPAs.    Leave the blocking and tackling to customer agencies, with GSA focusing on improving the playing field of MAS contracts.

Roger Waldron


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