FAR and Beyond Blog
The Multiple-award Double Standard
On March 13,2014, Defense Procurement and Acquisition Policy (DPAP) issued a class deviation “clarifying” (i.e. establishing) that DoD ordering activities are responsible for determining prices fair and reasonable for Blanket Purchase Agreements (BPAs), task orders and delivery orders issued under GSA’s multiple award schedule program. This deviation has generated significant discussion, analysis and debate in the procurement community regarding the balance between procedures and outcomes when using the GSA’s Schedules streamlined ordering processes. The language of the deviation is as follows:
Supplies offered on the schedule are listed at fixed prices. Services offered on the schedule are priced either at hourly rates, or at a fixed price for the 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.
The impetus behind the DPAP deviation is a growing concern that when using the GSA Schedules program, DoD contracting officers are not doing any analysis of proposed prices at the BPA and task order level. Specifically, DPAP is concerned that rather than doing any analysis DoD contracting officers are merely relying on the language in FAR 8.4 (the regulations governing the GSA Schedules program) that states GSA has already determined Schedule prices fair and reasonable and, therefore, ordering activities are not required to make a separate determination of fair and reasonable pricing. See FAR 8.404(d). In essence, the concern is that the FAR 8.4 language promotes a lack of due diligence on the part of DoD contacting officers in evaluating task order and BPA pricing under the GSA schedules program. (For the record, it should be noted that FAR 8.4 actually includes additional price analysis requirements for orders and BPAs requiring a statement of work, but I digress.)
DPAP’s concern is understandable. Some due diligence by the contracting officer is appropriate to ensure that the government is getting a fair deal at the task order level under multiple award contracts, including the GSA Schedules. At the same time, a balance should be struck recognizing that one of the important benefits of multiple award contracts is the streamlined task order competition process—a process mandated by statute and regulation. Perhaps some compromise, simplified language addressing evaluation of orders could be coordinated between DoD, GSA, OMB and NASA; a compromise that strikes the right balance and addresses multiple award contracts across the spectrum.
More importantly, such an approach would address the inconsistency in the treatment of orders under multiple award contracts that results from the deviation. A review and comparison of FAR 16.505(b)(3) and FAR 8.404(d) reveals guidance that is essentially the same regarding the determination of fair and reasonable pricing at the order level. In both cases, the regulatory guidance informs contracting officers that if the prices are established at the contract level, the pricing policies and procedures of FAR 15.4 do not apply. FAR 8.404(d) states that since GSA has determined contract prices for supplies and service fair and reasonable; the ordering activity does not have to do a separate determination of fair and reasonable pricing at the order level. FAR 16.505(b)(3) states that “[i]f the contract
did not establish the price for the supply or service, the contracting officer must establish prices for each order using the policies and methods in subpart 15.4.” [Emphasis added.] As such, FAR 16.505(b)(3) also makes clear that if the prices have been established at the contract level under a multiple award contract, then the contracting officer does not have to make a fair and reasonable price determination pursuant to FAR 15.4.
So one must ask, why the double standard for GSA schedules versus other multiple award contracts?
Coalition Spring Conference in the News
The Coalition’s 2014 Spring Conference: Opportunities for Success in the Federal Market received attention in the press. Click below for some of the highlights!
- DoD’s latest efficiency push revolves around service contracting (Federal News Radio)
- Interview with Richard Levi, General Counsel, General Services Administration (Federal News Radio)
- DoD to scrutinize GSA prices (Federal Times)
- Army projects contract spending will fall 25 percent in 2014 (Federal Times)
2014 Spring Conference Photos
Click here to check out the photos from the Spring Conference!
Meet Jan Frye on VA Acquisition, May 7
Coalition members are invited to attend a meeting on May 7 with Jan Frye, Deputy Assistant Secretary Office of Acquisition and Logistics at the Department of Veterans Affairs.
This is a unique opportunity for members to hear from Jan Frye on the latest acquisition initiatives at the VA designed to support America’s Veterans. The May 7 meeting will be at 10:00am at McKenna Long & Aldridge (1900 K Street, Washington, DC 20006). To attend in person, RSVP to Roy Dicharry at firstname.lastname@example.org.
GSA Administrator Dan Tangherlini testified before the House Committee on Appropriations last week on the GSA’s budget request for FY 2015. In his testimony, Administrator Tangherlini emphasized the importance of providing GSA with Zero Net Budget Authority in the coming fiscal year. This authority would allow GSA to invest the rent it collects from agencies back into federally owned buildings for repair projects, modernizations and other purposes. The FY 2015 request includes more than $1.25 billion for repair projects, $420 million for three border crossing and inspection projects, and $251 million to continue the Department of Homeland Security consolidation at St. Elizabeths.
Consolidation of space continues to be a priority at GSA in support of the President’s Freeze the Footprint initiative. In FY 2014, GSA received $70 million to support consolidation projects throughout the government. GSA estimates that as a result of this investment, customer agencies will save $17 million in annual rent payments, the government’s leasing costs will be reduced by more than $38 million, and the Federal footprint will decrease by 507,000 rentable square feet. For FY 2015, GSA increased its budget request for consolidations to $100 million. GSA also requested $240 million for appropriated accounts that support the Office of Government-wide Policy and the Office of Citizen Services and Innovative Technologies.
To view the full GSA Budget Request for FY 2015, visit www.gsa.gov/portal/mediaId/187523/fileName/FY15_Budget_Request.action.
April 8th, President Obama released two executive actions on contractor compensation. Both are intended to advance pay equality between men and women in the federal contractor workforce. The first is an executive order that ensures that employees of federal contractors are able to discuss compensation without adverse actions on the part of their employers. The EO states that “the contractor will not discharge or in any other manner discriminate against any employee or applicant for employment because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.” The White House has also clarified that the EO “does not compel workers to discuss pay, nor does it require employers to publish or otherwise disseminate pay data.”
The second executive action is a Presidential Memorandum instructing the Secretary of Labor to propose a rule requiring Federal contractors and subcontractors to submit summary data on paid compensation to the Department of Labor. This submission is to include data by gender and race. The proposed rule is expected to be released in early August 2014. Please watch the Friday Flash for the release of the proposed rule.
In a blog posted this week to Interact, the Alliant II Team requested feedback from industry on cyber security risk management. As an issue with increasing focus and importance within the federal space, GSA is focusing on a more effective way to connect cyber requirements to the contract level rather than just the task order level. With a team of acquisition and cyber experts, the concept of a Cyber Security Risk Management Plan has emerged as a possible solution to bridging the gap between industry and government while checking all the boxes in Federal Information Processing Standards (FIPS)200 and the underlying guidance as published by The National Institute of Standards and Technology (NIST), the blog reads. GSA is interested in feedback regarding the proposed approach to addressing an overarching cyber security plan for IT government contracts. If you would like the Coalition to submit input, please contact Roy Dicharry at email@example.com.
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.
DHS to Make Single Awards for $6 Billion Contract
There will be fewer than expected awards under the Homeland Security Department’s (DHS) $6 billion cyber contract for continuous monitoring products and services, reports Federal Times. Rather than selecting multiple winners for its upcoming string of task orders, DHS is expected to make single awards. The next six task orders will cover products and services needs for multiple agencies.
Security Clearance Changes Ahead
According to Office of Management and Budget (OMB) deputy director for management Beth Cobert, the government will be releasing a detailed plan to implement more than a dozen recommendations to improve the security clearance process. The recommendations include:
- Clarifying and expanding requirements for reporting actions and behavior of employees and contractors to support decisions on access to facilities, classified/sensitive information, and IT systems.
- Accelerating the implementation of a standardized program of Continuous Evaluation (CE).
- Reducing the total population of 5.1M Secret and TS/SCI clearance holders to minimize risk of access to sensitive information and reduce cost.
- Establishing new Government-wide adjudication requirements for credentials issued to include the currently optional OPM supplementary standards.
- Establishing mechanisms to manage and oversee government-wide spending for suitability and security processes.
To access the OMB Suitability and Security Process Review report that includes these recommendations, visit www.whitehouse.gov/sites/default/files/omb/reports/suitability-and-security-process-review-report.pdf.
DISA Exploring Alternative to CAC
According to Federal Times, the Defense Information Systems Agency (DISA) is exploring an alternative to the Common Access Card (CAC). Recently the National Institute for Standards and Technology (NIST) issued draft guidance for agencies that were investigating the implementation of derived security credentials, which store security credentials within devices instead of through a separate card. According to Mark Orndorff, DISA chief information assurance executive, the current pilot program looking at CAC alternatives is in its earliest stages with “a single-digit number of folks” participating and is limited to unclassified data. Orndorff noted that the hardest problem is going to be the provisioning side of the security credentials, ensuring DoD has a trusted and secure way of getting certificates on a device. Noting that it is a matter of time until the government shifts away from CAC use, Orndorff stated that he would like to move as fast as possible to having derived credentials stored on devices as the main effort going forward.
RFQ for GSA’s Common Acquisition Platform
GSA has released a Request for Quote (RFQ) for Common Acquisition Platform (CAP) Foundational Support. The RFQ was issued as a small business set-aside for Service Disabled Veteran Owned Small Businesses (SDVOSBs) under MOBIS Schedule (SINS 874-1 and SIN 874-6). FAS Commissioner Tom Sharpe wrote in the GSA Blog last week about CAP and GSA’s overall approach to Category Management. The RFQ documents are posted below:
CAP RFQ Cover Letter:
CAP Foundational Support RFQ:
CAP RFQ SF18:
Off the Shelf: Legal Update on Government Contracts
On “Off the Shelf”, David Dowd, partner at Mayer Brown LLP, provides a legal update on the interplay between the Mandatory Disclosure Rule and the Civil False Claims Act, GSA Multiple Award Schedule (MAS) audit findings, and the DoD deviation regarding price reasonableness determinations for orders under the MAS program.
Dowd also touches on the proposed FAR rule regarding personal conflicts of interest and the new executive orders regarding pay equity. To listen to the program online, visit www.federalnewsradio.com/?nid=78.
Final Rule on Industrial Funding Fee
GSA released a final rule on the Industrial Funding Fee (IFF) this week. The rule updates the General Services Administration Acquisition Regulation (GSAR) to clarify that the IFF may be used to fund GSA programs beyond the Multiple Award Schedules (MAS). Specifically, GSA is amending GSAR clause 552.238-74 Industrial Funding Fee and Sales Reporting to include the expanded role of net revenue generated by IFF payments. The clarification was made following a recommendation by the GSA Office of Inspector General (OIG). In a February 2013 audit, the OIG found that GSA had not updated the GSAR to reflect current use of the IFF (granted by the GSA Modernization Act of 2006). The rule is effective May 16, 2014.
GSAR Rule on eMods
In March, GSA issued a final rule amending the General Services Administration Acquisition Regulation (GSAR) to add a Modifications (Federal Supply Schedule) clause, and an Alternate I version of the clause that requires electronic submission of modifications under Federal Supply Schedule (FSS) contracts managed by GSA. The public reporting burdens associated with both the basic and Alternate I clauses were also updated. The rule went into effect this week on April 14.
Upcoming GSA Industry Days and Training
Over the next few weeks, the vendor community has many opportunities to engage with GSA. See below for the meeting topics and dates.
- Sustainability: Changing Vendor’s Procurement Responses – April 28, 1:00 p.m. – 2:00 PM EDT
A part of a “Doing Business with GSA” series, designed to provide vendors with a deeper look at partnering with GSA, this session is for current and potential contractors who understand the value of providing sustainable products and services. For more information and to register click the following link. http://gsa.gov/portal/content/184107
- IT Schedule 70 Quarterly Industry Meeting – May 6, 2014, 1:00 p.m. – 2:00 p.m. EDT
GSA’s Quarterly Industry Meeting is an opportunity for IT Schedule 70 leaders to meet with Industry and provide information on IT Schedule 70’s key initiatives, policy updates and eTools. GSA also uses this meeting as an opportunity to gather Industry feedback. For more information and to register click the here: http://www.gsa.gov/portal/content/189099
- Alliant Program Management Review Meeting – May 6-7, 2014, 8:00 a.m. – 4:30 p.m. EDT
Members do not want to miss this opportunity to receive in-depth and updated information regarding the Alliant contract and its progress to date. Alliant Industry Partners and guests invited by the GSA Alliant program are welcome to attend the next quarterly Alliant PMR in Washington, DC. Advance registration to attend is required and necessary to facilitate access into the conference venue. No walk-ins or substitutes will be accepted. Once you are registered, you’ll be registered for both days. Due to room capacity, vendors can bring no more than three representatives to this two-day event. Attendees are encouraged to submit questions in advance for the Q&A session. Please email questions to Jennifer Jeans by Wednesday, April 30, 2014. For more information and to register click the here: http://www.gsa.gov/portal/content/188391
CGP Briefing: The New Guidance on Cybersecurity Acquisition – What Contracting Professionals Must Learn Now
The Tower Club, Tysons Corner, VA
May 22, 2014, 8:00AM – 11:00AM, Registration 7:30AM
Registration Fee: Premier Member $95; Standard Member $145; Non-Member $215
The Coalition will be hosting a morning panel discussion and workshop on the implications for contractors of the new DoD and GSA final report and guidance on cybersecurity acquisition – including an overview and update on the Draft Implementation Plan and:
- Improving Cybersecurity and Resilience through Acquisition – Final Report of the Department of Defense and General Services Administration (January 23, 2014)
- Management Strategy Considerations on the Draft Implementation Plan (March 12, 2014)
- Framework for Improving Critical Infrastructure Cybersecurity, the National Institute of Standards and Technology (NIST) (February 12, 2014)
- The DoD (DFARS) Final Rule on enhanced safeguards for unclassified CTI (controlled technical information) (November 18, 2013)
- The President’s Executive Order, EO 13636 (February 12, 2013)
- The Status of Proposed and Pending Federal Legislation
The specific recommendations from the DoD – GSA Final Report include:
- Institute Baseline Cybersecurity Requirements as a Condition of Contract Award for Appropriate Acquisitions
- Address Cybersecurity in Relevant 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, Whenever Available, In Appropriate Acquisitions
- Increase Government Accountability for Cyber Risk Management
A primary purpose of the DoD – GSA Final Report is to recommend strategic guidelines for acquisition practitioners. In addition to covering the substantive materials, panelists will discuss the following issues as they relate to the new guidance, NIST Framework, and DFARS rule:
- How government, schedule, and commercial contractors should prepare and respond to the new guidance in proposal efforts
- Is it likely that the new guidance will move from voluntary to mandatory for contractors in the near future?
- With an estimated $46 Billion spent on global critical infrastructure cybersecurity in 2013, how much is enough?
- Are Risk Management principles and Best Practices management sufficient in this current threat and vulnerability environment?
- Are there implications in the new guidance for the certification and qualifications of FedRAMP contractors in providing cloud services?
Discussions will likely include Cloud issues as well as network security and certification, and the two panels will include the following:
Confirmed Speakers Include:
- Jon Boyens, Senior Advisor for Information Security, NIST
- David Z. Bodenheimer, Partner, Crowell & Moring LLP
- Beth Ferrell, Partner, McKenna Long & Aldridge
- Tom Barletta, Partner, Steptoe & Johnson
We are confident that the information, sources, and resources covered will strengthen your cybersecurity efforts and expand your knowledge in this critical area and we look forward to your participation.
To register, click HERE!