Friday Flash, 03.07.14

FAR and Beyond Blog

Strategic acquisition offers government and industry an opportunity to work together to identify unnecessary costs in the acquisition process and pass those savings along to federal agencies.  However, a new term has entered the dialogue regarding the Federal Strategic Sourcing Initiative (FSSI).  That term is “supplier suppression.”  What does “supplier suppression” mean in the context of FSSI?

At bottom, “supplier suppression” means constricting the supply chain and, ultimately, restricting competition through a limited set of generic, government-wide contract vehicles.  GSA is currently repeating its past.  Over 20 years ago, GSA had a limited set of FSS contracts that were mandatory for use across the federal government.  The result was static pricing, restricted competition, limited access to best in class commercial companies, and high customer dissatisfaction.  Customer agencies avoided using GSA.

“Supplier suppression” will have long term negative consequences for customer agencies and the American people.  Limiting competition in the supply chain will inevitably lead to higher prices and lower quality for customer agencies and the American people.

In response to FSSI and the concept of supplier suppression, the Coalition has begun work on a white paper focusing on FSSI and its impact.  The Coalition will host a Forum focusing on FSSI and its impact on customer agencies, contractors and the American people.  The Coalition has also developed a set of “Strategic Acquisition Principles” that, if adopted, would deliver best value solutions for customer agencies while maintaining a vigorous, robust commercial supply chain.  At the heart of these principles are sound requirements development and volume commitments as driving value for customers and sound business opportunities for contractors.  Effective requirements development is the key.

Strategic Sourcing initiatives, appropriately structured, could be a win for all stakeholders.  The current FSSI approach, however, creates significant detachment between customer agencies and contractors.  It is a top down approach rather than a bottom up one.

The Coalition’s “Strategic Acquisition Principles” are built around the fundamental procurement principle that the closer the acquisition is to the requirements holder the more likely a best value outcome will result for all.  The closer a procurement is to the actual requirements holder, the better opportunity for clear, consistent requirements with corresponding volume commitments.  Clear, consistent requirements and volume commitments drive competition and savings.  Here are the Coalition’s principles:

 Strategic Acquisition Principles

1. Strategic acquisition offers government and industry an opportunity to work together to identify unnecessary costs in the acquisition process and pass those savings along to federal agencies.  Commercial item contracting is a model that reduces the cost of acquisition.  By eliminating government-unique requirements in favor of commercial practices, the costs involved in doing business with the Federal government are reduced and the taxpayer saves. In essence, put “commercial” back into commercial item contracting and save.
2. Savings calculations should cover the Total Acquisition Costs to the government including the administrative costs involved in planning, conducting acquisitions, data collection, and contract management.  How the government calculates its strategic sourcing savings should also be transparent to the American public.
3. GSA Schedules are a strategic source. Agency specific BPAs with well-defined requirements and volume commitments lead to innovative solutions through robust competitions, at competitive prices, with improved efficiency.  Generic government-wide BPAs add costs without commensurate value.
4. Continuous open seasons enhance competition and innovation while meeting the Multiple Award Schedule program’s statutory mandate that it remains open to all sources.  Continuous open seasons facilitate an active supplier base; provide access to the latest commercial services, products, and solutions for GSA and its customer agencies; and encourage task order competition.

We look forward to your feedback on these principles.  More importantly, we look forward to delivering our Strategic Sourcing White Paper and hosting our Strategic Sourcing Forum in June.

Roger Waldron

President

 

Join The Coalition’s 2014 Spring Training Conference!

 

Want to actively participate in discussions and hear directly from acquisition leaders at DoD, DHS, HHS, VA, and GSA? Now’s your chance!  Register for The Coalition for Government Procurement’s Spring Training Conference taking place on April 10th!

Featured Speakers include:

• The Honorable Gerry Connolly, House Committee on Oversight and Government Reform (Invited)
• Harry Hallock, Deputy Assistant Secretary, United States Army (Invited)
• Jan Frye, Deputy Assistant Secretary, Office of Acquisition and Logistics
• Cameron Leuthy, Senior Budget Analyst, Bloomberg Federal
• Richard Levi, Counsel to the Inspector General, GSA
• Maureen Regan,  Counsel to the Inspector General, VA
• Richard Ginman, Director of Defense Procurement and Acquisition Policy, DoD
• Jeffrey Koses, Senior Procurement Executive, GSA

Discussion Topics include:

• The Future of Federal Acquisition – What’s on the Horizon
• Selling in the Federal Market – Who’s Buying and Who’s Not
• Oversight and Enforcement – The OIG Perspective
• Maximizing the Benefits, Avoiding the Risks—The Latest in Contract Compliance and Regulatory Changes
• Army Acquisition – Current and Future Initiatives
• Government-wide Acquisition Summit

Breakout Sessions Include:

• The GSA Acquisition Centers – Updates for 2014
• The GSA Services Portfolio
• Doing Business with DHS – New Guidelines for Acquiring Services; Eagles Update
• Government-wide IT Acquisitions – Updates for 2014
• Small Business Preferences – What’s Going Right and What Needs Improvement?
• Air Force Strategic Sourcing – What’s the Current Status and What’s Next?
• The GSA Schedule Crystal Ball – What to Expect for the Program and its Pricing Policy
• The GSA Category Management – What Does it Mean to your Business?

View the Draft Agenda Here!

Register Here!

Interested in being a sponsor?  Check out our sponsorship opportunities here or contact Matt Cahill at mattcahill@thecgp.org.

 

White House Releases FY15 Budget Proposal

On Tuesday of this week, the White House released its $3.9 trillion FY2015 budget proposal. According to ASI Government, the proposal includes $56 billion in additional spending above the discretionary funding cap set by the Bipartisan Budget Act of 2013, split evenly between defense and non-defense programs. According to an overview provided by the Office of Management and Budget (OMB), the proposal supports expanding the use of shared services between Federal agencies and strategic sourcing to leverage the buying power of the Government. While the budget document touches on all areas of government, member should be aware of the following:

• Decreased IT Spending

According to FCW, the budget proposal includes expanded top-level oversight of federal IT projects and slightly more than $79 billion in federal IT spending, down slightly from the $81.4 billion enacted for 2014. Additionally, the entire proposed savings in IT cuts is expected to come from the Department of Defense (DoD). Overall Defense IT spending would drop 6 percent from $37.6 billion this year to $35.4 billion in FY2015, while civilian IT would remain stable at $43.7 billion, said federal Chief Information Officer Steven VanRoekel.

• Cybersecurity Funding

The President’s budget includes a focus on funding for areas involved in cybersecurity. The $496 billion FY2015 DoD budget includes more than $5 billion in spending related to cyber, funds that are spread across the various defense components and activities as part of comprehensive DoD plans to ramp up cyber operations, reports Federal Times. Additionally, the budget includes around $1.3 billion for the Department of Homeland Security’s (DHS) cybersecurity funding. That is an increase from the $792 million in cybersecurity funding Congress approved for DHS this fiscal year. Programs that are funded in the budget proposal include: the Continuous Diagnostics and Mitigation program, Network Security Deployment, including the EINSTEIN3 Accelerated (E3A) program, and cyber and cyber-enabled investigations carried out by Immigration and Customs Enforcement.

• Federal Real Estate

The budget includes $57 million to start up the Civilian Property Realignment Act (CPRA). According to the budget documents, “CPRA would create an independent board of private and public sector real estate experts that would make recommendations to the Congress on properties that should be sold, consolidated, co-located or reconfigured.”

 

The FY2015 Budget Proposal and Strategic Sourcing

The new 2015 budget request out today from the White House has a prominent place for strategic sourcing. This week on In Depth with Francis Rose, Coalition President Roger Waldron discusses the FY2015 budget and its support for strategic sourcing. The budget request says the “creation of central vehicles that can be used by all Federal agencies has reduced contract duplication and reduced prices for some common office supplies by over 65 percent. Such efforts save taxpayer dollars directly through reduced prices and duplication that allows agencies to focus scarce human capital resources on more complex, mission-critical efforts.” Members can listen to Roger’s comments by clicking here.

 

DoD Services Contracts Vetted for Duplication and Savings

According to a report from Federal News Radio, the Department of Defense (DoD) intends to implement targeted reductions in the ranks of contractor employees in FY2015. All three military departments say they are mapping out ways to make do with less contractor support than they currently have.

“What we’re trying to do is acknowledge that we don’t currently understand whether our demands for service contracts are all currently supporting a valid military need. What we’ve concluded is that it’s got to be, in large part, appetite suppression for these contracts in an austere environment,” said Elliott Branch, the deputy assistant secretary of the Navy for acquisition. Lt. Gen. Charles Davis, the military deputy to the assistant Air Force secretary for acquisition, said his department’s focus will be on knowledge-based services. According to Davis, the Air Force is hoping for improved central oversight and management of all of its service contracts as a result of its recent decision to use the General Services Administration’s OASIS contract vehicle to buy most of its professional services. Davis notes that whether it is OASIS or other multiple-award [indefinite-delivery, indefinite- quantity] contracts, if the Air Force can make “use of those almost mandatory or at least highly-recommended,” it hopes to reduce the cost of the things it buys in every command.

 

Department of Energy Strategic Sourcing Memo Released

Last week, the Department of Energy (DoE) released a memorandum to all Procurement Directors concerning strategic sourcing. The memo updates previous guidance regarding an order of precedence for considering use of strategic sourcing agreements and information on agreements placed by DOE, the Integrated Contractor Purchasing Team (ICPT), and the Supply Chain Management Center (SCMC). Furthermore, the memo directs DoE Procurement Directors to:

• Establish internal processes that place consideration of established DOE [strategic sourcing] agreements at the top of the order of precedence of acquisition strategies when conducting acquisition planning for goods and services.

• Conduct internal independent review and oversight functions/processes to challenge use of acquisition strategies to acquire goods and services that do not consider use of these agreements.

 

GSA Announces MRO FSSI Awards

This week GSA publicly announced the awardees for a new strategic sourcing solution for Maintenance, Repair and Operations (MRO) equipment.  The 23 blanket purchase agreements are for MRO products available to Federal agencies through the purchasing channel.  GSA estimates that pricing available through the contract vehicle is 12 percent lower than standard government pricing.  GSA also expects that the new MRO FSSI contract can achieve $16 million in savings in Year 1 and more than $30 million annually with increased use.  A list of the award winners is posted at https://interact.gsa.gov/document/gsa-announces-awards-mro-purchasing-channel.

 

Compliance Lessons from the Office of Inspector General

By: Jack Horan, Partner, McKenna Long & Aldridge LLP

Effective and compliant contract administration should be a primary goal for all government contractors, including, of course, contractors with the Department of Veterans Affairs (VA).  As with any other business goal, compliance should be attained efficiently.  Within the web of statutory, regulatory, and contractual requirements, VA contractors should understand the areas where noncompliance creates the greatest risk and exposure, and spend their resources accordingly.

As with the Offices of Inspectors General throughout the government, the VA Office of Inspector General (OIG) is a central player in the oversight of contracts, enforcing compliance with all major VA statutory, regulatory, and contractual requirements, and redressing compliance failures.  As part of its responsibilities, the VA OIG reports to Congress twice annually on the audits, reviews, and investigations it conducts.[1]  Although intended for other purposes, these reports can assist VA contractors in identifying the requirements that are of the most importance to the VA, and should be most important to the contractor.  In short, VA OIG’s actions over the prior year serve as a lesson to contractors on where to spend their time and money (and the effect of noncompliance).

The VA OIG has “a nationwide staff of auditors, investigators, health care inspectors, and support personnel” in six major component “offices” that conduct “independent oversight reviews to improve the economy, efficiency, and effectiveness of VA programs, and to prevent and detect criminal activity, waste, abuse, and fraud.”  For a VA contractor, the three component offices that are of most importance are:  (1) the Immediate Office of the IG; (2) the Office of Counselor to the IG; and (3) Office of Investigations.^[2]

The Immediate Office of the IG is top-tier management, with the Deputy Inspector General operating as the “Chief Operating Officer.”  In addition to planning, directing and monitoring all [IG] operations,” the Immediate Office establishes investigative priorities for the Office, and identifies and promotes legislative initiatives to Congress.

The new year should bring a new IG to the VA.  On November 6, 2013, GeorgeOpfer announced his retirement as IG after more than 44 years of government service.  Mr.Opfer assumed responsibility as Inspector General on November 17, 2005, after being nominated by President GeorgeW.Bush.  Although President Obama has not nominated a replacement, Mr.Opfer’s long-time Deputy, RichardGriffin, is currently serving as Acting Inspector General.  Mr.Griffin has been a Deputy Inspector General since November 23, 2008, and previously served as Inspector General from November 1997 to June 2005.

A change in Inspector General can have a significant effect on the priorities, policies, and procedures of an office – as demonstrated by the GSA’s OIG under the direction of the current IG, Brian Miller.  Given his status as Acting Inspector General and his long service under Mr.Opfer, it would be surprising if Mr.Griffin made dramatic changes to the VA OIG’s policies or procedures.  Significant changes will likely come, if at all, under the next IG.

The Office of Counselor provides counsel to the OIG on False Claims Act cases affecting the VA and serves as liaison to the Department of Justice on False Claims Act cases.  The Office of Counselor also manages the Office of Contract Review, which  provides pre-award and post-award audits of contractors’ proposals and contracts under an agreement with VA’s Office of Acquisition, Logistics and Construction (OALC).[3]  The majority of pre-award audits of proposals for contracts or modifications under the VA’s Federal Supply Schedule (FSS) program.  The Office automatically reviews the pricing for all proposals when the estimated contract or modification exceeds $5,000,000 under Schedule 65IB, Drugs, Pharmaceuticals, and Hematology Related Products, and $3,000,000 for the other VA Schedules.  The Office of Contract Review also reviews pharmaceutical manufacturers’ compliance with the pricing requirements of the Veterans Health Care Act.  Thus, the Office of Contract Review reviews pricing for major VA contracts and ensures the pricing is compliant with contractual, regulatory, and statutory requirements, and provides a recommendation to the contracting officer on the prices the VA should pay for items on large FSS contracts.

So how did the pricing proposed by potential contractors fare with Office of Contract Review?  During fiscal year 2013, the Office conducted 83 pre-award audits of proposals of all types, and identified $655,056,285 in cost savings, or an average of $7.9 million in cost savings per audit.[4]  It’s safe to say that the Office did not routinely accept pricing as proposed by the contractors.

How about proposals for FSS awards, renewals or modifications?  Forty-six of the 83 pre-award audits were of proposals for awards, renewals or modifications under the FSS program^[5] – 32 for initial award, ten for renewals, and four for modifications to add products.[6]  The Office recommended a price reduction for 72% (23 of 32) of the audited proposals for initial award.  The Office recommended a total of $470,428,110 in price reductions, with an average of $14.7 million per audit (including all 32 audits).  Thus, offerors submitting proposals for an initial award of an FSS contract fared worse than the average contractor subject to pre-award audits.

With pricing established by the existing contracts, one would expect that the contractor would fare better in pre-award audits for contract renewals.  Contractors did fare better but the Office frequently challenged the proposed pricing.  The Office recommended a total of $18,577,827 in price reductions, with an average of $1,857,783 per audit.  The OIG recommended a price reduction for 60% (six of ten) renewal proposals.

Contractors seeking product additions fared the best over the past year with the OIG recommending price reductions in only 25% (one of four) of its audits.  The one price reduction was a significant one though — $8,615,256.

So, here are the lessons learned from the pre-award audits:

• Most obviously, the OIG takes a hard look at proposed pricing, in the past year rejecting 72% of pricing proposed for initial award, 60% for renewals, and 25% for modifications.
• A contractor needs to be prepared to support its pricing not only when it is seeking the initial FSS contract, but also at renewal and for each modification.

Now let’s look at post award audits – audits conducted to determine whether a contractor is complying with its pricing obligations.  The Office reported 33 post-award audits in fiscal year 2013, which resulted in the VA recovering contract overcharges totaling over $17.6 million.  According to the OIG, approximately $11.7 million of that recovery resulted from Veterans Health Care Act compliance with pricing requirements, recalculation of Federal ceiling prices, and appropriate classification of pharmaceutical products.

Fourteen of the post-award audits were of voluntary disclosures.  The Office claimed more than offered by the contractor in nine of 14 voluntary disclosures.  The average recovery to the VA from voluntary disclosures was $1,157,117.[7]

The VA recovered 100 percent of recommended recoveries for post-award audits.

Lessons learned from post-award audits:

• Pay close attention to your Veterans Health Care Act pricing – it is a major compliance area for the OIG, comprising the largest recovery area.
• Be prepared to support your accounting and rationale for any voluntary disclosures.  The disclosure is likely to be audited and the proposed repayment amount is likely to be challenged.
• Your opportunity to affect the government’s view of your liability is through negotiations with the OIG.  The Office has an excellent record – 100% of the time – of recovering what it determines the VA is due.

Now, a look at the focus of the Office of Investigations over the past fiscal year.  The Office of Investigations (OI) investigates crimes committed against programs and operations of the VA.  Within the OI, the Criminal Investigations division investigates all types of crimes (including criminal fraud as well as rape and murder) and civil fraud.  For fiscal year 2013, the OI reported opening 45 cases, making 11 arrests, and obtaining more than $564.1 million[8] in fines, restitution, penalties, and civil judgments “in the area of procurement practices.”

The OI specifically identified twelve criminal cases involving procurement violations by contractors – all twelve involved service-disabled, veteran-owned small business fraud.  In those cases, the SDVOSB business either misrepresented the eligibility of its owner, or the true ownership of the business.

Lessons learned from the OI:

• Exposure under the False Claims Act for VA contracts can be very significant – reaching over $500 million in 2013.
• People get arrested and go to jail for defrauding the VA.
• If you tell the VA that you are a serviced-disabled veteran and own and operate a SDVOSB, you better be a service-disabled veteran and own and operate the SDVOSB.

Finally, one other lesson learned – this one from the structure of the VA OIG.  Contact by the Office of Contract Review and the Office of Investigations can both lead to civil or even criminal liability, but there is a significant difference.  If the contact comes from the Office of Investigations, the issue has already likely been determined to be a potential civil fraud or criminal violation.  There is no doubt that it is time to call your lawyer.

 

GSA Testifies on Recycling Electronics

The Senate Homeland Security and Governmental Affairs Committee held a hearing last week on Electronics Recycling.  According to Chairman Tom Carper, “the federal government is the nation’s largest purchaser of electronics and subsequently the largest disposer of such devices.  This provides our government with the opportunity and responsibility to ensure that it recycles electronics in the safest, smartest way.”

GSA’s lead sustainability officer, Kevin Kampschroer, provided testimony to the committee about GSA’s role helping agencies to meet the goals set forth in the National Strategy for Electronics Stewardship.  The strategy outlines the Federal government’s plan to enhance the management of electronics throughout the products’ lifecycle—from design to reuse and recycling.  Kevin Kampschroer also spoke to steps that GSA is taking with its own contracts.  GSA is looking at returning electronics to the original vendor if they cannot be transferred within the government for use, donated, or sold.  According to the testimony, GSA is incorporating takeback provisions into many GSA contracts, and is also “developing government-wide guidance about incorporating take-back requirements into all contracts.” To access GSA’s testimony, which provides more details about GSA’s green electronics initiatives, click here.

 

FedRAMP OnRAMP Site Unveiled

A new beta website launched through a collaborative effort between the General Services Administration (GSA) and Meritalk, will allow the public to track cloud services providers’ progress toward complying with the Federal Risk and Authorization Management Program (FedRAMP). According o FCW, FedRAMP OnRAMP provides visibility into existing commercial and government secure cloud service offerings. A comprehensive version is expected to be released in mid-March.

 

Feedback Requested: PSCs for Alliant II and Alliant II SB

Last week, the Alliant II and Alliant II Small Business team posted to GSA Interact, a new question concerning Product Service Codes (PSC). According to the post, PSCs are used by the United States government to record the products, services, and research and development purchased by the government. The codes indicate what was bought for each contract action reported in the Federal Procurement Data System (FPDS). GSA is interested in feedback from industry on the following questions regarding PSCs:

• Does this list of Product Service Codes adequately represent the work experience you have seen through the current Alliant and Alliant Small Business GWACs and other agency information technology contracts?
• Are we missing any other Product Service Codes aligned to Information Technology (IT) services?
• Are there Product Service Codes listed that should not be listed?
• What advantages do you see in a contract that provides a list of Product Service Codes that would help in the market research and procurement of IT services?
• What types of innovative solutions (i.e. PSC dashboard, apps, research tools, etc.) could be derived by collecting and sharing Product Service Codes?

To respond, please visit the Alliant II and Alliant II SB community on GSA Interact at https://interact.gsa.gov/group/alliant-ii-alliant-small-business-ii-gwacs.

 

Off the Shelf: An Update on GSA’s Integrated Technology Service

This week on Off the Shelf, Mary Davie, assistant commissioner for GSA’s Integrated Technology Service, and Mark Day, deputy assistant commissioner for ITS, provide an update on ITS priorities for 2014. NS2020, GSA schedules, strategic sourcing, cloud computing, SmartBUY, and the Alliant follow on procurement, are among the programs highlighted. To listen to the program, click here.

 

Meet NCR Assisted Services Next Tuesday

GSA’s National Capital Region (NCR) Assisted Services will join the IT/Services Committee meeting next Tuesday, March 11.  Terry McNair, Deputy Regional Commissioner, National Capital Region at GSA will brief members on Assisted Services’ mission and outreach to industry.  There will also be a special opportunity from 9:30- 10:00am for Myth-busters introductions with the NCR Assisted Services leadership team.  We encourage all members who are interested in learning more about NCR Assisted Services to take advantage of this opportunity.

IT/Services Committee Meeting

Tuesday, March 11

9:30 AM

Northrop Grumman IT (7575 Coleshire Drive, McLean, VA)

 

RSVPs are required to attend.  Please RSVP to Roy Dicharrry at rdicharry@thecgp.org.

 

Forum with Under Secretary for Science and Technology at DHS, Daniel Gerstein

The Coalition is excited to announce our next breakfast forum event with Under Secretary for Science and Technology at DHS, Daniel Gerstein.  This event will be held on Thursday, March 13 from 8:30 – 10:30 at McKenna Long & Aldridge LLP in Washington, D.C.

PURPOSE/OBJECTIVE:

• Brief federal contractors/industry representatives on DHS S&T
• Explain S&T priority areas, recent successes with industry partners
• Provide insights into how industry can best work with S&T, where S&T is going

THEMES & MESSAGES:

• S&T 101
• Game Changers & hot challenges
• Innovation
• Looking to the future – how industry can help
• How to work in current financial environment
• Importance of industry partnerships

Location:

McKenna Long & Aldridge LLP – 1900 K Street NW, Washington, DC 20006

 

Webinar – Contractor Assistance Visits with GSA’s Supplier Management Division

The Coalition will be hosting a Myth-Busters webinar focusing on the processes and procedures for Contractor Assistance Visits (CAVs) under the GSA Multiple Award Schedule program. CAVs are conducted by the Industrial Operations Analysts (IOA) from GSA’s Federal Acquisition Service (FAS).  MAS contractors can expect 2-3 CAVs over the course of a five year contract period in the current environment. It is vital to contract compliance and your overall business interests to understand the IOA role and expectations for MAS contractors.

Tom Brady, Director, Supplier Management Division, Office of Acquisition Management at GSA’s Federal Acquisition Service will be discussing the respective roles of the Administrative Contracting Officer (ACO) and the IOA. Topics will include the updated review parameters and processes for CAVs as well as key compliance issues (e.g. Industrial Funding Fee) surrounding MAS contracts. This webinar is a “must dial in” event for contractor compliance managers, in house counsel, contracting officers, and executives responsible for management and oversight compliance.

REGISTER HERE!