FAR & Beyond Blog
Originally published in the Friday Flash on May 25, 2012:
Memorial Day marks the unofficial beginning of summer (growing up in small town in Northern Maine it usually seemed that summer didn’t begin till July 4th). As a child I remember that in days leading up to Memorial Day, members of the Veterans of Foreign Wars (VFW) would stand outside the grocery store requesting donations and handing out “Buddy Poppies.” To me, these men were a big deal, most were World War II or Korean War Veterans. These men were considered local heroes, highly respected for their service. One or two were World War I veterans—I grew up in the 1960’s and 70’s and there were still many World War I veterans who were in their 60’s and 70’s. On Memorial Day our town would hold a parade honoring those who had fallen in service to our nation. All the local veterans would march in the parade, accepting donations and handing out Buddy Poppies.
So what is a “Buddy Poppy?” The Buddy Poppy was inspired by the poem “In Flanders Fields,” honoring the fallen of the First World War. The poem was written by Colonel John McCrae, a Canadian surgeon, who served in the War. The poem is haunting:
In Flanders fields the poppies blow
Between the crosses, row on row
That mark our place; and in the sky
The larks still bravely singing, fly
Scare heard amid the guns below.
We are the dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields
Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold high.
If ye break faith with us who die
We shall not sleep though poppies grow
In Flanders fields.
The red poppy flower became the “Flower of Remembrance” for those who served on the Allied side in the First World War. In 1921, the Franco-American Children’s League sold artificial poppies in America to support orphans and those left destitute by the war in Belgium and France. Subsequently, the Franco-American Children’s League dissolved, and in the spring of 1922 the VFW began selling poppies made in France to support the orphans and destitute. By 1924, the VFW began selling “Buddy Poppies” made by disabled veterans.
Since that time, the VFW’s National Buddy Poppy Committee has ensured that the artificial poppies are made by veterans located in VA Hospitals and facilities throughout the country. The proceeds from the sales of a Buddy Poppies primarily go to support local veteran services. So when you “contribute” or buy a Buddy Poppy at your local grocery store, it will support a veteran and a neighbor! Please, when you make your grocery list for the Memorial Day barbecue, make sure you include a “Buddy Poppy.”
This Memorial Day, please make sure you take time to honor all service men and women who have fallen in defense of freedom. God bless them and their families. God bless and protect all those in harm’s way. Please also remember those contractor personnel who have fallen while supporting our troops around the world.
The Multiple Award Double-standard, Part II
This week, Federal Times published Part II of Roger Waldron’s blog on the Multiple Award Double-standard regarding the treatment of orders under the GSA Schedules program as a result of DoD’s recent deviation on fair and reasonable pricing. Click here to read the article.
GSA Announces OASIS Unrestricted Awards
This week, the General Services Administration announced awards to 74 companies for its One Acquisition Solution for Integrated Services (OASIS) Unrestricted contract. OASIS was developed in response to the government’s substantial need for a hybrid, government-wide acquisition vehicle. The contract for complex professional services will provide a streamlined solution for both commercial and non-commercial needs. The list of the 74 awarded companies is posted on FedBizOpps.
GSA Headquarters Tour with Bart Bush, June 5
Join the Federal Buildings Committee on June 5th for a tour at GSA headquarters followed by a discussion with Bart Bush, Assistant Commissioner of the Office of Client Solutions in the Public Buildings Service (PBS). Mr. Bush will discuss GSA’s efforts to reduce the Federal footprint through consolidation projects. GSA recently announced a $70 million investment in 19 consolidation projects with Federal agencies across the country. These projects are designed to reduce costs by eliminating multiple leases and to also improve environmental performance.
The GSA headquarters tour is scheduled for 9:30am with the meeting with Bart Bush to follow. Members who are interested in attending, please RSVP to Roy Dicharry at email@example.com for more details. Space is limited so please RSVP as soon as possible.
GSA Seeking Applications for QPC Board
GSA is currently seeking applications for Quality Partnership Council (QPC) Board Member positions/representatives for all six schedules managed by the Integrated Workplace Acquisition Center.
The goal of the QPC board is to work together to discuss relevant issues affecting procurement within the federal government. Board members are required to attend conference calls on a quarterly, or more if needed, basis and in-person meetings estimated at two meetings per year. Members represent their industry (not company) and engage in discussion with other members to solicit their feedback for board meetings. The approximate involvement would include 20+ hours per year, which includes board member calls, attending QPC meetings and additional time if needed.
Board members hold their position for two years from the time they are selected.
Note, if you are not affiliated with these industries, or are a federal customer, you are still encouraged to apply and will be considered. In order to be considered, please fill out the application form by Friday, May 30, 2014. If you have any questions, please contact IWAC.BD@gsa.gov.
FSSI RFI for Computers
The National Aeronautics and Space Administration (NASA) Goddard Space Flight Center (GSFC) has issued a Request for Information (RFI) as part of the Federal Strategic Sourcing Initiative (FSSI) for Desktops and Laptops, initiated by the Office of Management and Budget (OMB). Common configurations for Standard Desktops and Laptops are proposed in the RFI based on feedback from Federal agencies. Responders to the RFI are encouraged to comment on any of the preliminary requirements and to express their interest in the proposed acquisition.
NASA is interested in hearing feedback on a number of areas, including:
- Pricing—Does Industry recommend proposing aggregate pricing or unit pricing?
- Reporting Requirements – Various reporting requirements shall be included in the contracts—Contractor Program Performance, Cost, Cost Savings, Technology Refreshments, etc. shall be included at a minimum. Does Industry recommend reporting areas not listed above? If so, what are they?
- Extended Warranty – Standard warranty is 3 years. What feedback may Industry provide on the possibility of an additional 1-2 years past the common 3 year warranty with recommended waiver language in the contract?
- Delivery – Standard delivery is 30 days from receipt of order (ARO). Can Industry support an accelerated delivery schedule of 20-21 days taking into account the standard “buying season” of most Agencies?
For more information on these questions and the descriptions of the requirements under consideration for a Desktop and Laptop FSSI, view the RFI here.
The Budget Outlook for Contractors
In the program, Bjorklund gives his thoughts on the budget moving forward and explains what the market realities are for government contractors. He describes areas of the budget where contractors can generate business and what contractors need to think about in this challenging federal market. To listen to the show online, visit www.federalnewsradio.com/80/3621851/The-budget-outlook-for-contractors.
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.
Proposed Rule Reflects Questionable Implementation of Statute to Expand Application of Personal Conflict of Interest Rules
By: Jason A. “Jay” Carey, Partner, McKenna Long & Aldridge LLP; Alison L. Doyle, Partner, McKenna Long & Aldridge LLP; John W. Sorrenti, Associate, McKenna Long & Aldridge LLP
The Federal Acquisition Regulation (“FAR”) currently imposes personal conflict of interest (“PCI”) requirements on contractors performing acquisition functions closely associated with inherently governmental functions. FAR subpart 3.11. Contractors performing such work must screen for and prevent PCIs, and the screening process includes disclosure and review of covered employees’ financial interests and other relationships. Compliance can be a significant burden and understandably raises concerns about the proliferation of personal financial information in the hands of contractors and the government.
On April 2, 2014, the FAR Council issued a proposed rule that would greatly expand the application of those PCI requirements to contractors performing a number of other (non-acquisition) “functions closely associated with inherently governmental functions,” as well as contracts for personal services. 79 Fed. Reg. 18503 (Apr. 2, 2014). The proposed rule’s implementation of the underlying statute raises red flags, and would require many new contractors to accept significant and ambiguous compliance burdens. Comments are due by June 2, 2014.
The proposed rule purports to implement section 829 of the National Defense Authorization Act for Fiscal Year 2013, which required the Secretary of Defense to review existing PCI requirements to determine whether they should be extended to other defense contractors through a revision of the Department of Defense supplement to the FAR. The proposed rule, however, goes beyond the stated intent of section 829, extending the requirement to all agencies, not just the Department of Defense. Contractors and industry groups submitting comments may want to address the propriety of this approach given the statutory language.
With respect to the substantive requirements of the proposed rule, it deletes the current limitation to acquisition-related functions, and applies PCI rules to all contractor “functions closely associated with inherently governmental functions.” Section 829 referred to 10 U.S.C. § 2838(b)(3) to define the term “functions closely associated with inherently governmental functions,” and that statutory provision defined the term as the list of functions in FAR § 7.503(d). The proposed rule, however, does not adopt this definition — and, in fact, does not define the term at all. Rather, the rule refers generally to FAR subpart 7.5. But that subpart does not define the term, or even contain the words “closely associated.” As a result, the proposed rule provides no guidance to contracting officers regarding what it means for a function to be “closely associated” with inherently governmental functions. Leaving this essential term undefined will assuredly create confusion, and lead to an inconsistent and uneven application of the rule from agency to agency and contracting officer to contracting officer. And over time, agencies will gravitate to the most conservative approach — i.e., the broadest application — without any systematic assessment of whether that approach makes sense, or is worth the cost to contractors and the procurement system.
Further complicating matters is the ambiguity of the functions listed in FAR § 7.503(d), which sweep in a wide range of services that support government operations, including:
- Budget preparation (including workload modeling, fact-finding, efficiency studies, and should-cost analyses);
- Reorganization and planning activities;
- Development of policies or regulations (including analyses, feasibility studies, and strategy options);
- Any situation that might permit a contractor to gain access to confidential business information or other sensitive information;
- Support for responses to Freedom of Information Act requests;
- Some legal, security, and inspection-related services.
The FAR Council is interested in receiving comments on which functions listed in FAR § 7.503(d) should be included or excluded from the PCI requirements. In addition to addressing that question, contractors and industry groups should consider commenting on the ambiguous scope of the covered functions in FAR § 7.503, which is certain to lead to uneven implementation. For example, the new PCI rule would apply to contracts where the contractor may have access to “confidential business information” or “other sensitive information.” See FAR § 7.503(d)(11). Those terms are not defined, and have potentially broad application — not just to contractor proprietary information and source selection information, but also to any information the government views as confidential or sensitive. The reference to “planning activities” in FAR § 7.503(d)(2) is similarly broad and undefined.
Given the absence of any definition of “closely associated,” the lack of clarity in FAR § 7.503, and the conservative nature of many in the acquisition workforce, a broad application of PCI requirements seems likely if the proposed rule is adopted as-is. As currently drafted, the proposed rule has far-reaching implications, and is likely to impose substantial costs and compliance burdens on contractors — beyond what even Congress intended. Contractors should consider submitting comments, and closely monitor the progress of the proposed rule.
GAO Praise ‘Active’ Suspension and Debarment Programs
According to a Government Accountability Office (GAO) report this week, six key agencies have strengthened their suspension and debarment programs as a result of recommendations made by GAO back in 2011. These six agencies are the Departments of Commerce, Health and Human Services (HHS), Justice, State, the Treasury, and the Department of Homeland Security’s (DHS) Federal Emergency Management Agency (FEMA). Over the past several years, these agencies have taken action to incorporate characteristics associated with active suspension and debarment programs. They have addressed staffing issues, issued formal policies, promulgated detailed guidance and have engaged in practices that encourage an active referral process.
GAO notes that the number of suspension and debarment actions government-wide has more than doubled from 1,836 in fiscal year 2009 to 4,812 in fiscal year 2013. The six agencies that were reviewed experienced a notable increase in suspension and debarment actions starting in fiscal year 2011 when GAO initially submitted its recommendations.
GAO notes that the increase in the number of suspension and debarment actions suggests that OMB’s Interagency Suspension and Debarment Committee (ISDC) has been effective. ISDC officials emphasized that increased activity has been coupled with an increased capability to use suspension and debarment appropriately while adhering to the principles of fairness and due process.
Update on DoD’s Contractor Manpower Data System
In recent months, the Department of Defense (DoD) has taken has taken additional steps to implement its November 2011 plan to collect contractor manpower data via a department-wide solution, the Government Accountability Office (GAO) reports. In accordance with a Congressional mandate, GAO was tasked with reporting on DoD’s contractor inventory submissions for fiscal years 2011 through 2015. The report addresses the status of DoD’s efforts to implement a department-wide contractor manpower data collection system. In addition to the data collection system to track the Department’s contractor full-time equivalents (FTE), Congress required DoD to develop a similar system that captures direct labor hours, among other things.
Similar to the Navy and the Air Force, DoD implemented a system in October 2013 based on the Army’s Contractor Manpower Reporting Application (CMRA). Each of the four CMRA systems is independent, maintaining its own interface, but all are accessible via a common webpage. Options for developing the current CMRA system include maintaining the four independent CMRA systems or developing a single, unified system. Deciding how to enhance the Army’s Contractor Manpower Reporting Application (CMRA) system and standardizing business processes and rule for collecting and using inventory data are among the implementation challenges facing DoD.
The report notes that thirty-two DOD components submitted inventories for fiscal year 2012, collectively reporting an estimated 670,000 contractor FTEs providing services to DOD with obligations totaling about $129 billion.
GAO does not make any recommendations at this time but continues to believe that its 2011 recommendation that DoD develop a plan of action with timeframes and resources should be fully implemented.
MSC Virtual Industry Day, June 9
On June 9th, 2014, 10:00 – 12:00 PST the Management Service Center, Auburn, Washington, is conducting a 2-hour Virtual Industry Event focusing on the 6 schedules that are managed from that office, as well FABS Schedule 520, and AIMS Schedule 541. This event is open to all contractors that hold any of the following GSA Schedules: 738 II – Language Services, 899 – Environmental Services, 874 V – Logistics Worldwide (LOGWORLD), 874 – Mission Oriented Business Integrated Services (MOBIS), 871 – Professional Engineering Services (PES), 00CORP – GSA Consolidated Schedule, Financial and Business Solutions (FABS) – 520 and Advertising and Integrated Marketing Solutions – 541.
The purpose of the event is to bring Industry Partners up to date on potential changes to the Schedules represented by Professional Services Category (excluding IT 70) and cover various other topics of interest.
You can register on-line at: google.com
Coalition members are invited to attend a meeting with Jan Frye, Deputy Assistant Secretary Office of Acquisition and Logistics at the Department of Veterans Affairs on May 28 (rescheduled date).
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 28 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.
Save the Date: Rapid Response to OASIS Webinar, June 5
The General Services Administration (GSA) announced the final awardees on their long-awaited OASIS multiple-award contracts (MACs), which are expected to become the largest professional services program in the federal government. OASIS offers opportunities worth $60 billion in task orders during the next decade, but with significant uncertainty in the market where do we go from here?
Join Bloomberg Government in partnership with the Coalition for Government Procurement for a free webinar on June 5 at 2:00 PM EDT where we will preview the structure, scope and competitive landscape on OASIS.
Topics Will Include:
- The structure of OASIS and its relation to other contract vehicles
- The type of work that is likely to shift towards OASIS
- Analysis of awardees and a preview of the competitive landscape
- Prospects for small businesses
- A preview of the top agencies that are likely to use OASIS
Speakers Will Include:
- Roger Waldron, President, Coalition for Government Procurement
- Kevin Brancato, Senior Defense Analyst, Bloomberg Government
- Miguel Garrido, Quantitative Analyst, Bloomberg Government
More information and registration information will be distributed next week.