Friday Flash, 09.06.13

FAR and Beyond Blog/Comment of the Week

The Labor Day weekend marks the end of summer and the beginning of fall and the school year.  The Coalition hopes that everyone had a wonderful summer!

This week also marks the beginning of a busy fall calendar for the Coalition.  At the center is our Fall Conference scheduled for October 30th at the Fairview Park Marriott.  We are looking forward to hearing from the Honorable Frank Kendall, Under Secretary of Defense (Acquisition, Technology & Logistics) and Major General Wendy Masiello, Deputy Assistant Secretary for Contracting, Office of the Assistant Secretary of the Air Force for Acquisition.  The Fall Conference agenda and listing of other confirmed speakers can be found here.

This first “Friday Flash” after Labor Day also marks the beginning of a new name for the “Comment of the Week.”  From this point forward the Friday Flash’s “Comment of the Week” will be referred to as the “FAR and Beyond” keeping in step with our internet presence via the “Far and Beyond” blog.   So with the marketing portion of this week’s “FAR and Beyond” done; it is now time to turn to an issue of significant policy interest regarding GSA’s Multiple Award Schedule (MAS) program.

The Federal Acquisition Service’s (FAS’s) treatment of subcontracts under federal prime contracts as a commercial transaction for Price Reduction Clause (PRC) purposes continues to raise significant procurement and economic policy concerns for customer agencies and MAS contractors.  At an operational level, FAS continues to insist that subcontracts under federal prime contracts be considered “commercial transactions” and subject to the PRC.   As the Coalition discussed in its “FAR and Beyond” blog of January 28, 2011 (yes—2011), this practice restricts competition for customer agency open market procurements.  As such, this FAS practice prevents agencies from achieving greater competition, obtaining lower prices, and securing better value for commercial services, solutions and products.  Ultimately, the practice increases total acquisition costs for the American people.

A year and a half later, FAS confirmed the Coalition’s concerns regarding the treatment of subcontracts under open market federal prime contracts. On September 7, 2012, FAS waived the application of the PRC for purposes of the Air Force’s open market procurement for commercial office furniture.  Under the Air Force’s proposed two-tier procurement strategy, furniture manufacturers are essentially subcontractors to small business dealer prime contractors located across the country.  The two-tier subcontract structure immediately raised concerns among manufacturers regarding the application of the PRC.  In sum, many in industry were concerned that by offering a price reduction as a subcontractor to a small business prime contractor in order to compete for an Air Force requirement, the PRC would be triggered under their MAS contracts.  This issue was subsequently raised in a Government Accountability Office (GAO) protest by Herman Miller.  However, the FAS waiver of the application of PRC for the Air Force procurement rendered the issue moot.  The Coalition also discussed the waiver of the PRC in its November 5, 2012 and April 3, 2013 “FAR and Beyond” blogs.

FAS’s class waiver of the PRC is unprecedented.  It validates the real, practical restriction on competition for customer agencies that is inherent in applying the PRC to subcontracts under federal prime contracts.   At the same time FAS continues the practice of treating subcontracts under federal prime contracts as commercial transactions for purposes of the PRC.   There is a profound disconnect between the waiver and current practice; a disconnect that costs customer agencies and the taxpayer.

On April 3, 2013, the Coalition wrote a letter to FAS regarding the significant procurement policy and public questions raised by the waiver of the PRC.  The letter and the Coalition’s position regarding the PRC can be found here.

To date the Coalition has not received a formal response to our letter.

Roger Waldron

President

 

Welcome VP of Membership & Marketing, Matt Cahill

The Coalition for Government Procurement welcomes Matt Cahill to the team as Vice President of Membership and Marketing.  Matt will interface with members to fully understand your business objectives as well as desires and needs for future services. He is also responsible for membership renewal, overall member satisfaction, and events and sponsorships.  Additionally, he will drive the association’s branding and identity, integrated campaigns, public relations, and interactive and social marketing programs to ensure strong connections with members and constituents.

 

Prior to joining the Coalition, Matt spent over 10 years in client services, sales, and marketing with companies including The Corporate Executive Board, FedSources, and Deltek.

Matt is a mid-western transplant and an avid Indianapolis Colts fan. When he is not working, he enjoys traveling as much as possible with family and friends; his favorite trip to date has been to Argentina.  Matt holds a Bachelor of Arts degree from DePauw University.  He and his wife, Heidi, reside in Falls Church, VA.

 

Update on OS3

The Coalition submitted a letter to GSA as a follow-up to the OS3 Industry Day for the third generation Federal Strategic Sourcing Initiative (FSSI) contract for office supplies.  The letter addresses a question posed by GSA during the Industry Day about whether OS3 should be an open market IDIQ. As outlined in our letter, the Coalition strongly recommends that GSA utilize the efficiency and effectiveness of the Schedules program for the next FSSI contract vehicle for office supplies.

Bob Woodside, Program Manager of the FSSI OS2 program office has agreed to join the General/Office Products Committee to discuss a number of topics raised during the Industry Day and questions on GSA Interact about NAICS codes, discounts by order size, and same day delivery.  The General/Office Products Committee meeting will be next Thurs., Sept. 12 at 1:30pm EST.  Committee members will receive an announcement with further details about the meeting.  If you are not already a member of the committee and would like to join the discussion, please contact Roy Dicharry at rdicharry@thecgp.org.

 

Attention Golfers

Photos from the Joseph P. Caggiano Memorial Golf Tournament benefitting wounded veterans are now posted online!  Thanks to the generosity of our sponsors and players, the Coalition was able to donate $5,000 each in honor of our good friend, Joe Caggiano, to Hope for the Warriors and Operation Second Chance.  These organizations are deeply grateful for your continued support of our heroes.

So how will the funds raised from the tournament be used to assist wounded veterans? Hope for the Warriors will use the contributions to provide a full cycle of care to service members, veterans and military families including Employment & Education, Clinical Care Management, Recreational & Athletic Programs, and Community Outreach.  Operation Second Chance will provide emergency financial assistance to wounded, injured and ill veterans, in the form of rent, utilities, daily essential items, travel and morale.

The Coalition is incredibly grateful to our title sponsor PwC for making the event possible. We also appreciate the generosity of CohnReznick and Integrity Consulting for sponsoring the lunch and reception, and Baker Tilly and 3M for sponsoring the beverage cart.  Thank you as well to all the hole sponsors and contest sponsors and each of the golfers who purchased mulligans. Your support makes a positive difference in the lives of wounded veterans.

We hope that you all can join us again for the Joseph P. Caggiano Memorial Golf Tournament in 2014!

 

Agencies Join USPS Cloud ID Management Pilot

The Department of Veterans Affairs, the National Institute of Standards and Technology and the General Services Administration (GSA) have all joined the US Postal Service’s Federal Cloud Credential Exchange (FCCX). According to FCW, FCCX will allow people to use third-party credentials to access multiple federal websites and services.

GSA will be in charge of harmonizing FCCX with the Federal Identity Credential Access Management (FICAM) policy, which is the process used to certify trusted framework providers. FCCX is an outgrowth of the Administration’s National Strategy for Trusted Identities in Cyberspace initiative. The effort is designed to reduce costs and save millions by streamlining how the public interacts with federal websites and eliminate the need for agencies to use their own in-house ID management systems. Currently, agencies often have different management systems that require users to create different usernames and passwords to access government sites and services. FCCX will provide an authentication service that spans all agencies.

Other agencies rumored to be adopting FCCX include, the Internal Revenue Service, Department of Education, and the Social Security Administration. Please note that the pilot and the participation of the agencies above have not been finalized.

 

CSIS Report on Service Contract Trends

The Center for Strategic and International Studies (CSIS) has published a report on trends in service contracting between 2000 and 2012.  The report from the Defense-Industrial Initiatives Group (DIIG) at CSIS shows a decline in the share of services contracts in recent years.  The CSIS chart (below) shows this trend and projects what services spend might look like through FY 2015 based on budget forecasts from the Congressional Budget Office (CBO) both with and without sequestration.  The CSIS report also provides an overview of trends in terms of competition, contract funding mechanisms, contract vehicles, service areas and service contracting by Federal agency.  To access the full report, click here.

 

 

DoD Sharing IT Resources to Save Money

The U.S Air Force, Army, and the Defense Information Systems Agency (DISA) recently reached an agreement to pursue the “Joint Information Environment.” The new architecture-sharing and modernization agreement is expected to increase bandwidth and network security and reduce $1 billion in future costs. Recent internal changes had left the Army with excess information technology capacity, allowing the Air Force to upgrade its systems and identify $1.2 billion in cost avoidance. The Air Force will also utilize 15 joint regional security stacks the Army is set to establish after consolidating network security. The Army and DISA plan to implement this new cloud technology and network security consolidation in FY2013 and FY2014. The Army and Air Force will have access to DISA’s network security stacks as a joint capability, according to Defense Systems.

 

Veterans and Disabilities Hiring Rules

The U.S. Department of Labor Office of Federal Contract Compliance Programs (OFCCP) announced two final rules to improve the hiring of veterans and people with disabilities.  The rules, yet to be published in the Federal Register, will strengthen existing rules for contractors and impose new recruitment and data reporting requirements.

Hiring Veterans

The Department of Labor is making changes to the Vietnam Era Veteran’s Readjustment Assistance Act (VEVRAA) at 41 CFR Part 60-300.  The final rule will strengthen the existing affirmative action provisions in VEVRAA and also require that contractors:

• Establish annual hiring benchmarks for protected veterans
• Document the number of veterans who apply for jobs and the number of veterans hired
• Invite applicants to self-identify as veterans
• Incorporate the equal opportunity clause in subcontracts
• Follow certain job listing requirements
• Allow OFCCP access to documentation showing contractor compliance

Hiring Individuals with Disabilities

The Department of Labor will update regulations in Section 503 of the Rehabilitation Act of 1973, as amended at 41 CFR Part 60-741.  The final rule strengthens existing affirmative action requirements for contractors to improve the hiring and recruitment of individuals with disabilities.  Specifically, the rule is expected to require contractors to:

• Apply a 7% utilization goal for qualified individuals with disabilities to each of their job groups, or to their entire workforce if there are fewer than 100 employees
• Document the number of people with disabilities who apply for jobs versus the number hired
• Invite applicants to self-identify as having a disability
• Incorporate the equal opportunity clause in subcontracts
• Follow certain job listing requirements
• Allow OFCCP access to documentation showing contractor compliance

The Department of Labor plans to release guidance and materials for contractors to assist in complying with the final rule and the Americans with Disabilities Act.

Both rules will go into effect 180 days after publication in the Federal Register.  Contractors with a written affirmative action plan in place as of the effective date will have additional time to comply.

The OFCCP will host a webinar on Sept 11 at 2:00pm EST on the new hiring requirements.  Click here for more information and to register.

 

Legal Corner

Gratuities  – Cautionary Tales for Contractors and Government Employees

By: Tom Barletta, Partner, Steptoe & Johnson LLP; Fred Geldon, Senior Counsel, Steptoe & Johnson LLP;  & Mike Navarre, Special Counsel, Steptoe & Johnson LLP 

Recent events demonstrate that government investigators and prosecutors are taking more seriously the ethical regulations that govern gratuities.  Cases in point:

• On April 25, 2013, the U.S. Department of Justice issued a press release announcing that a Bureau of Prisons (BOP) employee had pled guilty to a charge of receiving unlawful gratuities.  The BOP employee, a supervisory traffic management specialist in the BOP Relocation Services section, was responsible for giving relocating BOP employees a list of approved movers and then referring their move to agents of the chosen carrier.  While performing these duties the employee received spa and salon gift cards in the amount of $1,007 and $790 from one carrier’s agent, as well as free moving services from moving companies.  The BOP employee was subsequently assessed a fine of $1,500 and placed on probation for 18 months.
• On June 5, 2013, the Washington Post reported that the Internal Revenue Service (IRS) had placed two managers on administrative leave for accepting free food and other gifts in violation of government ethics rules.  These violations were discovered during an audit of a years-old conference, at which the managers “allegedly held an after-hours party in their private hotel suites.”  It apparently was not clear who gave the managers the food, worth $1,162.  Acting Commissioner Danny Werfel said in a statement to the Post that the IRS has started the process of firing the managers.

The basic rules applicable to government employees regarding gratuities are set forth in the Standards of Ethical Conduct for Employees of the Executive Branch (“Standards”), which are codified at 5 C.F.R. § 2635.  The Standards generally prohibit federal government employees from accepting gifts[1] from “prohibited sources,” a category that includes, among others, contractors (and employees of contractors) doing business with or seeking to do business with the federal government employee’s agency.  5 C.F.R. §§ 2635.102(k), 2635.203(d).

There are some exceptions, however.  For example, under the Standards, federal employees may accept, even from “prohibited sources,” items worth $20 or less, as long as the total value of the gifts from the same source is not more than $50 in a single calendar year (calculated by including a contractor and its employees as a single source).  5 C.F.R. § 2635.204(a).  The Standards also include other limited exceptions, such as gifts motivated by family relationships.

The size of the gratuities in the two recent examples discussed above far exceeds these thresholds.  In the case prosecuted by the Justice Department, however, the amount at issue was significantly less than amounts usually cited in large corruption cases, and demonstrates that even these (relatively) small violations are attracting the attention of auditors, investigators, and prosecutors.

Although the Standards apply only to government employees who receive gratuities rather than to contractor employees who offer gratuities, contractors can face potential liability in relation to gratuities as well.

The federal criminal gratuities statute, 18 U.S.C. § 201, provides for fines or imprisonment for anyone who, for example,

directly or indirectly gives, offers, or promises anything of value to any public official, former public official, or person selected to be a public official, for or because of any official act performed or to be performed by such public official, former public official or person selected to be a public official.

18 U.S.C. § 201(c)(1)(A).

Unlike a bribe, an illegal gratuity does not require an intent to influence; rather, the illegal gratuity only need be given “for or because of” an official act.  An illegal gratuity “may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken.”  United States v. Sun-Diamond Growers of California, 526 U.S. 398, 404-405 (1999).  There must, however, be a connection, i.e., the government must prove “a link between a thing of value conferred upon a public official and a specific ‘official act’ for or because of which it was given.”[2]  Id. at 414.

The risk to contractors is heightened, however, because the line between an acceptable gift and an illegal gratuity is nuanced.    For example, in  United States v. Hoffmann, 556 F.3d 871, 877 (8th Cir. 2009), the court rejected the defendant’s contention that the Government had failed to prove that he violated the gratuities statute because he did not reasonably believe that the government employee would take an official action and because the government employee never did so.  Rather, the court upheld the conviction finding that a “reasonable juror could conclude” that the contractor gave the government project manager a set of golf clubs “to . . . reward future performance.”

The risk to contractors is demonstrated by yet another recent Justice Department announcement in a whistleblower “qui tam” case that included gratuities allegations.  On March 7, 2013, DOJ announced that three CIA contractors (American Systems Corporation, Anixter International Inc., and Corning Cable Systems LLC) had agreed to pay $3 million to settle allegations they violated the False Claims Act and Anti-Kickback Act.  The announcement included allegations[3]  that in pursuit of a 2009 contract the companies had provided gratuities (meals, entertainment, gifts, and tickets to sporting and other events) to CIA employees.

Prohibitions on gratuities applicable to contractors are also incorporated into various FAR provisions.  For example, FAR 52.203-13(b)(3) (Contractor Code of Business Ethics and Conduct) requires that contractors “timely disclose, in writing, to the agency Office of the Inspector General, with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed . . . [a] violation of Federal criminal law involving . . . gratuity violations found in Title 18 U.S.C.”  In addition, FAR 52.203-3(a) allows the government to terminate a contract if a contractor or contractor employee “[o]ffered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and [i]ntended, by the gratuity, to obtain a contract or favorable treatment under a contract.”  The government also may recover damages and/or suspend or debar a contractor from federal contracting for violations of this clause.  See FAR 3.204(c).

Finally, in addition to potential criminal penalties and suspension and debarment, providing gratuities to government employees can also result in other adverse effects for a contractor, such as negative past performance ratings that could affect current and future business.

In sum, to maintain healthy relationships with their government customers and to protect government employees and themselves from potential liability, contractors should understand the laws and regulations applicable to gratuities to government employees, have a clear policy regarding gratuities (which, for many contractors includes a prohibition on giving gratuities) and provide appropriate education and training to their employees.

Of course, contractors should also be aware of laws and prohibitions that apply in related contexts, including anti-kickback laws that prohibit certain improper payments between prime contractors and subcontractors, the Foreign Corrupt Practices Act, which prohibits certain types of payments to foreign officials, and laws and regulations that regulate payments that can be made to members of Congress and staff.

 

2013 Fall Training Conference—The New Federal Market 

October 30, 2013  Fairview Park Marriott

How has the federal market changed in the wake of sequestration? How will you succeed in FY 2014? How will actions from The Hill and changing Agency budget priorities impact your business?  Learn the answers to these questions and more  from Federal Acquisition Leaders, Agency CFOs, government leaders and industry experts at  The Coalition’s 2013 Fall Training Conference – The New Federal Market. Breakout sessions will address new developments in government-wide acquisition programs including Strategic Sourcing,  GSA Acquisition Center Initiatives, Veterans Affairs, GSA e-marketing, Professional Services and more.

Confirmed Speakers include

• Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics – Department of Defense
• Major General Wendy M. Masiello, Director of Contracting—Air Force
• New!  Peggy Sherry, Chief Financial Officer, Dept. of Homeland Security
• Emily Murphy, Senior Counsel, House Committee on Small Business
• Norman Dong, Deputy Controller— Office of Management and Budget
• Kathleen Turco, Chief Financial Officer—Veterans Health Administration
• Anne Rung, Chief Acquisition Officer—General Services Association
• Troy Cribb, Chief Counsel for Government Affairs—Senate Homeland Security & Government Affairs Committee

Click here for more information, a full agenda and to register.

 

The Service Contract Act (Webinar) Rescheduled for Thursday, Oct 3, 2013

Join The Coalition and Baker Tilly for a 1-hour webinar about The Service Contract Act and its application to Multiple Award Schedule Contracting.  This session will provide an overview of the Service Contract Act and the nuances of the regulation that make it particularly cumbersome for contractors to comply with. We will explore the added complexity that is presented with the inclusion of this regulation in Multiple Award Schedule contracts.

Attendees will hear examples of challenges contractors face when vehicles, such as the GSA Schedule, apply the Act. This course will offer a unique perspective regarding how to best approach these issues in order to mitigate liability during award.  Click here for more information and to register.