As I reflected on 2012 and the potential topic for this year’s forty-eighth “Comment of the Week” in 2012, it became obvious to me what I should write about.
Thank you to our members for your support and participation in our collective effort to bring common sense to Government procurement. It has been an interesting and challenging year for the procurement community. Now more than ever we need to engage in a positive dialogue across the procurement community to improve the efficiency and effectiveness of the procurement system for the American taxpayer. The Coalition looks forward to continuing the dialogue in 2013 with key stakeholders from OFPP, DoD, DHS, GSA, and the VA.
Thank you to our men and women in harm’s way protecting our freedom. Thank you to our wounded warriors and all those who have fallen in defense of our country. Please keep them all in your prayers.
Thank you to all those in public service and the contractor personnel who support them.
Thank you to the Coalition staff for a job well done this year. Thank you for your dedication, professionalism, hard work and good humor! You make the Coalition work for the members!
I wish everyone Happy Holidays! Be safe in all your travels and enjoy your families!
Please keep the victims and families of Newtown in your thoughts and prayers.
Comment of the Week (12.14.12)
On January 9, 2013, the Coalition for Government Procurement will host a Forum entitled “Planning for the GSA Expo.” FAS’s Tami Riggs, Assistant Commissioner, Office of Customer Accounts and Research and her team will join us for a dialogue focusing on the schedule, logistics, and theme for this year’s conference in Orlando, Florida. Attendees will have an opportunity to engage with Tami and her team on the latest planning information for the GSA Expo. This event will provide important information for contractors making plans now regarding their participation in the GSA Expo. This event will be a precursor to GSA opening up booth sales to contractors later in January. In sum, the event is a “must attend” for those planning and budgeting for GSA Expo 2013. For more information and to register, please click here.
Training, Education, Dialogue, and Conversation leading to insight and understanding across the procurement community. That’s the GSA Expo! Over the years I have attended the GSA Expo both as a GSA employee and as a representative from the private sector. I have also been honored to participate in the Expo’s training program for government and contractor acquisition professionals. The GSA Expo provides a wonderful service through its educational offerings for the entire procurement workforce. Just as important, it brings together GSA, its customer agencies and contractors for a Myth-Busters dialogue on key procurement and program initiatives, issues, and challenges. The insight and understanding gained through these exchanges improves the procurement system for all.
Better insight and understanding leads to better outcomes for the taxpayer! That’s why the 2013 GSA Expo is so important—it is an opportunity to demonstrate the vital role GSA’s procurement programs and its contractors play in delivering best value mission support for customer agencies and the taxpayer. It is also a wonderful opportunity for GSA to bring all its stakeholders together for a Myth-Busters dialogue on two key focus areas, modernizing the GSA schedules program and strategic sourcing. The Coalition is ready to host such a “summit” meeting during the Expo We look forward to working with GSA towards such a meeting.
But first things first—we are looking forward to see you all on at the January 9 Forum: Planning for GSA Expo. Don’t miss this first conversation in our continuing GSA Expo dialogue!
Coalition President, Roger Waldron, expressed concern with the concept of mandatory use in connection with strategic sourcing vehicles as articulated in a Dec 7 article published in Federal Computer Week. A recent memo on strategic sourcing from the Office of Management and Budget seems to propose such a move. The Coalition is concerned that mandating the use of strategic sourcing vehicles would be unnecessarily restrictive for federal agencies- reducing competition and limiting agencies’ ability to procure best value services and products. In addition, “indefinite-delivery, indefinite-quantity contracts (IDIQs) provide more flexibility and reduce the change of breach of contract lawsuits against the government,” Waldron explained. The Coalition is continuing to review the OMB strategic sourcing memo and welcomes input on this issue from members.
The Administrator for Federal Procurement Policy Joe Jordan recently released a post on the OMBlog detailing historic savings in contracting. “The Administration reduced contract spending by over $20 billion in Fiscal Year (FY) 2012 compared to last year,” the post says. According to OMB, the decrease is the largest single year dollar decrease in Federal contract spending on record and it continues a three-year downward trend from 2009-2012. The FY 2012 total on contract spending was $35 billion less than the amount spent in FY 2009.
While referencing the November 2011 OFPP memo on management support services, the blog also notes that “agencies successfully reduced management support services spending by $7 billion over the last two years, meeting the Administration’s goal of bringing down such spending by 15 percent by the end of FY 2012.” In addition to reductions in management support services contracts, strategic sourcing of items such as office supplies and domestic shipping services has already saved nearly $200 million since FY 2010. According to OMB, hundreds of millions more have been saved through agency-level strategic sourcing of IT and medical equipment. For more information about the government’s future plans for strategic sourcing, members should review the recent OMB memo.
Mark Day, Director of the Office of Strategic Programs for the Integrated Technology Services, at GSA, joins host Roger Waldron, Coalition President, on “Off the Shelf” to discuss acquisition and management of information technology by the Federal Government. Day provides an update on GSA’s GWAC contracts, including Alliant and Alliant Small Business, as well as a new Smart Buy strategic sourcing initiative. He also talks about the role of GSA as an early adopter of cloud brokerage. To listen to the program, click here.
The OASIS business case was released on OMB Max this week, an internal Federal government portal. The business case is open for comments from Federal agencies through December 27. GSA also plans to solicit comments on the OASIS business case from the public once Federal agency comments are incorporated. Follow the OASIS Industry Community on GSA Interact for future announcements.
Senator Claire McCaskill, Chairman of the Subcommittee on Contracting Oversight, issued a letter to the Office of Management and Budget (OMB) proposing that the agency consider strategic sourcing, among other options, for the procurement of food services. The committee held a hearing in October 2012 exploring whether food service contractors may be overcharging the government by withholding rebates or discounts that should be passed along to the government. Senator McCaskill is concerned that federal agencies have limited transparency into the rebates and discounts received by food service contractors and that few agencies have policies on rebates and allowances.
In 2011, the federal government spent $6.8 billion on contracts to acquire food services for military bases, federal office cafeterias, and concessions at national monuments and in national parks. To ensure that taxpayer dollars are being spent wisely, Senator McCaskill has requested OMB to consider how the federal government can better leverage its buying power through the strategic sourcing of food services. In the letter, Senator McCaskill references the September 2012 GAO report which suggests that the government could save billions in annual procurement costs through strategic sourcing.
For the second year in a row, the Department of Treasury has exceeded its small business procurement goals. The department’s goal for FY 2012 was 35%, well above the government-wide goal of 23%, and was able to achieve 35.74% of total procurement dollars to small business. In FY 2011, the goal was 28.5% and the agency achieved 34.51%. According to Jake Hansen, director of procurement at the Internal Revenue Service, the agency’s success can be attributed to a department-wide focus, commitment and buy-in from senior leadership and customers, and a motivated and engaged workforce. Hansen also emphasizes the importance of small business goals that are attainable in order to keep the acquisition workforce inspired. Treasury’s small business goals will continue to be 35% in FY 2013.
The Department of Homeland Security (DHS) has announced six awards under Eagle II. The contract is worth an estimated $22 billion and is designed to be the primary vehicle for DHS IT purchases. The first six awards were for functional category 3 for independent, test, validation, verification and evaluation.
Budget Sequestration, the WARN Act and Compliance Costs—Implications for Contractors
Jim Schweiter, Partner, McKenna Long & Aldridge LLP
Last August, Congress passed the Budget Control Act of 2011 (Pub. L. 112-25). This law authorized raising the debt ceiling, established caps on discretionary spending, and put in place a process known as sequestration to implement a total of $1.2 trillion in automatic spending cuts through fiscal year 2021, unless Congress passes a bill which the president signs to avert such a result. Sequestration is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled in order to achieve compulsory deficit reduction.
Much has been written about the draconian effects sequestration will have on the programs, projects and activities of executive branch agencies. Senior executive branch officials, members of Congress and industry leaders all predict catastrophe if sequestration is implemented. In the case of government contractors, the decline in new government work caused by funding reductions, or the truncation of existing government work through contract terminations, changes, or other mechanisms, may cause employers to consider terminating or laying off employees. As a result, it is important for employers to understand their rights and obligations under the Worker Adjustment and Retraining Notification (WARN) Act.
Notification Requirements under the WARN Act
The primary purpose of the WARN Act is to require certain employers to provide at least 60 days advance notice to employees who are impacted by a “plant closing” or “mass layoff.” Each of these terms has a lengthy statutory and regulatory definition but, in brief, a “plant closing” refers to a shutdown of a site of employment resulting in an employment loss for at least 50 employees, while a “mass layoff” means a reduction in force at a single site of employment impacting at least (1) 50 employees and 33 percent of the active employees at that site, or (2) 500 employees.
As a general rule, whenever an employer foresees that 50 or more employees could lose employment at a site of employment within a 90-day period, that employer should carefully analyze whether the definition of a “plant closing” or “mass layoff” may have been met, and thus whether WARN notice requirements have been triggered. If the WARN notice requirements are triggered, the employer must provide written notice of the anticipated employment loss to (1) the affected employees (or to their representative if unionized), (2) a designated state official, and (3) the chief elected official of the unit of local government within which the layoff or plant closing will occur. If the employer provides less than 60 days’ notice before the employment action, it may be subject to paying wages and benefits to the affected employees for the portion of the 60-day period in which notice was not given, in addition to other potential penalties.
The WARN Act recognizes that plant closings and mass layoffs cannot always be anticipated months in advance, and certain exceptions to the 60-day notice requirement exist. The “unforeseeable business circumstances” exception is the relevant exception that would be associated with layoffs or plant closings resulting from the January 2, 2013 onset of sequestration. This exception encompasses a “sudden, dramatic, and unexpected action or condition outside the employer’s control.” The Labor Department’s interpretive guidance noted that although budget sequestration can be seen months in advance, the actual impact on a particular contractor may be unknown until much later. Therefore, an abrupt termination of a particular contract might qualify under the “unforeseeable business circumstances” exception. If contractors must lay off or separate their employees in less than 60 days, such announcements would be sudden and dramatic and therefore consistent with the WARN Act. According to the Labor Department, in such cases employers would not have to provide the full 60-day notice.
Contractor Costs and the WARN Act
The Office of Management and Budget (OMB) just issued new guidance that certain liability and litigation costs associated with WARN Act compliance will be allowable costs under government contracts. Under the OMB memorandum, if sequestration occurs and an agency terminates or modifies a contract which causes the contractor to order a plant closing or layoffs subject to the WARN Act’s notification requirements, and that contractor has followed the Labor Department’s guidance, then any resulting court-determined, WARN Act-based employee compensation costs, attorneys fees and other litigation costs would qualify as allowable costs which would be reimbursable by the contracting agency, regardless of the litigation outcome. Such costs would also have to be both allocable to the contract in question and reasonable in accordance with existing FAR principles.
This new OMB memorandum has prompted several large defense contractors to announce that they will not issue WARN Act notices before January 2, 2013. However, the guidance has exacerbated partisan tensions. Senators Charles Grassley (R-IA) and Kelly Ayotte (R-NH) announced jointly that they had sent a letter of inquiry “asking under what authority the administration is using to say it is okay to disregard the law,” and then promise contractors “a taxpayer funded bailout for their legal expenses if they do so.”
Regardless of the seemingly inevitable partisanship that accompanies the run up to a presidential election, there are several points about the most recent OMB memorandum for contractors to bear in mind. First, the implementation of sequestration alone does not portend layoffs or plant closings triggering WARN Act notice requirements. There must be some adverse contract action flowing from sequestration’s funding reductions which affects an employer. In addition, the OMB guidance clearly contemplates a court determination of both employee compensation costs, as well as attorneys fees and other litigation costs. However, employers may incur substantial costs associated with the publication and dissemination of WARN Act notices or employee negotiations and settlements not resulting in litigation. Under the OMB guidance, these costs would not seem to be allowable. Contractors who anticipate potential WARN Act liability should seek guidance from contracting officers about the extent to which their WARN Act-related costs will be allowable. Awareness of the OMB memorandum by DCAA and DCMA personnel will almost certainly also take time, and ignorance of the OMB guidance could complicate audits. Finally, before allowable costs may be reimbursed, the Government must have funds available to do so. If sequestration occurs, agencies may not have sufficient funding to reimburse WARN Act-related costs. Even if litigation resulted from a WARN Act dispute, the Judgment Fund would not be available for such purposes because the litigation would not involve the United States.
Prudent employers should prepare for various scenarios and have contingency plans in place to provide appropriate notice as soon as it becomes clear that a particular contract action will cause a WARN-triggering employment loss. Some companies are considering “provisional notices,” which communicate to all employees that federal budgetary issues could result in an employment loss. However, because they do not indicate which specific employees will be impacted and the specific date on which the employment loss will occur, such provisional notices may be “better than nothing” (and may show the employer’s good faith efforts to try to comply with WARN) but are still unlikely to fully satisfy the requirements of WARN. Finally, employers should be aware that several states have their own plant closing laws (sometimes referred to as “mini-WARN” statutes), and some of these laws have more stringent requirements that the federal law. Employers should thus analyze relevant state laws in states in which a significant employment loss may occur.
 Pub. L. 100-379, codified at 29 USC 2101 et. seq.
 20 C.F.R. 639.9(b)(1); see also, 29 USC 2102(b)(2).
 Department of Labor, Training and Employment Guidance Letter No. 3-12, July 30, 2012.
 Office of Management and Budget, Guidance on Allowable Contracting Costs Associated with the Worker Adjustment and Retraining Notification (WARN) Act, Memorandum for the Chief Financial Officers and Senior Procurement Executives of Executive Departments and Agencies, Sept. 28, 2012.
 Sara Sorcher, White House Moves to Head Off Sequester Layoffs, National Journal, Sept. 29, 2012, at http://www.nationaljournal.com/nationalsecurity/white-house-moves-to-head-off-sequester-layoffs-20120928.
 Senators John McCain, R-Ariz., and Lindsey Graham, R-S.C., called the guidance “politically motivated” and said they’d block any contractor payments by the Pentagon to cover failure of issuing WARN Act notices. Joyce Tsai, Partisan Debate Deepens over Layoff Notices Before Sequestration, Stars and Stripes, Oct. 5, 2012, at http://www.stripes.com/partisan-debate-deepens-over-layoff-notices-before-sequestration-1.192039.
 Letter from Senators Charles Grassley and Kelly Ayotte to Jeffrey Zients, Acting Director, Office of Management and Budget, (Oct. 1, 2012), at http://www.grassley.senate.gov/about/upload/100220121.pdf.
 31 USC 1304.
8(a) Sole-Source Justifications- A Slow Start
The GAO recently released a report entitled Slow Start to Implementation of Justifications for 8(a) Sole-Source Contracts. According to the report, from October 28, 2009, through March 31, 2012, agencies awarded 72 sole-source 8(a) contracts over $20 million. GAO also analyzed trend information in FPDS-NG from fiscal year 2008 through fiscal year 2011, which showed that the number and value of these contracts declined significantly in 2011.
GAO recommends that OFPP issue guidance to clarify the circumstances in which an 8(a) justification is required. The GAO also recommends that GSA—which operates FPDS-NG—implement controls in FPDS-NG to help ensure that contract values are accurately recorded, and that SBA take steps to ensure that its staff confirm the presence of justifications.
GSA Releases RFQ for MOBIS
GSA has recently released a request for quote to consolidate some of its administrative functions. “As a result of the acting Administrator’s Top-to-Bottom reviews of GSA’s offices, these four staff offices were asked to each develop a plan to consolidate and transform their respective GSA functions to strengthen accountability with the expected outcomes of greater efficiency and enhanced service delivery,” the RFQ’s statement of work stated. GSA expects the vendor to provide Consultation, Facilitation, and Program/Project Management Professional Services focused on business transformation support for the GSA Offices of the Chief Financial Officer, Chief Information Officer, Chief People Officer, and Administrative Services. Additionally, the contractor is expected to provide specialized expertise and experience with organizational consolidation that is focused on communications and change management, project management and tracking and strategic planning among others.
Jan. 23 webinar – Trade Agreements Act
Mark your calendars for our first webinar of 2013! Join the Coalition and McKenna Long & Aldridge LLP for a one hour lunchtime webinar on Foreign Acquisition and the Trade Agreements Act. Registration information will be available next week on our website. If you would like more information or would like to register early, please contact Athena Oliff at email@example.com or 202-315-1052.
2013 GSA Expo Forum – Registration Now Open!
GSA Expo is the signature annual training and marketing event of the General Services Administration. It is the place where industry meets the marketplace to display the incredible array of commercial services and products available through the GSA Schedule program.
Do you want to know GSA’s vision for Expo in May 2013? Should you expect changes in attendees, the theme, or overall logistics of the conference? Join us in a dialogue with Tamela “Tami” Riggs, Assistant Commissioner, Office of Customer Accounts and Research General Services Administration, Federal Acquisition Service to find out what’s new for Expo 2013. This is a fantastic opportunity to engage in a myth-busting dialogue directly with GSA to ensure that your company has the most cost-effective and engaging plan to market your Schedule services and products.
GSA will begin booth sales in mid-January. At this forum, Tamela “Tami” Riggs and the GSA Expo team will share their plans and answer questions to help you develop your marketing strategies for Expo. Our Myth-Buster Planning Forum is just in time to position your company to get the most out of this year’s GSA Expo.
All GSA Schedule contractors should plan to attend this forum on January 9th at 8:00am at the Crystal Gateway Marriott. We look forward to seeing you there!
To Register, Click Here!