Friday Flash, 11.01.13

FAR and Beyond Blog 

The Coalition was privileged to host speakers from across the federal enterprise at the Fall Training Conference this week for a discussion of key procurement issues, challenges and opportunities of the “New Federal Market.”  Much of the discussion during both the morning plenary sessions and the afternoon breakout sessions was focused on strategies for achieving affordable, best value outcomes for customer agencies and the American people.

Affordability and best value outcomes start with sound, effective and clear customer requirements.  Sound requirements development drives superior contractor performance, pricing and value for customer agencies.  Prices paid do not in and of themselves demonstrate the cost to the government.  Prices paid must be put into context in order to assess savings and value to customer agencies.

Unfortunately, it seems that the current focus across the federal enterprise is decidedly on prices paid.  So much so that OMB is championing the development of a “prices paid portal” to collect all prices paid for products and services across the federal government.  Presumably the information collected would be used to assist contracting officers in planning and executing procurements.  Aside from the significant technical challenges involved in creating such a portal and the overwhelming amount of data that would be collected, one must ask if such a portal will truly improve decision making across the federal government.

Price alone is incomplete data.  In order to truly inform contracting personnel across government regarding market conditions—such a portal must include contract requirements, terms and conditions, and volume.  Requirements, terms and conditions, and volume are significant drivers of price and value.  Without including this information as part of the portal, price is largely misleading.  As last week’s “FAR and Beyond” blog noted, requirements development is the Achilles heel of government contracts.  Focusing on improving requirements development through the creation of centers of expertise will save millions, if not billions, of dollars while also improving contract performance outcomes!  It is a simple formula:   SOW/Requirements=Price/Value.

Next week more on requirements and strategic sourcing.

Roger Waldron

President

 

Coalition Fall Training Conference In the News

There were a number of articles in the news this week from the Coalition’s Fall Training Conference—The New Federal Market.  Here are a few in cased you missed them:

• Procurement officials explain new normal to contractors (Federal Computer Week)
• Air Force Embraces OASIS (Federal Computer Week)
• Air Force launches crowdsourcing-like approach to acquisition (Federal News Radio)

 

 

 

Congratulations the 2013 Excellence in Partnership Awardees

On Wednesday the Coalition held the 2013 Excellence in Partnership (EIP) Awards ceremony honoring individuals and organizations in the acquisition community that have made significant contributions to the procurement system while providing best value to the taxpayer.  The 2013 EIP honorees were recognized in nine distinguished categories including a new category, the Veterans Hiring “Continuing the Commitment” Award, honoring well-established and successful hiring programs for military veterans in the private sector.

The 2013 EIP honorees are:

1. Contractor Savings Award – General Dynamics Information Technology
2. Government Savings Award (DoD) – OHIO Replacement (PMS397) R&D Contract Team, U.S. Navy
3. Myth-buster’s Award (Civilian) – Aletha Pelham, Facilities Maintenance and Hardware Acquisition Center, General Services Administration
4. Myth-buster’s Award (DoD) – Surface Ship Torpedo Defense Team (PMS415), U.S. Navy
5. Lifetime Acquisition Excellence Award – Dr. Nick Nayak, Chief Procurement Officer, Department of Homeland Security
6. Best Veteran Hiring Program (Government) – Virginia Department of Motor Vehicles
7. Best Veteran Hiring Program (Industry) – Booz Allen Hamilton
8. Veterans Hiring “Continuing the Commitment” Award – CACI, Inc. and L-3 Communications
9. Green Excellence in Partnership Award (Industry) – The HON Company, MechoSystems and Ricoh Americas Corporation

Congratulations again to the 2013 EIP awardees and thank you to all our members who joined in recognizing this year’s outstanding group of honorees.

 

Check Out the Photos from Fall Conference 2013

The smiling faces say it all! Thank you to our Fall Conference speakers and attendees for making this season’s event a huge success. To view all the snapshots from the day, click here http://keithpix.smugmug.com/Other/Other-2/TheCGP

 

New Report: LPTA Sacrifices Innovation

FCW published an article this week on a new report from Market Connections and Centurion Research Solutions on low price technically acceptable (LPTA).  The report shows that both government officials and industry believe that LPTA helps drive down prices but also impedes innovation and sacrifices long-term value for short-term cost savings. The survey included responses from 375 contractors and 360 civilian and defense decision-makers in government. The objectives of the report were to gauge the impact of LPTA procurements on the government and the contractors who serve them, assess LPTA’s effect on the development and delivery of solutions to Federal agencies and explore strategies used by contractors to deal with the LPTA environment. The report found:

• 59 percent of contractors and 42 percent of federal employees believe the government will increase its use of LPTA, primarily due to the tight budget environment.
• 65 percent of contractors and 43 percent of government employees believe LPTA sacrifices long-term value for short-term savings.
• 71 percent of contractors and 59 percent of government employees believe LPTA could result in contracts being awarded to less qualified vendors.
• 63 percent of contractors said they are likely to equate “best value” with LPTA, even though the approaches are different.

To learn more, access the full report here.

 

GSA Consolidates Data Centers, Streamlines IT

In an October 29 press release, GSA announced that it has closed 37 data centers this fiscal year as part of the national Federal Data Center Consolidation Initiative (FDCCI). The move allows the agency to eliminate real estate costs and reduce energy consumption. Also, IT operations have been consolidated as part of Administrator Dan Tangherlini’s effort to cut costs, reduce redundancies and increase efficiencies at GSA.  GSA has successfully completed its goal to close 32% of its non-core data centers.

In addition, all IT offices and staff within GSA are now consolidated under the leadership of GSA CIO Casey Coleman. According to GSA, instead of having several CIOs serving each individual Business Line, or having IT staff reporting into a different program office, these resources will now be located in a new GSA IT office under the GSA CIO. IT contracts will also be under the GSA IT office.

 

New DFARS Changes: In-Sourcing, Certified Pricing Data

This week, the Department of Defense (DoD) issued changes to the Defense Federal Acquisition Regulation Supplement (DFARS). The first is an interim rule on private sector notification requirements of in-sourcing actions. The rule will implement section 938 of the National Defense Authorization Act for FY 2012 regarding private sector notification of in-sourcing actions. The rule states that a written notification will be provided to affected incumbent contractors within 20 business days of the contracting officer’s receipt of a decision by the cognizant component in-sourcing program official to in-source services. The notification will summarize why the services are being in-sourced and must be coordinated with the component’s in-sourcing program official.

Also, the DFARS issued a final rule concerning DoD policy on competitive acquisitions in which only one offer is received. The final rule provides additional exceptions and further addresses requests for data other than certified cost or pricing data from the Canadian Commercial Corporation. To access the final rule, visit www.gpo.gov/fdsys/pkg/FR-2013-10-31/pdf/2013-25728.pdf.

 

OMB Significantly Reduces Requirements for Financial Management Systems

In a move to increase efficiency, the Office of Management and Budget (OMB) rescinded its previous Circular A-127 requirements for agency financial management systems and replaced them with a more streamlined version.  According to Federal News Radio, the change reduces the number of financial system requirements from 500 to 70 in the new Appendix D.  The new guidance is intended to replace the burdensome “check the box” requirements system that drove complexity and cost, and instead emphasizes the government’s business and information needs.  It also removes a lengthy and resource intensive requirement for certification and provides more flexibility for agencies to adopt shared services.  In a Federal News Radio interview, OMB acting controller Norman Dong said that, “It comes back to the whole principle of focusing less on the how, and focusing more on the what, and focusing more on the objectives we are trying to achieve in financial management.”  OMB is taking a similar approach in other areas, including grant circulars, where requirements have accumulated over time and can afford to be reduced and streamlined in order to improve efficiencies.

 

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.

 

DoD: Secure Technical Data on Unclassified Contractor Networks

The Department of Defense (DoD) is moving to secure unclassified contractor networks in an attempt to better safeguard US intellectual know-how, according to an article in Defense News. According to Defense Secretary Chuck Hagel, the new DoD program, initiated on October 10, is designed to provide a cohesive, comprehensive and cost-effective approach to protecting priority investments and future defense capabilities while maintaining efficient business operations with its industrial partners.

The new guidance, yet to be released, will require defense officials to take immediate action to improve the protection of unclassified controlled technical information that resides on or passes through defense contractor systems or networks. The guidance will also include mandates for unclassified contractor network security, reports Defense News. Undersecretary of Defense for Acquisition, Technology and Logistics (AT&L) Frank Kendall is tasked with proposing an amendment to current regulations pertaining to the safeguarding of this technical information. Secretary Hagel wrote that the effort will include necessary policy, guidance, and rulemaking activities, to include expansion of current cybersecurity information-sharing activities and programs.

 

SUSPEND Act Update

This week, the House Oversight and Government Reform Committee cleared Chairman Darrell Issa’s Stop Unworthy Spending (SUSPEND) Act for floor debate.  The bill would reform the suspension and debarment (S&D) process by consolidating agency level offices into one review board, the Board of Civilian Suspension and Debarment, at GSA.  There are some exceptions—larger agencies and the military departments can continue to operate their own S&D offices if they demonstrate that they have an effective program.

According to an Oversight and Government Reform Committee press release, there are “serious weaknesses in the suspension and debarment programs of numerous agencies, which are supposed to keep the over $1 trillion taxpayer dollars awarded in contracts and grants out of the hands of individuals and companies who should not get them.”  Chairman Issa said that, “while the vast majority of contractors and grantees fulfill their obligations, the SUSPEND Act streamlines the procedures for dealing with the ones that do not.”