It is the first week of March and with spring right around the corner, the “Comment” is taking a break from the “Thirteen Thoughts for 2013” to focus on the Coalition for Government Procurement’s 2013 Spring Calendar of Events. We are committed to “continuing the dialogue” with procurement leaders across the Federal Government on challenges, issues and opportunities to improve the procurement system. Given the current budgetary challenges, it is more important than ever that government and industry work together toward common sense procurement policies and procedures that deliver best value outcomes for customer agencies, taxpayers through sound business opportunities for the private sector.
Our 2013 Spring Calendar of events provides members the ability to meet and engage directly with key government stakeholders. On March 27th the Furniture Committee will travel to Philadelphia for a meeting with the Integrated Workplace Acquisition Center (IWAC) and to attend the IWAC’s Evergreen Recognition Ceremony honoring green contracting efforts. On March 28th, Dorothy Robyn, Commissioner of GSA’s Public Building Service (PBS) will speak to our Federal Buildings Committee on PBS’s acquisition management priorities. All members are invited to attend the Federal Buildings Committee Meeting. Please contact Roy Dicharry at rdicharry@thecgp.org for additional information regarding attendance on the 28th. These two committee meetings are representative of our efforts to constantly and consistently provide high quality committee meetings that address members’ needs and interests. The committee meetings provide a wonderful opportunity for dialogue with our government partners.
On April 17th, the Coalition will hold our Spring Conference “Continuing the Dialogue: Strategic Acquisition—An Opportunity for Federal Efficiency and Commercial Business. The Conference agenda can be found here. Our participants include a cross section of key government customers and policy leaders. The Spring Conference will be highlighted by Joe Jordan, Administrator, Office of Federal Procurement Policy, moderating a panel discussion on strategic acquisition with Elliot Branch, Deputy Assistant Secretary, US Department of Navy, Daniel Clever, Deputy Chief Procurement Officer, US Department of Homeland Security, Iris Cooper, Executive Director of Acquisition Operation, US Department of Veterans Affairs, and Tom Sharpe, FAS Commissioner, GSA.
The Spring Conference will also include our ever popular “Rogers” session on Recent Developments in Government Contracts Case Law and Regulation. Jonathan Aronie of Sheppard Mullin, David Dowd of Mayer Brown, and Jack Horan of McKenna Long & Aldridge will be presenting the “Rogers.” For the first time the Spring Conference will also host breakout sessions with key government procurement officials. These sessions afford members the opportunity for wide ranging dialogue on key procurement program/policy developments and business opportunities. The breakout sessions will include DHS Programs and Priorities, Schedules Modernization—What’s Next?, GWACs, OASIS, Defense Procurement and Acquisition Policy, NASA SEWP, and Federal Strategic Sourcing Initiatives. Registration and sponsorship information can be found here.
On May 22nd the Coalition will host Acting Administrator, Dan Tangherlini for a GSA Business Roundtable focusing on the new mission and priorities he envisions for GSA in 2013 and beyond. We look forward to continuing the dialogue regarding GSA’s mission and priorities in delivering best value solutions to customer agencies and the taxpayer. More details on the roundtable will be announced in the coming weeks.
On June 20th the Coalition’s Healthcare Committee will travel to Chicago to meet with the VA’s National Acquisition Center (NAC) leadership. This meeting will be the first of its kind in Chicago, bringing Coalition members together with NAC’s leadership to discuss issues of mutual concern. For more information on this meeting, please contact Carolyn Alston at calston@thecgp.org.
Finally, the Coalition is excited to announce that our MAS Legal Training Course for In-house Counsel has been approved by the Virginia State Bar for six hours of Continuing Legal Education credit. We will be holding the MAS Legal Training Course for In-house Counsel on Thursday, June 27. To register go here.
Roger Waldron
President
Members: Sequestration Notice from DoD and DHS
This week, The Coalition for Government Procurement received notices from the Department of Defense (DoD) and the Department of Homeland Security (DHS) about the impact of sequestration on contractors. According to the DoD notice from Frank Kendall, Undersecretary of Defense for Acquisition, Technology, and Logistics, the total reduction in available DoD resources for the remainder of FY 2013 is $46 billion. This includes a nearly $41 billion reduction from the sequester and estimated $6 billion reduction from the current continuing resolution. Kendall explained in his letter to the Coalition that, “your members should anticipate that the automatic across-the-board cuts will cause the Department to reduce both the quantities of equipment and the levels of services that we acquire for the balance of this fiscal year and perhaps beyond”. He also explained that, “to the extent we can continue operations while delaying and deferring new obligations until the uncertainty is resolved, we will do so.” In general, DoD anticipates that the reduction will impact the full range of DoD’s planned contracts as well as the efficiency of the procurement process. As DoD looks to mitigate the negative consequences from sequestration, they are looking for suggestions from industry about how to best preserve support for the warfighter and the DoD mission.
Nick Nayak, Chief Procurement Officer with DHS, also provided notice to members about possible impacts of the sequester on contractors. According to Nayak, it is possible that fewer funds may be available for procurements, and that reductions may also impact contract administration. As a result, some planned procurements could be cancelled or reduced in scope, and certain existing contracts could be reduced in scope, terminated or partially terminated. In these cases, the contractor officer will promptly notify contractors in accordance with the terms and conditions of each contract. Nayak further explained, “unless a contractor is provided a formal notification to the contrary, all DHS contractors must continue to comply with all terms, conditions, requirements and deliveries specified in their contract.”
OFPP Reviews Federal Employee vs Contractor Costs
The Office of Federal Procurement Policy (OFPP) held a public meeting this Tuesday, March 5, on the use of cost comparisons in Federal procurement. The purpose was to receive feedback on how the relative cost of performance by Federal employees versus contract performance should be evaluated in order to identify the most cost-effective source for the government.
The meeting was led by Administrator for Federal Procurement Policy Joe Jordan. During his remarks, Jordan explained that the meeting and following comment period are OFPP’s first step in evaluating existing cost comparison policies and how they can be improved. Jordan further noted that OFPP’s ultimate goal is to be able to determine which option is the best value for the taxpayer. Public comments during the meeting were provided by the Aerospace Industries Association, American Federation of Government Employees, Professional Services Council, and Project on Government Oversight (POGO).
The OFPP is also receiving written comments from the public through April 15. They are particularly interested in feedback concerning:
(1) When cost comparisons are likely to be beneficial,
(2) What principles should guide the conduct of a cost comparison, and
(3) What special considerations should be involved when work is currently being performed by a small business contractor.
The Coalition will submit comments to OFPP by April 15. If you have any input regarding OFPP’s questions or about cost comparisons in general, please contact Carolyn Alston at calston@thecgp.org.
OMB recently released a detailed report to Congress on sequestration. In the report, OMB Director Jeffrey Zients notes “OMB calculates that, over the course of the fiscal year, the sequestration requires a 7.8 percent reduction in non-exempt defense discretionary funding and a 5.0 percent reduction in non-exempt nondefense discretionary funding.” Additionally, because the cuts will be implemented in the remaining seven months of the year, the effective percentage reductions will be approximately 13 percent for nonexempt defense programs and 9 percent for nonexempt nondefense programs. According to FCW and ASI Government, the specified cuts include:
- $31 million from the Defense Department’s acquisition workforce development fund
- $452 million from the Department of Defense’s (DoD) department-wide procurement account, including unobligated balances
- $16 million from the Homeland Security Department’s office of the CIO
- $10 million from the Housing and Urban Development Department’s information technology portfolio
- $84 million from the Coast Guard’s acquisition, construction, and improvements account
- $17 million from the Internal Revenue Service’s business systems modernization
NASA has released a draft RFP for its $10.5 billion Solutions for Enterprise-wide Procurement (SEWP) V contract. The SEWP contract offers a wide range of advanced technology including tablets, desktops and servers, storage systems, security tools, software products, and cloud based services. As a Government-Wide Acquisition Contract, SEWP is utilized by all federal agencies. Also, NASA will host an industry day on March 11 from 9 a.m. to noon to provide an overview of the draft RFP and field vendor questions. NASA anticipates issuing a final RFP early this summer with proposals due in late summer. The estimated award timeframe is by May 2014.
House Passes Continuing Resolution
On March 6, the House of Representatives approved H.R. 933, the Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act of 2013 in a 267-151 vote. A press release on the House Appropriations Committee website notes that the bill “provides necessary funding to keep the doors of the government open until the end of the fiscal year on September 30.” The legislation includes a full-year of appropriations for Defense, and Military Construction and Veterans Affairs. According to The Hill, “the bill now goes to the Senate, which is expected to make additions to the bill and try to send it back to the House before March 27, when funding for the government runs out.”
Contracting and Tax Accountability Act
Representatives Jason Chaffetz (R-UT) and Jackie Speier (D-CA) have introduced H.R. 882, the Contracting and Tax Accountability Act of 2013. According to a press release on Congressman Chaffetz’s website, the “legislation prohibits companies with seriously delinquent federal tax debts from receiving new federal contracts.” “Designed to mandate tax compliance as a prerequisite for receiving a federal contract,” the bill would codify earlier FAR regulation that required contractors to certify that they do not have a delinquent tax debt to the federal government. For more information members are encouraged to take a look at the bill linked above.
Meet PBS Commissioner Dorothy Robyn: March 28
“Continuing the Dialogue”
PBS Acquisition Focus for 2013
Dorothy Robyn, Commissioner, GSA Public Buildings Service
Thursday, March 28, Offices of Mayer Brown, 1999 K St, NW, Washington DC
Registration at 7:30am, Presentation and Discussion at 8:00am
Coalition members are invited to join the conversation as we delve into the PBS acquisition focus for 2013 with PBS Commissioner, Dorothy Robyn. As PBS Commissioner, Dr. Robyn leads one of the largest and most diversified public real estate organizations in the world. The Public Buildings Service is responsible for providing superior workplaces for federal customer agencies at good value for the American taxpayer.
Dr. Robyn manages the nationwide asset management, design, construction, leasing, building management and disposal of approximately 375 million square feet of government-owned and leased space, accommodating over 1 million federal workers, and covering all 50 states, six U.S. territories and the District of Columbia. Additionally, Dr. Robyn oversees an annual budget of more than $9.4 billion and a workforce of almost 6,800.
Attend this session to see how PBS priorities and initiatives will impact sales of products and services to Federal customers. For more details and to register, please contact Athena Oliff at aoliff@thecgp.org.
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.
* * *
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.
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!
March 13 webinar – Trade Agreements Act
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 aoliff@thecgp.org or 202-315-1052.
Now Available- CLE Credits for In-House Counsel Training!
Continuing Legal Education (CLE) credits are now available for the Coalition’s General Services Administration (GSA) Schedule Contracting for In-House Counsel training scheduled for June 27, 2013. Attendees can earn 6 CLEs for the course with the Virginia State Bar.
GSA Schedule Contracting for In-House Counsel Training
June 27, 2013 8:00 am
McKenna Long & Aldridge LLP
1900 K St NW
Washington, DC
About the course:
This GSA Schedule Contracting for In-House Counsel training will provide information and tools to help you understand the GSA/VA Schedule contracting program and provide insightful legal advice to your in-house client.
The GSA Schedule, including the delegated VA Schedules, is a $50 billion contracting program that all federal agencies use to acquire commercial services and products. These multiple year, government-wide contracts cover professional services, information technology, pharmaceuticals, medical equipment and a vast array of commercial products.
Schedule contracts offer a huge market opportunity. Thousands of companies including both Fortune 500 companies and a vast number of small businesses have GSA/VA Schedule contracts. All federal agencies, and in some instances state agencies, can place orders against the contracts.
Of particular interest to in-house counsel, Schedule contracts have a pricing methodology, and disclosure requirements that are unique in federal government contracting. The contracts provisions must be correctly understood, managed and monitored to assure that your company realizes anticipated profits. Failure to do so can result in significant monetary, administrative, civil and even criminal penalties.
New Strategic Acquisition Working Group
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 awoolley@thecgp.org.