On Wednesday the Coalition hosted the Joseph P. Caggiano Memorial Golf Tournament to benefit our wounded veterans. Again this year the tournament was held at Whiskey Creek Golf Course in Ijamsville, Maryland. Despite some intermittent rain through the early part of the round, it was a wonderful day! The Coalition was honored to have several veterans attend and play as our guests. We kicked off the day by presenting separate checks for $5,000 each to Hope for the Warriors and Operation Second Chance.
Roger Waldron with Operation Second Chance Representative
Over the last three years the Coalition has contributed over $30,000 to these two organizations. Thank you to our title sponsor PwC! Thank you to our Lunch & Reception sponsors, CohnReznick and Integrity Consulting! Thank you to our Beverage Cart sponsors, Baker Tilly and 3M! Thank you as well to all the hole sponsors and contest sponsors and each of the golfers who purchased “mulligans,” a great “strategic sourcing” buy! Without your collective commitment to supporting our veterans, the event would not have been possible.
L-3 and PWC players with Hope for the Warriors Representatives
A special thank you to Paul and Mike Caggiano for attending and playing in the tournament. Paul and Mike also presented the checks to Operation Second Chance and Hope for the Warriors. Joe Caggiano, Paul’s son and Mike’s brother, was the driving force behind the Coalition’s charity efforts in support of wounded veterans. The success of the tournament is largely due to all the great work Joe did in building up the event. The golf tournament was a labor of love for him. It is an honor and a privilege that the tournament is named in Joe Caggiano’s memory! God Bless the Caggiano Family and all our veterans!
Finally, thank you to the Coalition staff and the staff at Whiskey Creek for making the tournament such a smooth-running success. You made it look easy!
Happy Labor Day Weekend!
Roger Waldron, President
The GSA Office of Inspector General (OIG) issued a report on prompt payment discounts on August 20, 2013. The report describes GSA’s progress implementing the OIG’s recommendations following a March 2010 audit of Multiple Award Schedule (MAS) vendor prompt payment discounts.
The OIG found that the Federal Acquisition Service (FAS) has implemented all but two of the IG’s recommendations from 2010. The two actions that the IG noted as outstanding are:
- Work with the Office of General Counsel and business portfolios to select a small population of MAS contracts where claims can be pursued on a pilot basis.
- Submit a business case to the Office of Government-wide Policy, Office of Acquisition Policy, to develop and issue the appropriate policy (if regulatory policy or other policy changes are required).
In response to the OIG’s draft report, FAS Commissioner Tom Sharpe suggested two actions that FAS would take to address these items. First, Acquisition Management will develop a recovery plan to pursue prompt payment “overcharges” by September 30, 2013. Second, an Instructional Letter will be issued stating that “MAS customers do not have the authority to charge or negotiate away prompt payment discount terms, and will require a solicitation refresh to incorporate such language into the Information for Ordering Offices section of each Schedule contract price list.”
For the full report, visit www.gsaig.gov/?LinkServID=802DCFF7-0586-B2E3-98A0DFC766BFB6CC&showMeta=0.
Norman Dong, Deputy Controller at the Office of Management and Budget (OMB) joins the list of prominent speakers confirmed for this year’s Fall Conference on October 30.
2013 Fall Training Conference—The New Federal Market
How has the federal market changed in the wake of sequestration? Find out at the Coalition’s 2013 Fall Training Conference – The New Federal Market. You can expect active presentations and discussions regarding long term changes in what, how and from whom agencies acquire services and products. The agenda also includes a number of breakout sessions that address new developments in government-wide acquisition programs.
- Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics – Department of Defense
- Major General Wendy M. Masiello, Director of Contracting—Air Force
- New! Norman Dong, Deputy Controller— Office of Management and Budget
- Kathleen Turco, Chief Financial Officer—Veterans Health Administration
- Anne Rung, Chief Acquisition Officer—General Services Association
- Troy Cribb, Chief Counsel for Government Affairs—Senate Homeland Security & Government Affairs Committee
Click here for more information and to register.
Show your support for education and training of the acquisition workforce and constructive dialogue between government and industry. Click here to see our available sponsorships.
GSA published a blog post on GSA Interact this week addressing the Coalition’s questions concerning the next Federal Strategic Sourcing Initiative (FSSI) BPAs for janitorial and sanitation (JanSan) and maintenance, repair and operations (MRO) products. The Coalition sincerely appreciates GSA’s response to all of the vendor questions on the draft RFQs and the ongoing dialogue with industry through GSA Interact. Vendors who would like to inquire further about any of GSA’s responses may post their questions on GSA Interact. If you have any comments that you would like the Coalition to submit, please contact Aubrey Woolley at email@example.com or (202) 315-1053. To view GSA’s blog post, visit https://interact.gsa.gov/blog/questions-fssi-jansanmro-rfps-submitted-coalition-government-procurement.
This week on “Off the Shelf”, Cliff Colley, Military Veteran Transition coordinator for CACI, Inc. and Tony Claiborne, Military Transition lead for L-3 National Security Solutions Group, discuss best practices for recruiting, hiring and mentoring veterans who are transitioning to the civil workforce. Colley and Claiborne also provide tips for veterans seeking job opportunities in the civil workforce.
Hiring veterans is good for business as both L-3 and CACI have demonstrated. To listen to the program, visit www.federalnewsradio.com/80/3430060/Helping-veterans-find-jobs.
The Coalition is collecting industry feedback on the EULA review process for Kay Ely, Director of IT Schedule Programs. Is your company seeing an improvement in the EULA process? Are you still experiencing significant delays? Please send your response by COB Friday, Sept. 6 to Aubrey Woolley at firstname.lastname@example.org or call (202) 315-1053. Please note that feedback to Kay Ely will address the overall EULA process and not identify any individual companies.
According to a new report from Bloomberg Government, the Department of Defense (DoD) is preparing to release at least 6,272 civilian employees if sequestration cuts $52 billion from its fiscal 2014 budget. The information is based upon an unreleased Pentagon planning document. Additionally, Defense procurement programs would suffer under the proposed cuts. The Pentagon planning document notes that the cuts would affect procurement and research/development most heavily, especially “non-major or other procurement” programs. The Air Force’s “other procurement” request would be cut by 30 percent to $1.6 billion. Examples of these at risk accounts include those that bankroll Army vehicles, combat engineering, bridging, maintenance and material handling equipment as well as Air Force missiles, ammunition, mission planning systems, drug interdiction, combat training ranges, radios and satellite modifications. Procurement program reductions are detailed below:
- Army: Cut from $16 billion to $12.6 billion
- Navy: Cut from $44.1 billion to 37.9 billion
- Air Force: Cut from $18.8 billion to $15.5 billion
Additionally, the Defense Logistics Agency (DLA) has announced that it plans to cut $13.1 billion in operating and material costs of the next six years. Explained to contractors by DLA Director Vice Adm. Mark Harnitchek the new “13-in-6” strategy includes the following tenants:
- Partnering with industry to reduce excess inventory and increase use of reverse auctions
- Reducing contract delays, lowering pricing, and using performance-based logistics
- Increasing small business opportunities
- Improving planning and forecast accuracy for purchasing items
- Consolidating and co-locating infrastructure, including limiting the number of DLA warehouses
Vice Adm. Mark Harnitchek stated that the DLA has “about $14 billion of inventory for lots of reasons and probably half of that is excess to what we need…and it does cost money. It costs the money to buy it, and it costs a lot of money to hold it,” he said.
According to the Washington Business Journal, Exelis has filed a suit in U.S. District Court in Washington, DC, seeking to prevent the Navy from releasing pricing information to competitors. Under the Freedom of Information Act, the Navy plans to release pricing data under a contract held by Exelis that is scheduled to expire in December. The Exelis suit argues that releasing the data would provide its competitors the opportunity to adjust their offers before final proposal revisions are due. Exelis is concerned that this could subsequently undercut their quote and give its competitors an unfair advantage in all other competitions for similar services.
Gratuities – Cautionary Tales for Contractors and Government Employees
By: Tom Barletta, Partner, Steptoe & Johnson LLP; Fred Geldon, Senior Counsel, Steptoe & Johnson LLP; & Mike Navarre, Special Counsel, Steptoe & Johnson LLP
Recent events demonstrate that government investigators and prosecutors are taking more seriously the ethical regulations that govern gratuities. Cases in point:
- On April 25, 2013, the U.S. Department of Justice issued a press release announcing that a Bureau of Prisons (BOP) employee had pled guilty to a charge of receiving unlawful gratuities. The BOP employee, a supervisory traffic management specialist in the BOP Relocation Services section, was responsible for giving relocating BOP employees a list of approved movers and then referring their move to agents of the chosen carrier. While performing these duties the employee received spa and salon gift cards in the amount of $1,007 and $790 from one carrier’s agent, as well as free moving services from moving companies. The BOP employee was subsequently assessed a fine of $1,500 and placed on probation for 18 months.
- On June 5, 2013, the Washington Post reported that the Internal Revenue Service (IRS) had placed two managers on administrative leave for accepting free food and other gifts in violation of government ethics rules. These violations were discovered during an audit of a years-old conference, at which the managers “allegedly held an after-hours party in their private hotel suites.” It apparently was not clear who gave the managers the food, worth $1,162. Acting Commissioner Danny Werfel said in a statement to the Post that the IRS has started the process of firing the managers.
The basic rules applicable to government employees regarding gratuities are set forth in the Standards of Ethical Conduct for Employees of the Executive Branch (“Standards”), which are codified at 5 C.F.R. § 2635. The Standards generally prohibit federal government employees from accepting gifts from “prohibited sources,” a category that includes, among others, contractors (and employees of contractors) doing business with or seeking to do business with the federal government employee’s agency. 5 C.F.R. §§ 2635.102(k), 2635.203(d).
There are some exceptions, however. For example, under the Standards, federal employees may accept, even from “prohibited sources,” items worth $20 or less, as long as the total value of the gifts from the same source is not more than $50 in a single calendar year (calculated by including a contractor and its employees as a single source). 5 C.F.R. § 2635.204(a). The Standards also include other limited exceptions, such as gifts motivated by family relationships.
The size of the gratuities in the two recent examples discussed above far exceeds these thresholds. In the case prosecuted by the Justice Department, however, the amount at issue was significantly less than amounts usually cited in large corruption cases, and demonstrates that even these (relatively) small violations are attracting the attention of auditors, investigators, and prosecutors.
Although the Standards apply only to government employees who receive gratuities rather than to contractor employees who offer gratuities, contractors can face potential liability in relation to gratuities as well.
The federal criminal gratuities statute, 18 U.S.C. § 201, provides for fines or imprisonment for anyone who, for example,
directly or indirectly gives, offers, or promises anything of value to any public official, former public official, or person selected to be a public official, for or because of any official act performed or to be performed by such public official, former public official or person selected to be a public official.
18 U.S.C. § 201(c)(1)(A).
Unlike a bribe, an illegal gratuity does not require an intent to influence; rather, the illegal gratuity only need be given “for or because of” an official act. An illegal gratuity “may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken.” United States v. Sun-Diamond Growers of California, 526 U.S. 398, 404-405 (1999). There must, however, be a connection, i.e., the government must prove “a link between a thing of value conferred upon a public official and a specific ‘official act’ for or because of which it was given.” Id. at 414.
The risk to contractors is heightened, however, because the line between an acceptable gift and an illegal gratuity is nuanced. For example, in United States v. Hoffmann, 556 F.3d 871, 877 (8th Cir. 2009), the court rejected the defendant’s contention that the Government had failed to prove that he violated the gratuities statute because he did not reasonably believe that the government employee would take an official action and because the government employee never did so. Rather, the court upheld the conviction finding that a “reasonable juror could conclude” that the contractor gave the government project manager a set of golf clubs “to . . . reward future performance.”
The risk to contractors is demonstrated by yet another recent Justice Department announcement in a whistleblower “qui tam” case that included gratuities allegations. On March 7, 2013, DOJ announced that three CIA contractors (American Systems Corporation, Anixter International Inc., and Corning Cable Systems LLC) had agreed to pay $3 million to settle allegations they violated the False Claims Act and Anti-Kickback Act. The announcement included allegations that in pursuit of a 2009 contract the companies had provided gratuities (meals, entertainment, gifts, and tickets to sporting and other events) to CIA employees.
Prohibitions on gratuities applicable to contractors are also incorporated into various FAR provisions. For example, FAR 52.203-13(b)(3) (Contractor Code of Business Ethics and Conduct) requires that contractors “timely disclose, in writing, to the agency Office of the Inspector General, with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed . . . [a] violation of Federal criminal law involving . . . gratuity violations found in Title 18 U.S.C.” In addition, FAR 52.203-3(a) allows the government to terminate a contract if a contractor or contractor employee “[o]ffered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and [i]ntended, by the gratuity, to obtain a contract or favorable treatment under a contract.” The government also may recover damages and/or suspend or debar a contractor from federal contracting for violations of this clause. See FAR 3.204(c).
Finally, in addition to potential criminal penalties and suspension and debarment, providing gratuities to government employees can also result in other adverse effects for a contractor, such as negative past performance ratings that could affect current and future business.
In sum, to maintain healthy relationships with their government customers and to protect government employees and themselves from potential liability, contractors should understand the laws and regulations applicable to gratuities to government employees, have a clear policy regarding gratuities (which, for many contractors includes a prohibition on giving gratuities) and provide appropriate education and training to their employees.
Of course, contractors should also be aware of laws and prohibitions that apply in related contexts, including anti-kickback laws that prohibit certain improper payments between prime contractors and subcontractors, the Foreign Corrupt Practices Act, which prohibits certain types of payments to foreign officials, and laws and regulations that regulate payments that can be made to members of Congress and staff.
 “Gifts” include entertainment, favors, discounts, hospitality, transportation, and other things of value. 5 C.F.R. § 2635.203(b).
 The Court in Sun-Diamond also rejected the Government’s contention that the illegal gratuities statute is violated by providing a gift to an official because he is in a position (i) to act favorably at some unknown future time, or (ii) to “build a reservoir of goodwill that might ultimately affect one or more of a multitude of unspecified acts.” Sun-Diamond, at 405.
 The Justice Department also alleged that the companies improperly received source selection information from a CIA employee to whom they had provided gratuities.
The Defense Department released an Inspector General report on whether contracting officials at Joint Base San Antonio-Lackland provided a fair opportunity to compete, supported price reasonableness determinations, and conducted necessary surveillance for task orders issued under multiple-award contracts for services. The 772nd Enterprise Sourcing Squadron (ESS) at Joint Base San Antonio-Lackland provides environmental, construction, and services contract support for the Air Force Civil Engineer Center (AFCEC). The report found that of the 20 task orders (valued at $15.8 million) that were reviewed by the 772nd ESS, a contracting officer (CO) did not justify a fair opportunity exception for one contract valued at $446,954 due to the CO’s misunderstanding of the Federal Acquisition Regulation’s (FAR) requirements. Additionally, COs did not adequately document that the prices paid for all 20 task orders were fair and reasonable because they relied on unsupported technical evaluations among other inaccurate estimates. Specifically, COs did not perform the necessary surveillance for 19 of the 20 task orders.
The OIG recommends the 772nd Enterprise Sourcing Squadron obtain technical reviews and independent Government cost estimates that are adequately supported. They also recommended that contracting officers be required to prepare quality assurance surveillance programs, and tailor CO’s representative designation letters. CO representatives should document surveillance performed and report progress to the contracting officer.
A recent George Washington University Law School paper explores the “Congressional War on Contractors.” The paper, written by Jessica Tillipman, Assistant Dean at the law school, explained how the use of suspension and debarment of government contractors is being misused by Congress. The Federal Acquisition Regulations (FAR) prohibits Suspension & Debarment Officials (SDOs) from using debarment as a punishment for past misconduct. The real intent is for suspension and debarment to be used to protect the government in the public interest. However, Tillipman provides numerous examples of how Congress increasingly sees debarment as a way to “weed out bad contractors.” To read the full report, visit http://docs.law.gwu.edu/stdg/gwilr/PDFs/45-2/JLE202.pdf.
Defense OIG Urges Further Cost-Reimbursement Contracts
This week the Department of Defense (DoD) Office of Inspector General (OIG) released a report that recommends contracting officials more closely follow interim Federal Acquisition Regulation (FAR) revisions concerning cost-reimbursement contracts. Of 161 contracts valued at $53.3 billion, the OIG found that the Army did not consistently implement the necessary interim rule for 107 contracts, valued at $10.5 billion. In these cases, the rule was not implemented correctly because officials were unaware of the rule. The report notes that without following necessary FAR revisions, contracting personnel may increase contracting risk because cost-reimbursement contracts provide less incentive for contractors to control costs.
Among other directives, the OIG specifically recommends that DoD:
- Emphasize the importance of the FAR revisions to contracting personnel for the use of cost-reimbursement contracts
- Update Army guidance to eliminate the threshold for cost-type contracts
- Consider issuing more hybrid contracts so that contract type can be selected on each task or delivery order
- Establish better communication channels to identify opportunities to transition to firm-fixed-price contracts
Other issues the OIG looked at included whether cost-reimbursement contracts were rightly justified and how the requirements under contract could transition to firm-fixed-price in the future.
Component Origins Addressed in NIST Guidance
The National Institute of Standards and Technology (NIST) has released draft guidance for agencies concerning supply chain risk management. The 278 page draft adds the origin and movement of IT components as a potential risk factor for Federal supply chains.
As reported in last week’s Flash, NASA, along with its SEWP V contract vehicle, is one of the agencies mandated to apply special rules regarding the acquisition of IT gear and software from China. The rules were included in the current continuing resolution that funds the government through the end of this fiscal year. Current legislation requires that all acquisitions of IT, “produced, manufactured or assembled by one or more entities that are owned, directed or subsidized by the People’s Republic of China” be subject to special risk assessment and approval.
NIST will accept public comments on the draft through October 15, 2013.
Small Business Size and Status Rule in Effect
A final rule that implements the provisions of the Small Business Jobs Act of 2010 concerning small business size and status goes came into effect this Tuesday, August 27. The rule amends the U.S. Small Business Administration’s program regulations to implement statutory provisions that establish a presumption of loss equal to the value of the contract or other instrument when a contractor willfully seeks and receives an award by misrepresentation. According to an article written by McKenna Long & Aldridge LLP, the rule applies substantial damages and penalties for contractors that willfully misrepresent their size or status and establishes a new potential basis of liability that can have significant monetary implications for contractors. Members are encouraged to review the rule and the article from McKenna Long & Aldridge.
VA Acquisition Academy Virtual Course
A Department of Veterans Affairs Acquisition Academy (VAAA) virtual delivery course, launched in July 2012 to train contracting officer’s representatives (CORs) for Federal Acquisition Certification-Contracting Officer’s Representative (FAC-COR) Level II, has saved an estimated $188,000 over the past year, according to a VA press release. The course replicates face-to-face instruction in a virtual environment, produces cost savings by eliminating the need for travel, is green through a paperless training environment, and results in higher productivity because students spend less time away from the office.
As part of its on-going efforts to reduce travel costs while maintaining the highest standards of quality instruction, the academy also delivered FAC-COR instructor-led training sessions in 57 locations throughout the United States in FY 2012. The VAAA will leverage distance technology with other course offerings where it makes sense. The FAC-COR program is administered by the VA Acquisition Academy’s Program Management School. For more information members are encouraged to visit www.acquisitionacademy.va.gov.
Join the Coalition and Bloomberg Government- Sept 4 (Webinar)
An Update on Sequestration and the Budget– As the effects of sequestration set in, many continue to wonder what federal programs are being cut and what the future holds for additional reductions. Please join Bloomberg Government and The Coalition for Government Procurement on September 4 at 2:00pm ET for a monthly webinar focused on the current state of sequestration and an outlook for upcoming budget cuts. Industries covered will include defense and federal contracting among others. For more information and to register, visit http://connect.bloomberg.com/microsite/sequestration0813/regform-cgp/0.ashx.
The Service Contract Act: Sept 12 (Webinar)
Join The Coalition and Baker Tilly for a 1-hour webinar about The Service Contract Act. This session will provide an overview of the Service Contract Act and the nuances of the regulation that make it particularly cumbersome for contractors to comply with. We will explore the added complexity that is presented with the inclusion of this regulation in Multiple Award Schedule contracts.
Attendees will hear examples of challenges contractors face when vehicles, such as the GSA Schedule, apply the Act. This course will offer a unique perspective regarding how to best approach these issues in order to mitigate liability during award. Click here for more information and to register.