The Coalition for Government Procurement

 

As promised in last week’s FAR & Beyond, this week, the focus is on the challenges and opportunities associated with the management of transactional data.

Last spring, GSA published a proposed General Services Acquisition Regulation (GSAR) that would establish a new requirement for GSA contactors (Multiple Award Schedule (MAS) contractors, IT GWAC contractors, and other GSA contractors) to report transactional data at the order and Blanket Purchase Agreement level to GSA on a monthly basis. The data elements to be reported include:       

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The proposed rule retains the Price Reduction Clause (PRC), but it deletes the tracking customer (basis of award) requirement for those MAS contractor reporting transactional data (TD). Commercial Sales Practices (CSP) information still would be required from all MAS contractors along with an ongoing obligation to provide updates throughout the life of the contract.

As you know, the Coalition submitted comments to GSA opposing the proposed rule. To be clear, however, Coalition members do not question the government’s discretion in choosing to use TD as part of the management of the procurement process (what the government will do with all this information is a matter for another blog). Rather, Coalition members are universally concerned about/opposed to “how” the government collects and manages TD.

The proposed rule will impose significant new and costly reporting burdens and compliance risks on GSA’s contractors. Negative impacts will be felt by small businesses, in particular, as they seek to do government-wide business through GSA’s contract portfolio. As noted in our comments on the proposed rule, the Coalition conducted a survey of its members regarding the costs associated with implementing and administering TD reporting.   The survey results revealed that the proposed rule would cost GSA contractors more that $800 million dollars annually to implement. These costs represent an economic drain on the private sector at a time when GSA is seeking to be an economic catalyst.

In essence, the proposed rule will require GSA contractors to aggregate, validate, and report data that the government already has in its possession. The government drafts the statement of work, issues the task or delivery order request, and pays the contractor upon receipt of the invoices. The government already has, in its possession/systems, all the data it is seeking under the proposed rule. As such, TD reporting represents a new form of contract duplication, one that increases costs for contractor and avoids addressing the internal systems needs of the government.   For this reason, Coalition members support a government pilot focused on procurement data collection activities internally across the federal enterprise. This effort could start with assisted services procurement organizations using the GSA Acquisition Hallways.

Along these lines, we wonder whether GSA’s largest customer, the Department of Defense (DoD), is taking an internal data management approach. As noted in last week’s blog, on January 5th, DOD published DoDI 5000.74, Defense Acquisition of Services (the instruction). This new instruction establishes policy, assigns responsibilities, and provides direction for the acquisition of services across DoD. Enclosure 6 of the instructions is entitled Data Collection, Reporting, and Inventory of Contracting Services. It establishes data collection and reporting requirements to support annual updates to senior officials and Functional Domain Experts. Enclosure 6 states in pertinent part that:

DoD Components will establish procedures to collect acquisition of contracted                 services data. Collection of the data, described in paragraphs 2a-0 of this                   enclosure, will be automated, as it is either already captured in DoD’s standard             procurement data systems or reported under the requirements of the annual                       ICS [Inventory of Contracted Services]. . ..(Emphasis added.)

See page 26, Enclosure 6, Paragraph 2 of DoDI 5000.74.

According to Enclosure 6, among the data elements already captured in DoD’s standard data systems or reported under the requirements of the annual ICS are:

  • Four Digit Product Service Code
  • Total price or estimated value of the contract, task order or interdepartmental Purchase Request
  • Total dollar amount obligated to date on the contract
  • Type of contract
  • Performance-based contract/task order or not
  • Identity of agency that made the award if the award was made on behalf of the DoD pursuant to an interagency agreement
  • Extent of competition
  • Award to a socio-economic category
  • Functions/mission performed by the contractor
  • Contracting organization and customer organization
  • Funding source
  • Fiscal year
  • Direct labor hours and associated costs from contractors to calculate full time equivalents

Although the instruction covers only services, it would be informative to know the specifics of this data collection and to what extent similar information for products/supplies also resides in DoD’s standard procurement systems.

The Coalition believes that DoD’s automated capture of data could be a step on the path towards addressing its internal procurement data collection and reporting needs and might help address the disconnect over TD reporting. For this reason, the Coalition would like to explore the creation of a Category Management Data Working Group led by DoD and GSA, with a charter of identifying strategies/opportunities to facilitate/implement improved internal collection and management of procurement data by the government. As part of its responsibilities, the working group would also conduct market research on pre-existing commercial sources of market data, as well as commercial best practices for the internal management and reporting of TD.

For its part, the Coalition offers to work with its members to identify commercial best practices for the internal management of procurement data. As always, the Coalition looks forward to sharing our research with GSA and OMB.

FAR & Beyond: Despite the snow, January has been a very busy month for procurement policy/management issues and initiatives.

Defense Acquisition of Services

On January 6th, the Department of Defense (DoD), Office of the Under Secretary of Defense for Acquisition Technology & Logistics USD (AT&L) published DoDI 5000.74, Defense Acquisition of Services. The new guidance establishes policy, assigns responsibilities and provides direction for the acquisition of services across DoD. The guidance establishes and implements a management structure for the acquisition of contracted services as well as addresses the management and use of data. The guidance seeks to create greater clarity and transparency for DoD and its stakeholders regarding the organizational structure and management approaches for the acquisition of services.

FSS Pricing Disclosures

On January 19th the Coalition submitted its comments on the information collection requirements of the Federal Supply Schedule (FSS) Pricing Disclosures. Significantly, in addition to the Price Reduction Clause (PRC) collection requirements, GSA, for the first time included the information collection requirements associated with the Commercial Sales Practices (CSP) submissions. GSA also specifically addressed and included burden hours and costs associated with training, compliance, audits, and reporting for the CSP and the PRC. The Coalition welcomes the greater level of awareness and transparency regarding the burdens and costs associated with these FSS pricing disclosure requirements. The Coalition looks forward to future opportunities to comment on the FSS pricing disclosures.

OMB Draft Policy on Software Licensing

On January 21st, the Coalition submitted its comments on the Office of Management and Budget’s (OMB’s) draft Category Management Policy 16-1: Improving the Acquisition and Management of Common Information Technology: Software Licensing. The draft memorandum seeks to establish a management framework for the acquisition of software across government while addressing contract duplication and identifying best practices. While the Coalition supports efforts to improve the acquisition of commercial software and reduce unnecessary contract duplication, there are concerns regarding the establishment of mandatory-use government-wide licenses and the creation of an Enterprise Software Category Management Team (ESCT) that will identify “best in class” solutions.   The Coalition comments include a series of questions regarding the software management initiative. We look forward to hearing from OMB with feedback on our comments and questions on the draft memo.

Much can be learned from the DoD, GSA and OMB documents about the government’s approach to the management of data. As the sign on Under Secretary Frank Kendall’s door states “In God We Trust; All Others Must Bring Data.”

More on “bringing data” in next week’s blog!

Analysis by Cameron Leuthy

(Bloomberg Government) — The eighth year of any administration that makes it that far sometimes feels like a slog. An election year with divided government — Republicans in control of the House and Senate and a Democrat in the White House — doesn’t feel like an auspicious climate for major budget policy proposals from the White House.

That’s why there’s a temptation to immediately declare the fiscal 2017 budget dead on arrival — but it’s only partly true.

Any major new legislative proposals in the president’s fiscal 2017 budget request — such as increased taxes or new spending programs — probably won’t gain traction.

However, the discretionary spending proposals for the annual appropriations that keep the government operating won’t be dead on arrival. Congress eventually has to decide on funding levels for everything — from paying federal workers to making grants and buying goods and services from the private sector.

Congress probably won’t finish appropriations until after the elections — but that’s not news. Congress hasn’t finished the appropriations process on time since 1997.

The Bipartisan Budget Act of 2015 gave the process a head start this year by setting discretionary caps for fiscal 2016 and 2017 for base defense and nondefense spending — as long as both sides stick to the deal.

Next Steps for HIT

January 21st, 2016

This week the Defense Health Agency (DHA) and GSA held an industry day highlighting DHA’s strategic decision to partner with GSA to meet its Health Information Technology (HIT) needs. The Coalition attended the session. It was an informative, wide ranging discussion of DHA’s procurement plans and GSA’s IT contract vehicles. In particular DHA addressed its HIT strategic goals and how its partnership with GSA will further advance those goals. The slides for the industry presentations can be found here.

As noted in last week’s FAR & Beyond blog, the Coalition believes the partnership between DHA and GSA is a positive step towards reducing unnecessary contract duplication. The Coalition looks forward to working with DHA and GSA to promote acquisition strategies that deliver best value mission support in meeting the healthcare needs of the warfighter.

A part of the industry day focused on IT Schedule 70. DHA discussed its goals for use of GSA’s IT Schedule 70. And, significantly, GSA announced its decision to create a Health IT SIN on IT Schedule 70. In support of its decision to add a Health IT SIN, GSA issues a Request for Information (RFI) providing draft terms and conditions for the SIN and seeking public feedback. Now that the decision has been made to create a Health IT SIN, the Coalition appreciates the public opportunity to comment on the proposed terms and conditions for the new SIN. Comments are due January 29th. Due to the short turnaround time, members should provide their comments to Aubrey Woolley by COB Wednesday, January 27th, if not earlier.

For our comments, the Coalition will be seeking feedback from members on identifying processes, procedures and terms that will foster an efficient, effective implementation for both government and industry. The Coalition will focus on promoting a dialogue with GSA and DHA that ensures the creation of the Health IT SIN does not create duplicative paperwork, accounting and compliance (e.g. Price Reduction Clause) activities. For example, the Coalition is seeking your feedback and recommendations on how to efficiently and effectively list products and services that qualify for both the more general IT SINs and the HIT SIN. The Coalition is also seeking feedback on the timing and scope of compliance with the RFI’s term requirement that HIT products and services offered under the new SIN comply with all applicable Healthcare and industry standards. In addition, the Coalition welcomes member in put on the role of resumes and the inclusion of minimum experience and education labor qualifications at the contract level. The Coalition notes that FAR 39.104 addresses the role of minimum experience and education requirements in IT contracts. We look forward to member input on these areas as well as any other comments regarding the RFI terms and conditions.

Finally, Coalition members look forward to continuing the dialogue with GSA and DHA regarding effective, competitive and innovative approaches to acquiring HIT products and services through GSA’s suite of government-wide IT contract vehicles.

Last month the Defense Health Agency (DHA) announced its decision to partner with the General Services Administration (GSA) to satisfy its Health Information Technology (HIT) requirements. The Coalition applauds this positive step toward reducing contract duplication. Coalition members look forward to working with DHA and GSA to provide efficient, effective best value solutions to support the healthcare needs of the warfighter.

In articulating its rationale for utilizing GSA’s suite of contract vehicles, DHA stated in part that market research determined that there was overlap between the Alliant GWAC contractors and the former D/SIDDOMS prime contractors. D/SIDDOMS was the Department of Defense’s previous MAIDIQ contract program for HIT. DHA also stated that to promote outcome standardization and cost/process efficiencies it will use Alliant, Alliant SB, 8(a) Stars II, VETS and Schedule 70. Significantly, the notice also indicated that “to facilitate onboarding of new technological solutions as efficiently as possible, DHA will work with GSA’s Schedule 70 program to create a new HIT Special Item (SIN) aligned with DHA and other Federal agencies’ requirements.”

On January 20th DHA will be holding an industry day to share its strategy with the IT contractor community. The industry day will be held at the GSA Central Office with two sessions, one starting at 9 am and the second at 1 pm. The same information will be presented at each session. As part of the industry day GSA will discuss “the work it is doing to create a Schedule 70 HIT Special Item Number (SIN), the GWAC programs, the future Alliant 2 and VETS 2 contracts.” The industry day is a very positive, sound step for DHA and GSA in communicating with industry partners regarding the way forward for DHA’s HIT requirements. Coalition members look forward to hearing first hand, DHA’s strategies for using GSA’s suite of contract vehicles.

Coalition members are also very interested in hearing an update on GSA’s work in evaluating the potential for a HIT SIN. Last summer GSA issued an RFI seeking industry feedback on the possibility of creating a HIT SIN. By letter dated July 7, 2015, the Coalition provided comments in response to the RFI. As noted in the letter, the Coalition supports GSA’s efforts to explore new ways to enhance its acquisition offerings for customer agencies. As part of the industry day, Coalition members look forward to GSA’s feedback on the industry responses to the RFI. This feedback will be an important step in GSA and industry’s partnership working towards efficient, effective and best value use of Schedule 70 to meet HIT needs.

Interestingly, as noted above, DHA wants to facilitate onboarding of new technological solutions as efficiently as possible. The Coalition members share DHA’s strategic goal for Schedule 70. In January 2014, in response to an outreach effort by OMB, the Coalition submitted a white paper entitled “MAS Reform: Towards an Innovation Portal.” The white paper provides recommendations to transform Schedule 70 into the IT Commercial Innovation Schedule. The white paper seeks to build on GSA’s New Introductory Item Special Item Number process by identifying opportunities to streamline the schedule contracting process and reduce barriers to entry to facilitate increased competition and access to innovation from the commercial marketplace.

Finally, the DHA industry day highlights the critical role GSA can play in bringing both customer agencies and contractors together to support the mission. A strong partnership between DHA, GSA and industry will ensure that DHA’s and GSA’s objectives are met. Coalition members look forward to hearing from DHA and GSA on January 20th. The Coalition stands ready to engage in a dialogue with GSA and DHA on achieving efficient, effective best value contracting processes through Schedule 70 to support the warfighter.

By Eric SitarchukMeredith AutenRebecca HillyerEvan JacobsAllyson Ho of Morgan Lewis

Supreme Court grants certiorari in qui tam case to consider viability and scope of the “implied certification” theory of liability under the False Claims Act.

On December 4, the US Supreme Court granted certiorari in Universal Health Services, Inc. v. Escobar[1] to address the hotly debated “implied certification” theory of False Claims Act (FCA) liability. The Court’s decision could have significant implications on FCA jurisprudence by potentially foreclosing the theory in its entirety or, alternatively, providing a uniform standard and limitations in its application.

  • The FCA proscribes “knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval.”[2] In defining the element of falsity under the FCA, courts have divided claims into two categories: claims that are factually false and those that are legally false. The latter category is further divided into claims premised on either an “implied” or “express” certification of compliance with conditions of payment.[3] The implied certification theory generally contemplates liability under the FCA where a contractor seeks and receives reimbursement from a government payor for services rendered, but has not complied with a statute, regulation, or contractual provision that is a condition of payment by the government payor for those services. The theory is “implied” because it applies even where the contractor has made no express certification of compliance to the government.

 

The Circuits Are Split on the Implied Certification Theory

The circuits are split on the viability and proper scope of the implied certification theory. The Seventh Circuit has rejected it; other circuits have accepted it but apply the theory inconsistently and without articulating a clear standard.

The Supreme Court has agreed to consider two important questions:[4]

(1) “Whether the ‘implied certification’ theory of legal falsity under the FCA—applied by the First Circuit below but recently rejected by the Seventh Circuit—is viable.”

(2) “If the ‘implied certification’ theory is viable, whether a government contractor’s reimbursement claim can be legally ‘false’ under that theory if the provider failed to comply with a statute, regulation, or contractual provision that does not state that it is a condition of payment, as held by the First, Fourth, and D.C. Circuits; or whether liability for a legally ‘false’ reimbursement claim requires that the statute, regulation, or contractual provision expressly state that it is a condition of payment, as held by the Second and Sixth Circuits.”

The first question involves the circuit split between the Seventh Circuit, which has rejected the “implied certification” theory, and the First, Second, Fourth, Sixth and D.C. Circuits, which have accepted the theory in various forms.

For example, in United Sates v. Sanford Brown, Ltd.,[5] the Seventh Circuit considered a defendant’s alleged noncompliance with a Program Participation Agreement (PPA) necessary to receive certain federal education subsidies. The PPA obligates the defendant to “abide by a panoply of statutory, regulatory, and contractual requirements,” many of which are incorporated by reference to the respective statute, regulation, or contractual provision.[6] The government argued that defendant’s adherence to these obligations were “conditions of payment,” which would require an institution to “remain in compliance with all of the PPA’s conditions in order to remain lawfully eligible to continue receiving federal subsidies.”[7] The Seventh Circuit rejected this argument, holding that “the government’s theory of liability lacks a discerning limiting principle” and that it would be “unreasonable for us to hold that an institution’s continued compliance with the thousands of pages of federal statutes and regulations incorporated by reference into the PPA are conditions of payment for purposes of liability under the FCA.”[8]

In contrast, in Escobar, while the First Circuit claimed to “eschew[] distinctions between . . . implied and express certification theories,” it ultimately upheld an implied certification theory of liability. Escobar concerned allegations against a mental health clinic that certain caregivers at one of its facilities were not properly supervised in violation of state Medicaid regulations and that the clinic violated the staff composition requirements contained in those regulations. Citing provisions of the state Medicaid regulations, the First Circuit held that these supervision and licensure requirements “clearly impose conditions of payment” and that “alleged noncompliance with certain regulations were sufficient allegations of falsity to survive a motion to dismiss.”[9]

The Supreme Court is poised to resolve this circuit split and determine whether the implied certification theory is viable in the first instance. Should the Court determine that the implied certification theory is sustainable, it could address the second question presented to provide needed guidance on applying the theory.

Significantly, circuit courts “differ on whether a condition of payment must be expressly identified as such, or whether a statute, regulation, or contractual provision can be a ‘condition of payment’ even if it does not state that payment is conditioned on compliance.”[10] In Mikes v. Straus,[11] the Second Circuit held that the “implied false certification is appropriately applied only when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order to be paid.”[12] The Second Circuit reasoned that “the False Claims Act was not designed for use as a blunt instrument to enforce compliance with all medical regulations—but rather only those regulations that are a precondition to payment—and to construe the impliedly false certification theory in an expansive fashion would improperly broaden the Act’s reach.”[13]

Other courts of appeals, however, have adopted a broader application of the implied certification theory. In United States v. Sci. Applications Int’l Corp.,[14] the D.C. Circuit rejected the limitation, articulated by the Second Circuit, that the implied certification theory can apply only where the underlying statute or regulation is expressly designated as a precondition of payment. The D.C. Circuit expressed concerns that adopting such a limitation “would foreclose FCA liability in situations that Congress intended to fall within the Act’s scope.”[15] Other courts of appeals have held similarly to the D.C. Circuit.[16]

 

Conclusion

Given the significant conflicts among the courts of appeals on these important issues, the Supreme Court can provide critical guidance on the viability and scope of the implied certification theory of liability. That guidance will be critical for companies that contract with and seek reimbursement from government payors.

 

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Philadelphia
Eric Sitarchuk
Meredith Auten
Rebecca Hillyer
Evan Jacobs
Allyson Ho

[1] No. 15-7, — S. Ct. –, 2015 WL 4078340 (Dec. 4, 2015).

[2] See 31 U.S.C. § 3729(a)(1)(A).

[3] See United States ex rel. Escobar v. Universal Health Servs., Inc., 780 F. 3d 504, 512 (1st Cir. 2015).

[4] See Universal Health Servs., Inc. v. United States, No. 15-7, 2015 WL 4078340, at *1 (U.S. Dec. 4, 2015); see also Petition for Writ of Certiorari at *i, Universal Health Servs., Inc. v. United States, No. 15-7 (U.S. June 30, 2015), 2015 WL 4035937.

[5] No. 14-2506, 788 F.3d 696 (7th Cir. 2015).

[6] Id. at 701.

[7] Id. at 709-10.

[8] Id. at 711.

[9] See 780 F. 3d at 513-14.

[10] See Petition for Writ of Certiorari at *3, Universal Health Servs., Inc. v. United States, No. 15-7 (U.S. June 30, 2015), 2015 WL 4035937.

[11] 274 F.3d 687 (2d Cir. 2001).

[12] Id. at 699; see also Chesbrough v. VPA, P.C., 655 F.3d 461, 468 (6th Cir. 2011).

[13] Id. at 609.

[14] 626 F.3d 1257, 1268 (D.C. Cir. 2010)

[15] Id. at 1268.

[16] See United States ex rel. Hutcheson v. Blackstone, 647 F.3d 377, 386-88 (1st Cir. 2011); see also United States v. Triple Canopy, Inc., 775 F.3d 628, 636 (4th Cir. 2015).

In accordance with the Paperwork Reduction Act, the General Services Administration’s (GSA’s) Office of Acquisition Policy published a November 18th notice requesting public comments regarding the paperwork burdens of GSAR Clause 552.238-75, Price Reductions, commonly referred to as the Price Reductions Clause (PRC). The Coalition is asking members to please review this notice and provide feedback on the practical utility of PRC compliance and Commercial Sales Practice disclosures, GSA’s estimates of the burden for contractors of collecting this information, and what drives price reductions off the Schedules price for your Federal customers (e.g. the PRC, competition, market changes, etc.). Please send your submissions to Aubrey Woolley by COB Jan. 12th.

At its core, GSA is requesting an extension of the information collection requirements as set forth in the PRC. However, the requested extension has been expanded and renamed “Federal Supply Schedule Pricing Disclosures.”   Significantly, the notice not only includes burden estimates for the PRC. For the first time it also includes burden estimates for the Commercial Sales Practices (CSP) disclosures—the information that is used to establish and maintain Federal Supply Schedule pricing and price related terms and conditions.

The Coalition applauds GSA’s acknowledgement and inclusion of CSP burdens in the notice. It is a transparent step forward in the dialogue around pricing and data disclosure. It is important to note that GSA credited comments received in response to the proposed Transactional Data Reporting (TDR) rule as spurring it to include the CSP burden in the current notice. As you will recall, as part of the TDR notice, GSA noted that it in addition to transactional data reporting (e.g. task order reporting) it would maintain the right to ask for updated CSP at any time throughout the life of the contract. In response to this statement the Coalition, among others, provided comments to GSA indicating the significant burdens associated with this statement and the CSP. We are gratified to see GSA acknowledging this burden in the current “Federal Supply Schedule Pricing Disclosures” notice (hereinafter the Pricing Disclosures notice).

The Pricing Disclosures notice also include three other significant changes. First, the notice actually included a total estimated cost burden for the PRC and the CSP. In the past, the burden was stated in terms of an average and a total number of burden hours. Second, the cost burdens are assessed for two categories of contractors: (1) Heavier lift contractors; and (2) Lighter lift contractors. Heavier lift contractors are those with higher sales volume under the contract which, in GSA’s view, likely results in a greater burden. Third, the notice sets forth the burden in several cost categories for the heavy lift and lighter lift contractors. These categories include training, compliance systems, OIG audits, price reduction notifications, pre-award disclosures, price increase modifications, adding items and SINs, and exercising options.

In seeking public comments GSA stated the following:

“Public comments are particularly invited on: Whether this collection of information is necessary and whether it will have practical utility; whether our estimate of the pubic burden of this collection is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected.”

As Coalition members will recall, the last public notice seeking comments on the PRC burden was published in 2012. At that time the Coalition conducted a survey of our members regarding the PRC burdens which formed the basis for our response to GSA. In turn, GSA specifically cited our comments in subsequently increasing the burden hours associated with the PRC. Please review our 2012 comments and GSA’s subsequent notice increasing the burden.

Coalition members, we need your support on this central issue once again. We are seeking your comments and feedback on the Pricing Disclosures notice and the specific areas cited above where GSA is seeking public comment. In particular, please provide us with your analysis regarding price drivers. What drives price reductions? Is it competition? Market changes? Sales goals? The PRC?

Please provide your feedback to Aubrey Woolley by Tuesday, Jan 12th.

 

This month, Administrator Denise Turner Roth provided the keynote address at the DC Chamber of Commerce Annual Meeting & Chairman’s Inaugural Breakfast. The address focused on GSA’s role as an economic catalyst and on the importance of public and private partnerships. Administrator Roth’s address reflected her strong commitment to strengthening GSA’s relationship with the business community.

In outlining GSA’s economic catalyst initiatives, Administrator Turner Roth set forth three guiding principles:

  • Foster two-way communications between government and industry, leading to improved contract requirements that reflect supplier feedback
  • Increase support to prospective and new vendors, which allows us to continually cultivate the products and services the government has access to
  • Reduce barriers and complexity across the board by reviewing internal processes to ensure they are geared toward achieving desired results

Coalition members welcome and support the Administrator’s focus on the government-industry partnership. In the spirit of that partnership, Coalition members also look forward to future Myth-Busters dialogues on opportunities to implement/apply the Administrator’s three principles to specific procurement policies and procedures governing GSA’s government-wide contracting portfolio, including the Multiple Award Schedule (MAS) program.

As part of that dialogue, in January, FAR & Beyond will launch a series of blogs identifying opportunities to apply these principles throughout GSA’s contract portfolio in an effort to solve key challenges that currently impede economic growth and opportunities for commercial firms nationwide. Opportunities to streamline acquisition procedures and increase government access to commercial products, services, and solutions are tailor-made for the synergistic effect of government-industry in partnership. There is no shortage of opportunities for government and industry to partner in streamlining acquisition procedures and increase access to commercial products, services and solutions.

With regard to GSA’s MAS program, there is no greater barrier to entry for commercial firms than the closure of schedules to new offers. Procurement law long has recognized that, by definition, competitive procedures under the Competition in Contracting Act of 1984 (CICA) includes the multiple award schedules program if, among other things, participation in the program is open to all responsible sources. By undermining full and open competition, closing the schedules to new offers mitigates the government’s access to the fruits of market forces: innovation and downward pressure on prices. In addition to contradicting the spirit, if not the letter, of the law, it is antithetical to the schedules program’s raison d’etre.

Currently, multiple schedules are closed to new offers. For example, Schedule 75 – Office Solutions: Supplies & Services has been closed to new offers since 2010. A very powerful, symbolic first step in reducing barriers and increasing support to vendors would be to reopen this schedule to new offers. Such a step would be a catalyst for economic activity and provide opportunities for new vendors to enter the federal market. It also would provide current Schedule 75 contractors who are approaching the end of their 20 year contract term an opportunity to submit offers and receive new contracts to continue to compete and deliver commercial products and services to customer agencies. In the end, everyone benefits.

Schedule 75 continues to play a positive role in the federal marketplace for office supplies and services, and thus, it reflects the enduring strength of the MAS platform. According to GSA’s Schedule Sales Query (SSQ) tool, sales under Schedule 75 totaled $362 million for the first 3 quarters of FY2015. In contrast, according to SSQ, sales under GSA’s separate Federal Strategic Sourcing Initiative (FSSI) OS3 Multiple Award IDIQ contract totaled $50 million for the same time period. Clearly, Schedule 75 remains an important engine of opportunity, an economic catalyst, for the commercial office solutions industry, and it should be maintained and promoted by re-opening it to new offers!

By Robert S. Metzger[i]

[Originally posted on Bloomberg BNA]

 

The federal government purchases more than $30 billion of goods and services annually through various General Services Administration (GSA) Multiple Award Schedule (MAS) contracts. Today, when federal agencies purchase information and communication technology (ICT) using GSA contracting vehicles, there are no generally applicable requirements to protect against cyber or supply chain threats. This will change – and should. Federal agencies, including the Department of Defense, use GSA contract vehicles to acquire information systems, solutions, hardware, and software. Federal agencies need assurance that sensitive federal information will be protected against loss or compromise when shared with contractors who sell through GSA vehicles. Similarly, GSA needs to minimize exposure to counterfeit or corrupted hardware when purchased through its contracts.

Cybersecurity and supply chain security are related, but distinct. In the contemporary threat environment, both are crucial national objectives. As used here, the objective of cybersecurity is the protection of information and information systems against attacks which have their principal purpose the unauthorized extraction (theft) of sensitive and valuable federal information. Representative cyber attacks may be executed against vulnerable networks, weaknesses in information system, or through manipulation of connected devices. Supply chain security, among other purposes, seeks to assure the integrity and functionality of hardware. When supply chain security fails, owners and operators of electronic equipment may experience premature failure or degraded performance. Counterfeit electronic parts are among the threats addressed by supply chain security. Parts that are tainted or harbor malicious encoded control software can combine dangers both to cybersecurity as well as physical security of affected systems. (These distinctions are not always well understood.)

This article finds that the national interest dictates new measures that GSA should adopt to better protect against both cyber and supply chain threats to the billions of dollars or supplies and services, especially information technology equipment and services that are purchased annually for federal agencies and other eligible users of GSA’s MAS vehicles. These threats endanger the ability of federal agencies to perform their missions, expose sensitive federal and contractor information to unauthorized extraction and use, and could impair the reliability of electronic systems that are essential to the functioning of both civil and defense functions of government. Addressing these threats by changes to MAS contracting practices will be daunting. But strategies and methods can be identified and must be pursued. GSA can add cyber and supply chain security requirements to master Schedule contracts and can establish a range of new contract terms that are available to agencies when placing orders under these contracts. It can isolate into new Schedules and SINs certain supplies or services to which more demanding security requirements apply. At the same time, GSA will have to weigh its actions carefully and seek input from its thousands of commercial companies who hold Schedule contracts. It should not impose unnecessary obligations on the MAS contractor base that add expense or unduly restrict competition.

Many Cyber and Supply Chain Security Initiatives

There are multiple, concurrent initiatives underway to better protect federal information and information systems against both cyber and supply chain threats. These have been accelerated as agencies react to the Office of Personnel Management (OPM) cyber breach and similar events. By and large, GSA has been outside the recent initiatives.

  • The National Archives and Records Administration (NARA) is nearing completion of a new federal regulation that will govern all forms of “controlled unclassified information” (CUI).[1] The NARA rule will distill more than 100 types of sensitive but unclassified federal information into 23 categories and 82 subcategories of CUI. It will apply across all federal agencies, provide rules on designation and marking of controlled information, and guide agencies on public access rights and on allowable dissemination. The NARA rule also will establish baseline measures for both physical and electronic safeguarding of CUI.
  • The National Institute of Standards and Technology (NIST) has issued a new Special Publication, NIST SP 800-171, specifically intended to inform companies who operate nonfederal information systems on how they should protect CUI.[2]
  • Through a revised Interim Rule,[3] DoD now requires its entire supply chain to protect four kinds of “covered defense information.”[4]To protect this information on contractor systems, DoD’s Interim Rule adopts the new NIST SP 800-171 standard. DoD previously acted to obligate its key contractors to adopt systems and practices to detect and avoid counterfeit electronic parts.[5] By a Proposed Rule released for comment in September, DoD now proposes to extend supply chain security measures to its entire supply chain, inclusive of small businesses and sellers of Commercial Off The Shelf (COTS) products.[6]

The Office of Management and Budget (OMB) in August issued draft Acquisition Guidance to provide federal agencies with guidance on implementing strengthened cybersecurity protections in Federal acquisitions for products or services that generate, collect, maintain, disseminate, store, or provide access to Controlled Unclassified Information.[7] The draft guidance would direct agencies to

[1] Controlled Unclassified Information, (Proposed Rule), 80 Fed. Reg. 26501, May 8, 2015, available at http://www.gpo.gov/fdsys/pkg/FR-2015-05-08/pdf/2015-10260.pdf.

[2] Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations, NIST Special Publication (SP) 800-171, June 2015, available at http://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-171.pdf.

[3] Network Penetration Reporting and Contracting for Cloud Services, (DFARS Case 2013– D018) (Interim Rule), 80 Fed. Reg. 51739, Aug. 26, 2015, available at http://www.gpo.gov/fdsys/pkg/FR-2015-08-26/pdf/2015-20870.pdf. The new Interim Rule revises an earlier rule,Safeguarding Unclassified Controlled Technical Information, (DFARS Case 2011–D039) (Interim Rule) (hereafter, the “UCTI Rule”), Nov. 18, 2013, available at www.gpo.gov/fdsys/pkg/FR-2013-11-18/pdf/2013-27313.pdf. The 2015 Interim DFARS includes the category of information previously protected, Unclassified Controlled Technical Information (UCTI), as one of the four types of “covered defense information.” What was “UCTI” now is designated as “controlled technical information,” namely technical information with military or space application. DFARS 204.7301 (Definitions), at 80 Fed. Reg. 51742.

[4] The four information types include “controlled technical information”, critical information (operations security), export-controlled information and “[a]ny other information” that requires safeguarding or dissemination controls pursuant to “laws, regulations, and Governmentwide policies.” The last category anticipates the final rule on Controlled Unclassified Information. DFARS 204.7301 (Definitions), at 80 Fed. Reg. 51742.

[5] Detection and Avoidance of Counterfeit Electronic Parts, (DFARS Case 2012–D055) (Final Rule), 79 Fed. Reg. 26092, May 6, 2014, available at http://www.gpo.gov/fdsys/pkg/FR-2014-05-06/pdf/2014-10326.pdf.

[6] Detection and Avoidance of Counterfeit Electronic Parts—Further Implementation, (DFARS Case 2014–D005) (Proposed Rule), 80 Fed. Reg. 56939, Sept. 21, 2015, available at http://www.gpo.gov/fdsys/pkg/FR-2015-09-21/pdf/2015-23516.pdf.

[7] Improving Cybersecurity Protections in Federal Acquisitions, (draft Guidance), Office of Management and Budget, Aug. 11, 2015, available at https://policy.cio.gov/.   The final Guidance is expected soon.

[i] Robert S. Metzger is a shareholder and heads the Washington, D.C. office of Rogers Joseph O’Donnell, PC (RJO). This article presents his individual views and should not be attributed to any client of RJO or to any organization with which Mr. Metzger is or may be affiliated. Mr. Metzger acknowledges with appreciation the insight of several reviewers of the draft of this article, including his RJO colleague, Brian D. Miller, who served as Inspector General of the GSA from 2005-2014.

GSA’s Acquisition Services Fund (ASF) is a revolving fund in the Treasury authorized by statute (40 U.S.C. 321) to support Federal Acquisition Service (FAS) operations. The ASF is essentially the result of the merger of the General Supply Fund (GSF) and the Information Technology Fund (ITF) that supported operations of the Federal Supply Service (FSS) and the Federal Technology Service (FTS). As part of the merger of FSS and FTS, the ASF fund was created to replace the GSF and the ITF.

The ASF receives no direct appropriations from Congress. The GSA Administrator is charged with determining the ASF’s cost and capital requirements for each fiscal year and developing a plan addressing those requirements in consultation with GSA’s Chief Financial Officer. Any change to the plan’s ASF cost and capital requirements for a fiscal year must be approved by the Administrator.

The statute provides that, as part of the cost and capital plan, the Administrator shall establish rates to be charged agencies that are provided for personal property and non-personal services through the ASF. Examples of rates charged agencies include the MAS program’s Industrial Funding Fee (IFF), the contract access fee included on the IT GWACs and OASIS, and the fees charged agencies for FAS’s assisted services support. In addition, the ASF is authorized to collect revenue from the net proceeds of personal property disposal and the receipts from carriers for loss of, or damage to personal property.

As mentioned above, the ASF supports direct procurement operations across FAS, including, but not limited to, Assisted Acquisition Services, General Supplies and Services, Integrated Technology Services and Travel, Motor Vehicle and Card Services. The ASF can also pay for the following:

other direct costs of and indirect costs that are reasonably related to, contracting, procurement, inspection, storage, management, distribution, and accountability of property and nonpersonal services provided by the General Services Administration or by special order through the Administration. See 40 U.S.C. 321(c)(1)(C).

It appears that GSA uses this statutory authority to fund the Integrated Award Environment (IAE), the Common Acquisition Platform (CAP), and 18F.

The statute provides that, at the end of each fiscal year, the uncommitted balance of funds remaining in ASF, after making provisions for anticipated needs Federal agencies, shall be transferred to the general fund of the Treasury as miscellaneous receipts. A commitment occurs when the CFO concurs with a purchase request and fences the funds to support the pending requirement. An obligation occurs when the contract is signed or some mandatory action like payroll occurs. As part of the overall ASF plan, GSA may also maintain reserves to account for future needs, obligations, and investments.

Based on a review of publicly available documents, at the end of the last two fiscal years, the unobligated ASF balances appear to be approximately $2 billion at the end of FY 14 and $1.8 billion at the end of FY15. The unobligated balance, or “surplus”, affords FAS a significant tool to invest in the future. Two immediate opportunities for investment in the procurement system that would have immediate impact are:

  1. Increasing investments in the development of the acquisition workforce.
  1. Investing in internal systems to aggregate and report transactional data across the Federal enterprise.

First, increasing training and professional development for the FAS acquisition workforce manifests a commitment to the agency’s most important resource, its people, which will be reflected in continuous improvement of the efficiency and effectiveness of the MAS program. For example, MAS contractors currently report a lack of consistency in the application and/or understanding of the underlying pricing policies and procedures governing the negotiation and award of MAS contracts. These inconsistencies can unnecessarily increase costs, delays, and uncertainty around contract awards and modifications.[1] Training can help address this concern! Make no mistake, the Coalition understands the importance FAS management places on supporting the acquisition workforce, which is why it supports providing FAS management with more resources to increase opportunities for training and professional development. Again, it is an investment in the future of FAS.

Second, consistent with ASF’s ability to fund other direct and indirect costs associated with procurement operations a portion of the unobligated balance or reserve should be set aside to fund/support the development of internal systems for the aggregation and reporting of transactional data across the federal enterprise. This should be done in lieu of imposing costly transactional data reporting requirements on MAS contractors. As they stand now, the proposed transactional data reporting requirements amount to a “tax” on MAS contractors and agency users. Indeed, the Coalition, in its comments on the proposed transactional data rule, specifically noted that the costs associated with the implementation and ongoing management of the rule are in the hundreds of millions of dollars annually. These costs eventually will be passed on to government customers through higher contract prices.

Rather than imposing a costly new reporting system on government contractors, and ultimately, agency customers, FAS should use the ASF to fund a pilot for an internal transactional data reporting system that would allow GSA to collect and share transactional data from customer agencies. By piloting such a system, GSA could assure that it has the processes in place to secure proprietary and/or FOIA-protected vendor information.

It should be remembered that, under the rule, GSA is asking contractors to report data the government already has in its possession. This investment merely represents a less costly and more efficient alternative for GSA to access the data it possesses than the proposed rule. Clearly, the precedent for such an approach already exists, as one need only to look to IAE, CAP, and 18F.

 

[1]In response to this concern, in calendar year 2016, the Coalition will be conducting a survey of MAS contractors seeking their feedback regarding the consistency and accuracy of the application/interpretation of the current pricing policies and procedures across the FAS portfolio. The survey results will be shared with FAS leadership as part of a Myth-Busters dialogue.

 

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