When reflecting on the concept of “restraint of trade,” one might recall an economics, history, or law course in which they studied the Sherman Antitrust Act. That act prohibits restraints of trade, like agreements, combinations, and other acts, that might cause monopolies to arise, and, by so doing, it protects markets, and ultimately the public, from the deleterious effects of reduced market competition. Although, generally, the Government cannot be sued under the Sherman Act for its actions that, in effect, restrain trade, that fact does not mitigate the harm caused by them. Such is the case with the Price Reduction Clause (PRC).
This summer, the Coalition for Government Procurement (the Coalition) submitted comments on the GSA’s Federal Register Notice, Information Collection 3090-0235, Federal Supply Schedule Pricing Disclosures and Sales Reporting. GSA’s notice sought feedback on whether the PRC was necessary and had practical utility. In response, the Coalition, highlighted, among other things, PRC’s role as a “restraint of trade” limiting the ability of Schedule contractors to compete in the private sector and noting that “[p]erpetuating the PRC as a condition of doing business with the Government, will continue to negatively impact commercial opportunities for MAS contractors thereby reducing investment and job opportunities across the commercial market.”
The PRC represents a significant compliance burden for contractors. It is incorporated into approximately 14,000 MAS contracts, with nearly 12,000 contractors, and this incorporation translates into an obligation for contractors to establish effective systems and designate responsible personnel to maintain compliance with the PRC throughout the life of the contract. It occurs in addition to other activities, like offer and negotiation over the mechanics for triggering price reductions; oversight and review activities during performance to validate compliance; and training employees and senior executives responsible for contract compliance on the key compliance and reporting requirements of the PRC.
These administrative compliance activities may have made sense when they were developed almost 40 years ago, but they do not now. In the past, Schedules were mandatory and closed, and competition was not required at the order lever. Thus, some mechanism was needed to assure that the Government was receiving fair and reasonable prices. The market, however, has changed. The Schedules program resembles an actual marketplace, and fair and reasonable pricing and best value are being driven by competition at the order level, not by a PRC dissociated from the specific requirements of the Government at the transaction level. To this point, it is significant to note that, according to a GSA analysis of the PRC, only three percent of price reductions are a result of the tracking customer feature of the PRC, with the majority of price reductions the result of market forces.
This reality brings us back to the issue raised at the beginning of this blog, specifically, activities that, in effect, manifest themselves as restraints on trade. By relying on a bureaucratic, process-intensive pricing oversight clause, rather than the forces of competition associated with the requirements of a given task/delivery order, the Government is influencing how contractors approach business in the commercial market. Faced with an ever-present risk of triggering a price reduction, contractors alter their behavior in the commercial market, delaying or avoiding innovative business deals. Likewise, they alter their behavior in the Government market, delaying the introduction of new offerings due to concerns that they will not align with the PRC and CSP. This fact was borne out in another recent IG report, wherein it was found that GSA used the NASA SEWP contract for orders because the subject items were not available through the Schedules or could not be provided in time to meet the customer’s needs. It would be helpful to understand why the sampled products were unavailable or could not be provided within the customer’s requested timeframe.
In a rapidly changing technology environment, GSA should be praised for investing in and updating its systems and taking steps to align with market practices that make sense. On this point, eliminating the PRC offers the Government the opportunity to explore focusing on innovations like e-invoicing and solutions-based Schedule purchases, which aligns with the current effort to consolidate the Schedules. It allows the Government to focus resources where they would be most effective: at the task order competition level. So too, it allows the Government to free-up contracting resources to align with other complex procurement work.
As this blog has mentioned in the past, GSA’s Federal Marketplace Initiative and its associated activities, like Schedules consolidation, implementing unpriced service schedules, and the review of various reporting requirements, represent a logical point to reflect on the utility of contracting compliance mechanisms, like the PRC, developed for a different time and market. In light of the deleterious market effects that arise from the PRC, GSA should seize the opportunity to remove this relic of the past, rely on the forces of the market, and widen a channel for agency buyers to access innovation and value.
Dr. Michael Wooten Sworn in as OFPP Administrator
On September 4, Dr. Michael Wooten was sworn into his new role as Administrator of the Office of Federal Procurement Policy (OFPP). Dr. Wooten was confirmed on August 1, filling in a position that had been vacant since the start of the current Administration. Before becoming OFPP Administrator, Dr. Wooten served as the deputy chief procurement officer for the District of Columbia and was a deputy department chairman at the Defense Acquisition University. The Coalition looks forward to working with Dr. Wooten as he seeks to increase the efficiency and effectiveness of the Federal procurement system government-wide.
GSA Opens FAST 2020
This week the General Services Administration (GSA) opened registration for their Federal Acquisition Service Training (FAST) Conference. FAST 2020 is GSA’s national training conference that will take place on April 14-16, 2020 in Atlanta, GA. GSA also released the list of training sessions for the conference, which can be found here.
The Coalition for Government Procurement has already registered for a booth, and we hope you will stop by to see us at Booth #515. Please stay tuned for more details about Coalition related activities for members at the FAST 2020 Conference!
GSA OIG Comments on TDR and the PRC
Last week, the GSA’s Office of Inspector General (OIG) released their comments on GSA’s Price Reductions Clause (PRC) and raised concerns over the plans to extend the Transactional Data Reporting (TDR) pilot another year beyond the initial pilot deadline of December 2019. The comments noted that the OIG remains concerned about TDR because the pilot has not yet produced pricing data for GSA’s use in pricing analyses or decision-making.
Alongside concerns about the data collected, the OIG raised issues about the waiver of the Commercial Sales Practice (CSP) and the PRC for Schedule contractors participating in the TDR pilot. According to the OIG, the CSP requirements and pricing adjustments based on the PRC are the cornerstone of GSA’s Schedules program.
Federal Computer Week (FCW) reported this week that multiple factors, particularly the increase of Micro Purchase Threshold (MPT) from $3,500 to $10,000, are likely to increase Government Wide Acquisition Contract (GWAC) spending at the end of the Fiscal Year (FY). The higher MPT is specifically projected to boost credit card purchases as the FY ends. GSA expects September to be their busiest month of the year for its GWACs. GSA has seen task orders on Alliant 2 and VETS 2 outpace last year’s trends and project that this will continue through the end of the year. Additionally, Solutions for Enterprise-Wide Procurement (SEWP) and National Institutes of Health Information Technology Acquisition and Assessment Center (NITAAC) will extend their hours of operation this month as they prepare for increased orders as well.
SEWP has seen about a 25% increase in IT product order trends and expects this to continue. In the past 20% of spending on SEWP comes within the last two weeks of September. In response, SEWP has updated and increased their High Availability System. Glynis Fisher, deputy director at NITAAC, has noted the best in class designation across all three of their GWACs accounts for part of the increased work expectations there. NITAAC has also worked to improve its online ordering system NextGen e-GOS, streamlining the procurement process to facilitate more transactions.
Join the Cloud Contracting Dialogue with GSA’s Keith Nakasone, Sept 10
Join the IT/Services Committee for a dialogue with Keith Nakasone, Deputy Assistant Commissioner for Acquisition with GSA’s IT Category on September 10th at 10am. Keith will brief members on the latest on cloud contracting at GSA. The meeting will be in McLean, VA and hosted by Northrop Grumman IT. To attend the member meeting in person, or to request the dial-in information, please RSVP to Michael Hanafin at email@example.com. We hope to see you there!
GSA Seeking Feedback on OS4 Requisition Draft RFQ
On August 30, the Office Supplies Fourth Generation (OS4) Requisition Channel Draft RFQ was made available on GSA eBuy. This procurement is a Blanket Purchase Agreement against Schedule 75. Responses are requested by September 13. GSA notes that vendors on both the OS4 and legacy SINs are encouraged to review the draft RFQ.
Lieutenant General Ron Place has been selected to serve as the Director of the Defense Health Agency (DHA) as of September 3rd. Lt. General Place has extensive experience with military healthcare, including leading the Military Health System’s National Defense Authorization Act 2017 Program Management Office and serving in multiple leadership positions at the DHA the past two years. He is board-certified in general and colorectal surgery, has published over 40 peer reviewed articles and book chapters and has combat experience form Afghanistan and Kosovo. He has been awarded the Distinguished Service Medal with oak leaf cluster and the Legion of Merit with three oak leaf clusters. He has further been awarded the combat action, combat medic, and flight surgeon badges.
DHA is transitioning toward taking over the administration of all military hospitals by 2021. Place has emphasized the need for a united effort to accomplish the DHA’s goals. Lt. General Place received endorsements by previous director Navy Vice Admiral Raquel Bono and Tom McCaffery who serves as the assistant secretary of Defense for Health Affairs.
The Legal Corner provides the legal community with an opportunity to share insights and comments on legal issues of the day. The comments herein do not necessarily reflect the views of the Coalition for Government Procurement.
By: Joy Sturm, Partner, Hogan Lovells; Allison Pugsley, Partner, Hogan Lovells; David Burgett, Senior Counsel, Hogan Lovells; Annie Vanselow, Senior Associate, Hogan Lovells; and Ryan Harrigan, Associate, Hogan Lovells
On Thursday, August 8, 2019, the Department of Justice (“DoJ”) announced that Danish medical device company Ambu, Inc. (“Ambu”) will pay $3.3 million to settle False Claims Act (“FCA”) allegations that it violated the Trade Agreements Act (“TAA”) (19 U.S.C. § 2518) by selling products to the Defense Logistics Agency (“DLA”) and the Department of Veterans Affairs (“VA”) that were made in China and Malaysia. The TAA restricts the Federal government’s purchase of “end products” to only those (1) manufactured in the United States or wholly manufactured in a “designated country,” or (2) ‘‘substantially transformed’’ in the United States or a designated country. China and Malaysia are not designated countries.
According to the DoJ press release, Ambu executives certified that its products came from TAA compliant countries despite allegedly knowing that most of the products were manufactured in noncompliant locations. Between December 2011 and March 2015, more than 80% of the product sold by Ambu to the Federal government came from noncompliant countries.
FCA settlements are not new to the healthcare industry. Nearly 90% of recoveries during 2017 and 2018 under the FCA came from the healthcare industry, according to an analysis by Bloomberg Law. The TAA focus of the allegations, however, is notable.
In recent years, there have been policy changes that have arguably increased the ability of the government to purchase products that do not meet the TAA standard. In 2016, the VA adopted a blanket non-availability determination for its Federal Supply Schedule contract that applies to innovator pharmaceutical products that are considered “covered drugs” under the Veterans Health Care Act of 1992. In addition, a 2018 decision by the Court of Federal Claims broadened the definition of “U.S.-made end product,” under the Federal Acquisition Regulation TAA clause to include products subject to partial manufacture in the U.S. that do not otherwise meet the TAA “substantial transformation” test. See Acetris Health, LLC v. United States, No. 18-433C (Fed. Cl. July 10, 2018). However, this interpretation is pending appeal and may not survive.
Despite these changes, the Ambu settlement demonstrates that the government is still focused on and enforcing TAA compliance. In addition, private whistleblowers can initiate FCA complaints. (It is unclear whether or not a whistleblower was involved in the Ambu case.) To avoid FCA liability, it is important for companies to understand the evolving landscape and ensure that all certifications under Federal contracts are current and accurate.
Should you have any questions about this alert or otherwise, please do not hesitate to contact our Federal contracts team.
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This article has been reprinted with permission from Hogan Lovells US LLP.
Healthcare Spotlight: What’s the VA Got to Do With It? Military Medical Procurement Changes Reach the VA
The Healthcare Spotlight provides the healthcare community with an opportunity to share insights and comments on leading issues of the day. The comments herein do not necessarily reflect the views of the Coalition for Government Procurement.
By Keeley McCarty and Bryce Chadwick, Sheppard Mullin
There are big changes happening in military healthcare procurement. Some are unsurprising given the October 1, 2019 deadline for the reorganization of all military hospitals and clinics under the management of the Department of Defense (DOD), Defense Health Agency (DHA). But some may be unexpected, reaching all the way to Department of Veterans Affairs (VA) procurement, though the extent to which the VA will ultimately be affected is unclear. In the past few weeks, at least three major announcements were made regarding military healthcare: (1) DHA and the Defense Logistics Agency (DLA) signed a memorandum of agreement (MOA) regarding their respective rolls in DOD healthcare, (2) DLA gave the VA access to its medical/surgical prime vendor formulary indefinitely, and (3) the VA cancelled its long-anticipated prime vendor solicitation under the Medical/Surgical Prime Vendor (MSPV) 2.0 program. Is this all a coincidence? Probably not.
On August 15, 2019, the DLA and DHA announced an MOAestablishing a new cooperative approach to medical logistical support to the military healthcare community. DLA currently provides combat logistics support to the military, the U.S. Coast Guard, select federal agencies, and certain allied nations, among others. The MOA covers all aspects of the medical logistics support DLA provides to DHA, including pharmaceuticals, medical/surgical supplies, and healthcare technology equipment. The MOA assigns the DLA and DHA their own roles and responsibilities relating to medical acquisitions, and makes DLA “the acquisition enabler of choice for medical materiel,” according to the DLA press release. Where DLA already has extensive experience in awarding and administering contracts, this seems to be the governmental equivalent of assigning the experts to perform their expertise. Thus under the MOA, DLA will take the lead in procuring medical materiel, and DHA will oversee the acquisition of medical services.
Just three days earlier, on August 12, 2019, the VA and DLA announced a “strategic partnership” by which the VA will have access to DLA’s supply ordering system. This ordering system essentially is a catalog for medical and other supplies (including cleaning supplies and equipment, construction materials and equipment, and notably, medical and surgical supplies and equipment). The VA’s press release suggests this new arrangement will be permanent, touting the modernization and efficiency this collaboration will bring by creating “a centralized ordering system for VA.”
The VA/DLA “strategic partnership” is significant because, until its cancellation the afternoon of August 15, 2019, there was an active Request for Proposals (RFP) for prime vendors under the VA’s much-anticipated MSPV 2.0 program, in addition to various active supplier Requests for Quotations (RFQ) in multiple U.S. regions. The VA cancelled the prime vendor RFP, which had been open since June 3, 2019, providing only that another solicitation would issue in 6-8 weeks. But will it? With the VA’s new access to the DLA supply chain, it is unclear what the VA has to gain by moving forward with its own separate catalog. Assuming that the DLA catalog includes all critical supplies, it would seem duplicative for VA to reinvent the wheel next door with MSPV 2.0. Still, the VA has unique buying restrictions not applicable to DOD, such as the Veterans First contracting program requiring procurement priority for veteran-owned small businesses where two or more are able to submit offers for a VA contract. The VA undoubtedly will run into trouble if it does not take these requirements into account when purchasing through DOD.
Regardless of what the VA plans to do, one would hope the agency communicates the plan to vendors, who have been preparing for MSPV 2.0 since it was previewed in 2018. The military healthcare procurement system as a whole seems to be on the cusp of becoming significantly more integrated and efficient, with DLA taking the lead on medical supply procurement systems for DOD and possibly the VA. However, this could mean MSPV 2.0 is left to dry up on the vine, resulting in fewer contracting opportunities at the VA for medical prime and supply vendors going forward, and other impacts yet to be seen. For now, we await the VA’s next move.
 We have yet to see the MOA itself but will update this blog with a copy when it becomes available.
The EIP Awards honor individuals and organizations in the acquisition community who have made significant contributions to the procurement system that deliver best value and meet agency missions. Historically, these awards have recognized individuals, organizations, and contractors involved in procurement with GSA, VA, DOD, DHS, and other government agencies.
We are seeking nominations from qualified candidates in the award categories from the Department of Defense, Federal Civilian agencies, and industry.
Lifetime Acquisition Excellence Award
Presented to an individual in the contracting community (government or industry) for demonstrating a life-long commitment to advancing “common sense in government procurement.”
Acquisition Excellence Award
Presented to an organization or individual (government or contractor) for outstanding performance over the year in meeting the mission-critical needs of a Federal agency through a government contract.
Excellence in Innovation Award
Presented to an organization or individual (government or contractor) for creating innovative solutions and/or an innovative process for a Federal agency that improves and facilitates mission performance.
Advocating for Veterans Award
Presented to an organization or individual (government or contractor) for promoting and executing a successful program that supports veterans.
Pharmaceutical Subcommittee Meeting with VA and PBM, Sept 25
Please join the Pharmaceutical Subcommittee for a meeting with Jennifer Zacher, Assistant Chief Consultant of the Pharmacy Benefits Management (PBM) Service at the Department of Veterans Affairs on September 25th at 11am EST. Jennifer Zacher will dial-in to the meeting to provide the Subcommittee with an update on the VA’s PBM program and their objectives for FY2020. The Coalition is planning for this meeting to be held as a virtual meeting. Members in the Washington, DC area are welcome to join the meeting at the Coalition office at 1990 M St, NW Suite 450, Washington, DC. For the dial-in information or to attend in person, please RSVP to Michael Hanafin at firstname.lastname@example.org
Cyber and Supply Chain Security Committee Meeting, Sept 26
The Coalition’s Cyber and Supply Chain committee will be meeting on Thursday, September 26 at 10:00 AM. Joyce Carrell Assistant Director, Supply Chain and Cyber Directorate, National Counterintelligence and Security Center at DNI will be speak to the committee about the impact of supply chain on relevant intelligence issues. The meeting will be at Northrop Grumman (7575 Colshire Drive, McLean, VA 22102). For the dial-in information or to attend in person, please RSVP to Michael Hanafin at email@example.com.
Join us for the First Ever BRIC Meeting, Oct 3
Please join the newly created Business and Regulatory Issues Committee for its first meeting with Jon Etherton, President of Etherton and Associates. The kick-off meeting for the BRIC will be on October 3 at 10:00 AM at the CGI Innovation Center (1000 N Glebe Road 9th floor, Arlington, VA 22201). Jon will provide a briefing on the status of the NDAA, along with budget and policy challenges pending on the Hill. For the dial-in information or to attend in person, please RSVP to Michael Hanafin at firstname.lastname@example.org
Cybersecurity Summit for Government Contractors, October 8
The Coalition is very excited to announce that it will be a Silver Sponsor for the 4th Annual Cybersecurity Summit for Government Contractors – DC: Hot Topics, Trends and Emerging Issues, taking place on October 8 at Valo Park in McLean, VA. The Cybersecurity Summit is a 1-day, high level, broad sweep of how cybersecurity impacts the latest regulatory requirements, business risks, and technology challenges in today’s government and commercial landscape. There will be several opportunities to interact with presenters and attendees. Keynote speakers include Chris Roberts, who gained global attention in 2015 for hacking into an aviation system while on a United Airlines flight. If you are in a leadership position and the threat of cyber event keeps you up at night, you should not miss this event. Coalition members who would like more details and to attend the event can sign up here. Coalition members can get 20% off by referencing promo code 20CGP2019 at checkout.
As reported by Federal News Network, for the past nine months Special Publication 800-53, revision 5, a critical cybersecurity document from the National Institute of Standards and Technology (NIST), has been under review by the Office of Information and Regulatory Affairs (OIRA). NIST 800-53 rev. 5, Security and Privacy Controls for Information Systems and Organizations, provides a comprehensive set of cybersecurity safeguards for “all types of computing platforms, including general purpose computing systems, cyber-physical systems, cloud and mobile systems, industrial/process control systems, and Internet of Things (IoT) devices.”
This publication offers important cybersecurity guidelines to help those in both the public and private sector manage a range of risks associated with cybersecurity. NIST announced that once the revision is approved, at least six other important cybersecurity related documents will be released for public comment. The following is a list of those documents provided by NIST:
–NIST Special Publication 800-53, Revision 5 (Final Public Draft), Security and Privacy Controls for Information Systems and Organizations. Currently in review at the Office of Management and Budget Office of Information and Regulatory Affairs.
–NIST Special Publication 800-53A, Revision 5, Assessing Security and Privacy Controls in Federal Information Systems and Organizations: Building Effective Assessment Plans. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
–NIST Special Publication 800-53B, Control Baselines and Tailoring Guidance for Federal Information Systems and Organizations. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
–Federal Information Processing Standard (FIPS) 199, Revision 1, Standards for Security Categorization of Federal Information and Information Systems. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
–Federal Information Processing Standard (FIPS) 200 Revision 1, Minimum Security Requirements for Federal Information and Information Systems. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
–NIST Special Publication 800-161, Revision 1, Supply Chain Risk Management Practices for Federal Information Systems and Organizations. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
–NIST Special Publication 800-171, Revision 2, Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
–NIST Special Publication 800-171B, Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations: Enhanced Security Requirements for Critical Programs and High Value Assets. On Hold until review cycle completion of SP 800-53 by Office of Management and Budget, Office of Information and Regulatory Affairs due to dependencies on SP 800-53.
DoD Seeking Feedback on Draft Cybersecurity Certification for Contractors
The Department of Defense (DoD) is in the process of creating a new cybersecurity certification for contractors. The Office of the Assistant Secretary of Defense for Acquisition started the process of developing the certification in March 2019. On Wednesday, a draft of the Cybersecurity Maturity Model (CMMC) certification was released. DoD is seeking feedback on Draft CMMC v0.4 by September 25, 2019.
According to Federal News Network, the Department will “release the model to a consortium in January 2020, which will help contractors learn the CMMC and the steps necessary to achieve each level of the certification program.” Contractors can expect to see the CMMC in RFIs beginning in June 2020 and in RFPs in the Fall of 2020.
For an overview of the CMMC, the draft CMMC v0.4 document, and additional information about submitting comments, visit https://www.acq.osd.mil/cmmc/draft.html.
The Department of Veterans Affairs (VA) published a final rule this week updating its VA Acquisition Regulation (VAAR). These changes seek to align the VAAR with the Federal Acquisition Regulation (FAR), remove outdated and duplicate requirements, and decrease burdens for contractors. The rule deals with the following broad scope of topics:
-Energy and Water Efficiency
-Renewable Energy Technologies
-Protection of Privacy and Freedom of Information
-Other Socioeconomic Programs
Additions made to the VAAR include clauses related to Other Socioeconomic Programs and Disaster or Emergency Assistance Activities. The first change is 826.202-1, Local area set-aside, which requires that the contracting officer decide whether a local area set-aside should be further restricted to Service-Disabled Veteran-Owned Small Businesses (SDVOSB) or Veteran-Owned Small Businesses (VOSB) for Disaster or Emergency Assistance Activities. The second subsection is 826.202-2, Evaluation preference, which requires that the contracting officer include evaluation factors in accordance with 815.304 and the evaluation criteria clause stated in 815.304-71(a), 852.215-70, Service-Disabled Veteran-Owned and Veteran-Owned Small Business Evaluation Factors, for these types of procurements.
The rule will be effective on September 30.