Friday Flash, 11.08.13

FAR and Beyond Blog

As you know, the GSA Multiple Award Schedule program and the IT GWACs (GSA, NASA and NIH) are strategic platforms that leverage the government’s acquisition resources through streamlined competitions for customer agency requirements.  In essence, GSA is a federal procurement market marker.  GSA is not a government-wide requirements holder.  What does that mean?  Well, at its best, GSA provides customer agencies and contractors with an efficient, effective government-wide framework for conducting business.       

Understanding, communicating and competing requirements is the key to saving taxpayer money.  As this blog has noted many times, requirements development is the “blocking and tackling” of government procurement.  Sound requirements development is vital to best value outcomes.  Moreover, the closer a procurement is to the actual requirements holder, the better opportunity for clear, consistent requirements with corresponding volume commitments.  Again, clear, consistent requirements and volume commitments drive competition and savings.

That is why the Office of Federal Procurement Policy’s (OFPP’s) current approach to strategic sourcing is troubling.  Rather than empowering customer agencies to articulate, communicate and compete their specific requirements through agency specific BPAs under GSA’s MAS program, OFPP is pursuing a strategy of establishing government-wide BPAs theoretically covering multiple agency requirements.  These government-wide BPAs are extremely broad, overly complex and include significant data reporting requirements beyond standard commercial practice.  But fundamentally, these BPAs lack clear, consistent requirements and volume commitments.

A case in point is the GSA’s current Request for Quotes (RFQ) seeking to establish government-wide FSSI BPAs for “Janitorial and Sanitation Commodities (JanSan).”  The terms of the RFQ are, at best, confusing if not troubling.  The RFQ’s “Notes to Contractors” state in part that “[t]he total spend opportunity addressable through this solicitation is estimated to be more than $599 million annually.” The notes subsequently refer to an Attachment 5 for the various department and agency commitment letters.    See page 2 of the RFQ.  In addition the RFQ’s Attachment 6 – Participating Agencies’ Spend, lists 10 departments/agencies annual spend on janitorial and sanitation supplies.

The disparity between Attachment 5 and Attachment 6 is very instructive with regard to the role of requirements.  All the commitment letters in Attachment 5, save one, are written as “conditional commitments” to use the resulting BPAs.    For example, the Department of the Army’s commitment letter states in part that it will “conditionally commit to use the Federal Strategic Sourcing Initiative (FSSI) solution for our JanSan Supplies with an annual estimated spend of $1-3 million in this area.”  A conditional commitment is not a commitment!  Moreover, the Army’s conditional commitment of $1-3 million represents at most two percent of the Army’s $151.9 million annual JanSan spend as stated in Attachment 6 of the RFQ.  Similar disparities can be seen throughout the commitment letters.  The disparities, complexities and data collection costs associated with the JanSan BPAs limit competition, hurt small businesses and threaten the long term supply chain.  Interestingly, the one agency that appears to make an unequivocal commitment to the JanSan FSSI BPAs is the requirements holder closest to the procurement—GSA!

The disparity between the conditional commitment amounts and total spend by potential users of the JanSan BPAs reflect the lowest common denominator approach to the JanSan BPA requirements.  In order to include everyone—the BPA commits no one.   In response to this analysis, a knee jerk reaction could be to attempt to make the FSSI BPAs mandatory.  As I have noted previously, such an approach would be fundamentally flawed and have long term negative consequences for the competition and the supply chain—including small businesses.

The good news is that strategic sourcing can be much more competitive transparent, effective and efficient for the American people.  As noted above, GSA’s MAS program is a strategic acquisition tool that provides customer agencies with the opportunity to leverage requirements through competition for agency specific BPAs.  A more focused approach to strategic sourcing through the MAS program would eliminate generic, government-wide BPAs like JanSan and Maintenance, Repair and Operations (MRO) to the maximum extent practicable.   Alternatively, customer agencies should establish strategic sourcing BPAs based on their specific requirements, including significant volume commitments.  Specific agency requirements and volume commitments will lead to more competition, better pricing and improved efficiency.  Agencies can more clearly communicate their technical requirements, buying patterns, usage rates and locations when establishing their own BPAs.  In turn, contractors can strategically manage their support for the agency delivering better value outcomes and increased savings.  It all boils down to executing based on sound requirements.  Finally, agencies would be required to report on their savings to ensure accountability and transparency.

In sum, strategic sourcing through agency specific BPAs will increase competition, maintain the long term supply chain across the federal enterprise and increase opportunities for small businesses.  It is an approach that will be a win for the American people, customer agencies and the private sector.   After all, when it comes to requirements, who knows better what should go in the house than the homeowner!

Roger Waldron

President

 

New Government-wide FOIA Portal

The Administration has released new plans to revamp the way Freedom of Information Act (FOIA) requests are submitted to the government. According to a Government Contracts Advisory article from McKenna Long & Aldridge LLP, the plan will include the creation of a single online portal for submission of all FOIA requests, as well as an effort to standardize FOIA regulations and practices across agencies. The plans were released in a draft report entitled, “The Open Government Partnership:  Second Open Government National Action Plan for the United States of America.” The new portal will simplify the submission of FOIA requests and provide increased transparency by allowing requesters to track the status of the government’s response.  McKenna Long notes that the administration hopes a coordinated FOIA process will reduce the amount of time and effort needed to navigate through each agency’s unique FOIA processes and procedures.

 

GAO Identifies Additional $3.3 Billion Savings for PortfolioStat

The Government Accountability Office (GAO) released a study this week on progress made under the PortfolioStat initiative.  PortfolioStat was launched in March 2012 for agencies to assess the current maturity of their IT portfolio management process and eliminate duplication across their organizations to achieve greater efficiency and cost savings.  PortfolioStat covers agency enterprise IT systems (email, identity and access management, IT security), IT infrastructure (desktop systems, mobile devices and telecommunications), and business systems (financial management, grants-related federal financial assistance, and human resource management systems).  The Office of Management and Budget (OMB) estimated that agencies had approximately 100 consolidation opportunities through PortfolioStat totaling $2.5 billion in savings between FY2012 and FY2015.  The GAO study, however, found even greater potential savings within the same three year period of $3.3 billion.  GAO’s analysis of data collected from 26 agencies shows that there are 204 opportunities and at least $5.8 billion in savings that can be achieved.  This estimate includes consolidations within the Department of Defense and Justice Department that were not included in OMB’s original analysis.  The following GAO table shows these estimates in more detail.

 

NASA SEWP V Extended to December

NASA has again extended the proposal deadline for its Solutions for Enterprise-Wide Procurement (SEWP) V contract vehicle.  The new submission deadline is December 3. NASA’s original Oct. 14 proposal deadline for SEWP V was postponed on Oct. 2, the day after the beginning of the recent partial government shutdown. For more information, visit the NASA SEWP website at www.sewp.nasa.gov/sewpv/.

 

TAA Limitations on Pharmaceuticals Procurement and VA Solutions

Donna Lee Yesner

Morgan, Lewis & Bockius, LLP

The Trade Agreements Act (TAA) creates a dilemma for the Department of Veterans Affairs (VA) as it attempts to buy pharmaceuticals under GSA Federal Supply Schedule (FSS) 65. This article explores the laws and policies that result in the predicament and the potential solutions.

Summary

The TAA requires that contractors offer products made in the U.S. or a designated county.  China and India are primary manufacturing sources for pharmaceuticals. These countries do not qualify as designated countries. Consequently, for some VA requirements there may be no TAA eligible products.  The Act permits procuring agencies to make determinations of non-availability. GSA policy, however, prohibits contracting officers from making such determinations under FSS contracts.

Compounding the problem, GSA Schedule 65 is VA’s primary source of supply for pharmaceutical products.  VA follows a sourcing hierarchy in which the FSS takes precedence over regionally awarded or locally awarded contracts and open market purchases.  In order to procure a drug through a regional, local or open market contract, an ordering office must first determine the item unavailable on a Schedule 65 contract and then obtain a waiver from use of the Schedule.  Although, the VA considers its prime vendor contract to be a national supply contract, if a product is not ordered from the prime vendor under a manufacturer’s FSS contract, the prime vendor must have offered a contract price, and these contract prices are generally limited to generic drugs that the prime vendor buys at a discount.  Further, the inability to add a product to the FSS damages VA’s ability to obtain covered drugs in accordance with  the Veterans Health Care Act, because manufacturers are only required under the statute to offer their drugs for purchase on the FSS.

The FSS program is the most convenient, price competitive vehicle for procuring pharmaceuticals, and the only contracting arrangement through which manufacturers of covered drugs are compelled to sell to the VA.  It is however, not the only procurement vehicle for doing so. If products with a non-TAA country of origin are unavailable under FSS contracts, there are options for user agencies.

1.  The TAA does not apply to contracts under the “micro purchasing” threshold of $3,000 Under the FAR micro purchasing rules, government facilities are permitted to place small orders under $3,000 with a wholesaler or a manufacturer without soliciting competitive quotations.[1]

2.  The TAA does not apply to contracts under the simplified acquisition threshold of $150,000. Individual purchase order contracts above $3,000 but under $150,000 are subject to competition rules, but the rules are more limited and the award process less burdensome than for acquisitions above the threshold.  If the VA entered into a standalone BPA, each order is a distinct contract determinative of TAA applicability.

3.  The VA could determine that a product is unavailable from TAA compliant countries and purchase a drug offered at a contract price by the prime vendor or award a single source contract to a manufacturer with a value exceeding $202,000 covering the item.

4.  The VA could award such contracts without competition to manufacturers of unique, single source drugs.  Where only one manufacturer’s drug is approved for a particular indication, the VA could also award a national committed use contract to that vendor.

Please read more to understand the impact and ramifications of the options on the government and contractors.

Although the VA has expressed interest in authority to issue a blanket unavailability determination for patent protected drugs, such authority would not provide a solution for multiple source drugs.  A waiver from TAA requirements for covered drugs under the VHCA would likely require legislative authority.  It is likely that the number of pharmaceutical chemicals sourced in India and China will not decrease, and that the TAA status of these countries will not change in the near future.  The most viable solution for the VA may be adoption of a depot contracting system similar to DoD’s DAPA program, and issuance of non-availability determinations on a drug-by-drug basis applicable to the prime vendor contract.

 

President Calls for IT Procurement Reform

Federal News Radio reported on President Obama’s personal call for IT procurement reform this week.  About the launch of Healthcare.gov, the President said “it’s inexcusable, and there are a whole range of things that we’re going to need to do once we get this fixed — to talk about federal procurement when it comes to IT and how that’s organized.”  After the President’s remarks, Federal CIO Steve VanRoekel noted, “I think the way we implement technology, the speed at which technology moves, often times it’s challenging to drive innovation in the context of cycles that take 6-9 months, a year or more to implement technology, and by the time you get the procurement done, the technology will change.”  According to Fed News Radio, VanRoekel has said that there are opportunities for procurement reform that he will pursue with the Office of Federal Procurement Policy.  For the full article, visit www.federalnewsradio.com/253/3498399/HealthCaregov-problems-rekindle-push-for-IT-procurement-reform.

 

GSA Recognized with GreenGov Presidential Award

The White House presented GSA with a GreenGov Presidential Climate Champion Award this week for its work helping Federal partners prepare for the impacts of climate change.  The GreenGov Presidential Awards celebrates extraordinary achievement in the pursuit of green Executive Order 13514. As part of the agency’s Climate Adaption Action Plan, GSA’s Climate Adaption Team worked with customer agencies to better understand climate risks to their assets.  According to a GSA Blog post this week-

• The Kansas City office identified its US Department of Agriculture customer, who is concerned about the future reliability of a mission critical data center and its information technology support given extreme heat and persistent drought conditions that are projected for the region through the end of the century.
• GSA’s National Capital Region staff wanted to leverage lessons learned from a major flooding event in 2006 at Internal Revenue Service headquarters to assess how projected extreme heat and rising sea levels will impact the facility and the telecommunications services that support it.  The NCR threshing session was selected as a White House Council on Environmental Quality GreenGov Spotlight Community.

The Climate Adaption Team, which includes representatives from the Federal Acquisition Service, Public Buildings Service and the Office of Governmentwide Policy, were recognized with the GreenGov Presidential Climate Champion Award at ceremony at the White House Tuesday.

 

GAO: More Oversight of Operations and Maintenance

In a new report, the Government Accountability Office (GAO) evaluated 10 federal information technology (IT) operations and maintenance (O&M) investments with the largest budgets in fiscal year 2012. Agencies that were reviewed include the Departments of Defense, Energy, Health and Human Services, Homeland Security, Treasury, Veterans Affairs, the Social Security Administration and the National Aeronautics and Space Administration (NASA). Of the over $82 billion that federal agencies plan to spend on IT in fiscal year 2014, at least $59 billion is to be spent on O&M. GAO was asked to review IT O&M investments and agency use of operational analysis, “a key performance evaluation and oversight mechanism required by the Office of Management and Budget (OMB) to ensure O&M investments continue to meet agency needs.” GAO notes that of the 10 investments, only the Department of Homeland Security (DHS) investment underwent an operational analysis (OA). Other agencies did not assess their investments, which accounted for $7.4 billion in reported O&M spending. GAO is recommending that the seven agencies that did not perform OAs on their large IT O&M investments do so and that DHS ensure that its OA is complete and addresses all OMB factors. Of the seven agencies, three agreed with GAO’s recommendations; two partially agreed; and two had no comments. DHS agreed with the GAO recommendation.

 

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.

 

Coalition Chairman Bill Gormley on Off the Shelf

This week on “Off the Shelf”, Bill Gormley, president of the Gormley Group and chairman of The Coalition for Government Procurement, discusses government procurement practices that add costs without enhancing value. Gormley provides his insights regarding the operational costs associated with contract duplication, non-commercial data requests, government unique requirements and the rolling back of commercial item acquisition. He also discusses the importance of well-defined requirements in achieving best value and operational savings. Members can listen to the discussion here. Be sure to catch Off the Shelf on Federal News Radio 1500AM during the following times: Tuesdays at 10am, Thursdays at 9am and Fridays at 3pm.

 

DATA Act Advances in Senate

The Digital Accountability and Transparency (DATA) Act was passed by the Senate Committee on Homeland Security and Governmental Affairs this Wednesday.  Introduced by Sen. Mark Warner (D-VA) and Sen. Rob Portman (R-OH), the DATA Act is designed to standardize reporting of Federal spending data so that it can be tracked throughout the full cycle of spending by federal agency, account, and program.  The data would also be audited by the Government Accountability Office (GAO).  According to Senator Mark Warner’s website, the DATA Act would:

• Create Transparency for All Federal Funds: DATA will expand FFATA to include spending data for all federal funds by appropriation, federal agency, sub-agency, account, program activity, object class, and maintains current reporting for federal awards like contracts, grants and loans. This expansion of USASpending.gov will allow policy makers and the public to track federal funds more clearly and link spending to budget priorities.
• Set Government-wide Financial Data Standards: The Department of Treasury is tasked with establishing financial data standards for the Federal agencies in consultation with the Office of Management and Budget and the General Services Administration to improve data quality. The legislation will establish one consistent framework to be used across the government to make it easier to compare federal spending.
• Reduce Recipient Reporting Requirements: This legislation requires the Office of Management and Budget to review the existing Federal award recipient financial reporting to reduce compliance costs based on the new financial data standards. The legislation will also establish a pilot program to evaluate alternatives for consolidating financial reporting for Federal award recipients.
• Improve Data Quality: The Inspectors General at each agency will be required to provide reports on the quality and accuracy of the financial data provided to USASpending.gov. The Government Accountability Office will also provide a report following the Inspectors Generals findings to create a government-wide assessment on the data quality and accuracy of the financial data reported.

The DATA Act now moves to the full Senate for consideration.  For a chart showing how the DATA Act would change Federal data reporting compared with how it is done today, visit www.datacoalition.org/issues/data-act.html.  The chart is provided by The Data Act Coalition which supports the bill.

 

SBA Rule to Increase Small Business Participation in MACs

The Small Business Administration (SBA) published a final rule amending the SBA’s regulations to increase small business participation in Multiple Award Contracts.  The Acquisition Process: Task and Delivery Order Contracts, Bundling, Consolidation final rule amends SBA regulations to establish policies and procedures for setting aside, partially setting aside and reserving Multiple Award Contracts for small business concerns. It also establishes policies and procedures for setting aside task and delivery orders for small business concerns under Multiple Award Contracts, including the Multiple Award Schedules program. The final rule is effective December 31, 2013. To access the final rule, click here.

 

DPAP Memo on Biobased Reporting

Director of Defense Procurement and Acquisition Policy (DPAP) Richard Ginman released a new memo on November 1 that updates biobased reporting requirements. The memo provides notice of a change to FAR 52.223-2, Affirmative Procurement of Biobased Products Under Service and Construction Contracts. “The change requires contractors to submit their annual biobased reports to the new reporting module available in the System for Award Management (SAM) portal at www.sam.gov.” According to the memo, the new module allows vendors to submit reports on a contract-by-contract basis during the fiscal year to improve consistency in reporting and increase procurement of biobased products. When dealing with FAR 52.223-2 contracting officers are requested to inform contractors about the new reporting portal to “ensure performance and compliance with the biobased reporting requirement.” For more information, link to the full memo.

 

December 2013 MAS Basic Training

Join the Coalition December 5 for an intensive, one day training workshop that teaches the basics of utilizing the General Services Administration (GSA) Multiple Award Schedules (MAS) program. Over the course of the MAS Basic Training you will learn how to obtain and manage your GSA schedule, market GSA contracts, comply with Federal procurement requirements, follow policy changes, and prepare for MAS audits. A highlight of the course is training on GSA’s electronic tools including eBuy, GSA Advantage! and GSA eLibrary. Other materials covered will include structuring your contract to address compliance requirements while retaining flexibility to compete in the federal and commercial market place. Training will also cover the FAR 8.4 ordering procedures. The course will be taught by those on the front lines of GSA schedule negotiations and contract management. Attendees are eligible to earn up to 8 CLP credits with submission of an attendance certificate and course training packet available for pick-up after the event. The training begins at 8:15am on December 5 at McKenna Long & Aldridge LLP in Washington DC. Register Here!