Friday Flash, 09.13.13

September 13, 2013

FAR and Beyond Blog

On Monday the Coalition provided the Federal Acquisition Service’s (FAS’s) Office of Acquisition Management with our white paper, “GSA Multiple Award Schedule Pricing: Recommendations to Embrace Regulatory and Commercial Market Changes.” The Coalition thanks all the members of the Pricing Working Group for their contributions to the white paper. It truly was a team effort. The Coalition also thanks the Office of Acquisition Management for its openness and interest in the issues, challenges and opportunities associated with reforming the Multiple Award Schedules (MAS) program’s outdated, anti-competitive pricing policies. As many of you know, the white paper effort was sparked by “Myth-Busters” discussions with the Office of Acquisition Management. The MAS program is a valuable tool for the acquisition of commercial services and products. The current pricing policy is, however, fundamentally out of sync with the statutory and regulatory requirements for competition at the task order level. Section 863 of the 2009 National Defense Authorization Act mandated robust competitive procedures for MAS task and/or delivery orders exceeding the simplified acquisition threshold ($150,000). Congress recognized that competition at the task order level for agency specific requirements drives pricing under the MAS program. Moreover, over the last decade GSA has been investing in e-tools to enhance transparency and competition at the task and delivery order level through the implementation and maintenance of eBuy (GSA’s online Request for Quotes tool).

The statutory and regulatory task/delivery order competition requirements and GSA’s investments in e-tools highlight a fundamental procurement truth—competitive pricing is driven by specific requirements and contract terms (e.g. statements of work and volume commitments). Such requirements are articulated and communicated at the task order level—and the MAS program provides a government-wide commercial marketplace for competition for and acquisition of agency mission requirements.

Most importantly, the current MAS pricing policy, as applied to contracts, restricts competition in both the commercial and federal marketplace. As explained in last week’s “FAR and Beyond” blog the treatment of subcontracts under federal prime contracts as commercial transactions for Price Reduction Clause (PRC) purposes restricts competition for agency customers and increases costs to the government and taxpayer. In the same manner, based on the applicable contract terms, the PRC also restricts the ability of a MAS contractor to compete in the commercial marketplace. It is truly time to ask whether it makes any procurement or economic sense for GSA to require that as a condition of having an MAS contract, a contractor must limit or otherwise restrict its competitive commercial activities and/or opportunities!! Can we as a nation afford a MAS pricing policy that limits commercial commerce and harms small business concerns? Reforming the MAS pricing policy can increase efficiencies, innovation and competition for all! Please take the time to review the white paper!! It was a team effort.

Roger Waldron

President

Nominations Open for EIP Awards

Nominate a deserving acquisition official for an EIP Award today! The Excellence in Partnership (EIP) Awards honor acquisition officials who have made significant strides in promoting and utilizing multiple award contracts, saving taxpayer dollars and contributing to veterans hiring and green initiatives. Awards will be given to individuals, organizations and contractors involved in procurement with GSA, VA, DoD, DHS and other government agencies. EIP Award nominations for 2013 are being accepted in the following categories:

DHS Representatives Jose Arrieta and Bob Namejko with The Coalition’s President Roger Waldron

Nominations will be accepted through October 1. Please provide a brief description of why your nominee should be recognized with an EIP award with your nomination. Submit your nomination here. If you have any questions, please contact Aubrey Woolley at awoolley@thecgp.org or (202) 315-1053.

House Small Business Jobs Act Roundtable

The Coalition participated in a roundtable this week hosted by the House Small Business Subcommittee on Contracting and Workforce. The purpose of the roundtable was to provide a forum for Small Business Administration officials and industry to discuss federal contracting matters related to the implementation of the Small Business Jobs Act—especially small business size standards, NAICS codes, and changes in multiple award contracting as a result of the law. Subcommittee Chairman Hanna (NY) intends for the roundtable to begin a continuous dialogue between government and industry about how to improve federal contracting opportunities for small businesses within the scope of the Small Business Jobs Act.

Tiffany Hixson Speaks to IT/Services Committee

This week Tiffany Hixson, Regional Commissioner for GSA’s Northwest Arctic Region, joined the Joint IT/Services Committee meeting for an update on initiatives within her region. The Coalition sincerely appreciates Ms. Hixson for the update and discussion concerning Region 10’s priorities for FY2014 and Category Management. In the coming fiscal year GSA will focus on being America’s buyer, serving its agency partners and collaborating with industry on new initiatives. It will also concentrate on delivering better value and savings through strategic sourcing, reducing the total cost of ownership and attending more to how the government spends. GSA plans to measure its progress in these areas via change in market share.

Tiffany Hixson also provided members with some preliminary information about how Category Management may be applied for professional services in Region 10. The Coalition sincerely appreciates the myth-busters dialogue with Tiffany Hixson on these important topics.

New Guidance on Government Charge Cards

The Office of Management and Budget (OMB) issued new guidance this week on the use of Government charge cards. The new requirements for agencies are being put in place in response to the Government Charge Card Abuse Prevention Act of 2012. The OMB guidance establishes new reporting and audit requirements. Agencies must certify on an annual basis that appropriate controls are in place for charge cards and that corrective actions have been taken to mitigate the risk of fraud and inappropriate practices. To help ensure that required safeguards and internal controls are in place, GSA has developed a compliance assessment tool for agencies posted on www.smartpay.gsa.gov under “Smart Bulletins.”

OMB also requires that agencies report employee purchase card violations and the disciplinary actions taken in response. Agency Inspector Generals (IGs) will play a significant role in ensuring proper use of charge cards by conducting periodic risk assessments and audits to analyze the risks of illegal, improper or erroneous purchases. The OMB memo is posted at www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-21.pdf.

OASIS Amendments

Amendments to the One Acquisition Solution for Integrated Services (OASIS) solicitations were issued this week. The amendments can be found at:

1. OASIS Unrestricted

https://www.fbo.gov/?s=opportunity&mode=form&tab=core&id=838ef86870d91d77c047a55c414facf0&_cview=0

2. OASIS Small Business

https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=a98c8d5d0598988c2d639cf522dd8d67

The deadline for submissions has been extended to October 10, 2013 at 4:00pm CDT.

2013 Fall Training Conference—The New Federal Market

October 30, 2013 Fairview Park Marriott

How has the federal market changed in the wake of sequestration? How will you succeed in FY 2014? How will actions from The Hill and changing Agency budget priorities impact your business? Learn the answers to these questions and more from Federal Acquisition Leaders, Agency CFOs, government leaders and industry experts at The Coalition’s 2013 Fall Training Conference – The New Federal Market. Breakout sessions will address new developments in government-wide acquisition programs including Strategic Sourcing, GSA Acquisition Center Initiatives, Veterans Affairs, GSA e-marketing, Professional Services and more.

Confirmed Speakers include

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! Peggy Sherry, Chief Financial Officer, Dept. of Homeland Security
Emily Murphy, Senior Counsel, House Committee on Small Business
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, a full agenda and to register.

Continuing Resolution Introduced

This week the lawmakers introduced a continuing resolution that would provide funding for the government at current levels through December 15, 2013. The bill provides funding at $986.3 billion, slightly below the current, post-sequestration level, and gives extra funds and spending flexibility to a select group of agencies. According to Federal Times, this select group of agencies and programs include the following:

Spending flexibility for Customs and Border Protection and Immigration and Customs Enforcement to sustain current workforce and operations levels
More funding for the Interior Department and the Forest Service for wildfire suppression efforts
More funds for Veterans Affairs Department disability claims processing.
Funding for pandemic flu preparedness and chemical or biological attack response efforts
Funding flexibility to maintain National Oceanic and Atmospheric Administration weather satellite programs.

The House had originally planned to vote on the bill later this week; however House leaders announced that the vote will be postponed until next week.

Legal Corner

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[1] 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.”[2] 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[3] 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.

[1] “Gifts” include entertainment, favors, discounts, hospitality, transportation, and other things of value. 5 C.F.R. § 2635.203(b).

[2] 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.

[3] The Justice Department also alleged that the companies improperly received source selection information from a CIA employee to whom they had provided gratuities.

Small Business Committee with Emily Murphy, Sept 25

The Small Business Committee will meet with Emily Murphy, Senior Counsel of the House Committee on Small Business on September 25 at 11am. All members are invited to join the discussion of small business contracting matters at Holland & Knight, 800 17th Street, NW Suite 1100, Washington, DC. If you would like to participate or join remotely, contact Roy Dicharry at rdicharry@thecgp.org.

Strategic Sourcing Working Group Update

On September 5, the Coalition’s Strategic Sourcing Working Group held its first meeting at Mayer Brown LLP in downtown Washington D.C. The well attended meeting included background information on the government’s strategic sourcing efforts updates on the current Federal Strategic Sourcing Initiative (FSSI) contract vehicles, and a discussion about how strategic acquisition strategies can best deliver cost savings and best value to the American taxpayer.. . If you or your company would like to get involved in the working group please contact Roy Dicharry at rdicharry@thecgp.org.

Acquisition Training Development

In an interview with Federal News Radio, Joe Jordan, Administrator for the Office of Federal Procurement Policy (OFPP), described his most recent effort to further develop and enhance the government’s acquisition training programs. In a memo last week, OFPP consolidated acquisition training oversight to the Federal Acquisition Institute Training Application System (FAITAS). The move aims to strengthen FAITAS as a one-stop shop for all things acquisition training, while also allowing agencies to share acquisition training resources. “What this memo does is for all the civilian agencies, it pulls their registration for training classes, certification information and, most importantly, workforce management tools into one place,” Jordan said in the interview.

Additionally, the Federal Acquisition Council on Training (FACT) will oversee several initiatives, including developing a new contract vehicle for all agencies to purchase acquisition training. According to Jordan, the contract will allow for volume discounts and also robust reporting to the Federal Acquisition Institute (FAI), so they can monitor class prices, actual utilization of the contract, seats and the training. As a part of the effort, FAI will also expand its relationship with the Defense Acquisition University (DAU). OFPP is looking at harmonizing the structure of the training, the content of the training along with the delivery of the training, and workforce management systems of the two organizations.

Off the Shelf with Robin Portman of Booz Allen Hamilton

This week on “Off the Shelf”, Robin Portman, executive vice president at Booz Allen Hamilton, discussed the challenges and opportunities of the new federal market. Portman provided her insights regarding the role technology plays in achieving best value mission support for customer agencies, including her thoughts on key best practices in contracting that agencies could employ to best leverage constant technological change. Portman also shared Booz Allen Hamilton’s experience championing veteran and Wounded Warrior support efforts. To listen to the show, please click here.

FAS Commissioner, Tom Sharpe on Off the Shelf Next Tuesday

Members can tune into Federal News Radio next week and hear FAS Commissioner, Tom Sharpe speak to a host of procurement issues with Coalition President, Roger Waldron. The show will be posted online to the Off the Shelf website here for members to listen to. The show will air on Tuesday, Sept. 17 at 10:00 and Thursday, Sept. 19 at 2:00pm. It will be posted online shortly after Tuesday.

DoD Releases Class Deviation on Subcontract Report Submissions

On Monday, the Department of Defense (DoD) released a class deviation on summary subcontract report submissions. When using Federal Acquisition Regulation (FAR) 52.219-9, Defense Federal Acquisition Regulation Supplement (DFARS) 252.219-7003, or their alternates, the deviation requires contracting officers to use language attached to the memorandum in lieu of current language and guidance. According to ASI Government, the deviation implements the following changes:

FAR 52.219-9 Deviation

Reduces the frequency of summary subcontract reports submitted under an individual subcontracting plan from biannual to annual.

Eliminates the requirement for multiple summary subcontract reports submitted under an individual subcontracting plan for construction and related maintenance and repair contracts, so that only one consolidated report encompassing all contracts is necessary.

DFARS 252.219-7003 Deviation

Changes the entity to which the contractor submits the summary subcontract report in the Electronic Subcontracting Reporting System from the Department of Defense (DoD) component to DoD.

Removes the requirement for the year-end supplementary report for Small Disadvantaged Businesses and the report for Small Disadvantaged Participation.

Data Transparency Push on Capitol Hill

At the Data Transparency 2013 conference on Tuesday, House Majority Leader Eric Cantor (R-Va.) said that he and other members intend to schedule a vote soon on the recently improved Digital Accountability and Transparency (DATA) Act (H.R. 2601). According to Federal News Radio, the bill would require agencies to standardize and make public online federal procurement, assistance and financial-management data. Given that earlier controversial provisions in the bill have been taken out, support for the bill has been growing in Congress and in the White House. Some of the removed portions of the legislation include a requirement to report data that agencies already were reporting, and the creation of a commission to oversee the transparency effort.

The Service Contract Act (Webinar) Rescheduled for Thursday, Oct 3, 2013

Join The Coalition and Baker Tilly for a 1-hour webinar about The Service Contract Act and its application to Multiple Award Schedule Contracting. 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.