FAR and Beyond Blog
Yesterday Dr. Daniel M. Gerstein, Under Secretary for Science & Technology (Acting), U.S. Department of Homeland Security (DHS) , provided the Coalition with a thoughtful, engaging and very informative presentation on Science & Technology’s (S&T) cross-cutting mission. S&T supports a broad customer base, including the DHS components, federal departments and agencies, and first responder emergency management. The S&T value proposition focuses on operations, innovation and building partnerships to provide the Homeland Security Enterprise with technologies, solutions and capabilities to better protect the Homeland. Dr. Gerstein’s discussion with the Coalition and its membership reflected the best in the Myth-Busters tradition of positive, informative dialogue between government and industry. The Coalition for Government sincerely thanks Dr. Gerstein for his engagement and we look forward to continuing the dialogue!
On April 10th the Coalition will be hosting our 2014 Spring Training Conference, Opportunities for Success in the Federal Market, in Fall Church, Virginia. The Training Conference provides a wonderful opportunity for members to hear directly from senior procurement leaders and program managers from across the Federal enterprise. Speakers include:
- Harry Hallock, Deputy Assistant Secretary (Procurement) U.S. Army
- Dr. Angela Billups, Senior Procurement Executive, Department of Health and Human Services
- Mr. Randall Culpepper, Program Executive Officer for Combat and Mission Support, U.S. Air Force
- David Grant, FEMA Chief Procurement Officer
- Tiffany Hixon, Regional Commissioner for FAS
- Richard Ginman, Director of DPAP
The conference also will include a presentation from Cameron Leuthy, Senior Budget Analyst for Bloomberg Government on the current federal fiscal profile, winners and losers under the current budget, and who is buying.
Oversight, contract compliance and risk assessment are all keys to success in the federal market. To that end, the Training Conference will include a session “Oversight and Enforcement – The OIG Perspective with Richard Levi, Counsel to the GSA Inspector General and Maureen Regan, Counsel to the Department of Veterans Affairs Inspector General. We will also have our annual Legal Panel—Maximizing the Benefits Avoiding the Risks with Jason Workmaster, Partner at McKenna Long & Aldridge LLP, Jonathan Aronie, Partner at Sheppard Mullin LLP and David Dowd, Partner at Mayer Brown LLP.
We are very excited to have Steve Schooner, Nash & Cibinic Professor of Government Procurement Law and Co-Director of the Government Procurement Law Program, George Washington University Law School as our Keynote speaker. It is fitting that Steve will be addressing the Conference on the key procurement trends, challenges and opportunities in the federal marketplace as the Spring Training Conference will mark the beginning a new initiative working with The George Washington University Law School to celebrate and honor the Coalition’s 35th Anniversary!
So not only will the Spring Conference provide an opportunity to hear and learn from procurement leaders from across the federal enterprise, it will also provide an opportunity to be the first to hear about the Coalition’s new initiative to honor our 35th year, promote common sense in government procurement, and support our veterans! I am confident our members will be pleased and proud of this new initiative.
We look forward to providing our members with an exciting and engaging Training Conference. See you all April 10th!
This week, the Government Accountability Office (GAO) published a report on the impacts in 2013 of “sequestration”—the across-the-board cut of $85.3 billion in Federal government accounts. GAO found wide ranging effects on Federal agency operations and services. GAO put these effects in three broad categories—reductions, delays and impacts on the Federal workforce. The delays GAO noted were primarily in awarding contracts, procurement, delayed maintenance and training. Most agencies involved in the study reported delaying contracts or reducing the scope of contracts as a result of sequestration. The table below shows the types of contracts affected. According to GAO, the most common types of contracts affected were for program management and support services and information technology. As an example, GAO noted that the State Department cut or delayed several IT initiatives designed to facilitate internal and external communications. Also, fifteen agencies reported to the GAO that they had revised planned maintenance or repairs, or set aside these activities for a future fiscal year. For example, the Defense military services delayed scheduled depot maintenance. In the case of the Air Force, an estimated $100 million of maintenance for the active duty force was deferred from its public depots. The GAO chart below is a summary of the contract related actions agencies reported as a result of sequestration.
To access the full report, visit www.gao.gov/products/GAO-14-244.
Defense Procurement and Acquisition Policy (DPAP) released a class deviation on March 13 on the determination of “fair and reasonable” pricing under the Federal Supply Schedules. The deviation requires that DoD contracting officers determine fair and reasonable pricing when using Schedules (in lieu of FAR 8.404(d) Pricing). The following deviation is effective as of March 13, 2014.
8.404(d) Pricing. (DEVIATION)
Supplies offered on the schedule are listed as fixed prices. Services offered on the schedule are priced either at hourly rates, or at a fixed price for performance of a specific task (e.g., installation, maintenance, and repair). GSA has determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, to be fair and reasonable for the purpose of establishing the schedule contract. GSA’s determination does not relieve the ordering activity contracting officer from the responsibility of making a determination of fair and reasonable pricing for individual orders, BPAs, and orders under BPAs, using the proposal analysis techniques at 15.404-1. The complexity and circumstances of each acquisition should determine the level of detail of the analysis required.
To view the class deviation memo, visit https://thecgp.org/images/CLASS-DEVIATION_Determination-of-Fair-and-Reasonable1.pdf.
Secretary of the Department of Homeland Security (DHS) Jeh Johnson testified this week before the House Appropriations Subcommittee on Homeland Security during a hearing on the President’s FY2015 budget request for DHS. The Secretary’s comments included a top to bottom review of DHS acquisition governance processes. According to Secretary Johnson, the review will cover everything from how DHS develops its strategies, to the development of requirements, to how it sustains platforms, equipment and people. DHS plans to consolidate functions to provide the Department with the proper oversight, management and responsibilities to carry out this task. Jeh Johnson believes that this will allow DHS to more fully ensure that the solutions DHS pursues are responsive to the department’s strategy, technologically mature, and cost effective.
The FY 2015 Budget requests $60.9 billion in total budget authority, $49.0 billion in gross discretionary funding and $38.2 billion in net discretionary funding. Focus areas of the budget include:
- $1 billion for FEMA’s preparedness grants with particular emphasis on building and sustaining capabilities that address high consequence events that pose the greatest risk to the security and resilience of the United States
- $2.6 billion to support Immigration and Customs Enforcement (ICE) activities
- $1.27 billion for DHS cybersecurity activities
- 10.2 billion to support disaster resiliency, primarily through grants programs administered by FEMA and the Disaster Relief Fund
The Department of Defense (DoD) and the General Services Administration (GSA) have requested comments on recommendations from the Joint Working Group on Improving Cybersecurity and Resilience through Acquisition. The report provided six recommendations incorporating cybersecurity into federal acquisition:
- Institute baseline cybersecurity requirements as a condition of contract award for appropriate acquisitions
- Include cybersecurity in acquisition training
- Develop common cybersecurity definitions for federal acquisitions
- Institute a federal acquisition cyber risk management strategy
- Include a requirement to purchase from original equipment manufacturers, their authorized resellers, or other trusted sources
- Increase government accountability for cyber risk management
Along with the notice, there is a Memorandum for Public Commenters, and the Cyber Acquisition Implementation Plan along with an Appendix. According to the notice, the Request for Comments is being published to obtain stakeholder input on how to implement the report’s recommendations above. Published this week, members should submit comments on or before April 28, 2014.
DHS Under Secretary for S&T Speaks to CGP
This week, the Coalition hosted a forum featuring Acting Under Secretary for Science and Technology at DHS, Dr. Daniel Gerstein. Dr. Gerstein spoke to a range of issues including the Science and Technology (S&T) directorate’s priorities, their customer base, current acquisition projects and upcoming industry opportunities. Dr. Gerstein also noted that DHS intends to release a set of Science and Technology Roadmaps with industry in June of this year to plan for upcoming acquisitions of vital solutions for first responders and law enforcement personnel across the US.
This week marked the initiation of 18F, a newly formed organization, within the General Services Administration (GSA). 18F encompasses the Presidential Innovation Fellows program and an in-house digital delivery team. According to a sneak preview of the beta website, 18F is a “startup within GSA — the agency responsible for government procurement — giving us the power to make small changes with big effect.” According to the 18F website, the organization builds effective, user-centric digital services focused on the interaction between government and the people and businesses it serves. Look for more about this interesting new organization within GSA in future Friday Flash articles.
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. 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.
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). 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. 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 – 32 for initial award, ten for renewals, and four for modifications to add products. 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.
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 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.
 See Semiannual Report to Congress, Issue 69, (October 1, 2012 – March 31, 2013),VA OIG; Semiannual Report to Congress, Issue 70 (April 1 – September 30, 2013), VA OIG.
 The three other component offices are the following: (1) the Office of Audits and Evaluations, which audits and evaluates the effectiveness of the Veterans Health Administration programs and Veterans Benefits Administration programs; (2) the Office of Healthcare Inspections, which monitors the healthcare provided to the veterans; and (3) the Office of Management and Administration, which provides comprehensive support services to the VA OIG, and administers the VA OIG Hotline.
 The Office of Counselor also supervises the Release of Information Office, which primarily processes Freedom of Information Act and Privacy Act requests for OIG records, as well as other requests for information.
 The reports describe the pre-award audits results as “potential cost savings” and “savings and cost avoidance” so it is not clear whether these amounts include audit recommendations ultimately rejected by the contractors.
 To provide some perspective, the VA estimates that there are currently 1900 contract holders under its FSS program.
 The categorization of the pre-award and post-award audits in this article are based on the description of the audits in Appendix A of the reports.
 The OIG’s reports labeled eleven post-award reviews as involving voluntary disclosures with a total recovery to the VA of $12,728,288.
 This amount includes a $500 million fine resulting from a False Claims Act case against a large pharmaceutical company.
Cybersecurity Takes The Pole Position in 2014 In Federal Acquisitions
By: Tom Barletta, Partner, Steptoe & Johnson LLP; Andy Irwin, Partner, Steptoe & Johnson LLP; & George Leris, Associate, Steptoe & Johnson LLP 
The Obama Administration has been placing greater emphasis on cybersecurity, including enhancing cybersecurity in the acquisition process. Three of the Administration’s more recent acquisition related cybersecurity initiatives are discussed below.
On November 18, 2013, the DoD issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to impose requirements on contractors for safeguarding unclassified controlled technical information and reporting cyber incidents. On the same day, the DoD also issued an interim rule amending the DFARS to address supply chain security in defense contracts.
More recently, DoD and GSA issued a DoD/GSA Final Report on Improving Cybersecurity through Acquisition (“Final Report”) on January 23, 2014, containing recommendations for incorporating cybersecurity standards into the acquisition planning and contract administration process. Those recommendations include instituting baseline cybersecurity requirements; improving cybersecurity training; developing common cybersecurity definitions; instituting a federal cyber risk management strategy; purchasing from trusted sources; and increasing government accountability for cyber risk management.
Safeguarding Unclassified Controlled Technical Information and Cyber-Reporting
The DoD final rule and implementing contract clause require a contractor who has access to or stores specific types of unclassified “controlled technical information” (UCTI) to implement certain security standards on its computer network and to report certain “cyber incidents” to DoD. See DFARS 304.734 & 252.204-7012; see also DFARS 204.703 & 212.301 (regarding solicitations and contracts for commercial items).
The final rule focuses on “controlled technical information” — technical data or computer software, as defined in DFARS 252.227-7013, with a “military or space application” that is subject to restrictions on access, release, and disclosure. In that regard, the final rule references DoD Directive 5230.24, Distribution Statements on Technical Documents, and (in the preamble) DoD Directive 5230.25, Withholding of Unclassified Technical Data from Public Disclosure. Those Directives generally deal with sensitive but unclassified information that is subject to marking or release restrictions under U.S. government programs. Much of this information is likely to be subject to US export control laws and regulations, such as the International Traffic in Arms Regulations (ITAR).
The final rule imposes three requirements on covered contractors. First, the contractor must implement certain National Institute of Standards and Technology (NIST) information systems security procedures in its project, enterprise, or company-wide unclassified information technology (IT) systems to safeguard any UCTI transiting through or residing in its systems. These procedures, drawn from NIST Special Publication 800-53, Revision 4, cover fourteen areas of information security: access control; awareness and training; accountability; configuration management; contingency planning; identification and authentication; incident response; maintenance; media protection; physical and environmental protection; program management; risk assessment; system and communications protection; and system and information integrity. Alternate methods of protection may be proposed to the contracting officer, and additional security measures beyond the NIST procedures may be required if warranted by risk/vulnerability assessments. (In assessing the security of their information systems, contractors may also want to consult NIST’s more recent, February 12, 2014 Framework for Improving Infrastructure Cybersecurity, which sets out guidelines and processes for cybersecurity activities.)
Second, the final rule requires a contractor to report to DoD any cyber incident affecting UCTI information within 72 hours of the incident. The definition of “cyber incident” in the final rule suggests that the term refers to a deliberate use of a computer network (e.g., “hacking”) that has an adverse effect on a contractor’s IT system or the controlled information residing therein. However, the final rule may have a broader reach, as a “cyber incident” potentially includes “an adverse release” of controlled information (as set forth in DFARS 252.304-7012(d)(1)(xi)), or “any other activities … that allow unauthorized access to the Contractor’s unclassified information system” (as set forth in DFARS 252.204-7012(d)(2)(ii)). The final rule also requires contractors to further investigate any cyber incidents after making the initial report and to cooperate in any DoD damage assessment activities, including responding to requests for information. The reporting requirement also presents difficult parallel export control considerations for contractors, as they may need to consider whether they should file parallel self-disclosures with the export control regulatory agencies.
Third, the final rule’s implementing contract clause includes contains a mandatory flow down to all tiers of subcontractors, including to subcontracts for commercial items. The final rule does not have a separate definition of “subcontractor” and vendors that may not consider themselves subcontractors may therefore be subject to the new rule. For example, the preamble to the final rule states that the requirements can apply to Internet service providers (ISPs) and cloud computing vendors. Furthermore, if a subcontractor experiences a cyber incident, the final rule requires reporting to the Government through the prime contractor.
Interim Rule on Supply Chain Security
This interim DFARS rule grants “pilot” authority to the DoD (to expire on September 30, 2018) to place certain restrictions on IT supply chains in procurements related to “national security systems” (NSS) (as defined in 44 U.S.C. § 3542(b) and including contractor NSS) in order to address supply chain risks. Specifically, the interim rule authorizes certain DoD officials to exclude a source for IT, whether acquired as a service or a supply, based on certain qualification standards and evaluation procedures. It also authorizes them to withhold consent to a subcontract with a particular source or to direct a contractor to exclude a particular source from consideration for a subcontract.
The interim rule includes a new solicitation provision and a new contract clause to be included in all solicitations and contracts for the development or delivery of information technology that are subject to the DFARS (i.e. not just for contracts for NSS). Those provisions give notice that DoD may use its exclusionary authority to manage supply chain risk. Contractors are required to flow the clause down to “all subcontracts involving the development or delivery of any information technology, whether acquired as a service or supply.” (Emphasis supplied).
The interim rule includes required procedures for taking exclusion actions and indicates that those actions should only be taken where there is a significant supply chain risk to a particular NSS. However, the interim rule does not define what qualification standards or evaluation factors DoD officials will use in considering supply chain risks and excluding supply sources. Furthermore, the interim rule gives DoD authority to limit disclosure of information relating to an exclusion decisions and provides that exclusion actions are not reviewable in a bid protest.
DoD/GSA Final Report on Improving Cybersecurity through Acquisition
The Final Report aims to establish a unified framework to address federal cyber risk management and acquisition processes, and, in particular, cyber risk in the acquisition of commercial information and communications technology. (The report essentially indicates that it does not apply to acquisition practices applicable to NSS.)
The Final Report identifies several important cyber risk related issues affecting federal acquisitions, and provides joint DoD/GSA recommendations on mitigating them at the federal level. At the top of the list are intentional or unintentional vulnerabilities that may come from inside or outside the supply chain, but which increase acquisition risk. The risk of counterfeit, “grey market,” or other nonconforming information and communications technology (ICT) components entering the supply chain also adds to the risk in supply chain management. Finally, the operations, maintenance, and disposal stages of ICT present significant risks when supervised and/or implemented improperly. The Final Report indicates that a well-functioning and unified federal acquisition approach to such issues is likely to reduce cybersecurity threats to the supply chain.
To that end, the Final Report lays out six recommendations which aim to reduce exposure to cyber risks in commercial ICT federal acquisition. First, it recommends establishing “baseline cybersecurity requirements” as a condition to awarding a contract. These requirements encompass basic protections (e.g., up-to-date virus protection and software patches; multiple-factor logical access; and methods ensuring data confidentiality). These elements should be expressed as technical requirements, and include performance measures and be clearly described in the relevant contract language. Importantly, the Final Report recommends that these requirements should be harmonized with other FAR/DFARS rule making actions, including the final rule discussed above on safeguarding UCTI in contractor IT systems.
Second, the Final Report recommends increasing the cybersecurity awareness of employees and entities working in federal acquisitions. It suggests that additional education and training opportunities for employees involved with procurements will lead to improved cyber risk management, including avoiding over-specifying and under-specifying cybersecurity requirements. It also proposes a government-sponsored cybersecurity outreach campaign targeting stakeholders to familiarize them with the government’s changing approach to cybersecurity.
Third, the Final Report recommends adopting common cybersecurity definitions for federal acquisitions. It acknowledges that use of unclear and inconsistently defined terms in the acquisition process (e.g., “cyber incident”) can lead to “suboptimal outcomes for both cybersecurity and efficiency” (e.g., changes, terminations, and disputes). The Final Report suggests that a having common definitions will reduce problems with, inter alia, cost estimates, solicitations, and award and performance of contracts.
Fourth, the Final Report recommends the creation of an interagency “federal acquisition cyber risk management strategy,” which would identify a unified hierarchy of cyber risks. It would also develop “overlays” – i.e., sets of flexible, risk-based security requirements and supplemental guidance – that an agency would tailor to its specific needs for specific products. These overlays would, for example, identify different security controls depending on the type of acquisition. As the Final Report highlights, different acquisitions present different risks and warrant different cybersecurity responses. Applying standardized but flexible overlays across markets segments and similar types of procurement will, according to the report, reduce the costs and duration associated with an acquisition.
Fifth, the Final Report emphasizes that federal agencies must ensure that the goods they acquire are authentic, as any sub-par goods drastically increase cyber risks (e.g., they may arrive with outdated security updates, or built to different specifications). Accordingly, it recommends identifying “trusted sources” – manufacturers, suppliers, or resellers, and taking other steps, appropriate to the particular acquisition, to qualify vendors as a means of reducing cyber risks. Further, the Final Report indicates that in cases involving the greatest risk, it may be appropriate for government personnel to determine whether a vendor is a “trusted source,” while in other less risky cases, attestation of company conformance to external standards may be appropriate.
Finally, the Final Report recommends increasing government accountability for cyber risk management. It details a four-step process for holding key personnel accountable for upholding cyber standards. Specifically, such personnel should: 1) address cyber risks when a requirement is being defined and a solution is being analyzed; 2) certify that the solicitation includes the appropriate cybersecurity requirements; 3) participate in the proposal evaluation process and provide for consideration of cybersecurity in best value decisions; and 4) continue to monitor post-award performance to the extent relevant to cybersecurity.
The three actions discussed above reflect the increased emphasis on cybersecurity in the acquisition process and indicate that cybersecurity will be an important issue for the acquisition community going forward.
 Tom Barletta is a partner in the Washington D.C. office of Steptoe & Johnson LLP and head of the Government Contracts group. Andy Irwin is a partner in its International Regulation & Compliance and Government Contracts group. George Leris is an attorney in Steptoe’s Privacy and Cybersecurity practice.
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:
- Harry Hallock, Deputy Assistant Secretary, United States Army
- 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?
GAO Examines TRICARE Management Activity
In a recent report to the Senate Committee on Armed Services, the Government Accountability Office (GAO) analyzed the Acquisition Processes for TRICARE’s Third Generation of Managed Care Support Contracts (MCSCs). Senate Report 112-173, which accompanied a version of the
National Defense Authorization Act for Fiscal Year 2013, required the GAO to review DoD’s process for acquiring TRICARE MCSCs. The report examined:
- The TMA acquisition process awarding TRICARE’s third generation MCSCs
- The extent to which issues were raised in the bid protests involving these MCSCs, including identifying any common themes
- Lessons learned from the acquisition process to award these MCSCs and how these lessons may be used in future acquisitions
The GAO found that the TRICARE Management Activity could improve communication and documentation to increase transparency during the evaluation of proposals and lengthen the acquisition process to allow more time to evaluate proposals and to transition from one MCSC to another. For more information, members can access the full report here.
Army Planning for ITES-3S Contract
According to a recent report in Federal Times, the Army plans to move forward with the award of its Information Technology Enterprise Solutions-3 Services (ITES-3S) contract in early 2017. The Army’s Computer Hardware Enterprise Software and Solutions (CHESS) group has said that it expects to make up to two dozen awards under the commercial IT contract. ITES-3S has an estimated value of $12-$20 billion at five base years and a one four-year option. In addition to two dozen non-restricted awards, the CHESS office anticipates 14 awards reserved for small businesses.
Proposed Rule on Electronics Disposal
GSA published a proposed rule this week on the disposal of Federal electronic assets. The proposed changes are to be made to the Federal Management Regulation (FMR), which sets policies for the Federal government concerning property management and related activities. The changes would encourage Federal agencies to use certified recyclers to dispose of electronic assets and restrict disposal of these products in landfills or through incineration. The proposed rule also includes “manufacturer take-back programs” as one of the options agencies can use to dispose of Federal electronics. To access the proposed rule, visit www.gpo.gov/fdsys/pkg/FR-2014-03-06/pdf/2014-04585.pdf. Comments are due May 5, 2014.
GSA Issues Final Rule on eMods
GSA issued a final rule on March 13 amending the General Services Administration Acquisition Regulation (GSAR) to require electronic submission of modifications to Federal Supply Schedule (FSS) contracts. According to GSA, use of eMod will streamline the modification process and establish controls to ensure that contract documentation is completed and approved by all required parties. The submission of information through eMod requires FSS contractors to purchase a digital certificate. The final rule goes into effect on April 14, 2014. To access the final rule, visit www.regulations.gov/#!documentDetail;D=GSA_FRDOC_0001-0961.
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.
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.