FAR and Beyond Blog
Happy New Year! The Coalition staff wishes you and yours a happy, safe and successful 2014! As you know, 2014 marks The Coalition for Common Sense in Government Procurement’s 35th anniversary. It is a special time for the organization, staff and member companies. We are looking forward to a wonderful year focusing on serving our membership and the procurement community. We will continue our efforts in promoting common sense strategies for the federal procurement system that deliver competitive, sound best value solutions for customer agencies and the American people. We will emphasize common sense solutions that enhance communication, cooperation, and consistency across the procurement system. We will also highlight the power and potential of GSA’s Multiple Award Schedule program to serve as an innovation portal for commercial firms seeking to do business with the federal government. More on these topics later but for now here is a rundown on our upcoming events for the first quarter of 2014:
On January 21st, the Coalition will be hosting a webinar presentation, “Fundamentals of Ethics and Compliance” by Steptoe & Johnson. This is a refresher on the unique ethics rules that govern government contracts. Attendees will get the latest information on any changes in the ethics rules, trends in oversight and tips on compliance. Significantly, this webinar is designed to help procurement professionals identify, address and avoid potential ethics issues.
On February 5th at the Tower Club, Tysons Corner, the Coalition will be hosting a Myth-Busters Forum with GSA Inspector General Brian Miller focusing on oversight, compliance and the Mandatory Disclosure Rule (MDR). As you know, the MDR has now been in place for five years. At its five year anniversary, Inspector General Miller and is staff, along with Jonathan Aronie of Sheppard Mullin will engage in a thoughtful, informed dialogue on the MDR and other key compliance issues.
On February 11th the Coalition will be hosting a webinar presentation by Baker Tilly focusing on “The Cost-Build Approach for GSA Schedule Labor Pricing.” This webinar will provide the latest information, trends, and sound approaches to pricing proposal preparations and evaluations in circumstances where a cost build approach is used. Finally, on February 20th, the Coalition will be hosting a Myth-Busters Forum with Mary Davie, Assistant Commissioner for the Integrated Technology Service (ITS) and Mark Day, Deputy Assistant Commissioner for ITS. Mary and Mark will provide the latest information on the ITS agenda, initiatives, and outlook for 2014.
On March 13th, the Coalition will host Daniel Gerstein, Deputy Under Secretary for Science & Technology, Department of Homeland Security for a Myth-Busters Forum focusing on key priorities of DHS’s science and technology programs and how industry can best work with DHS on key initiatives to protect the homeland.
As you can see, in addition to our regular committee meetings, the first quarter will be a busy one serving our membership. In the words of the Black Eyed Peas , “Let’s get it started!”
The FAR AND BEYOND” comment will return next Friday, January 10th with fourteen predications for 2014.
The General Services Administration (GSA) released a draft of its FY 2014-2018 Strategic Plan on December 20, 2013. GSA’s Strategic Plan for the next four years focuses on three strategic goals: Savings, Efficiency and Service. It also explains how the agency plans to meet these goals through initiatives like strategic sourcing and reducing the Federal real estate footprint. The chart below is a summary from the draft.
The Coalition plans to submit comments on the GSA’s FY2014- 2018 Draft Strategic Plan by January 22, 2014. Members interested in providing input, please contact Aubrey Woolley at email@example.com.
GAO Denies OASIS Protest
The Government Accountability Office (GAO) posted its decision on a bid protest against the OASIS contract filed by Aljucar, Anvil-Incus & Company (AAI) on Thursday. AAI contended that the RFP’s experience requirements for joint ventures were unduly restrictive of competition. GAO denied the protest. For more on GAO’s decision, visit www.gao.gov/products/D06553.
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 firstname.lastname@example.org.
Last week, the President signed into law both the $1.012 trillion budget deal and the $607 billion defense authorization act for FY 2014. The budget deal approves funding for the Federal government with $1.012 trillion for fiscal year (FY) 2014, $520.5 billion going to defense and $491.8 billion to non-defense agencies. Additionally it provides some relief from the automatic sequestration cuts, with a reduction of about $45 billion in FY 2014 and $18 billion in fiscal 2015. Appropriators can now write spending bills for the remainder of FY 2104 and for FY 2015 based on the amounts delineated in the bill. The deal contains a number of offsets including changes to military and civilian federal employee pensions.
President Obama also signed into law the National Defense Authorization Act (NDAA) for FY 2014. The legislation provides $607 billion for defense funding, $527 billion in base funding and $80 billion for America’s overseas conflicts. The law includes a change in the contractor salary cap for fiscal year 2014, setting the new cap at $625,000. The new cap is accompanied with exceptions for certain high-tech categories, including cybersecurity. Other provisions in the bill include a 1 percent salary increase for military personnel, ongoing construction on bases and an aircraft carrier in Virginia, pay for the destruction of chemical weapons in Syria and combat pay for war-fighters.
According to an article from FCW, three key IT policy areas could be the focus of legislation in the coming year. These areas include IT acquisition, sourcing from China and surveillance. Even though the Federal IT Acquisition Reform Act was recently stripped from the budget deal by committee chairs looking to present a clean bill to Congress for swift passage, the bill is likely to be reintroduced in some form next year. One congressional aide told FCW that, “Chairman Issa is optimistic a stand-alone bill addressing critical IT procurement reforms will move forward in both houses next year.” Also of note, the Senate is taking a more piecemeal approach to IT reform. Sen. Tom Udall introduced a bipartisan bill that would change CIO authorities and procurement of off-the-shelf technologies. It is also possible that a requirement for the federal government to pursue data consolidation strategies will be reintroduced as a stand-alone measure in the Senate.
Also on the agenda for FY 2014 could be restrictions on acquiring IT software and hardware produced by companies with links to the Chinese government and military. The restrictions were included in the continuing resolution that funded the government in fiscal 2013, and might be considered again in the fiscal 2014 appropriations bill that funds the departments of Justice and Commerce and most science programs. FCW notes that the Senate language would implement risk-based supply chain security measures, rather than country-specific restrictions.
Third, due to current debates concerning the role of the National Security Agency and individual privacy rights, two competing measures will likely frame the debate in FY 2014 about data collection on U.S. residents by the intelligence community. The opposing sides are represented by a bill by Sen. Dianne Feinstein (D-Calif.), which is generally supportive of surveillance tactics used by intelligence agencies and another measure, introduced by James Sensenbrenner (R-Wis.) in the House and Patrick Leahy (D-Vt.) in the Senate, which advocates more restrictions on how the intelligence community can operate. For the full article from FCW, visit http://fcw.com/articles/2013/12/31/it-legislative-agenda-2014.aspx.
On New Year’s Eve Federal Acquisition Circular 2005-72 was published covering some important topics for contractors–service contract reporting, the priority of sources of supplies and services for use by the government, terms of service agreements and new thresholds under the Trade Agreements Act (TAA).
The FAR Council published a final rule amending the Federal Acquisition Regulation (FAR) to implement a section of the Consolidated Appropriations Act, 2010. This final rule amends the FAR to require service contractors for executive agencies, except where DoD has fully funded the contract or order, to submit information annually in support of agency-level inventories for service contracts. Prime and first-tier contractors will submit the information by October 31 at www.sam.gov, including total dollar amount invoiced for services performed in the prior Government fiscal year and total amount of labor hours for the previous Government fiscal year. To lessen the burden on small and large business prime contractors, information is reported annually, reporting is phased in over three fiscal years, and only first-tier subcontracts are covered, not all tiers. The rule applies to solicitations issued and contracts awarded on or after January 30, 2014.
Also released by the FAR Council was a final rule on Prioritizing Sources of Supplies and Services for Use by the Government. The rule amends the FAR to update and clarify the priority of sources of supplies and services effective January 30, 2014. One of the Coalition’s recommendations submitted in our comments is included in the final rule. Language was added at FAR 7.102(a) to require consideration of existing contracts before creating new contracts—a positive step in the effort to reduce contract duplication.
Federal Acquisition Circular 2005-72 also makes adjustments to current TAA thresholds as determined by the U.S. Trade Representative and adopts as final an interim rule on Terms of Service and Open-ended Indemnification clauses. This rule clarifies that an End User License Agreement, Term of Service, or similar agreement containing an indemnification provision, is unenforceable and nonbinding against the Government and Government-authorized end-users. For more details, see FAC 2005-072 at www.gpo.gov/fdsys/pkg/FR-2013-12-31/pdf/2013-31147.pdf.
Federal News Radio will host an online chat with Dave Bowen, Chief Information Officer (CIO) of the Defense Health Agency (DHA). The live chat will be held Monday, January 13 at 1:30pm EST. According to Fed News Radio, Bowen runs an IT budget of more than $2 billion and a staff that eventually will grow to 8,000 across 57 hospitals and more than 350 clinics — supporting almost 10 million members.
The online chat with Bowen will focus on DHA’s priorities around technology. There will also be an interview with Dave Bowen at 12:30pm EST that can be accessed online at www.federalnewsradio.com/?nid=5. To register to participate in the online chat, visit www.federalnewsradio.com/394/3528358/Online-Chat-Dave-Bowen-Defense-Health-Agency-Mon-Jan-13. Questions may also be submitted in advance of the program by emailing Jason Miller at email@example.com.
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: Tuesday, 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