Friday Flash 03.31.17

FAR & Beyond

The Office of American Innovation:  A Jump Start for Procurement Innovation! 

On Monday, President Trump established the White House Office of American Innovation (OAI).  The OAI “will make recommendations to the President on policies and plans that improve Government operations and services, improve the quality of life for Americans now and in the future, and spur job creation.”  OAI will be responsible for launching initiatives with a focus on innovation, coordinating implementation of any resulting plans and creating reports of the President setting forth policy recommendations.”  In furtherance of its mission, OAI “will gather information, ideas, and experiences from other parts of Government, from the private sector, and from thought leaders and experts outside of the Federal Government.”

The OAI is a timely, strategic, and necessary effort.  Although there are many processes of government, the federal procurement process underpins all that the Government does to serve the American people. Unfortunately, too often that procurement process increases costs, reduces competition, and serves as a barrier to access best value commercial products, services and solutions.  The risk is that day-to-day Government operations become suboptimal, i.e., not efficient or effective in meeting mission requirements.

OAI can drive procurement streamlining that will create a dynamic, innovative, and responsive federal procurement marketplace.  To jump-start this innovation in procurement, the OAI can embark quickly on a Procurement Innovation Initiative (PII) encompassing the following:

  • Identify best practices in procurement, share lessons-learned, and leverage centers of excellence and innovation, like GSA’s FEDSIM and the Department of Homeland Security’s Procurement Innovation Lab.
  • Tap the unfulfilled potential of GSA’s Multiple Award Schedule (MAS) program by streamlining the contracting process to increase access to the dynamics of the commercial marketplace. Currently, the program is weighed-down by backward looking, burdensome data reporting and pricing compliance requirements that increase costs and reduce access to new commercial innovations in products and services.
  • Streamline and reorganize the Department of Veterans Affairs (VA’s) procurement operations, especially the VA’s MAS program, to ensure, timely, cost-effective access to the latest commercial medical products, services, pharmaceuticals and technologies to support Veterans healthcare. The Coalition will be conducting a survey of VA industry partners to identify additional recommendations to improve the procurement process.  The results will be shared with key stakeholders in furtherance of our common goal to support Veterans healthcare.
  • Put “commercial” back in commercial item contracting by creating an environment that mirrors, as closely as possible, the commercial market. By so doing, the government increases the incentive for commercial innovators to enter the public space with cutting edge technology and the benefits of robust competition.

The procurement system provides OAI with a strategic opportunity to truly create a 21st century Government, responsive to the needs of the American people, and, by delivering timely, best value commercial products, services, and solutions to customer agencies and the American people, these PII initiatives offer a “quick win” for innovation and reform.

The Coalition looks forward to supporting and working with the Administration’s new Office of American Innovation.

 

Last Chance to Register for Assisted Services Forum

On Tuesday, April 4, from 7:30 am – 12:30 pm, join the Coalition and government speakers from the General Services Administration’s (GSA) Assisted Acquisition Services (AAS).  Participants such as Tom Howder, Assistant Commissioner for AAS, and several Region Directors will be discussing What is AAS and How Does it Work?; Chris Hamm, Director of FEDSIM, and Sector Directors will be discussing The Work of FEDSIM; an industry panel of current FEDSIM contractors will be discussing Why and How they do Business with FEDSIM; and Rob Coen, Strategy Director for FEDSIM, and Chris Hamm will be discussing Streamlining Acquisition.  The session will conclude with a Pipeline Analysis for AAS and FEDSIM.  To register, click here.

Fair Pay and Safe Workplaces Revoked

On Monday, March 27, President Donald Trump signed the House Joint Resolution 37 into law and issued an Executive Order (EO), officially revoking the Fair Pay and Safe Workplaces  final rule and authorizing EO. The joint resolution of disapproval was passed by the House of Representatives on February 2, and the Senate on March 7. Pursuant to the Congressional Review Act (CRA), agencies are barred from issuing any rule that is “substantially similar” in place of Fair Pay and Safe Workplaces. In addition, President Trump also instructed Executive departments and agencies to consider rescinding their policies, rules, regulations, and guidance related to the implementation of the EO.

House Hearing on Challenges in Federal IT Acquisition

This week the House Oversight and Government Reform Committee received testimony related to the current challenges in Federal IT acquisitions and potential opportunities for reform. Among those testifying before the Committee was former Office of Federal Procurement Policy Administrator and current chair of the Section 809 Panel, Deidre Lee, who highlighted four pressing concerns for the Federal government related to IT acquisitions:

  • The need for policy to support agencies’ ability to execute their missions
  • The need to simplify a procurement process that can impede the ability of businesses to enter the Federal marketplace
  • The need to recognize the value of time
  • The need to recognize and reduce the risks associated with doing business with the Federal government

In addition, Ms. Lee detailed how the Section 809 Panel is currently working to produce a “how-to roadmap” that will provide Congress with step-by-step guidance for reforming defense acquisitions. This guidance, according to Ms. Lee will provide line-by-line, data-driven support for its recommendations. To watch the full hearing, click here.

 

Upcoming Schedule Mass Modification on Subcontracting Plans

On March 22, the General Services Administration (GSA) hosted a webinar detailing the upcoming Refresh/Mass Modification that will incorporate various clause and provision updates for all GSA Schedules, including small business subcontracting improvements. The Refresh is expected to be released by mid-April 2017, however, it may take longer for those schedules that fall within the scope of the Transactional Data Reporting Pilot Program. A draft of significant changes and a new model Subcontracting Plan can be found here and the slides can be found here.

Additionally, on March 28, the Coalition hosted a webinar on What Contractors Need to Know about New Subcontracting Plan Requirements (Part 1) with Robin Bourne, from GSA’s Office of Acquisition Policy, and John Corro, the program manager for the e-Subcontracting Reporting System (eSRS). The webinar provided additional information on the new requirements for subcontracting plans. The slides from the webinar can be found here. Part 2 of the webinar series will continue to describe additional subcontracting requirements.

 

Take the Contract Duplication Survey Today!

We ask that members please take a moment to complete the Coalition’s Contract Duplication Survey. The Coalition is specifically seeking member feedback on:

  • Number of duplicative contracts that members participate in
  • Costs associated with bidding on duplicative contracts
  • Impact that contract duplication has on small businesses

The Coalition will be using the results of this survey to update our 2012 study on contract duplication that examined industry costs associated with contract duplication. In September, Coalition President, Roger Waldron, shared the results of the original study with the DoD Advisory Panel on Streamlining and Codifying Acquisition Regulations (809 Panel) and the updated survey will be presented to the panel once it is completed.

 

President’s Budget to Include IT Modernization Fund

Representative Will Hurd (R-TX), the chairman of the Information Technology Subcommittee under the House Oversight and Government Reform Committee, has announced that the President’s budget will include a proposal for an IT modernization fund managed by the Office of Management and Budget (OMB).

Rep. Hurd noted that Congress has not decided how much funding they will request. The previous IT modernization bill that was sponsored by Rep. Hurd passed the House, but not the Senate, after the Congressional Budget Office determined the proposal would cost $9 billion.

 

Defense Acquisition Workforce Receives Timely Funding

On Tuesday, the Government Accountability Office (GAO) released a report on the Defense Acquisition Workforce Development Fund (DAWDF). The fund was established by Congress in 2008 as a way to provided dedicated funding for recruiting, training, and retaining members of Department of Defense’s (DoD) acquisition workforce. Since its creation in 2008, DoD has obligated more than $3.5 billion from the fund to improve the acquisition workforce.

Congress had expressed concern that significant balances in the fund were being carried over from one fiscal year to the next. As a result, Congress altered the process for the fund, allowing DoD to transfer expired capital.The GAO report found that because of this change DoD reduced the time it took to fund the DAWDF from 24 months to 2 months.  GAO made recommendations that DoD clarify if funds can be used to pay for management of the fund and to ensure that DoD components shave processes in place to verify the accuracy and completeness of the data.

 

Federal Networks Safer, But Work Remains

Earlier this week, the Cybersecurity and Infrastructure Protection Subcommittee received testimony regarding ongoing efforts at the Department of Homeland Security (DHS) to secure federal networks. Significantly, according to an official from the Government Accountability Office (GAO), although the federal government has made substantial progress in its efforts to better cybersecurity at civilian agencies, GAO believes there is still work to be done.

Currently, 93% of federal civilian users are covered by EINSTEIN, a DHS intrusion detection and protection system. This coverage represents a significant improvement by the agency since the enactment of the Cybersecurity Act of 2015. Prior to the law, the system only covered 38% of federal civilian users. In spite of DHS’ success, however, GAO has found a few issues that require further attention, including the reliance on a signature-based attack detection, a weak anomaly-based detection, and an inability to inspect all types of network traffic.

Click here to watch the hearing.

 

Supplemental Budget Cuts in 2017

On Wednesday, Federal News Radio reported that the White House has provided additional details for how it wants to cut $18 billion from some civilian agencies in 2017. The documents indicate that education, grant, and research programs along with foreign aid and assistance programs would see significant reductions. The Departments of Education, Housing and Urban Development, State and Energy will receive the largest cuts.

The White House released a request for additional appropriations on March 14. The supplemental request asked for an additional $30 billion of defense spending and $3 billion for the Department of Homeland Security, which are partially offset by cuts of $18 billion to other civilian agencies.

 

This Week on Off-the-Shelf: Procurement & the Presidential Transition

This week on “Off the Shelf”, Bill Gormley, president of the Gormley Group and Chair of the Coalition for Government Procurement, provides his thoughts on the opportunities and challenges facing the transition’s new procurement leadership team.

Gormley also provides an update on the transition’s potential impact on category management, measuring success of the procurement system and Total Acquisition Cost (TAC).  He also shares his insights on leadership as the key to successful procurement outcomes.

 

CDM Update Welcomes SIN

The General Services Administration (GSA) and the Department of Homeland Security (DHS) are developing a new contracting approach to their Continuous Diagnostics and Mitigation (CDM) program, in hopes that it will address many of the shortfalls of the original blanket purchase agreement (BPA).

Specifically, the agencies are looking to create a CDM special item number (SIN) under the Schedule 70 contract for IT. “The objective of the CDM SIN is to capture that product catalog. With the BPA sunsetting, there has been a lot of investment by both GSA in terms of analyzing the pricing and by DHS in terms of analyzing the technology and qualifying the tools,” said Jim Piche, the homeland sector director at GSA’s FEDSIM in a meeting last week.

GSA also released a request for information on March 22 on the CDM SIN. GSA is asking for feedback across eight broad categories, including the proposed SIN description, proposed evaluation and qualification process and whether products and services should be included in the five subcategories.

Read the RFI here.

Legal Corner

Common Sense Prevails — “Tougher” To Satisfy Rule 9(b) Standard in “Implied Certification” FCA Case Arising from GSA Schedule Contractors’ Alleged TAA Non-Compliance

Justin Ganderson- Covington & Burling LLP

Jason Workmaster- Covington & Burling LLP

A U.S. District Court recently dismissed a False Claims Act (FCA) qui tam action alleging that numerous GSA Schedule contractors violated their obligations under the Trade Agreements Act (TAA), resulting in the submission of false claims under the “implied certification” theory of FCA liability.  As discussed further below, the court’s decision — United States ex rel. Berkowitz v. Automation Aids, No. 13-C-08185, 2017 WL 1036575 (N.D. Ill. Mar. 12, 2016) — is important for at least two reasons:

  1. The court found that “often” it is “tougher” to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) when FCA allegations are based on an implied certification theory.
  1. The court held that, when dealing with conduct arising from a “sprawling federal procurement statutory and regulatory framework” (like the TAA), general allegations of non-compliance may support a breach-of-contract claim, but are insufficient in an FCA case. Rather, “specific allegations” about the fraudulent scheme are needed.

This decision comes at a particularly opportune time for contractors, given the likelihood of increased TAA and Buy American Act (BAA) enforcement during the Trump Administration and the corresponding potential uptick in whistleblower FCA activity involving these country-of-origin issues.

Discussion

The Berkowitz case involves the complex area of TAA compliance.  The TAA, as implemented in the FAR, generally waives the domestic sourcing requirements prescribed by the BAA when a procurement is valued in excess of certain specified dollar thresholds.  When it applies, the TAA requires that government contractors deliver “U.S.-made end products” (i.e., end products “manufactured” or “substantially transformed” in the U.S.) or “designated country end products” (e.g., end products “wholly manufacture[d]” or “substantially transformed” in certain foreign countries with which the United States has negotiated a trade agreement).

The relator here, Berkowitz, is a competitor of the companies he sued and is not a “whistleblowing insider,” as the court put it.  As a consequence, he lacked first-hand knowledge of the defendant contractors’ practices regarding TAA compliance and so he instead based his allegation of fraud on a comparison of “product lists that he received in the course of his business (the lists reflected the products’ country of origin) with data on products being sold to the government by other vendors.”  Relying on this comparison, Berkowitz asserted that the defendants had sold non-compliant items to the Government while, with each invoice they submitted, “impliedly certifying” that they were in compliance with the TAA.  According to Berkowitz, this rendered each invoice a false claim within the meaning of the FCA.  Once Berkowitz’s complaint was unsealed, the majority of the defendant contractors moved to dismiss, arguing that the complaint failed to satisfy Rule 9(b)’s heightened pleading requirements for fraud claims.

It Is “Tougher” to Satisfy Rule 9(b) When Relying on the Implied Certification Theory

In ruling on the defendants’ motions, the District Court noted the well-established principles that, under Rule 9(b):  (1) a plaintiff “must describe the who, what, when, where, and how of the fraud;” and (2) a failure to meet these requirements can result in dismissal with prejudice.  These general principles, of course, are not new.  But what is new is the District Court’s discussion of the interplay between the Rule 9(b) requirements and the showing of “materiality” that must be made under the U.S. Supreme Court’s United Health Services, Inc. v. United States ex rel. Escobar decision.

The District Court noted that, in Escobar, the Supreme Court held that if “a claimant seeks payment for a specified good or service and fails to disclose that the good or service violates a ‘material’ statutory, regulatory, or contract-based requirement, then it is possible to establish False Claims Act liability on an implied certification theory.”  But the District Court went on to explain that “simply alleging” a fraud based on an implied certification theory will not satisfy the Rule 9(b) pleading requirements.  In fact, the District Court opined that “it is safe to say that satisfying Rule 9(b) often will be tougher to do in implied certification cases than in cases with an outright affirmative misrepresentation. Tougher not because the implied certification theory of liability is disfavored as a matter of law in any way, but only because Rule 9(b) is . . . sensitive to the factual context of each case.”  (Emphases added).

Fraud Will Not Be Inferred From General Allegations of Non-Compliance with a Complex Statutory and Regulatory Procurement Regime

The District Court took issue with Berkowitz’s attempt to “infer” an FCA violation that (a) allegedly arose from a complex statutory and regulatory procurement framework, and (b) was based on general facts that merely tended to support a “simple mistake” or a potential breach of contract (e.g., the mere sale of TAA non-compliant end products).

The court noted that the “closest that Berkowitz comes to nudging the [FCA] claim away from a breach of contract to a fraud is when he alleges that two of the Defendants received notices from GSA about noncompliance with the Trade Agreements Act.”  However, the District Court explained that these “notices were based on reviews of catalogs, not submitted claims, so once again Berkowitz asks too much of the allegations to reasonably infer fraud, rather than a breach of contract or a simple mistake.”  (Emphases added).  And, in fact, one of the defendant contractors took action after receiving this notification from GSA – an employee emailed another to remove the product from the FSS.  The District Court acknowledged that this “exemplifies why, in the context of the sprawling federal procurement statutory and regulatory framework, inferring fraud from those few general notices is not reasonable.”  (Emphases added).

Key Takeaways

The District Court’s Berkowitz decision should prove to be useful for contractors defending against FCA complaints arising from alleged TAA and BAA non-compliances, as well as other alleged statutory and regulatory violations.  In fact, combining this decision with the D.C. Circuit’s 2014 decision in United States ex rel. Folliard v. Government Acquisitions, Inc. – finding that GSA FSS contractors, in general, can rely on letters of supply and manufacturer-certified information from suppliers to defeat an FCA allegation – should provide a real boost to potential contractor defenses.  Of course, an ounce of prevention is always worth a pound of cure, so contractors should continue to ensure that they have the necessary processes and procedures in place to avoid a TAA or BAA compliance failure in the first place.

New Office to Bring Innovation to Government

On Monday, March 27, President Trump issued a memorandum announcing the creation of the White House Office of American Innovation, which will focus on incorporating ideas from leaders in the private sector and government into policies that enhance the efficiency and effectiveness of the Federal government.   In addition, the memorandum details several of the program’s initial priorities, which include addressing legacy IT systems, reimagining the Department of Veterans Affairs’ (VA) healthcare system, and improving workforce development.

 

FITARA Implementation Slows

On Tuesday, March 28, Federal Computer Week (FCW) reported that progress related to the implementation of the Federal Information Technology Acquisition Reform (FITARA) Act has stagnated recently. According to testimony submitted by Dave Powner, the Director of IT Issues at the Government Accountability Office, agencies are not progressing as anticipated regarding the implementation of IT management, empowering Chief Information Officers (CIOs), and modernizing aging technology.

In particular, Powner highlighted the still-limited management authorities, limited partnering between Federal agencies and industry, and deficiencies in the IT workforce as recurring themes that have doomed past IT projects. In addition, he detailed how more than half of the current agency CIOs are reporting they do not have many of the authorities prescribed by FITARA.

IT Category Networking, April 11

The Coalition’s IT/Services Committee meeting will be meeting on Tuesday, April 11, at 10:00 am at LMI. The meeting will focus on networking with new members of GSA’s IT Category (ITC)- Jose Arrieta, Director of Schedule 70 Contract Operations, and Keith Nakasone, Deputy Assistant Commissioner for Acquisition. Kay Ely, Deputy Assistant Commissioner for ITC will also join the meeting.

There will be a 30-minute networking session from 10:00am.  The regular committee meeting will begin at approximately 10:30am. Please note there will not be a dial in option for the committee meeting this month due to the focus on networking.

To RSVP for the meeting, please contact Jason Baccus at jasonbaccus@thecgp.org.

DHS Learning Event: Effective Pricing Strategies in a Changing World, April 17

The Department of Homeland Security (DHS) has posted a special notice announcing an upcoming learning event, Effective Pricing Strategies in a Changing World, which will focus on price evaluations, the instructions and evaluations sections (L&M), and examples of successful pricing strategies. To register for the event, which will be on April 17 from 9:00 am – 12:00 pm in Washington D.C., click here. Space for the event is limited to 150 in-person attendees and limited virtual attendees.

GSA Training Symposium in Huntsville, April 25 & 26

The Coalition is reprinting the following GSA announcement about the upcoming training in Huntsville, Alabama.  We look forward to seeing you there.

This two-day event is packed with acquisition and training sessions tailored specifically to meet the needs of federal, military and civilian personnel, as well as GSA’s industry partners. The 2017 event will include sessions on multiple new government-wide initiatives that are transforming the federal acquisition space, and also create a forum for collaboration between the federal acquisition community and industry. The training sessions cover everything from category management and professional services to GSA Reverse Auctions and the Transactional Data Reporting Rule.

Industry partners will have the opportunity to:

  • Build their acquisition knowledge with our extensive, two-day Continuous Learning Point (CLP)-certified training program;
  • Network with hundreds of acquisition experts and leaders from GSA, DOD, and other agencies; and
  • Meet with federal acquisition professionals who are seeking the products and services necessary to meet their organizations’ missions.

Registration and exhibit booth sales are underway, with space available on a first come, first served basis.

 

Third Annual Healthcare Forum: Healthcare Priorities in the Trump Administration

May 2, 2017 from 7:15am – 12:45pm at McDermott Will & Emery LLP (The McDermott Building), located at 500 North Capitol Street NW, Washington, DC 20001.

Please join the Coalition for Government Procurement at our third annual healthcare forum where we will be discussing Healthcare Priorities in the Trump Administration.

This is a must attend event for DHA and VA contractors as attendees will learn about the DHA’s next steps for its acquisition operations. Pharma companies will hear the latest updates regarding DHA Pharmacy operations, including the rebate program and the new pharma contracts supporting retail and mail order. Attendees will also hear the latest regarding the VA’s Strategic Acquisition Center’s MSPV program and supporting BPAs and be able to choose between multiple breakout sessions depending on what your specific interests are.

If you’re a contracting and compliance officer or business development and federal market manager through the healthcare industry, you should register today! View the Agenda Here!

Spring Training Conference, May 11

The Coalition will be hosting its Spring Training Conference on Thursday, May 11, from 7:30 am – 6:00 pm at the Fairview Park Marriot. The working title of our Spring Training Conference is The First 111 Days – How the New Administration is Effecting Procurement Policy. The day will consist of a keynote and numerous panel discussions in the morning, followed by our famous Myth-Busters Breakout Sessions in the afternoon. Draft Agenda and additional details coming soon!