Originally, this Comment was to focus on Thought No.7, “From Strategic Source to Strategic Acquisition,” of the Thirteen Thoughts for 2013. The theme was to expand on my March 18th Federal Times editorial entitled “A New Framework for Acquiring Professional Services” which outlines the key elements of the strategic acquisition of complex services. The elements outlined in the editorial are central to ensuring best value outcomes for customer agencies, industry and ultimately the taxpayer.
However, due to interest from throughout the procurement community, I’ve decided to focus this week’s Comment on the GSA Office of Inspector General’s March 8th memorandum to the Commissioner of the Federal Acquisition Service (FAS). The memorandum is entitled “Major Issues from Multiple Award Schedule Preaward Audits, Audit Memorandum Number A120050-3.” It highlights recurring findings from the FY 2010 and FY 2011 Multiple Award Schedule (MAS) preaward audits conducted by the Office of Audits in support of FAS. The memorandum highlights three recurring issues:
(1) the majority of vendors provided information that was not current, accurate, and/or compete to support their proposed prices;
(2) nearly half of the vendors had minimal or no non-federal commercial customers, making it impossible to use non-governmental commercial sales as the basis for determining price reasonableness; and
(3) over a quarter of the vendors audited were found to have supplied labor that did not meet the minimum educational and/or experience qualifications required by the contracts.
The memorandum also provided additional observations regarding Industrial Funding Fee and potential cost avoidance in the negotiation of MAS contracts.
Of these three recurring issues, the finding that “the majority of vendors provided information that was not current, accurate and and/or complete to support their proposed prices “ has generated the most interest. With regard to the Commercial Sales Practices (CSP), in FY 2010 the IG found that 83 percent of the contractors reviewed had issues regarding their CSPs. In FY 2011, 69 percent of the contractors reviewed had these issues. The IG further observed that “Despite the improvement in CSP disclosures flaws in vendor CSP information continue to be problematic. Therefore, we affirm the position, as stated in our September 26, 2011, memorandum; the Federal Acquisition Service management should take action to ensure contracting officers appropriately and consistently evaluate discount information.”
The high rate of issues identified in contractor CSPs (83 percent in FY 2010 and 69 percent in FY2011) raises a fair question as to whether it is possible for a contractor operating in today’s commercial market to fully comply with the CSP. If over a two year period, close to three of four contactors reviewed failed to fully comply with the CSP, then perhaps there are flaws in the current CSP process. After all, the CSP is outdated. It dates to a time before technology fundamentally changed the way companies compete in the commercial marketplace. It predates the technological revolution in cell phones, the internet, and computers as well as the globalization of the commercial marketplace. It is now a profoundly different time and place then when the CSP was originally drafted and vetted through the rule-making process in the mid-90’s. To compensate, there has been increasing pressure to interpret the CSP in as expansive a manner as possible—harkening back to the old Discount Schedule and Marketing Data (DSMD) submission requirements that existed in the late 80’s and early 90’s. Ultimately, the Courts found that it was essentially impossible for MAS contractors to comply with the DSMD. We are seeing the same trend with the current application of the CSP. Given the CSP’s age and the high rate of issues with contractor submissions, it is time to conduct a top down review of the CSP and update the MAS pricing policies and procedures.
The IG’s additional observation on page five of the memorandum that “[c]ontracting officers fully agree with recommended cost avoidances but only achieved savings for a portion of them” highlights the relative value of MAS contract terms versus commercial contract terms and the role of task order competitions in driving pricing for customer agencies. Currently pricing under the MAS program is driven at the task order level—that’s where specific requirements are competed, priced and ordered. In essence the task orders provide a real, hard requirement to be performed while MAS contracts provide the opportunity to compete for customer agency requirements.
Think of it this way: GSA is offering MAS contractors a guaranteed minimum of $2,500 and the opportunity, over a five year period, to compete for delivery or task orders issued by customer agencies using the MAS program. In contrast, at the MAS task order level, an agency promises to compete and buy products, services or solutions to meet its needs. Moreover, competition for MAS delivery and task orders exceeding $150,000 is mandated by statute and regulation. GSA’s MAS program provides a wonderful service to customer agencies and contractors through a streamlined, dynamic and competitive framework for agency task and delivery orders.
As GSA conducts its review of the MAS pricing policies and procedures, reform should focus on rebalancing the relationship between MAS and commercial contract terms and contract pricing. In light of the Government’s mandatory competition requirements, electronic tools and customer requirements that are driving pricing at the order level, there are up to three levels of price protection to get a fair and reasonable price. The first is at time of contract award. The second is at the evaluation and award of a competitive Blanket Purchase Agreement. The third is at the task order (competition for actual requirement and “best price”) level. The GSA IG’s findings focus on contract award. The findings do not examine the additional levels of price and value competitions within the MAS program, especially the task order level competitions where taxpayer money is obligated and mission support is provided by MAS contractors. A review of the total acquisition cycle is in order to address the age old question of who actually gets “the best price”! I suggest that there is not a single answer, although it is an easy question to ask. The competitive marketplace is ever changing, therefore pricing is never stagnant. This is the beauty of the MAS program – the Government gets the latest market offerings and competitive task order pricing!
A review of the total acquisition cycle is also timely as it could identify what it really costs the Government to conduct an acquisition. Such a review could provide the framework for eliminating Government unique processes, procedures and requirements whose costs outweigh any benefits. Remember, unit price is only a portion of what the taxpayer is paying for the Government to make a purchase!
GSA Acting Administrator Dan Tangherlini testified during a House Appropriations Committee hearing this week. The purpose of the hearing was to continue oversight of GSA as the agency implements reforms resulting from its Top to Bottom review and builds an even “stronger GSA”.
Administrator Tangherlini’s statement before the Subcommittee on Financial Services and General Government focused on GSA’s efforts to 1) consolidate functions within the agency and 2) to provide certain expertise to customer agencies so that they can focus on their core missions.
In his testimony, the Administrator said that the Top to Bottom review revealed structural problems within GSA that “created a lack of coordination, duplicative investments and variable performance”. As a result, GSA has been consolidating certain functions since April 2012. The first change made was having the PBS Chief Financial Officer report to GSA’s Chief Financial Officer. GSA is also centralizing the authority of the Chief Information Officer so that all information technology budgets, personnel, and systems are within their authority. In addition, GSA is looking to consolidate human resources, administrative services, emergency response, small business outreach, and congressional affairs.
Administrator Tangherlini also highlighted the work GSA is doing to support Federal agencies. From offering lease rates 11.5% below market rates, to disposing of unneeded Federal properties, Tangherlini covered a number of PBS programs designed to help agencies save taxpayer dollars. The Administrator also spoke about the savings that have been achieved through strategic sourcing. To date, GSA estimates that strategic sourcing BPAs for office supplies, domestic delivery, telecommunications expense management services and print management have saved over $300 million.
Moving forward, the Administrator plans to continue to evaluate GSA’s processes and look for more efficient ways to serve the taxpayer. Administrator Tangherlini’s testimony before the Subcommittee on Financial Services and General Government can be viewed at http://appropriations.house.gov/calendararchive/eventsingle.aspx?EventID=323247.
GSA officials recently identified a security vulnerability in the System for Award Management (SAM) that may have compromised the sensitive information of some vendors. GSA sent an email to SAM vendors last Friday, March 15, notifying them of the problem. A software patch was put in place immediately after the vulnerability was discovered on March 8. Vendor registration information that may have been viewable by other SAM users includes Social Security numbers and bank account information. According to a list of FAQs that GSA has posted on the incident, “it was discovered that by following a unique series of steps an entity record manager could potentially see the sensitive information of another entity. Registrants using their social security numbers instead of a TIN for purposes of doing business with the federal government may be at greater risk for potential identity theft.” Those vendors identified as being at greatest risk for identity theft should receive a separate email from GSA regarding credit monitoring resources that will be provided at no charge. GSA is currently conducting a full review of SAM to investigate whether there are any additional impacts to vendors in the system.
The Office of Management and Budget (OMB) has instructed Federal agencies to “freeze the footprint” of their property. Agencies should not increase the total square footage of their domestic office and warehouse inventory compared to a baseline of FY2012. OMB encourages agencies to first look at co-locations and consolidations of space with other agencies in order to achieve no net growth of the overall Federal real estate inventory. Hoteling is also encouraged. In order to assess how space can best be utilized, GSA will advise agencies about how to use technology and space management to consolidate and increase occupancy rates in facilities.
Members who are interested in hearing more about the “freeze the footprint” policy and the impact on customer agencies are encouraged to attend the meeting with PBS Commissioner Dorothy Robyn next Thursday, March 28. For more information, contact Roy Dicharry at firstname.lastname@example.org.
“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 email@example.com.
On Thursday of this week, Congress passed legislation to keep the government open through the end of the fiscal year. The $984 billion spending bill will fund the federal government through September 30, 2013. The bill contains full-year funding levels covering Defense, Military Construction and Veterans Affairs, Homeland Security, Commerce, Justice and Science, and Agriculture. Other federal departments and agencies will continue to be funded at fiscal year 2012 levels.
According to Government Executive, the legislation also extends the federal pay freeze, maintains the $85 billion in sequestration cuts and includes a number of amendments affecting furloughs of food inspectors, military tuition reimbursements, and National Science Foundation funding.
On Wednesday, the House Oversight and Government Reform Committee approved the Federal IT Acquisition Reform Act (H.R. 1232). The legislation now awaits consideration by the full House. According to FCW, no timetable for floor consideration has been publicly discussed yet. Members are encouraged to review the current version of the bill at the link above. If you have any feedback on the legislation, please email your thoughts/comments to Aubrey Woolley at firstname.lastname@example.org.
GAO recently released a report on major investments at the Department of Homeland Security (DHS). The report was released after GAO was asked to testify on the progress DHS has made and challenges it faces in meeting cost and schedule commitments for its major IT investments. When conducting their review, the GAO focused on “the extent to which DHS investments are meeting their cost and schedule commitments, the primary causes of any commitment shortfalls, and the adequacy of DHS’s efforts to address these shortfalls and their associated causes.”
The GAO found that out of 68 major IT investments, 21 were not meeting cost and/or schedule commitments. Among the primary causes for the cost and schedule short falls were lack of understanding of user requirements, inaccurate preliminary cost and schedule estimates, technical issues in the development phase, and changes in agency priorities. GAO recommended that the Secretary of Homeland Security direct the appropriate officials to address guidance shortcomings and develop corrective actions for all major IT investment projects having cost and schedule shortfalls. DHS agreed with the recommendations.
Let’s Just Pretend the FAR Change Didn’t Happen
By Phil Seckman, Partner, McKenna Long & Aldridge LLP
The Federal Circuit’s recent decision in Sharp Electronics Corporation addresses a quandary familiar to federal supply schedule contractors regarding the proper contracting officer (CO) to whom the contractor must direct its contract claims to ensure jurisdiction. Sharp Corporation v. McHugh, 2013 WL 646330 (Fed. Cir. 2013). The Federal Circuit’s decision relates to a 2002 change to the Federal Acquisition Regulation (FAR) and seeks to provide contractors with certainty by announcing a so-called bright-line rule for interpreting the meaning of the disputes provision for schedule contracts. Despite the Federal Circuit’s intentions, ambiguities remain.
Prior to the 2002 FAR change, the FAR provided that “[t]he ordering office shall refer all unresolved disputes under orders to the schedule contracting officer for action under the Disputes clause of the contract.” 48 C.F.R. § 8.405-7 (2000). Because only the GSA CO had authority under the Disputes clause, it was clear before the FAR change that any contractor claim relating to an order placed under a schedule contract must be submitted to the GSA CO to ensure jurisdiction under the Contract Disputes Act (CDA). The FAR also made it clear that the ordering office was to refer any unresolved contractor claims to the GSA CO.
Then, on June 27, 2002, the FAR was amended to incorporate new policies for disputes in schedule contracts. 67 Fed. Reg. 43,514 (the final rule was effective on July 29, 2002). As the FAR councils noted when publishing the proposed rule, the change was being made to “permit the ordering office contracting officer to issue a final decision regarding disputes pertaining solely to performance of schedule orders.” 65 Fed. Reg. 79,702 (Dec. 19, 2000).
The revised regulation provides:
(a) Disputes pertaining to the performance of orders under a schedule contract. (1) Under the Disputes clause of the schedule contract, the ordering activity contracting officer may —
(i) Issue final decisions on disputes arising from performance of the order (but see paragraph (b) of this section); or
(ii) Refer the dispute to the schedule contracting officer.
(2) The ordering activity contracting officer shall notify the schedule contracting officer promptly of any final decision.
(b) Disputes pertaining to the terms and conditions of schedule contracts. The ordering activity contracting officer shall refer all disputes that relate to the contract terms and conditions to the schedule contracting officer for resolution under the Disputes clause of the contract and notify the schedule contractor of the referral.
(c) Appeals. Contractors may appeal final decisions to either the Board of Contract Appeals servicing the agency that issued the final decision or the U.S. Court of Federal Claims….
48 C.F.R. § 8.406-6 (2004) (the text from the 2002 FAR amendment was renumbered in 2004).
The plain language of this regulation establishes that when a contractor submits a claim to an ordering activity CO, it is that CO’s responsibility to determine whether a dispute relates solely to the performance of an order or, instead, pertains to the terms and conditions of the schedule contract. Thus, one might have read the regulation to mean that a contractor could submit a claim to either the ordering activity CO or the GSA CO. Then, the government would determine which CO possessed authority to issue a final decision.
While such an interpretation is certainly logical and reasonable, it is wrong. The Federal Circuit’s decision makes it clear that it is the schedule contractor, and not the CO, that is responsible for determining to whom its claims must be submitted. Failure to identify the correct CO may result in the dismissal of an appeal for lack of CDA jurisdiction. Choosing the appropriate CO is made all the more critical where a schedule contractor is nearing the CDA six-year statute of limitations.
The Sharp Electronics case involved a contractor’s certified claim requesting fees under the termination provisions of an Army order placed against a schedule contract. The contractor submitted its claim to the Army CO. Critically, the Army CO disregarded the clear responsibility under FAR 8.406-6 and ignored the claim. Thus, the 60-day CDA decision period elapsed and — in the contractor’s view — resulted in a “deemed denial.”
The contractor then appealed to the Armed Services Board of Contract Appeals (ASBCA). Sharp Elecs. Corp., ASBCA No. 57583, 12-1 B.C.A. 34,903. Both the contractor and the government believed that their dispute should be decided by the ordering agency CO. Both parties believed the dispute was based on the order contract performance and not the terms of the schedule contract. In fact, neither party raised the jurisdictional issue. The ASBCA raised the issue on its own.
The ASBCA then held that it lacked jurisdiction over the appeal because the dispute did require the interpretation of the schedule contract and, therefore, only could have been decided by the GSA CO. The contractor’s decision to submit the claim to the Army CO, combined with that CO’s failure to forward the claim, meant there had been no properly submitted claim under the CDA and, therefore, no “deemed denial” from which to appeal. Id. The fact that the regulation clearly places the responsibility upon the ordering activity CO to make a determination regarding his/her own authority to resolve the dispute and then to forward claims to the GSA schedule CO when the dispute pertains to the terms and conditions of the schedule contract did not alter the outcome.
In a split decision, the Federal Circuit affirmed the ASBCA decision finding that under FAR 8.406-6 the ordering agency CO did not have the authority to make a determination regarding the contractor’s claim because the dispute involved, at least in part, interpretation of the terms of the schedule contract. The Federal Circuit’s decision announces a so-called bright-line rule that “all disputes requiring interpretation of the schedule contract go to the [GSA] schedule CO, even if those disputes also require interpretation of the order, or involve issues of performance under the order.” See Sharp Elec., supra at *6
The Federal Circuit, in highlighting the bright-line, attempts to address the jurisdictional uncertainty under FAR 8.406-6 created by the 2002 rulemaking. As noted by the dissent, however, the Court has succeeded in, effectively, reinstituting the prior rule that all disputes relating to schedule contracts should be submitted to the GSA CO. In other words, when in doubt, contractors must submit claims to the GSA CO.
Perhaps being defensive regarding the dissent’s objections, the Court noted that under a schedule contract an ordering agency CO remains authorized to make final determinations regarding performance, the terms of an order or its modifications “as long as the dispute does not involve interpretation of the schedule contract.” The Court also states that an ordering agency CO may resolve a dispute by “applying the relevant provisions of the schedule contract “as long as their meaning is undisputed.”
Despite these statements, however, the actual effect of this holding, as the dissent properly points out, will be that most contract disputes under schedule contracts will be submitted to the GSA CO and not the ordering agency CO. Indeed, many disputes can be characterized as requiring interpretation of the schedule contract. Thus, contractors that submit claims to ordering activity COs who are inclined to disregard the claim, as did the Army CO in the Sharp case, run the risk that what seems to be a “deemed denial” is, in reality, a nullity under the CDA.
For these reasons, prudent schedule contractors will submit claims to GSA COs. GSA COs, however, typically have very little, if any, knowledge regarding the facts of a dispute that primarily relates to performance under an order and only tangentially requires the interpretation of the schedule contract. This could lead to increased denials or deemed denials of contractor claims. Nevertheless, after this decision, if a dispute may pertain to interpretation of a schedule contract terms and provisions, a schedule contractor, particularly one with a potential statute of limitations issue, will be wise to submit its certified claim to the GSA CO or risk a similar outcome.
Department of Homeland Security (DHS) has released its Annual Progress Report on the Chief Procurement Officer’s FY 2012- 2014 Strategic Plan. According to the report, the DHS acquisition workforce bought $17.1 billion in goods and services through more than 99,000 transactions in FY 2012. DHS also competed 72.3 percent of contract dollars awarded, earned an “A” from the Small Business Administration for small business contracting, and saved $386 million through strategic sourcing. Further, DHS continues to be a leader in sustainable acquisition with 98% of procurements being environmentally preferable products in FY 2012.
The report also addresses what will be the largest challenges facing the agency in FY 2013. These include:
- maintaining efficient procurement operations with current budget pressures,
- improving and developing the acquisition workforce,
- providing effective acquisition support across the “One DHS” enterprise, and
- facilitating effective dialogues among public and private stakeholders.
The progress report explains that “the overall DHS budget will require an increased focus on contracting efficiencies and effectiveness across all facets of the procurement lifecycle—from acquisition planning to contract closeout.” In order to provide for effective acquisition support, DHS plans to regularly assess and invigorate program support with human resources and capital outlays. Additionally, DHS plans to expand their current initiatives and introduce new initiatives to strengthen stakeholder engagement.
The Coalition looks forward to partnering with DHS in support of their mission in the coming year.
The National Institutes of Health Information Technology Acquisition and Assessment Center (NITAAC) released its draft RFP for the $10 billion NIH ECS III follow on, CIO-CS. The vehicle, known as the Chief Information Officer-Commodity Solutions, will provide IT commodities and solutions including health and biomedical-related products to meet scientific, health, administrative, operational, managerial, and information management requirements. NITAAC will award multiple IDIQ contracts under which federal government agencies can award fixed price delivery orders to acquire IT commodities and solutions. NIH notes in the draft RFP that contractors should address questions or comments to the Master Contracting Officer at email@example.com. All questions and/or comments must be received no later than 10:00 am EST on Monday, April 8, 2013.
A proposed rule was published on March 20 to revise the Federal Acquisition Regulation (FAR) to clarify certain workers’ compensation insurance requirements for contractors. As proposed, FAR clause 52.228-3 would require contractors to obtain workers’ compensation insurance or qualify as a self-insurer before beginning performance under certain contracts. Benefits are to be provided through the end of performance. Contractors must flow down the proposed clause to all applicable subcontractors under the Defense Base Act. For more details, please review the proposed rule. Comments are due May 20, 2013.
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!
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
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.