Friday Flash (12/20/13)
FAR and Beyond Blog
Happy Holidays from the FAR and Beyond Blog! We wish everyone a safe, prosperous and happy 2014! Look for the next blog on January 10th!
GSA announced in a press release this week that the U.S. Air Force has signed a memorandum of understanding (MOU) securing the Air Force’s use of the upcoming OASIS contract for the procurement of complex professional services. GSA’s press release quoted Randall D. Culpepper, Program Executive Officer for Combat and Mission Support, Office of the Assistant Secretary of the Air Force for Acquisition, as saying that “OASIS will save Air Force, and our folks in the field, a tremendous amount of time and effort. It will allow us to aggressively go after our small business goal with access to highly capable and vetted companies, and it significantly reduces our manpower requirements to conduct complex acquisitions.” Awards for the OASIS and OASIS Small Business contracts are expected to be announced in early 2014.
The Coalition is requesting member feedback on Low Price Technically Acceptable (LPTA) source selections in defense acquisitions for the Government Accountability Office (GAO). GAO has reached out to the Coalition and other stakeholders as part of a study for Congress on the use of LPTA by the Department of Defense (DoD). GAO has been tasked by Congress to assess how LPTA is being used in the source selection process by the DoD, what existing guidance exists on the use of LPTA, how the acquisition workforce is trained on LPTA, and how LPTA is being implemented under the Better Buying Power initiative. GAO’s LPTA report is due to Congress by June 30, 2014.
GAO will be interviewing the Coalition about LPTA in defense acquisition on January 16, 2014. To help us prepare, we are asking members to complete the LPTA Survey below. The Coalition will use the survey results to formulate our feedback and recommendations to GAO. As always, member responses will be for non-attribution and confidential.
Take the LPTA Member Survey now!
The LPTA survey will remain open through January 8, 2014. Thank you for your participation! If you have any questions, please contact Aubrey Woolley at email@example.com.
GSA would like vendors to be aware of a new Federal Strategic Sourcing Initiative (FSSI) community on GSA Interact for Building Maintenance and Operation Services. The first item to be released on the site is an RFI on the feasibility of creating a FSSI government-wide solution for building maintenance and operation services. There are also plans for a Listen to Industry Day in late January, which will also be announced via the GSA Interact page. The Coalition strongly encourages members to register to receive updates via GSA Interact here.
The request for information released by GSA notes that the Federal Acquisition Service (FAS) has identified services relating to Building Maintenance and Operations (BMO) as an area to examine with the thought that it “may or may not lend itself to a Federal Strategic Sourcing Initiative (FSSI) government-wide solution.” GSA is inviting contractors and associations in the related service industries to become part of the development process. Following the Industry Day in late January, GSA will provide the opportunity for interested industry stakeholders to meet with members of GSA. This meeting can be in person in the Kansas City, MO metro area, or virtual, as preferred by the requestor. For more information, members can review the RFI in its entirety here.
The VA National Acquisition Center has announced that Jane Stroder will be the new Federal Supply Schedule (FSS) Director. Ms. Stroder comes to the agency with over 20 years of extensive acquisition experience. Her last position was Branch Chief with the U.S. Forestry Service, where she was responsible for planning, managing and directing complex, nation-wide information technology procurements for products and service. The bulk of Ms. Stroder’s experience was with the U.S. Air Force in multiple Commands and locations both stateside and in Europe. Ms. Stroder holds a Master Degree in Procurement and Acquisitions Management and is FAC-C Level III certified in Contracting. She also holds a Certified Professional Contracts Manager and Associate Contract Managers certification from the National Contract Managers Association. The Coalition looks forward to partnering with Jane Stroder to provide best value solutions that meet the mission of the VA.
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.
Webinar – Fundamentals of Ethics and Compliance
Date: Friday, Jan. 21st
Time: 12:30 EST
Legal and ethical conduct in the government procurement process is critical to both contractor and government employees. It protects the credibility of that process and is important to maintaining the respect and trust of employees, partners, clients, and the public.
The purpose of this Webinar is to:
- Provide an understanding of the ethical and compliance rules that apply when dealing with customers and suppliers in the federal government marketplace
- Emphasize to contractors and employees the importance of ethical conduct when doing business with the federal government
- Help contractors and employees recognize ethical issues and compliance risks associated with doing business in the federal marketplace and know when to seek guidance
Topics to be covered include:
- Bribery and Gratuities
- Kickbacks and Contingent Fees
- Procurement Integrity Rules
- Organizational Conflicts of Interest
Who should attend:
- Government-facing contractor employees (not just attorneys and compliance experts)
- Government employees who deal with contractors.
Webinar – The Cost-build Approach for GSA Schedule Labor Pricing
Date: Tuesday, Feb. 11th
Time: 12:30 EST
This session will address the disconnect between services contracting and the GSA contracting model. Attendees will learn about the pricing and compliance challenges services contractors face as well as best practices for mitigating potential compliance risk. Key points of discussion will include labor category mapping, pricing strategies, CSP disclosures, and obligations under the Price Reductions Clause. Additionally, this session will provide an examination of the pricing options available to services contractors who price their services commercially using a cost-build pricing approach. Attendees will gain an understanding of the fundamental issues and challenges associated with the use of cost-build rates under the Schedules.
The purpose of this webinar is to:
- Learn about the issues stemming from the current disconnect between the GSA contracting model and services contracting.
- Learn about labor category mapping and pricing strategies and how to effectively mitigate post-award compliance risk.
- Learn about the cost-build approach to pricing and the many challenges faced by services contractors under this approach.
Who should attend:
- GSA Schedule services contract holders, executives, contract administrators and sales personnel
- GSA Schedule services Contracting Officers, Contracting Specialists
- Legal counsel representing GSA Schedule services contract holders