FAR and Beyond Blog
Last week the General Services Administration (GSA) announced the award of 21 Federal Strategic Sourcing Initiative (FSSI) Office Supply 3 (OS3) Indefinite-Delivery-Indefinite-Quantity (IDIQ) contracts. The awards went to 20 small businesses and one other than small business. The number of awardees raises significant questions regarding the long term supply chain for office supplies. The small number of contract awards reflects a GSA goal of reducing the number of office supply contractors in the federal marketplace. Indeed, GSA’s Federal Acquisition Service (FAS) has described FSSI OS3 as a form of “supplier suppression.” It is an approach that detaches customer agencies from contractors, limits choice and value for customer agencies; and reduces competition over the long term.
On January 31, 2014, GSA issued a separate OS3 solicitation seeking to award a set of IDIQ contracts covering four different CLINs:
CLIN 0001: General Office Supplies Full Catalog;
CLIN 0002: Office Paper;
CLIN 0003: Toner/Ink; and
CLIN 0004: GSA On the Go
Unlike OS2, GSA chose not to use the GSA’s Schedule 75 as the platform for establishing a set of FSSI Office Supply Blanket Purchase Agreements (BPAs). GSA cited the prior closure of the schedule to new offers as a primary reason for not using Schedule 75. GSA explained that those firms who were precluded from submitting an offer as a result of the Schedule 75 closure would be precluded from a schedule based OS3 FSSI solution. Therefore, to allow those firms an opportunity to compete, GSA chose to establish a new IDIQ contract. In essence, GSA closed Schedule 75 because it believed it had too many contractors on schedule (remember Demand Management). It then chose to conduct an acquisition to create a new set of contracts duplicating Schedule 75 because it did not have enough Schedule 75 contractors. The irony is that the result is another set of contracts that severely limits the office supply market—thereby increasing barriers to entry, limiting opportunities for small businesses and reducing long term competition.
GSA’s press release announcing OS3 states in part that “[t]his initiative builds upon the success of OS2, which generated more than $370 million in savings and achieved a small business utilization rate of 75 percent.” To the extent GSA is measuring savings based on discounts off the schedule contract price, it is an unremarkable claim. The GSA schedules program is designed to foster competition at the task order level and for BPAs—competition that leverages agency specific requirements and seeks price reductions. That is why individual agencies can and have competed task orders and/or established BPAs for their specific requirements at pricing better than FSSI pricing. More fundamentally, where is the data on savings?? To the extent information on savings has been shared publicly, it reflects a methodology largely based on measuring the discounts off the schedule contract price. It is a methodology that fails to address the ability of customer agencies to achieve as good or better savings when competing specific requirements via task orders or BPAs under the schedules program—an approach that would also provide greater opportunities for small business across the federal enterprise.
In touting OS3 savings, the critical questions are: (1) What prices were paid prior to the FSSI vehicles? (2) How do the FSSI prices compare? and (3) What are the administrative costs to the taxpayer of establishing and administering these duplicative contract vehicles? Moreover, a true item price comparison for OS3 involves GSA comparing OS3 pricing against OS2 competitive pricing (task orders) not the GSA schedule contract pricing! That is the most accurate comparison.
Finally, it is important to note that on February 3, 2014 a Freedom of Information Act (FOIA) request was submitted to GSA seeking among other documents, all documents relating to all public statements by GSA regarding savings resulting from the FSSI. It should be noted that this FOIA request was initiated as a single request with the objective of reducing GSA workload and strain on resources by having to respond once versus multiple FOIA requests from GSA schedule contractors. To date, there has been no responsive documents provided other than information on GSA’s FSSI websites. In June of this year, the FOIA request was narrowed in response to a GSA request. Since then there has been no further communication or response from GSA. This delay in responding raises significant questions: What analysis was done, or not done, to ascertain any savings? How was it done? Do we have all the results? What has FSSI cost GSA operations? What has it cost Government? Where is the analysis of the data FSSI contractors have been mandated to report? What are the fees collected to date by GSA for the OS2 BPAs?
In the name of transparency and accountability, we look forward to the release of all documents relating to the FSSI program.
Roger Waldron
President
LAST CHANCE TO REGISTER – The Coalition’s Second Annual Joseph P. Caggiano Memorial Golf Tournament
Last chance to register for The Coalition’s 2nd Annual Joseph P. Caggiano Memorial Golf Tournament which will be taking place this Wednesday, August 27th at Whiskey Creek Golf Club! The tournament is filling up fast, but there are still a few foursomes and single golfer spots available – contact Matt Cahill to register your team today at at mcahill@thecgp.org or 202-315-1054. Or, click here to register your foursome or as an individual golfer!
As a reminder, the tournaments net proceeds will be going towards a scholarship for a deserving veteran taking Masters or JD classes in US Government Procurement at The George Washington University.
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.
Thank you to this year’s tournament sponsors: The Gormley Group, CohnReznick, AvKARE, CACI, Integrity Consulting, E&Y, Brocade, Baker Tilly, General Dynamics Information Technology, HON, Deltek, Berkeley Research Group, Judge Group, L-3, CGI, Allen Federal Business Partners, 3M, TORO, Booz Allen Hamilton, Koniag, Markitecture, SAP, The Rendely Family, and The George Washington University
SEWP V Awards Delayed
This week, NASA’s Solutions for Enterprise-Wide Procurement (SEWP) announced that SEWP V awards would be announced in September instead of August. The FedBizOpps.gov notice states that due to the number of proposals received, the Government anticipates an announcement on or before late September 2014. Program Manager Joanne Woytek recently noted that although the award date has been delayed, the start of the contract remains unchanged from November 1, 2014.
FSSI HR Services and Training (HRST) WG, Aug 26
The Coalition has created a Federal Strategic Sourcing Initiative (FSSI) HR Services and Training (HRST) Working Group to provide feedback to GSA on the FSSI acquisition strategy for Human Resources and Training and Capital Management. This is a joint GSA/OPM initiative that will replace OPM’s existing Training and Management Assistance (TMA) contract vehicle. The Coalition’s HRST Working Group will hold its first meeting next Tuesday, August 26th at 2pm via conference call. Members interested in joining the meeting and the working group, please send an email to Aubrey Woolley at awoolley@thecgp.org.
Beginning on October 1, the US Army’s Energy Initiatives Task Force (EITF) will become the Army’s Office of Energy Initiatives. The new office will be tasked with producing 1 gigawatt of renewable energy generation by 2025. According to an article in Federal Times, Amanda Simpson, the current executive director of the EITF, will head the new office and work to identify additional renewable energy initiatives and reduce acquisition times for current projects. According to Simpson, the Army currently has about 13 projects in development with plans to add another 12 next year. Current projects include:
- 18 megawatts of solar power at Fort Huachuca in Arizona
- 50 megawatts of biodiesel at Schofield Barracks in Hawaii
- 90 megawatts of solar power at Fort Stewart, Georgia
The renewable energy projects in development are funded through “a variety of financing tools that do not require taxpayer dollars but instead rely on purchasing agreements.”
GSA and Air Force Collaborate on Contracting
On Monday, the General Services Administration (GSA) and the US Air Force announced their intent to create a joint working group to identify enterprise-wide contracts to help save taxpayer dollars. According to the blog post, GSA’s FAS and the U.S. Air Force’s Sustainment Center (AFSC) signed a Memorandum of Understanding (MOU) to help the AFSC to more effectively obtain the products and services they need to accomplish their mission.
The MOU outlines a strategic relationship between FAS and AFSC and establishes a working group that will identify cost-effective enterprise-wide solutions.
Examples of the FAS programs that are available to the AFSC include:
- General Supplies and Services Fourth Party Logistics (4PL) program
- Professional services contracts such as One Acquisition Solution for Integrated Services (OASIS) and the Multiple Award Schedules (MAS) program
- Direct Client Support (DCS) model
- Federal Strategic Sourcing Initiatives (FSSI)
- Reverse Auctions (RA) electronic tool
- Global Supply Special Order Program (SOP).
Seeking Member Feedback on UPC Notice
Last week FAS Commissioner Tom Sharpe spoke with Coalition members about GSA’s recent notice to Schedule holders to submit UPC codes and MSNs for items on GSA Advantage. We appreciate Commissioner Sharpe for engaging in a Myth-buster’s dialogue with Schedule contractors on some of the issues involved in the implementation of the notice.
As a next step, the Coalition will provide written feedback and recommendations to GSA. We are asking members to please send their input on the UPC/MSN notice to Carolyn Alston at calston@thecgp.org by COB Monday, September 8, 2014. Based on the input received, we will prepare a draft for member review. Thank you again to all members who have submitted their thoughts thus far. We look forward to continuing the dialogue with GSA on data management for product labeling under the Schedules program.
DoD Hosts Public Meeting on Business Systems Compliance
On August 18th, the Department of Defense (DoD) held a public meeting at the Mark Center in Alexandria, VA to hear comments and concerns about a proposed rule to amend the Defense Federal Acquisition Supplement (DFARS) on Business Compliance Systems (DFARS Case 2012-D042). The proposed rule implements a new approach to auditing contractor business systems. Law360 published an article that concisely explains the different applicability requirements for DoD prime and subcontractors based on which business system is being audited. The rule would require that contractors hire independent Certified Public Accountants (CPAs) to conduct triennial audits of their business systems, and these audits would then be submitted to DoD for further review and oversight before a determination is made on whether all compliance with systems requirements have been met. More information on the proposed rule can be read online at the Federal Register. Comments are due by September 15th, 2014. The Coalition will submit comments. To provide input on the Coalition’s response, please contact Carolyn Alston at calston@thecgp.org or (202) 331-0975.
Federal Government Shrinking as Hiring Down, Departures Up
On August 20th, the Washington Post reported that the federal workforce has been shrinking over the past few years. After a period of increased hiring during the first two years of the Obama administration, hiring began to decrease in 2010, and has continued to do so through 2013. Departures from the federal workforce, due to retirement, finding work in the private sector, and other reasons, decreased during the years of the Great Recession, but have steadily increased since 2010 as well.
(Partnership for Public Service)
Hiring veterans in the federal workforce was a priority for President Obama during his first years in office, but that too has decreased while veteran departures increased in recent years.
(Partnership for Public Service)
Administration is the top occupational field for departures, followed by healthcare and investigation/inspection.
Industry Groups Urge Supreme Court to Review “Per Invoice” Application of FCA Penalty
By: Donna Lee Yesner, Partner, Morgan Lewis
Violations of the False Claims Act (FCA) subject contractors to high penalties which can be unrelated to any loss actually suffered by government. The Act provides for treble damages for injury to the government, and a separate civil penalty of not less than $5,500 and not more than $11,000 per violation,. In recent years, an increasing number of whistleblower cases brought under the False Claims Act have been based on false certification and fraudulent inducement theories. The cases allege that a false representation or certification provided with the proposal induced the government to enter into the contract. Under this theory, some courts have considered the penalty applicable to every claim for payment as a matter of law, because each is tainted by the single misrepresentation at the contract formation stage. In such cases, the amount of the penalty will vary greatly depending on the number of individual orders submitted under the contract, as each invoice would be deemed a false claim subject to the penalty provision. For Multiple Award Schedule contracts, and similar IDIQ contracts, which provide a convenient means for government agencies to place repeat small orders for supplies or services as needed, a false certification can result in excessively high penalties, even if the invoices state the correct amount for work performed and there are no contract damages. Industry groups are urging the Supreme Court to consider whether such disproportionate penalties violate the Eight Amendment prohibition against excessive fines.
Last December, the Fourth Circuit Court of Appeals considered a whistleblower case involving a false certificate of independent price determination, . The Circuit Court reversed a lower court’s decision that the FCA penalty of $24 million, derived from application of the penalty to over 9,000 invoices, was grossly disproportionate to the conduct at issue under the Eighth Amendment. In that case, there were no proven damages and the invoices did not incorporate or reference the certificate at issue. In reinstating the penalty, the Fourth Circuit acknowledged problems with the “per invoice” rule, but nevertheless found that the penalty appropriately reflected the gravity of the offenses and provided the necessary and appropriate deterrent. The defendants in the case, United States ex rel. Bunk v. Gosselin World Wide Moving NV, 741 F.3d 390 (4th Cir. 2013), petitioned the Supreme Court for certiorari. A petition for certiorari is a request that the Court review the decision, as there is no right of appeal to the Supreme Court. The petition is currently pending. In June, three trade associations, PhRMA, the Chamber of Commerce, and the American Hospital Association submitted a brief as amici curiae, in support of the petitioners due to the importance of the issue and the need for clarification. The National Defense Industrial Association also submitted an amicus curiae brief.
In their briefs, the industry groups argue that the Fourth Circuit’s decision requiring a mechanical application of the FCA penalty to each invoice 1) results in irrationally large penalties that 2) bear no relationship to the severity of the offense or financial harm to the government. These are two of the four factors governing review of penalties under the Eight Amendment’s Excessive Fines Clause. The groups assert that the risk of incurring huge penalties leads defendants to settle, even when the claims are weak, and may deter smaller companies that depend on frequent billing from doing business with the government. This risk is exacerbated in government programs that necessitate a high volume of invoicing. In such programs, the magnitude of the penalty is determined not by culpability or harm to the government but by contract terms. Whistleblowers target defendants because the penalty is driven by the number of invoices rather than on the severity of the offense. Because there is no correlation between the penalty and culpability or harm, the same type of violation – false certification – can result in grossly disparate penalties. Industry groups have urged the Supreme Court not to wait for another circuit court decision to address this important issue, and to take this opportunity to provide needed clarification on the constitutional limits of the FCA penalty provision.
When Does an Agency Cross the Line from Clarifications to Discussions?
By Michelle E. Litteken, Associate, Mayer Brown LLP and Luke Levasseur, Counsel, Mayer Brown LLP
Originally Posted in Claims and Disputes (Mayer Brown Meaningful Discussions Blog) on August 19, 2014
Editor’s note: This is the first post in a series of posts focused on protest allegations related to discussions with offerors. Planned future posts will cover what qualifies as meaningful discussions, what constitutes unequal discussions, and a round up of recent protests involving discussions.
In a bid protest, the disappointed offeror often alleges that the agency failed to conduct meaningful discussions or engaged in unequal discussions. A threshold inquiry is whether the agency engaged in discussions. The CFC and GAO approach the question of whether agency communications constitute discussions differently, and a protester may want to consider that difference when selecting a protest forum.
FAR 15.306 defines clarifications as “limited exchanges, between the Government and offerors, that may occur when award without discussions is contemplated.” The FAR does not expressly define “discussions,” but it explains that “discussions” include negotiations that “are undertaken with the intent of allowing the offeror to revise its proposal.” The FAR used to limit clarifications to communications about relatively small matters, such as eliminating clerical mistakes or minor irregularities. However, the rules were revised in 1997 to allow a free exchange of information without requiring discussions. Decisions from the GAO and CFC reveal that the two protest forums apply the FAR provisions differently, with the CFC appearing to embrace a more substantial exchange of information that can still be characterized as clarifications.
Both GAO and the CFC recognize that, if an offeror is given an opportunity to revise its proposal, the agency has engaged in discussions. Several GAO and CFC cases refer to this as the “acid test.” The tough cases come when either (i) questions (often called “clarifications” by the agency) seek information that is necessary to determine technical acceptability of the proposal, or (2) the agency seeks a substantial amount of “clarify[ing]” information and an offeror’s response approaches (or crosses) the line of changing the proposal.
GAO has ruled that, when an agency uses information received from an offeror after submission of a proposal to determine the technical acceptability of a proposal, “discussions” occurred. For example, in Evergreen Helicopters of Alaska, Inc., GAO analyzed the “acquisition of fixed-wing aircraft services in the central region of Africa,” and considered an EN requesting information about the aircraft type and tail numbers. Such a request could be seen as soliciting information inadvertently omitted from the proposal, but GAO ruled that the communications constituted discussions because the information was necessary to determine technical acceptability. In contrast, in Tetra Tech, Inc., GAO held that the agency’s email to the awardee asking the awardee to confirm that it was accepting the end-state performance objective (as opposed to the technical approach) qualified as a clarification because the awardee was confirming information already in the proposal, not providing information that constituted a modification or revision of its proposal in response to the email.
Importantly, GAO doesn’t necessarily accept the agency’s characterization of the communications—but, instead, analyzes the parties’ actions. This lack of deference is illustrated in Evergreen Helicopters, in which GAO rejected the agency’s characterization and argument that the evaluation notices were clarifications because the offerors were not allowed to revise their proposals. Similarly, in Kardex Remstar, LLC, the agency sent an offeror a spreadsheet with spaces for the offeror to explain how its proposal satisfied the agency’s requirements. The agency characterized the communications as “clarifications” and expressly prohibited the offeror from changing its proposal. GAO rejected the agency’s characterization because the information was used to determine technical acceptability–even though the offeror could not revise its proposal.
In contrast, CFC decisions generally find that discussions occur only when an offeror is given the opportunity to revise its proposal, and the court is less likely to characterize the provision of information related to a technical acceptability determination as “discussions.” For example, in Mil-Mar Century Corp. v. U.S., the protester argued that an email asking the awardee to substantiate its proposed price, clarify its costs for an item, address a discrepancy in its labor hours, and clarify the adequacy of its proposed labor hours qualified as discussions. Although the agency included a disclaimer on the emails that the communications did not constitute discussions, the protester argued that the exchanges were discussions because the information the awardee provided was required by the RFP and essential to determine acceptability. The court deferred to the agency’s characterization and found the information was not a material requirement. The court also noted that “an exchange can constitute a clarification, and not a discussion, even whe[n] the information provided was ‘essential to evaluation criteria.’”Evergreen Helicopters and Kardex suggest that GAO would have agreed with the protester because the agency used the information to determine technical acceptability.
With respect to the amount of deference the CFC should give to an agency’s characterization of the communications, the Federal Circuit has held that the court should defer to the agency’s interpretation of the FAR’s definition if the agency’s interpretation is permissible. In Davis Boat Works, Inc., the CFC applied that reasoning to hold that a 7-page letter with a 25-page “process guide” the awardee submitted during the first round of evaluation constituted clarifications because neither the letter nor the guide substantially revised the offeror’s proposal. Instead, the court found that the Process Guide explained how the offeror would satisfy the RFP’s management approach requirements. The court was not concerned with the amount of information that the offeror provided, observing “any clarification must necessarily convey new information to the agency.” The court further stated: “in close cases, it is well-established that the government’s classification of a particular communication as a clarification or a discussion ‘is entitled to deference from the court,’ as long as that classification is permissible and reasonable.” In contrast, GAO has stated: “the agency’s characterization of the exchange is not controlling, as it is the actions of the parties that determine whether discussions have been held.”
Although there are many issues to consider when deciding where to file a bid protest, contractors might not sufficiently consider the different approaches that GAO and CFC take to determining whether discussions occurred. If a contractor anticipates that a discussions-related issue may become important in a protest being considered, subtle differences between the way the CFC and GAO evaluate these issues should be analyzed carefully.
EIP Award Nominations Open!
Nominate a deserving acquisition official for an EIP Award today! The Excellence in Partnership (EIP) Awards honor acquisition officials in the public and private sectors who have made significant strides in promoting and utilizing multiple award contracts, saving taxpayer dollars and contributing to veterans hiring and green initiatives. Awards will be given to individuals, organizations and contractors involved in procurement with GSA, VA, DoD, DHS and other government agencies. EIP Award nominations for 2014 are being accepted in the following categories:
1. Lifetime Acquisition Excellence Award
2. Contractor Savings Award
3. Government Savings Award (Civilian)
4. Government Savings Award (DoD)
5. Myth-Busters Award
6. Best Veteran Hiring Program
7. Green Excellence in Partnership Award
Nominations may be submitted on the CGP website here. If you have any questions, please contact Matt Cahill at mcahill@thecgp.org or (202) 315-1054.
DoD Security Guidelines for Commercial Cloud
A recent article in Federal News Radio notes that the Defense Information Systems Agency (DISA) is undertaking a top-to-bottom review of the cybersecurity requirements that determine whether individual commercial cloud computing systems are safe enough for Department of Defense (DoD) data. At an annual DISA event in Maryland, DISA’s program executive officer for mission assurance, Mark Orndorff, maintained that the current system for security compliance is more cumbersome than it should be. Currently, prospective commercial cloud providers are initially processed through the Federal Risk Authorization Management Program (FedRAMP) as a baseline. Should additional security constraints be necessary for DoD systems, vendors are required to pass through an additional layer of inspection.
In the top-to-bottom review of the procedures, DISA’s objective is to leverage FedRAMP much more, and if necessary, push to have additional requirements incorporated into the FedRAMP process. Orndorff notes that DISA has done this to some extent but should do more, with the hope of reducing the number of security timelines that industry must endure as a result of the FedRAMP process alone. Noting that the process is currently too difficult, Orndorff says that DISA will assess which areas it can accept more risk to relax requirements. As reported on in an earlier Friday Flash, the DoD launched five pilots to better understand the issue.
Roger Waldron on In Depth with Francis Rose
One of a federal agency’s acquistion strategies might disappear. A rewrite of the Federal Acquisition Regulation sets new requirements for blanket purchase agreements. The goal is to promote competition for new contracts. Roger Waldron is president of the Coalition for Government Procurement. On In Depth with Francis Rose, he said the rewrite will have some unintended consequences for federal agencies. To listen to the program, visit www.federalnewsradio.com/86/3684980/Roger-Waldron-President-Coalition-for-Government-Procurement.
Training – GSA Schedule Contracting for In-House Counsel, Sept 17
This class is a “must attend” for lawyers and corporate officials with significant contract management and compliance responsibilities in companies that have GSA Schedule contracts.
GSA Schedule contracts offer a huge market opportunity. The GSA Schedule, including the delegated VA Schedules, is a $50 billion contracting program that all federal agencies use to acquire commercial services and products. In some instances, state agencies can place orders against their contracts. These multiple year, government-wide contracts cover professional services, information technology, pharmaceuticals, medical equipment and a vast array of commercial products.
Thousands of companies including both Fortune 500 companies and a vast number of small businesses have GSA/VA Schedule contracts.
Of particular interest to in-house counsel and corporate executives, Schedule contracts have a pricing methodology, and disclosure requirements that are unique in federal government contracting. The contracts provisions must be correctly understood, managed, and monitored to assure that your commercial enterprise realizes anticipated profits. Failure to do so can result in significant monetary, administrative, civil and even criminal penalties.
This seminar will provide information and tools to help you understand the GSA/VA Schedule contracting program and provide insightful advice to your in-house clients and business partners.
Instructors:
- Carolyn Alston, General Counsel and Executive VP, Coalition for Government Procurement
- John Horan, Partner, McKenna, Long & Aldridge
- Jason Workmaster, Partner, McKenna, Long & Aldridge
Who Should Attend
- In-house counsel for current GSA/VA Schedule contractors
- In-house counsel for companies considering becoming a GSA/VA Schedule contractor
- Government attorneys that advise clients who evaluate or buy against Schedule contracts
- Outside counsel interested in learning more about GSA/VA Schedule contracting
- Compliance Officers
- Non-lawyers with extensive MAS experience
- Contract Managers
- Contracting Officers
What you can Expect
After attending this seminar you will:
- Earn 6 hours VA CLE!
- Understand GSA/VA’s most favored customer pricing policy and major requirements of the government solicitation
- Understand current audit/oversight procedures
- Understand current GSA Schedule Price Negotiation Priorities
- Understand how the GSA Schedule can impact your company bottom line
Be able to advise your in-house clients regarding:
- Disclosure of company records
- Establishing management and compliance processes
- Establishing ethics programs and mandatory disclosure
- Avoiding penalties
- Identifying resources to assist with continuing legal support of your internal GSA/VA Schedule programs
Registration Fees and Details – Register Here!
- Registration opens at 7:15am
- Training will begin at 8:00am
Notices of Request for Public Comments
This week two information collection notice requests were published in the Federal Register.
The Office of Management and Budget (OMB) plans to submit a request to review and approve an extension of a previously approved information collection requirement concerning payment by electronic fund transfer. The notice requests that comments be submitted on or before September 19, 2014. For more information, click the link to the request for public comment above.
OMB is submitting a request to review and approve an extension of a previously approved information collection requirement concerning pre-solicitation notice and response. Comments are due on or before October 20, 2014. For more information, members can access the link to the request for public comment above.