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A Tipping Point For Our Procurement System?


Labor Day weekend marks the traditional end of summer, a last free weekend to kick back and enjoy the sun, beach, and a barbecue before the busy school year begins.  Of course, it also marks the beginning of football season, and to this, please forgive me, I must say, “ROLL TIDE!” and “let’s go Vienna Tigers!”

This year, Labor Day Weekend also brings us to the close of a remarkable summer of rule-making that will have profound implications for the procurement system.  First, was saw the final issuance of the Transactional Data Reporting (TDR) rule that will establish a pilot program under which GSA contractors will report 11 data elements, data that already is in the possession of the government, for all transactions (delivery and task orders) under their respective MAS contracts, GWAC contracts, and other GSA government-wide contracts.    Just last month, the Coalition submitted to GSA over 60 questions regarding TDR.  These questions were generated by Coalition members, GSA’s industry partners.  We look forward to seeing GSA’s responses to these questions with the hope that they will reduce some uncertainty regarding the pilot.  Among the uncertainties is the projected/assessed paperwork burden of the TDR rule.  In this regard, in its September FAR & Beyond blog, the Coalition will address GSA’s calculation of burden estimates associated with TDR and what it means for GSA’s industry partners.

Second, GSA issued a proposed rule seeking the regulatory implementation of its Commercial Supplier Agreement (CSA) Deviation.  This deviation and the proposed rule address, in part, commercial terms that are inconsistent with Federal law.  As you know from this blog and Coalition comments, however, the CSA goes well beyond identifying and addressing those commercial terms inconsistent with federal law.  The CSA also lowers commercial terms in the order of precedence clause to just above the signature page of the contract.  The result means that, in the case of a conflict between any commercial term and a government unique term, the government unique term controls.  This rule applies to commercial software licenses, sale agreements, service level agreements, and any other commercial terms included as the addenda to a commercial item contract.  In addition, the proposed rule includes a new paperwork burden, requiring contractors to submit to the contracting officer the full text of all terms incorporated by reference.

The CSA marks a fundamental shift away from commercial item contracting and the Federal Acquisition Streamlining Act (FASA).  It creates a new barrier to entry for commercial firms seeking to enter the federal market through GSA’s government-wide contracting programs.  It also likely will have a disproportionate impact on small businesses along with firms seeking to sell innovative cutting-edge technologies to support customer agency missions.

Finally, just last week, the Fair Pay and Safe Workplaces rules (the labor rules) were issued by the FAR Council and the Department of Labor.  At over 200 pages, the rules reflect an entirely new level of complexity for government contractors and contracting officers.  Under the rules, contractors and subcontractors will be required to report “labor violations,” as defined in the rule, for a period going back three years from the date of the solicitation.   This information will be used for purposes of making responsibility determinations.  The labor rule will apply to all prime and subcontracts expected to exceed $500,000.  The effective date of the rule is October 25, 2016, with phase in of certain requirements.  This new, duplicative labor compliance reporting will increase costs and risks for government contractors.  For more information regarding the rule see the Crowell & Moring article included in this week’s Flash.  The Coalition will also be creating a webpage dedicated to information and analysis of the rules.

The underlying policy and operational goals of these three rules are well intended.  The government should manage its data and understand what it is buying.  Contract terms should be clear and consistent, and we all support compliance with our nation’s labor laws.  The unintended consequences of the implementation of these new rules, however, will have a negative impact on competition, cost/price, and value for customer agencies.  These new rules are layered onto a system that already is overburdened with process and reporting requirements for government and industry.

The increased administrative costs of these rules will be passed on to customer agencies in the form of yet higher contract prices/costs and will serve as a new, substantial barrier to entry into the federal market place.  Moreover, these new burdens may prove to be the tipping point when current contractors start rethinking their investment and participation in the federal procurement market.

At the same time these additional regulations are becoming part of overall acquisition framework, there are ongoing efforts to streamline and/or eliminate regulatory and compliance requirements to promote access to innovation from the commercial market place.  The Coalition supports such efforts with one caveat: streamlining the acquisition process/regulations should be a comprehensive, government-wide initiative.  Such an effort will increase productivity and opportunity for all industry partners, including so-called traditional and nontraditional firms, small, and large businesses.  The ultimate beneficiary will be customer agencies and the American people through increased efficiency, innovation, and productivity throughout the procurement system.  The Coalition stands ready to work with all stakeholders on such an effort.

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