Today marks the end of the first full work week of 2013. Welcome back everybody! The Coalition hopes all had a wonderful Holiday Season. This time of year everybody does lists. This year the Coalition, for the first time, is providing a list that we hope you find interesting and thought provoking. Here are our “Thirteen Thoughts for 2103:”
1. Is GSA’s mission impossible possible?
2. The GSA Expo, to be or not to be?
3. ODCs in 2013! (?)
4. Contract duplication. . . . hitting the delete button.
5. Closing the door on the Demand Based Model in 2013!?)
6. Put “Commercial” back in commercial item contracting!
7. From Strategic Sourcing to Strategic Acquisition
8. GSA’s 2012 waiver of the Price Reduction Clause—a statement in favor of competition!
9. Better Buying Power Metrics: how do we measure success?
10. Myth-Busters – continuing the dialogue is more than checking the box!
11. Requirements development—the blocking and tackling of federal procurement
12. The $500 billion question: an open or closed federal procurement system?
13. Oversight of the procurement system— is there balance?
These thoughts highlight some of the key challenges and opportunities facing the federal procurement system. They reflect issues of broad interest across the procurement community. The Coalition looks forward to continuing the dialogue with and among government and industry on improving the procurement system. In a time of economic challenge and fiscal constraint it is imperative that federal acquisition policies, procedures and programs provide sound business opportunities for contractors that deliver best value to customer agencies and the taxpayers. Next week’s Comment will provide observations and predictions regarding “Thirteen Thoughts for 2013.”
The Coalition hosted a forum this week on the upcoming GSA Expo featuring Tamela “Tami” Riggs, Assistant Commissioner, Office of Customer Accounts and Research and the GSA Expo planning team. It was a wonderful opportunity for members planning to attend the 2013 GSA Expo in Orlando to hear the latest on the conference and have a dialogue with GSA about how to maximize the value of the event for both government and industry. During the Coalition forum, members also reemphasized the importance of GSA attendance at GSA Expo- the agency’s hallmark event for the Multiple Award Schedules program. In case you missed the forum, booth sales for GSA Expo are scheduled to begin in February. GSA will post updates at http://expo.gsa.gov/.
Deputy Secretary of Defense Ashton Carter issued a memo yesterday announcing near and long term spending reductions due to budgetary uncertainty in FY 2013. Carter sited two sources for the uncertainty, 1) the fact that the Department is currently operating under a Continuing Resolution through at least March 27, 2013, and 2) potential sequestration which has been delayed by Congress through March 1, 2013. DoD is hopeful that both matters will be resolved, but believes that it is necessary for the Department to plan for the possibility of operating under a Continuing Resolution through the end of FY2013 and that sequestration takes place. According to Carter, the near-term actions “must be reversible at a later date in the event that Congress acts to remove the risks I have described.” Approved near term actions include:
- Reduce base operating funding
- Curtail travel, training and conferences
- Curtail facilities maintenance or Facilities Sustainment, Restoration and Modernization
- Curtail administrative expenses such as supply purchases, business IT, etc. (with exceptions for mission-critical activities)
- Review contracts and studies for possible cost-savings
- Clear all R&D and production contracts and contract modifications that obligate more than $500 million with the USD (AT&L) prior to award
- For Science and Technology accounts, provide the USD(AT&L) and the Assistant Secretary of Defense (Research & Engineering) with an assessment of the impact that budgetary uncertainty may have on meeting Departmental research priorities
In the longer-term, Carter directed Components to take the following actions for the investment portion of the DoD budget (procurement, Research Development Test & Evaluation, construction).
- Protect investments funded in Overseas Contingency Operations if associated with urgent operational needs
- To the extent feasible, protect programs most closely associated with the new defense strategy
- Take prudent steps to minimize disruption and added costs (e.g., avoid penalties associated with potential contract cancellations where feasible; prudently mange construction projects funded with prior-year monies)
For more details on the DoD’s plans to handle budgetary uncertainty in FY 2013, see the original memo at www.federalnewsradio.com/pdfs/DoD_handling_budgetary_uncertainty.pdf.
The Hill reports that Congress has begun to work on FY2013 appropriations bills in preparation to stave off a government shutdown, scheduled to go into effect after a continuing resolution runs out on March 27. House Appropriations Committee Chairman Hal Rogers (R-Ky.) indicated that three fourths of the work on appropriations is done and that negotiations are continuing, the Hill reports. According to ASI Government, a Senate Democratic aide confirmed that work was proceeding and would continue when the Senate returns on January 22.
Coalition members will receive the association’s “2012 Year in Review” next week highlighting the results of our 2012 strategic plan. The review gives members a snapshot of the procurement policy issues that we have advocated for on your behalf to ensure an efficient and effective procurement system that provides contractors with sound business opportunities and delivers best value for customer agencies. It also covers the market intelligence, networking, and training opportunities in Federal acquisition offered in 2012 that our members rely on to stay ahead in the government market. The review also provides a preview of what members can expect in the coming year based on our strategic plan for 2013.
The Defense Information Systems Agency (DISA) recently announced that during FY 2012 it awarded $1.3 billion in contracting dollars to small businesses, exceeding its goals for the fiscal year. A press release posted to DISA’s website noted that by awarding 26 percent of its contracts to small business, DISA beat its own goal by one percent, outperformed the federal small business goal of 23 percent, and helped the Department of Defense (DoD) work toward its department-wide small business goal of 22.5 percent. In the small business socioeconomic categories, the agency awarded 10 percent of contracting dollars to small disadvantaged businesses; 5 percent to woman-owned small businesses; 3.8 percent to service-disabled-veteran-owned small businesses; and 0.6 percent to small businesses located in historically underutilized business zones. The agency’s 2013 goal is set at 26 percent.
During the 2012 Fall Conference, GSA expressed interest in hearing from Coalition members about contract clauses that increase costs without adding value to the government. Based on input from members, The Coalition put together a list of these contract clauses that we presented to GSA. GSA’s Global Supply Business lines, the IT Acquisition Center and the Office of Acquisition Management now have a team of individuals examining the terms and conditions of GSA Schedule solicitations with an eye towards consistency and simplification. The Coalition will continue to seek updates on progress of the team.
The Coalition is pleased to announce that Mike Canales with Defense Procurement and Acquisition Policy (DPAP) will speak with Rob Coen, Acting Program Director of NIH’s NITAAC program at the next GWAC/MAC Committee meeting on January 22 at 9:30 am. If you would like to be added to the GWAC/MAC Committee email list for further details about the meeting and the committee in general, please contact Roy Dicharry at email@example.com.
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.
GSA has announced a GSA Listen to Industry Day on FSSI Janitorial & Sanitation (JanSan) and Maintenance, Repair, & Operations Products (MRO). Current FSSI commodity solutions include: Express and Ground Delivery services, Wireless Telecommunications Expense Management Services, Office Supplies, and Print Management. Two new solutions are now in development: 1) Janitorial and Sanitation Products and 2) Maintenance, Repair, and Operations Products (MRO). Specifically, GSA would like to hear from industry about commercial best practices that save money, provide for more efficient business activities, and educate GSA on ways the commercial sector procures these products more efficiently than the government. Attendees will have the opportunity to share best practices, help scope these two vehicles appropriately, identify key requirements, and be prepared to compete. GSA notes that seats are limited so please Register Here! If you have questions about this event, please contact FSSI.JanSan@gsa.gov or FSSI.MRO@gsa.gov.
We would like to notify members of a tentatively scheduled event on the strategic sourcing of complex services sponsored by The Coalition for Government Procurement, Professional Services Council, TechAmerica and American Council for Technology/Industry Advisory Council. The event is scheduled for 1:00 to 3:00 PM on Friday, January 31 at the NRECA Conference Center (4301 Wilson Blvd., Arlington, VA 22203). OFPP Administrator Joe Jordan will speak about the Administration’s perspective on strategic sourcing of complex services in addition to other senior-level officials. There will be a government panel and an industry panel for the discussion. The Coalition will provide members with more details as they are available.
The Procurement Round Table, in cooperation with the National Contract Management Association, will award $5,000 to a young federal acquisition professional who has contributed significantly to acquisition operations or acquisition policy. For more information regarding the Elmer B. Staats Young Acquisition Professional Excellence Award and to download a candidate application form, please visit: www.procurementroundtable.org/awards.html. The deadline for nominations is April 1, 2013.
GSA will host an industry day on Thursday, January 17 at 1:00 pm to engage with members of the development community, local and state jurisdictions, and other interested parties about a potential FBI headquarters consolidation. A Request for Information for ideas from industry about options for a new, consolidated FBI Headquarters is available on FedBizOpps.gov. The industry day will be at GSA Headquarters Auditorium; 1800 F Street, NW, Washington, D.C. There is no charge to attend the event, but attendees must email name(s) and contact information to firstname.lastname@example.org to pre-register.