On January 9 the Coalition will begin our “2013 Myth-Buster” Forum series. The Forum, “Continuing the Dialogue: Planning for the GSA Expo 2013” will be held at the Crystal Gateway Marriot from 8 am to 11:30 am. The 2013 GSA Expo is scheduled for the week of May 13 in Orlando. The GSA Expo is one the leading acquisition training and marketing events. The GSA Expo provides thousands of hours of acquisition training for government and contractor acquisition professionals. Historically, it has also been a wonderful “Myth-Busters” event fostering important dialogue among and between GSA, its customer agencies and contractors! Given the budgetary challenges we are facing, the Expo provides an efficient and effective means to train and engage all sectors of the procurement community to improve the operation and use of GSA’s government-wide contracting programs. The Expo is GSA’s opportunity to demonstrate its positive role and contributions to the whole federal procurement system!
On January 9, Tami Riggs, FAS Assistant Commissioner for Customer Accounts and Research (CAR) and her team will provide an update on GSA’s planning for the Expo. This month booth sales will begin for the Expo floor—and Tami and her team will provide updates on the Expo floor layout, booth availability and pricing, registration costs , events and training. In addition, as the Coalition has heard from throughout the procurement community, significant attendance and participation by GSA’s acquisition corps is vital to the continued success of the GSA Expo. We look forward to an important and engaging discussion with Tami and her team! To register for “Continuing the Dialogue: Planning the GSA Expo” please click here.
As next week will be the first full work week of 2013, the Coalition will be kicking off the year with its “Comment of the Week” that will list “Thirteen Thoughts (with predictions) for 2013.” The focus will be on thirteen key thoughts regarding the operation and management of our procurement system. Here’s an initial thought: As our federal government addresses ongoing fiscal challenges, GSA and its government-wide acquisition contracting programs (e.g. the Multiple Awards Schedules, GWACs, and travel contracts) continue to provide a streamlined, efficient and competitive process for customer agencies to acquire service and product solutions to their requirements. By leveraging the contracting resources at GSA, customer agencies can save time and money! However, there remains unfilled potential for GSA’s contracting programs to deliver best value solutions to customer agencies. GSA has an opportunity to focus on simplifying the contracting and task order competition process to obtaining additional value and savings for customer agencies, taxpayers, GSA and its contractors. More on this in my “Thirteen Thoughts (with predictions) for 2013” next week!
Late on Tuesday night the House of Representatives voted to approve the American Taxpayer Relief Act 2012. The bill was then signed by President Obama shortly thereafter. Passage of the bill narrowly averted the fiscal cliff by extending tax cuts for all individual earners that make less than $400,000 and families making less than $450,000. Additionally the bill postpones the impact of the automatic sequestration cuts for two months until March 1st, increases the top capital gains and dividends rates to 20 percent, extends unemployment insurance benefits and includes a host of other tax provisions. The Coalition will keep members updated on the latest developments concerning negotiations on sequestration.
On January 2, President Obama signed into law the National Defense Authorization Act for FY 2013 (HR 4310). The bill contains a host of contracting provisions specifically in Title VIII of the legislation. According to ASI Government, these include:
- An expansion in the whistleblower protections to non-defense contractor employees (excluding elements of the intelligence community)
- Department of Defense implementation of an efficiencies plan for both civilian and service contractor workforces
- Requirement for the GAO to include in its annual report to Congress a list of the most common grounds for sustaining protests relating to bids for contracts
The Coalition is in the process of reviewing the NDAA and will provide members with further analysis in the next Friday Flash.
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 for the 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!
On January 2, Defense Procurement and Acquisition Policy (DPAP) released a memorandum entitled Interagency Acquisition Policy Review. According to the memo recent changes to the FAR, including those at FAR 1.75 and OMB initiatives related to Interagency Acquisition, have created the perfect opportunity for the Department to reassess its policies, goals and objectives for Economy Act and non-Economy Act Interagency Acquisitions. DPAP’s Contract Policy and International Contracting (CPIC) organization is to lead a small team that will review the FAR, DFARS, and PGI, as well as DoD acquisition policy related to Economy Act and non-Economy Act interagency acquisitions. The team will include a representative from each of the Military Departments and an additional member representing other Defense Agencies.
GSA is accepting nominations for a new Government-wide Travel Advisory Committee (GTAC). The GTAC will review the government’s existing travel procedures and make recommendations to the GSA Acting Administrator about how to improve Federal travel efficiency and effectiveness, reduce costs, promote sustainability, and incorporate industry best practices. Members of the GTAC may include Federal agency travel managers, hoteliers, rental car companies, travel and lodging associations, corporations, and others. GTAC members will initially serve a two-year term with the possibility of an extension. Nominations to serve on the GTAC are due Wed., January 23, 2012. For more information about the nomination process and deadline, please see the original notice posted in the Federal Register.
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.
The Department of Treasury posted a notice in the Federal Register on December 28, 2012 with the new prompt payment interest rate. The prompt payment interest rate for January 1, 2013 through June 30, 2013 is 1-3/8 percent per year. According to the Prompt Payment Act, if interest is owed to a vendor, the government should pay the penalty whether the vendor requests it or not. The interest rate applies beginning on the day after the required payment date and ending on the date on which the payment is made.
The Coalition is excited to host Rob Coen, Acting Program Director of NIH’s NITAAC program at the next GWAC/MAC Committee meeting on January 22, 2013 at 9:30 am. If you would like to be added to the GWAC/MAC Committee email list for further details on this meeting and the committee in general please contact Roy Dicharry at email@example.com