FAR and Beyond Blog
On June 12th Tom Sharpe, Commissioner of the Federal Acquisition Service (FAS), posted a new blog entitled “Modernizing GSA’s Schedules Program for Today’s Marketplace.”
As you may recall, earlier this year GSA published its Strategic Plan for the next four years. The plan did not set forth a strategic vision for the MAS program—a troubling statement about the future of FAS given that the MAS program accounts for at least 75 percent of the dollar volume of all customer agency purchases made through FAS programs. As such, it is gratifying to see a renewed focus on the MAS program as evidenced by Commissioner Sharpe’s June 12 blog. It is also gratifying to see FAS seeking to address Other Direct Costs and exploring the creation of an unpriced IT and professional services schedule that has the potential to better leverage the convergence of technology and services and “as a service offerings” like cloud. It is also a positive step that FAS will be doing a “white space” look at the MAS program. The Coalition looks forward to continuing the dialogue on the future of the MAS program as outlined in our Innovation Paper and our MAS Pricing White Paper.
At the same time, several of the “modernization” initiatives set forth in the June 12th blog raise significant questions about whether the future MAS will be an open, dynamic and innovative market for customer agencies and commercial firms seeking to do business with the federal government. Here is a summary and comment on the initiatives outlined in the June 12th blog:
Standardized Part Numbers and Special Item Numbers
First, FAS will seek to standardize part numbers or special item numbers to reduce price variability at the contract level and enable customers to make better price comparisons at the order level.
As a threshold matter, there has been little if any real dialogue between FAS and its contractors on the logistics of standardizing part numbers across the hundreds of thousands, if not tens of millions, of products and the variations of these products currently on MAS contracts. FAS has not reached out to its contractor community to seek insight into how standardization will impact contractor costs, record keeping, systems changes, commercial practices or customer requirements. Rather, according to the June 12th blog, FAS will be issuing a mass modification in June seeking standardization of part numbers. Given the significant impact on MAS customers and contractors, the lack of dialogue on this issue is disappointing.
Standardized Labor Categories
Second, FAS will be working with stakeholders and service contractors to figure out the best approach to standardize labor categories for services.
Simply put, standardized labor categories are not only inconsistent with the commercial nature of the MAS program, they represent LPTA by other means. Standardized labor categories will limit the ability of commercial firms to offer innovative solutions and pricing to meet customer needs. As a result, standardized labor categories will drive best in class, innovative commercial firms from the MAS program. Standardized labor categories are anti-innovation at a time when the federal government is seeking to embrace innovation.
Third, in order for government to reduce what it is paying for products and services FAS will be collecting transactional data on products and services and providing it to customer agencies. As envisioned by FAS, this transactional data will help agencies make informed buying decision decisions and negotiate better prices.
Price alone is incomplete data. Terms and conditions, volume commitments, spending patterns, and performance requirements (SOW) all impact pricing. Focusing on price alone will not assist agencies in making sound procurement decisions. Not only is the quality of the data a concern, so is the quantity. Given the millions of transactions under the MAS program how will agencies make sense of the pricing data? If sound data is to be provided to customer agencies, it must include all the key elements impacting price. The sheer volume of sound data is likely to overwhelm the customer. Moreover, the variations in data collection requirements across government increases the complexity, cost and burden associated with this effort.
The costs of data collection and reporting on MAS contractors must be considered—costs that will inevitably be passed on to customer agencies. Are such costs worth it? Transactional data may provide some benefit during the market research phase but does that benefit outweigh the costs associated with collecting the data? Are resources better focused in other areas/initiatives—like improving requirements development and streamlining the acquisition process? The key to best value outcomes and pricing is not transactional data; rather it is sound requirements and volume commitments for agency specific requirements.
The current “modernization” of the MAS program is built on the assumption that the federal government is a single buyer, or rather, should act as a single buyer. It is a faulty assumption. The federal government contains many entities with varying missions, cultures, organizational structures, budget profiles, spending patterns, operational and technical requirements. Not all agency missions are the same. As such, the closer a procurement is to the requirements holder the more likely a sound, best value outcome. That is why the Coalition has supported use of agency specific BPAs that set forth sound requirements and volume commitments.
Diversity is inherent in the federal market. There are literally thousands of buyers with requirements and sellers ready to meet those requirements. At its best GSA can provide an open, dynamic, innovative and competitive marketplace where customer agencies and commercial firms can transact business. GSA’s time and talent should be focused on enhancing access to the diversity, dynamism and innovation of the commercial marketplace for MAS customer agencies.
Look for more commentary on Modernizing the Schedules program in future FAR & Beyond blog posts.
The Department of Defense (DoD) released a third draft of its request for proposals for an electronic system of medical and dental records for all active duty military personnel and their dependents. While plans for a joint DoD-Veterans Affairs Department health record system were scrapped in February 2013, the new DoD Healthcare Management System Modernization (DHMSM) is designed to be interoperable with the VA Electronic Healthcare Records (EHR) system. The estimated cost for the system is currently around $11 billion, and the final request for proposals is expected to be released in July. The DoD plans for the system to be online in 2017.
The General Services Administration (GSA) is seeking industry feedback and comments on its new Federal Strategic Sourcing Initiative (FSSI) for the Office of Personnel Management’s (OPM) new contract vehicle for human resources training. In addition, OPM would like to meet the principles of its Human Capital Assessment and Accountability Framework (HCAAF) while incorporating the benefits of FSSI in this new contract vehicle. GSA’s Interact website offers a list of questions they would like industry experts to provide feedback on pertaining to this initiative. The Government is seeking feedback as soon as possible because they anticipate making preliminary decisions on the acquisition strategy within the next thirty days. To view the questions and provide feedback, please visit this link.
GSA has officially ended its Federal Strategic Sourcing Initiative (FSSI) Second Generation Office Supplies (OS2) contract. After completing a review, GSA has made the decision to end all of the previous Blanket Purchase Agreement extensions of OS2, a GSA spokesperson said. “There is no FSSI office supplies contract presently in place and we are working to make an FSSI OS3 solution available as soon as possible,” a GSA spokesperson said in an email. “We advise federal customers to fulfill their present needs through GSA’s Multiple Award Schedule (MAS) 75 or through GSA Global Supply via GSA Advantage.”
Additionally, GSA currently faces one final protest from National Industries for the Blind on the OS3 solicitation. According to the Government Accountability Office, the protest was filed March 24 with an expected decision no later than July 2.
On June 17th, the Government Accountability Office (GAO) released a study it conducted on the estimated cost savings from a six day civilian furlough by the Department of Defense (DoD), as a result of a $37 billion across-the-board discretionary spending cut known as sequestration. The GAO found that DoD did not update its cost savings estimate as changes were made to the implementation of the furlough, such as exemptions for over 140,000 civilian employees and a reduction in the number of furloughed days from eleven to six. DoD officials claimed that they only had one week’s worth of payroll data to make their cost savings estimate, and thought that the initial estimate was “sufficient for their purposes.” GAO recommends that the DoD “update and utilize its furlough cost-savings information as it becomes available in the event that it decides to implement another administrative furlough in the future.”
In a recent blog post, Assistant Commissioner of the Office of Integrated Technology Services (ITS) at GSA Mary Davie reports that spending on the Networx contract for telecommunications and network services grew by more than 12 percent during the first half of fiscal year (FY) 2014. According to the post, agencies purchased $762 million in services for Networx over the first half of FY 2014, which is more than the $630 million agencies purchased over the same time last year. Mary notes that “the projected yearly increase we’re seeing is an indicator that agencies are utilizing Networx more often than ever to solve their network services solutions.” The tables below exhibit the growth and decreases across the service areas over the last year:
Source: GSA ITS
Mary concludes that as GSA looks to the future with NS2020, they are in the midst of developing new acquisitions and service delivery models to help structure and enhance future government telecommunications both globally and locally.
During a hearing held by the Senate Homeland Security and Governmental Affairs Committee, witnesses advised that the 17 agencies of the intelligence community (IC) need to get a better understanding of its contractor workforce. Director of acquisition and sourcing management at the Government Accountability Office (GAO) Timothy DiNapoli noted that a contracting workforce can present risk if internal controls, formal planning and documentation are inadequate. Among the hurdles to tracking the number and compilation of contractors in the IC is the varied and often evolving definitions of what core contract personnel are. Additionally, GAO found that agencies used various methods to calculate the number of contract personnel and lacked documentation for 37 percent of the records reviewed. Subsequently, many IC agencies under-report and over-report their contract obligations.
Principal Deputy Director of the Office of the Director of National Intelligence, Stephanie O’Sullivan, added that while the IC has developed inventories and tools for tracking the contracted workforce, “they’re not designed to be a 100 percent precise, auditable record, but rather a tool for strategic workforce management.” In conclusion the GAO referred to a January 2014 report, in which it recommended that the IC Chief Human Capital Officer (CHCO) take several actions to improve the inventory data’s reliability, revise strategic workforce planning guidance, and develop ways to identify contracts for services that could affect the government’s decision-making authority. According to the GAO, the IC CHCO has recognized the shortcomings and, in conjunction with the IC elements, has already taken some actions to improve the inventory’s reliability and has committed to doing more.
GSA OIG Report: Management at Ronald Reagan Building
On June 17th, the General Services Administration Office of the Inspector General (GSA OIG) released an audit of the Ronald Reagan Building and International Trade Center (ITC) in Washington, D.C. According to The Washington Post, the audit shows that the private managers of the building “…improperly benefited during the 2008 procurement process because a GSA official gave the firm a more positive review of its past performance than was warranted.” The audit concluded that mismanagement of the contract has contributed to significant financial problems at the Reagan building, and lists recommendations for increased oversight of the contract for both the Public Buildings Service (PBS) and the private sector building manager to implement. To access the audit, visit www.gsaig.gov/index.cfm/oig-reports/audit-reports/fy-2014-audit-reports-october-1-2013-to-september-30-2014/.
This week Tony Fuller, principal at Baker Tilly Virchow Krause LLP, joined “Off the Shelf”, for a deep dive into GSA schedule pricing. Fuller heads up Baker Tilly’s government contractor advisory services practice dealing with GSA pricing and audit issues.
He provided his insights regarding the latest trends in GSA schedule price negotiation processes and procedures. Fuller also highlighted key pre-award audit challenges and best practices for contract compliance, and provided his take on GSA schedules modernization and commercial item contracting. To listen to the program online, visit here.
Meeting with the VA National Acquisition Center
The Healthcare Committee of the Coalition for Government Procurement met with leadership of the VA National Acquisition Center in Hines, Illinois this week. Craig Robinson shared his outlook for the National Acquisition Center. Jane Stroder, Chief of the VA Schedules program shared that the organization will be restructuring with the objectives of increasing efficiency and improving the timeliness of processing offers and modifications. The NAC’s first priority is to fill the high number of personnel vacancies in the Federal Supply Schedule program. In addition, the program will organize around 3 contracting divisions: Pharmaceuticals, Medical-Surgical and services. Each of the divisions will be supported by a Senior contracting officer, a management/data analyst and a person responsible for issues such as solicitation development, small business subcontracting and training. The FSS program will also hire a customer advocate who will be able to help offerors with questions through the process. The organizational changes will in some cases require reassignment of cases among contracting officers. Members can expect those changes to begin in mid-July.
The Coalition extends its appreciation to the National Acquisition Center for its willingness to engage in an open dialogue with industry concerning the important acquisition programs of the Department of Veterans Affairs.
DCAA Issues New Audit Guidance Concerning Services By Contractor Employees Not Meeting Qualification Requirements Under T&M Contracts
By: Thomas A. Lemmer, Partner, McKenna Long & Aldridge LLP; Steven M. Masiello, Partner, McKenna Long & Aldridge LLP; Tyson J. Bareis, Associate, McKenna Long & Aldridge LLP
The Defense Contract Audit Agency has issued new audit guidance on the important topic of labor qualifications under time and material contracts. See MRD 14-PPD-008(R). This guidance matters to contractors because it relates to the common DCAA position (based on FAR 52.232-7(a)(3)) that contractors should not be paid any amount for effort performed by employees that fail to meet contractual qualification requirements.
The audit guidance clarifies that contracting officers have authority to approve the use of non-qualifying labor both before and after the labor is provided and directs auditors to coordinate with contracting officers before issuing audit findings in this area. Even in circumstances where contracting officer approval has not and will not be given, the guidance recognizes that:
[I]n many cases, the contracting officer is not going to withhold payment of all labor costs when an employee does not meet the labor qualifications if the work delivered did adequately complete the scope of work. In these cases, the contracting officer will need to modify the contract for a new rate or contract line item to reimburse the costs. Auditors should assist the contracting officer to help in arriving at a rate that is more appropriate than the rate charged by the contractor (e.g., a rate based on the fully burdened rate of pay for the unqualified employee, or the labor category where that employee truly fits).
The above language is helpful to contractors because it emphasizes the need to communicate with contracting officers and contractors to resolve this type of labor issue. This approach is consistent with the fact that, when DCAA questions billings due to employee qualification issues, the agency is not questioning the allowability of costs and, instead, is questioning whether amounts paid to the contractor are appropriate under the terms of the contract. As the DCAA guidance implicitly recognizes, such issues are more akin to contract administration matters, which are within the purview of the relevant contracting officer to address and resolve.
Predictably, the audit guidance also directs auditors to consider whether contractor failures meet labor qualification requirements represent business systems issues. Specifically, the guidance notes:
If the audit team determines that the contractor has a material amount of T&M billings that include hours that do not meet the labor qualifications specified in the contract, a significant deficiency related to DFARS 252.242-7006(c)(12) should be reported. The contractor has failed to establish adequate internal controls to exclude from costs charged to Government contracts, amounts that are not allowable in terms of contract provisions in the FAR 52.232-7 T&M Payment Clause. An adequate accounting system would include procedures for a contractor to ensure that they get the Contracting Officer’s specific authorization prior to the delivery and billing of hours that do not meet the qualifications specified in the contract.
(Emphasis added). By failing to direct auditors to consider whether the conduct observed results from a systemic issue or has a material impact on the reliability of contractor billings, the above guidance vastly oversimplifies the analysis necessary to determine whether conduct represents a significant deficiency under the Business Systems Rule. Unfortunately, this simplistic view of the Rule is consistent with the level of analysis often provided by auditors when determining that a significant deficiency exists in a contractor’s business system. Contractors should continue to be skeptical of these auditor assertions and, when appropriate, resist such assertions as inconsistent with the definition of “significant deficiency” in the Business Systems Rule.
If you have any questions concerning this recent audit guidance, please contact the authors of this alert or the McKenna Long attorney with which you typically work.
House Subcommittee Hearing of GSA-owned Judiciary Buildings
On June 19th, the House Subcommittee on the Courts, Intellectual Property and the Internet – part of the House Committee on the Judiciary – held a hearing on cost and security issues surrounding GSA owned and serviced judiciary buildings. The Hon. William P. Johnson and the Hon. Glen E. Conrad, United States District Court judges for the Districts of New Mexico and Western Virginia, respectively, testified about GSA renovation projects at their courthouses that faced a variety of cost and safety problems.
In addition, Michael Gelber, Deputy Commissioner of GSA’s Public Buildings Service (PBS) testified at the hearing. Gelber’s testimony highlighted GSA’s strategic partnerships with the Federal Courts to help build and maintain secure, efficient courthouses, as well as challenges to these investments stemming from GSA budget cuts from Fiscal Year 2011 – 2103. Bob Goodlatte (R-VA), the chairman of the Committee on the Judiciary, represents Roanoke, VA where the Poff Federal Building is located. The building’s renovation has been fraught with concerns over security breaches, structural integrity, and large cost overruns. To view the hearing and testimony, click here.
Proposed Rule: Reporting Suspect Items to Government
The FAR Council published a proposed rule this week extending certain reporting requirements for contractors beyond what is already required for counterfeit electronic parts to a broader scope of products and services. The proposed rule, titled “Extending Reporting of Nonconforming Items”, is intended to reduce the risk of counterfeit items entering the supply chain by ensuring that contractors report suspect items to a government database. According to an article by Crowell & Moring, “a contractor would be required to report to the contracting officer within 30 days of becoming aware that any ‘end item, component, subassembly, part or material contained in supplies purchased by the Contractor for delivery to, or for the Government is counterfeit or suspect counterfeit’”. It would also require that the contractor report the incidence to the Government-Industry Data Exchange Program (GIDEP) and monitor this site regularly to avoid delivery of any reported items to the government. For more details on the proposed rule, access Crowell & Moring’s article here. Comments on the rule are due August 11, 2014. Members who would like to provide feedback on the rule to the Coalition, please contact Aubrey Woolley at email@example.com.
DOL Proposed Rule: Minimum Wage for Contractors
The Department of Labor published a proposed rulemaking on June 17 establishing a minimum wage for contractors. The change is based on the President’s Executive Order (EO) 13658, which set a new minimum wage of $10.10 per hour, effective January 1, 2015. Beginning on January 1, 2016, and annually thereafter, the applicable minimum wage will be determined by the Secretary of Labor. Under the proposed rule, prime contractors and upper-tier contractors would be responsible for the compliance of any subcontractor or lower-tier subcontractor. Contractors would be required to maintain records for three years including for each worker the rate or rates of wages paid, the number of daily or weekly hours worked and any deductions made. Compliance with the EO’s requirements will be monitored by the Department of Labor’s Wage and Hour Division.
As a next step, the Labor Secretary will issue final regulations implementing EO 13658 by October 1, 2014. Within 60 days of their release, the Federal Acquisition Regulatory (FAR) Council will issue regulations for the FAR, including the contract clause. To provide input on the rule, please contact Carolyn Alston at firstname.lastname@example.org.
Two-Part Webinar Series for GSA Schedule Contractors
The Coalition for Government Procurement, in conjunction with Baker Tilly, is pleased to announce an upcoming Two-Part Webinar Series for GSA Schedule Contractors:
The landscape for GSA Schedule contractors has become increasingly difficult. Both products and services contractors are facing new challenges as they negotiate new GSA Schedule contracts or administer their existing GSA Schedule contracts. Pricing, contract terms and conditions, and post-award compliance have all come under the microscope, and contractors must be ready to respond. This two part series will address some of GSA’s and GSA OIG’s recent focal points so that contractors can consider potential impacts to their business and how they can best prepare.
Part 1: Challenges Facing Professional Services Contractors
Thursday, June 24th, at Noon EDT
Presented by Jeff Clayton and Jenn Thorson
A disconnect has always existed between services contracting and the GSA contracting model, but big changes are afoot within GSA that could make the Schedules program even more difficult to navigate. Topics for discussion include: challenges related to labor category mapping, pricing strategies, CSP-1 disclosures and PRC obligations, GSA’s category management initiative and the push for standardized labor categories. The pressure that GSA is facing from a pricing perspective and its impact on interactions with professional services contractors will also be discussed.
Part 2: Challenges Facing Products Contractors
Thursday, August 14th, at Noon EDT
Presented by Jeff Clayton and Steven Brewer
GSA is facing immense pressure to achieve lower prices for its federal government customers. This has impacted the government’s negotiation tactics and in turn it has impacted, and will continue to impact, products contractors. Prices paid data is being tracked and horizontal pricing comparisons are becoming the norm. Federal Strategic Sourcing Initiatives, an increasingly popular tool for GSA, continue their march across the supply side of the Schedules program. The presentation will discuss all of this and more, including best practices, so that contractors can prepare themselves to respond to these issues.
The Coalition’s Second Annual Joseph P. Caggiano Memorial Golf Tournament
Please join us for The Coalition’s 2nd Annual Joseph P. Caggiano Memorial Golf Tournament on August 27th at Whiskey Creek Golf Club! This charity tournament is to honor our good friend and colleague, Joe Caggiano, who was not only a 23-year veteran of the federal contracting marketplace but a naval veteran as well.
We believe Joe would be proud of the fact this year’s tournament proceeds are going to a brand new cause that will continue to support our nation’s veterans. In honor of the 35th Anniversary of The Coalition for Government Procurement, and in conjunction with The George Washington University, we are creating a scholarship/fellowship to provide financial support to a veteran. Specifically, qualified veterans concentrating their studies in the field of US Government procurement and pursuing the JD or LLM degree in Government Procurement Law or the interdisciplinary Masters of Science in Government Contracting degree (MSGC) at The George Washington University will benefit from the fund as we count on them to become the next generation of skilled professionals leading this critically important sector of the US economy.
Registration will begin at 9:30am with an 11:00am shotgun start, followed by a 4:30 pm post-tournament reception. The tournament will consists of a 4 player scramble with 144 maximum players. Please click here to register your foursome or as an individual golfer!
We have several exciting sponsorships available from title sponsors to beverage cart sponsors to hole sponsors, and also a wide range in pricing so no matter what your budget, you will still have an opportunity to support this wonderful cause. Please click here to review sponsorship opportunities and contact Matt Cahill at email@example.com or 202-315-1054 with any questions or sponsor commitments.
We look forward to your support and a fun and rewarding day for everyone!
DCAA & DCMA Audit & Compliance Boot Camp, July 21-22
American Conference Institute’s 4th
DCAA & DCMA Audit and Compliance Boot Camp
A Practical Course on How to Comply with Strict Cost and Pricing Data Requirements and Prepare for Rigorous Audits
Monday, July 21 to Tuesday, July 22, 2014
InterContinental Chicago Hotel on the Magnificent Mile, Chicago, IL
For 2014, this program has moved to Chicago in response to numerous requests to hold this program in the Midwest. In an era of backlog and government spending cuts, staying current on the latest developments is more important than ever. Unlike other training programs, participants will have the opportunity to delve into cost, pricing and audit requirements, and learn from government and leading companies in a highly interactive setting. The 2014 program has evolved in response to industry feedback and recent developments, with more in-depth sections on the most critical DCAA audit and compliance challenges affecting your business.
ACI Boot Camps are different. This program is advanced and rigorous – designed to provide up to date information through case studies, war stories and best practices. The sessions are at an advanced level but the amount of time dedicated to each topic is longer so you will leave with a much greater understanding of the issues and a plan of action to strengthen your operations when you get back to the office.
DCAA and DCMA have also offered their robust support of this event. There is no replacement for face-to-face discussion and Q & A with key agency decision-makers. Few events offer you the opportunity to hear directly DCAA and DCMA.
You can also benchmark and network with industry leaders, who have track records of successfully navigating DCAA audits and meeting the agency’s compliance expectations: DRS Technologies, The Boeing Company, FLIR Services, Oshkosh Defense, Rolls-Royce North America, The Louis Berger Group, and ULA Launch.
Group pricing is available. Send your entire team and register early as seats at this event are expected to fill to capacity.
Registrations will be taken on a first come, first served basis. Call 1-888-224-2480; fax your registration form to 1-877-927-1563 or register online at www.AmericanConference.com/DCAABootCamp.