This week “Thought No. 4” of the Thirteen Thoughts for 2013: Contract duplication. . . .hitting the delete button. The timing could not better for addressing this thought!
Yesterday the Government Accountability Office (GAO) removed the High Risk Designation from “Management of Interagency Contracting.” GAO cited improvements in: (1) continued progress made by agencies in addressing identified deficiencies; (2) establishment of additional management controls; (3) creation of a policy framework for establishing new interagency contracts; and (4) steps taken to address the need for better data on these contracts. This is a wonderful development! It took a sustained, disciplined effort across the procurement community to address the concerns identified by GAO.
From a strategic acquisition perspective, removal of interagency contracting from the high-risk list furthers the goal of reducing contract duplication. Contract duplication, multiple contracts across government for the same or similar services, increases transaction and administrative costs to government, industry and the American taxpayer. At a time of fiscal challenge and budget restraint, we can longer afford unnecessary, costly contract duplication.
Last year the Coalition conducted a survey of our members regarding the costs associated with contract duplication. The results of the survey can be found here. The Coalition provided the results with further analysis and comment to the Office of Federal Procurement Policy, the Office of Defense Procurement and Acquisition Policy (DPAP) and GSA’s Office of the Chief Acquisition Officer. The survey results highlighted the increased costs (contract administration, bid and proposal, overhead) to contractors due to contract duplication. Similar increased costs are also borne by the government. Ultimately the American taxpayer pays more than necessary due to contract duplication!
The fundamental purpose of interagency contracting is to leverage acquisition resources (personnel, budget) by reducing the need for multiple contracts and streamlining the competition for requirements at the order level. The GSA Schedules, IT GWACs, Networx, travel contracts, credit card and fleet contracts are examples of government frameworks that allow customer agencies to quickly compete and award orders for specific requirements. At their core, these interagency contracting programs provide an efficient, effective framework for customer agencies and contractors to compete and conduct business.
Removing interagency contracting from the high-risk list eliminates a significant potential rationale/basis for agency choosing to create its own contract vehicle rather than using an interagency contract. Of course, agencies must make good business decisions regarding acquisition plans and strategies, including the choice of contract. However, the removal of interagency contracting from the high-risk list, eliminates a potential complicating factor or concern as agencies develop acquisition plans and look at contracting options to meet their needs. Removal from the high risk list should also be reflected in current management policies and procedures governing the internal agency decision making for use of interagency contracting. Guidance should be simplified to better assist contracting officers and program managers. The Coalition applauds DPAP for embarking on such an effort.
In sum, removal of interagency contracting from the high-risk list provides a new point of departure or “reset” regarding contract duplication. It provides the procurement community with a wonderful opportunity to work together to press the “delete button” on new and current duplicative contracts that increase costs for government, industry and the American taxpayer. The Coalition looks forward to working with all stakeholders to keep pushing the delete button on this important issue.
The Coalition for Government Procurement welcomes the latest addition to GSA’s leadership, Chief Financial Officer (CFO), Michael Casella. Mike Casella comes to GSA from the U.S. Agency for International Development where he managed the development and humanitarian assistance budget for the past three years. He also has extensive experience with GSA customer agencies, the U.S. Office of Management and Budget, the Department of Treasury, and the Department of Commerce’s International Trade Administration. Mike Casella’s appointment as CFO is the latest addition to GSA’s new leadership team including FAS Commissioner Tom Sharp, who started his new role with GSA this week.
On Tuesday, President Obama issued the much anticipated Executive Order (EO) on cybersecurity entitled Improving Critical Infrastructure Cybersecurity. The EO is designed to increase cyber information sharing and enhance cybersecurity for critical infrastructure. The order also directs the GSA Administrator and the Secretary of Defense to determine how cybersecurity can be enhanced in procurement. GSA and DoD will issue recommendations to the President on the feasibility, security benefits, and relative merits of incorporating security standards into acquisition planning and contract administration. They will also recommend what steps can be taken to harmonize and make consistent existing procurement requirements. GSA spoke with the Coalition’s IT/Services Committee about this initiative and is interested in hearing members’ feedback on the issue. We will discuss this topic further during the IT/Services Committee meeting on March 12.
The Government Accountability Office (GAO) recently removed Interagency Contracting in its High Risk List for 2013. According to the GAO, sufficient progress has been made to remove the high-risk designation from Management of Interagency Contracting. GAO explained that progress has been made in the past two years on this issue, including the following improvements:
(1) continued progress by agencies to address identified deficiencies,
(2) establishment of additional management controls,
(3) creation of a policy framework for establishing new interagency contracts, and
(4) steps taken to address the need for better data on these contracts.
GAO had previously identified Interagency Contracting on the 2011 High Risk List due to the need for stronger internal controls, clearer definitions of roles and responsibilities, and training to ensure proper use of interagency contracts. For Coalition President Roger Waldron’s thoughts on this development, read the “Comment of the Week”.
House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) has released a draft bill that will centralize agency suspension and debarment (S&D) functions within GSA. The Stop Unworthy Spending (SUSPEND) Act would establish a Board of Civilian Suspension and Debarment at GSA and end more than 41 civilian agency and government corporation S&D offices effective October 1, 2014. According to the House Oversight and Government Reform Committee, the Government Accountability Office found that six of ten agencies lack effective S&D programs. The committee is concerned that businesses and individuals who should be documented as “excluded parties” may still be receiving federal contracts.
Last Friday, Defense Secretary Leon Panetta and Army General Martin E. Dempsey, Chairman of the Joint Chiefs of Staff, addressed pending sequestration cuts and how budget uncertainty would impact the DoD’s FY14 budget request. The budget is not expected to go to Congress until late March. According to a Defense Department press release, the budget includes $487 billion in cuts that were proposed in 2011. Secretary Panetta explained that $30 billion in new initiatives have been identified over the next five years to eliminate overhead and duplication. The department has already ordered hiring freezes, and is cutting back on maintenance and other areas. The Secretary is also recommending another round of base closures and realignments. In terms of growth, DoD will continue to push for an increase in special operations capability and cyber warfare experts as part of the budget request for FY 2014.
The Department of Navy Chief Information Officer released a memo on January 25 establishing a mandatory enterprise-wide policy to improve the management of the department’s imaging equipment. The policy is designed to achieve significant cost savings by leveraging the Defense Logistics Agency (DLA) Document Services to deploy more networked multifunction devices and purchase consumables and maintenance at a lower cost. The Navy’s new policy also encourages certain behavioral changes within the department such as copying more frequently in black and white versus color.
In a recent press release, DLA Document Services noted that the partnership with the Navy brings about 70,000 devices under their management, the single largest opportunity in its history. DLA will conduct assessments within the Navy to determine the most cost effective device configurations for the department. DLA Document Services director, Steve Sherman, said that “this initiative capitalizes on DLA Document Services’ core capabilities and infrastructure, as well as over 30 years of experience in managing office equipment for the DoD.”
Nondisplacement of Qualified Service Workers
Alison Doyle, Partner at McKenna Long & Aldridge, presented to the IT/Services Committee this week on the Nondisplacement of Qualified Service Workers. The presentation provided an overview of the requirements for service contractors under the new FAR 22.12 and FAR 52.222-17. In case you missed it, the presentation is available for members at https://thecgp.org/images/DC-50991955-v1-Nondisplacement_of_Qualified_Workers.pdf.
Awards to Historically Underutilized Business Zone (HUBZone) small businesses fell to their lowest level in five years in fiscal year (FY) 2012, as reported in The Washington Post. According to preliminary data posted by the Small Business Administration, spending fell 17 percent, to $8.2 billion of eligible contract dollars. Contracts awarded to HUBZone firms shrank from 2.34 percent in fiscal 2011 to 2.04 percent of eligible dollars in fiscal 2012. Following the 2010 census, many areas previously considered eligible were re-designated, barring 2,400 small firms from qualifying for the program. That reduction has made it harder for agencies to meet their HUBZone spending goals, said Mariana Pardo, director of the SBA’s HUBZone program. “The portfolio shrank significantly,’’ said Pardo. “It’s part of the reason that we are doing more aggressive outreach, marketing and training.’’
The Coalition for Government Procurement honors our dear friend and member, Ron Segal, who passed away suddenly on February 11. Ron was Founder and CEO of Spectrum Systems and a well respected member of the Coalition for more than a decade. Ron founded Spectrum in 1986, and built the company from a small start-up into the successful, customer-focused organization with high ethical standards that it is today. Ron was also a strong supporter of the Coalition who was passionate about a fair and equitable procurement system that delivers best value to the government. Ron will be greatly missed by the many lives he touched in both government and industry. We send our thoughts and prayers to his friends and family on behalf of the entire membership.
A memorial service for Ron Segal is scheduled for Saturday, February 23, 2013 at 1:00 p.m. at the Fairfax Hunt Club, 1321 Lake Fairfax Dr., Reston, VA. In lieu of flowers, donations may be made in his memory to the American Diabetes Association, American Heart Association, the Central High School Capitol Fund (Philadelphia, PA) or the Harry L Segal Scholarship Fund at the IST Department of Penn State.
What Does 2013 Have In Store for Government Contractors and Their Lawyers?
By Louis Victorino, Partner, Sheppard Mullin and Jonathan Aronie, Partner, Sheppard Mullin (originally published in the San Diego Business Journal)
It has been noted, the more things change, the more they stay the same. In the world of Government Contracts Law, however, the more things change, the more the phone rings. And while we’re only a month into 2013, the phone has been ringing off the hook. Here are a few of the reasons why.
The Government’s anti-contractor bias continues unabated. From the moment President Obama stepped into office, his executive team made clear their distrust of defense contractors. Indeed, one of OMB’s first public pronouncements focused on curbing perceived rampant contractor fraud. Shortly thereafter, Congress passed the Close The Contractor Fraud Loophole Act, certainly not the title one gives to an Act intended to extoll the virtues of the long and critical partnership between Government and industry. In late 2008, the Government continued down the anti-contractor path when it created what is known as the Mandatory Disclosure Rule, a regulation that requires contractors to self-report “credible evidence” of an extremely broad list of potential wrongdoing. The purported rationale for the rule? The Government’s belief that contractors were affirmatively hiding their fraudulent activities from the Government. Putting aside for a moment the many flaws in the Government’s apparent view that contractors generally are not to be trusted, the fact is the anti-contractor bias remains strong in 2013 and shows no signs of abating.
Increased enforcement activities. Tied closely to the Government’s view that contractors are not to be trusted, is the Government’s ever-increasing efforts to police those contractors more aggressively. Like 2012 before it, 2013 is poised to see increases in federal audits, investigations, and False Claims Act lawsuits. DCAA, the Defense Department’s primary audit watchdog, for example, continues to reach new levels of aggressiveness. As one commentator put it not long ago, the DCAA “is out of control.” Suspensions and debarments also are likely to increase in 2013. The President has directed federal agencies to make better use of the suspension/debarment process, and the OMB is making sure the President’s direction is implemented. It would be naïve, of course, to think this increase in enforcement activity is due solely to a mistrust of contractors. The Government’s collection of $4.9 Billion (yes, that’s Billion with a B) in False Claims Act settlements and recoveries in 2012 no doubt feeds the Government’s view that contractors need more policing, and fuels the arguments of the enforcement community that they need to be more, not less, aggressive.
Shrinking pots of money mean more bid protests. The number of bid protests (that is, disputes between a contractor and an agency over the non-award of a federal contract) has increased every year since 2008. In 2008, 1,652 actions were filed with the General Accountability Office (GAO), the primary arbiter of procurement award disputes. That number steadily increased to 2,475 in 2012. Whether or not that number will rise again in 2013 remains to be seen, but the likelihood that larger award decisions will be protested by a disappointed bidder will increase. As federal opportunities become fewer, the competition for those that remain almost certainly will heat up. In short, some companies simply cannot afford not to protest.
The Government will take more work in-house. With shrinking budgets and the elimination of programs, the Government will bring more work in-house in 2013 to maintain their internal funding levels and workforce headcounts. The move to in-sourcing will be advocated by Government labor “unions” and supported by the Democratic administration. See, e.g., Subtitle C of Title III of the National Defense Authorization Act for Fiscal Year 2012. This won’t just be in-sourcing of traditional Systems Engineering and Technical Assistance (SETA) work and weapons depot work, but will extend to major weapon systems repairs and overhaul, as well as design, development, and implementation of major Government software system upgrades. We also likely will see that Government engineering centers and laboratories will move to keep in-house significant research and development funding and activities. These efforts will have an obvious significant impact on contracting opportunities available to private companies, large and small.
The Government will become more aggressive with respect to securing intellectual property. As a consequence of bringing more work in-house, the Government will need the intellectual property necessary to perform that newly in-sourced work. As a result, 2013 likely will manifest an acceleration of recent trends to a more confiscatory Government policy regarding rights in data, including patents and copyright. Regardless of the standard rights in data delineated in applicable regulations and contract clauses, in connection with the solicitation of contracts for major programs, the Government will seek to obtain, at a minimum, a Government Purpose Rights License not only to data first produced or developed under the contract but also to a significant portion of all data used in the performance of the contract. Definitions of “Commercial Items” will be narrowed, expanding the Government’s rights in data, including software. Formal challenges to current contractor claims of data rights will increase. And, unfortunately, in some instances, contractor intellectual property simply will be used by the Government, with the propriety of the use left to be determined by years of litigation.
Greater competition for fewer dollars will prompt industry consolidation. The reduced number of contracting opportunities will have many collateral impacts on the Government contracting community and their legal advisors. As occurred with the end of the “cold war,” there likely will be an upswing in industry consolidation. With a reduction in funding and new programs available to contractors, the industry base will need to shrink. Some commercial and “dual use” companies simply will abandon the market. Others, with shrinking backlogs, will seek strength and economies through corporate combinations or “spin-offs.” Some companies, particularly smaller companies, will be targets of acquisition because of their success in winning large or significant program contracts. A business that wishes to be the leader in a particular technology may well need to acquire the winning competitor of the next and only large, long term contract involving that technology.
The increased pressure that comes with increased competition will cause some to stray. While the federal contracting community is, far and away, one of the most self-policed industries in the country, every industry has its exceptions. While most contractors will assess the new environment and adapt their business strategy accordingly, some will bend to the new fiscal pressures and adapt their strategies in more reckless ways. When contractor managers and employees see their livelihoods hitched to the success of the next proposal submission, some will do foolish things – some will seek inside information regarding the procurement, seek proprietary information about their competitors, provide false information to support their offer such as “inflated” resumes or product performance claims, and any number of other prohibited activities. In short, some people do pretty stupid things when they are under pressure. Fortunately, these events are the exception rather than the rule, but companies cannot afford to take any chances. If contractor leadership is not extremely vigilant and committed to internal integrity and compliance, the increased audits and investigations described above may well negate all efforts to be successful in the new smaller, Government contracting market.
Contractors continue to embrace ethics and compliance as a core element of success. Years ago, the implementation of an in-house ethics and compliance program was viewed by many contractors as a necessary evil; something needed to keep the lawyers happy, but rarely embraced by the “revenue generators.” Over the last 5-10 years, however, there has been a cultural shift among contractors. Contractors now embrace the benefits of an effective ethics and compliance program. Codes of Conduct are the rule rather than the exception. Training programs are standard fare for Government contractors. While the Government can take some credit for this evolution – there is nothing like a few multi-million dollar False Claims Act settlements in your industry to highlight the importance of compliance – contractors also deserve much of the credit for embracing the benefits of such programs. As the Government’s enforcement activities become more and more aggressive, one can expect to see a continued increase in the roster of Company’s embracing the benefits of an effective internal control system and ethics/compliance program.
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In short, we are reminded of an observation provided by an astute securities law school professor who noted: When the stock price of a company goes up, stock sellers will sue the buyers. When the stock price goes down, the buyers will sue the sellers. When the stock price remains the same, each will sue the other. Government contracting is a challenging market. Challenges exists in up-times and they exist in down-times. They likely will be different challenges from year to year, but challenges always are present. The astute contractor understands this and guides the organization accordingly.
The 2013 market clearly counsels in favor of enhanced care in the pursuit of new business. With respect to new solicitations, assure that the proposed terms and conditions and the statement of work/specifications are reviewed carefully and risks identified. Assure decisions to accept risk are fully informed and made at an appropriate level within the company. Finally, refresh your internal personnel training regarding Government and company rules delineating what are prohibited activities in connection with the submittal of a proposal. And, if all else fails, pick up the phone and give your friendly Government Contracts lawyer a call. You won’t be alone.
This article formed the basis, in part, for an article appearing in the January 21-27 issue of the San Diego Business Journal (www.sdbj.com) and special thanks to the editors of that publication for permission for its re-use.
GSA recently released an RFTC (Request for Technical Capabilities) to identify capable solutions that will meet the federal government’s needs to manage mobile devices. According to the notice posted on FedBizOpps.gov, the initiative will identify Mobile Device Management (MDM) and Mobile Application Management (MAM) platforms that can satisfy the government’s mobile device management needs. The due date for responses is 11:00 PM (EST), March 8, 2013.
The Department of the Army released a notice on FedBizOpps.gov on February 7 requesting information from industry regarding the ability to provide IT services. The notice comes as the Army is readying the third generation of its Information Technology Enterprise Solutions contract, commonly called ITES. The estimated value of services within the scope of the RFI is $11 billion to $15 billion over a 5 year period of performance. The notice includes a questionnaire for vendors, and a list of labor categories and task areas under consideration for the contract. The proposed task areas are:
- Business process reengineering
- Information systems security
- Information assurance
- IT services
- Enterprise design, integration and consolidation
- Education and training
- Program and project management
- Systems operation and maintenance
- Network support
The due date for responses is February 21.
Mark your calendars for a new webinar! Join the Coalition and McKenna Long & Aldridge LLP for a one hour lunchtime webinar at 12:30 pm on Foreign Acquisition and the Trade Agreements Act. Register here! If you would like more information, please contact Athena Oliff at firstname.lastname@example.org or 202-315-1052.
Register for the Spring Conference, April 17
Registration is now open for the Coalition’s Spring Training Conference on April 17th 2013 at the Crystal Gateway Marriott. Attendees will engage in a government-industry “Myth-busters” dialogue with acquisition leadership from the Department of Defense, Department of Veterans Affairs, General Services Administration and others about key procurement issues that impact members’ government business. The focus on “strategic acquisition” at this year’s conference is in response to increased interest in federal strategic sourcing. Strategic Acquisition can both improve the efficiency of government and provide an opportunity for businesses to offer innovative solutions that help agencies meet this goal. We have developed a robust and informative agenda with early speaker confirmation from Government and industry leaders alike. This is a conference you will not want to miss! Register Here!
GSA will have a webinar on CCR Account Migration and Update/Renewing Registration for SAM.gov on Tuesday, Feb. 26.
Host: GSA/FAS Office of the Integrated Award Environment
Date of Event: Tuesday, Feb. 26, 2013
Time of Event: 1 p.m. – 2 p.m. EST
This course is geared to those interested in doing business with the government and who previously registered in CCR. The course will cover essential activities for getting started and using the System for Award Management (SAM).
Upon completion of this course, you should be able to:
- Create a new SAM user account
- Migrate permissions from the legacy Central Contractor Registration (CCR) system in to SAM
- Update/renew an existing registration
All interested participants should register using the link above. This webinar will be available for the first 1,500 participants; for those that cannot attend the live session, this course will be recorded and posted to SAM.gov following the event.
The Coalition is establishing a Strategic Acquisition Working Group to make recommendations to the government about how to increase efficiencies in federal procurement and eliminate unnecessary cost drivers in the procurement system. As new Federal strategic sourcing solutions are being developed, this is a wonderful opportunity to share best commercial practices with GSA and OMB. More details will be discussed with members in the committee meetings this month. If you are interested in learning more or would like to volunteer, please contact Aubrey Woolley at email@example.com.
The Coalition hosted another successful MAS Basic Training yesterday at McKenna Long & Aldridge LLP. This one-day course taught members the basics of utilizing the Multiple Award Schedules program from instructors on the front lines of GSA schedule negotiations and contract management. The intensive course delved into topics such as contract requirements, schedule modifications, ethics, marketing, audit preparation and the proper utilization of schedule e-Tools.
Thank you to those who attended and our invaluable instructors – Jason Workmaster, Allison Doyle, Jack Horan (McKenna Long & Aldridge), Tim Dempsey (FAS Office of Acquisition Management, GSA), Chris Arndt (The Gormley Group), Jeff Clayton and Julia Ewart (Baker Tilly Virchow Krause LLP) and Pat Morrison (Morrison and Associates, LLC).
Look for more details soon on our next MAS Basic Training on Thursday, December 5th.