Friday Flash, 01.24.14

FAR and Beyond Blog

Here in DC it has been cold and snowy—and parents across the region are wondering if school is going to last through July 4^th given all the cancellations.  It seems that everyone in DC has lost productive time due to our winter weather.  The Coalition is no exception.

Our “Fundamentals of Ethics and Compliance” webinar presented by Tom Barletta, Partner at Steptoe & Johnson, originally scheduled for January 21^st has been rescheduled for February 6^th.  This makes the week of February 3^rd “Coalition Compliance Week” as on February 5^th we are excited to host Brian Miller, GSA Inspector General, and Aleksandra Doran, Assistant General Counsel to the GSA Inspector General, as well as Jonathan Aronie, Partner at Sheppard Mullin for a Myth-Busters Forum on “MAS Contract Compliance and the 5^th Anniversary of the Mandatory Disclosure Rule.”  For more information on these two important contract compliance events please click here.

Touching on the compliance theme, this week’s blog focuses on the impact that the Price Reduction Clause is having on GSA’s acquisition strategies for its Federal Strategic Sourcing Initiatives (FSSI).  As many of you know, last Fall GSA issued a draft Statement of Work (SOW) for the establishment of Multi-Agency Multiple Award Indefinite-Delivery Indefinite Quantity (IDIQ) contracts for Office Supplies Strategic Sourcing (OS3).   GSA’s previous office supply (OS1 and OS2) FSSI efforts utilized Blanket Purchase Agreements (BPAs) under the Multiple Award Schedule (MAS) program as the contracting platform.  In a change of direction, the draft OS3 SOW made clear GSA’s intent to create a new contract vehicle, apart from the MAS program for office supplies.   The proposed new contract vehicle will essentially duplicate the MAS program.

GSA’s MAS program was designed to be a cost effective platform that could be used across a broad spectrum of commercial services and products.   If the program no longer achieves that objective, now is the time to fix the schedule rather than creating a duplicative contract that in the long term will raise costs for both contractors and customers and reduce access to the Federal market for both large and small businesses.

We have a situation where MAS contractors and customer agencies apparently agree that the PRC may play a counter-productive role in the program by driving costs and prices up.  The Coalition provided GSA with insight into the costs associated with the PRC via our 2012 response to GSA’s Paperwork Reduction Act public notice seeking comment on the burdens associated with the clause. GSA’s response to our comments can be found here.  The Coalition’s White Paper on MAS Pricing provides positive framework for reform.  Central to the Paper are recommendations to eliminate or change application of the PRC.  We look forward to a robust dialogue on reforming the pricing policies.

More immediately, GSA still has the opportunity to conduct a streamlined competition for FSSI office supply BPAs under the MAS program that will reduce transactional costs for all.  I know, I know–but what about the potential for the PRC driving up costs under the resulting BPAs?  GSA has options!

Last year, in order to enhance competition, GSA waived application of the PRC for the Air Force’s commercial furniture strategic sourcing procurement!  If GSA can waive application of the PRC for a customer agency’s procurement why can’t it waive the clause for its own acquisition?  Moreover, as authorized in the General Services Acquisition Regulation (GSAR), GSA can issue a class deviation from the PRC under the office supply schedule.  As such, these two options would allow customer agencies, GSA and its MAS contractors to save time and money through a streamlined BPA competition under the MAS program.   Under the circumstances, GSA’s decision to duplicate the MAS program with a new contract vehicle rather than address the underlying PRC is troubling.

Roger Waldron

President

 

Funding Increased for Federal Buildings

This week GSA Administrator Dan Tangherlini announced that GSA has received increased funding for public buildings in the FY 2014 Consolidated Appropriations Act.  GSA will use the funds to repair and maintain existing infrastructure, pay rent for leased buildings, consolidate offices, and upgrade land ports of entry.  According to a GSA press release, the agency has had to forego more than $4 billion worth of capital improvements in recent years due to reduced funding.  However, appropriations of $1 billion in FY 2014 will allow GSA to move forward with maintenance and repair projects within the more than 9,000 federal buildings in GSA’s portfolio.

Congress also provided GSA with $70 million to consolidate space for Federal agencies. GSA is leading the government’s consolidation efforts to reduce the Federal footprint, save taxpayer dollars, and increase energy and water conservation.

There are also a number of specific construction and modernization projects funded through the FY 2014 Consolidated Appropriations Act.  They include $155 million for the Department of Homeland Security’s consolidation project at St. Elizabeth’s in Washington, DC; $226 million for the San Ysidro Port of Entry in Southern California, $61.6 million for the U.S. Land Port of Entry in Laredo, Texas; and $7.4 million for border crossing projects in Columbus, New Mexico.

 

GSA Expo 2014 Cancelled

This week GSA announced the cancellation of GSA Expo 2014. According to GSA’s Expo website, GSA made the decision based on careful review of projected attendance and Federal travel budget reductions.  The GSA Expo Team expressed their commitment to the need for training and will identify the most effective way to offer GSA Expo in 2015.  In lieu of the conference this year, GSA shared some resources available for training online at GSA Interact and GSA.gov.  To read GSA’s announcement, visit   www.expo.gsa.gov.

 

FSSI Industry Day for Buildings Maintenance & Operations

GSA will host a virtual Industry Day on Wednesday, January 29 from 9- 11:00am (EDT) to gather vendor input on the development of a government-wide strategic sourcing program for Building Maintenance & Operations (BMO) services.  During the meeting, GSA will discuss:

• the government’s tentative timeline and general strategy for developing a new BMO program,
• related best practices already under consideration,
• potential demand or performance management strategies that can lead to smarter services acquisition,
• small and local business utilization and how to address possible issues such as geographical constraints and regional pricing differences.

GSA has posted several announcements regarding the FSSI BMO initiative on GSA Interact, including an RFI due today and a video in which BMO program managers talk about the potential new BMO program.

To attend the virtual Industry Day, register here by Tuesday, January 28, at 5 p.m. EDT.

 

NASA OIG: More Spend Analysis for Strategic Sourcing

The Office of Inspector General (OIG) at the National Aeronautics and Space Administration (NASA) supports comprehensive spend analysis as a way to strengthen the agency’s strategic sourcing program. According to a recent report, the OIG found that without regularly performing a comprehensive spend analysis, NASA is unable to review Agency spending patterns for commodities and identify potential candidates for strategic sourcing. The OIG also noted that strategic sourcing has not been sufficiently implemented across the agency in part because of limited guidance and a lack of communication with procurement officials. The report concludes that the agency should take a number of steps, including the following:

• Perform a comprehensive spend analysis to identify potential strategic sourcing candidates and assess changes in agency-wide spending patterns
• Determine if NASA organizations are using strategically sourced commodities to the greatest extent practicable

• Require the use of strategic sourcing initiatives to the maximum extent possible and require officials to document decisions when strategic sourcing initiatives are not used

For the full report including all the recommendations, click here.

 

DISA Mobile Device Management System Launched

The Defense Information System Agency (DISA) plans to launch a new set of mobile capabilities starting January 31 to support as many as 100,000 DOD users of Apple and Android devices across the military, according to Federal Times.  DISA announced Thursday that the initial roll out, or version 1.0 of the mobile device management solution, will focus on managing unclassified devices. The program currently supports 1,800 unclassified mobile devices including iPad 3 and 4, iPhone 4S and 5, Samsung 10.1 tablets and Samsung 3S, and Motorola RAZR devices with participation from the combatant commands, services, and agencies throughout DOD. The program also supports 80,000 BlackBerry phones.

DISA stresses that the mobility program is not business as usual for IT procurements. They are aiming to create a secure adaptive mobile environment necessary incorporate the steady advancement of technology, including application development, changing security architecture requirements, and continuous enhancement of equipment.

 

Interview with Joseph Jordan

Last week, Federal News Radio interviewed Joseph Jordan on his last day as Administrator of the  Office of Federal Procurement Policy.  Jordan stated that savings from strategic sourcing are up, there’s more competition among vendors than in previous years, and that he expects overall federal procurement spending to go down once again when the final fiscal 2013 numbers come in next month. Preliminary estimates from the GAO state that agencies spent about $460 billion on procurement in FY13. Jordan noted during recent years that we have seen the largest two-year decrease in contract spending in history. As Joe leaves OFPP for a private sector job with FedBid, he believes there is clear evidence the government has been able to reign in contract speeding and buy smarter. One of Jordan’s initiatives, the Prices Paid Portal, is in the beta test at GSA. This data will allow the government to conduct more dynamic pricing, Jordan says. “I think as you see current solutions move up the maturity scale and the overall strategic sourcing effort move up the value chain — not to super complex services or any of that, I know there’s concerns about that — but move up from core commodities, you will see those types of things front-and- center.” To listen to the full interview, click here.

 

Compliance Lessons from the Office of Inspector General

By: Jack Horan, Partner, McKenna Long & Aldridge LLP

Effective and compliant contract administration should be a primary goal for all government contractors, including, of course, contractors with the Department of Veterans Affairs (VA).  As with any other business goal, compliance should be attained efficiently.  Within the web of statutory, regulatory, and contractual requirements, VA contractors should understand the areas where noncompliance creates the greatest risk and exposure, and spend their resources accordingly.

As with the Offices of Inspectors General throughout the government, the VA Office of Inspector General (OIG) is a central player in the oversight of contracts, enforcing compliance with all major VA statutory, regulatory, and contractual requirements, and redressing compliance failures.  As part of its responsibilities, the VA OIG reports to Congress twice annually on the audits, reviews, and investigations it conducts.[1]  Although intended for other purposes, these reports can assist VA contractors in identifying the requirements that are of the most importance to the VA, and should be most important to the contractor.  In short, VA OIG’s actions over the prior year serve as a lesson to contractors on where to spend their time and money (and the effect of noncompliance).

The VA OIG has “a nationwide staff of auditors, investigators, health care inspectors, and support personnel” in six major component “offices” that conduct “independent oversight reviews to improve the economy, efficiency, and effectiveness of VA programs, and to prevent and detect criminal activity, waste, abuse, and fraud.”  For a VA contractor, the three component offices that are of most importance are:  (1) the Immediate Office of the IG; (2) the Office of Counselor to the IG; and (3) Office of Investigations.^[2]

The Immediate Office of the IG is top-tier management, with the Deputy Inspector General operating as the “Chief Operating Officer.”  In addition to planning, directing and monitoring all [IG] operations,” the Immediate Office establishes investigative priorities for the Office, and identifies and promotes legislative initiatives to Congress.

The new year should bring a new IG to the VA.  On November 6, 2013, GeorgeOpfer announced his retirement as IG after more than 44 years of government service.  Mr.Opfer assumed responsibility as Inspector General on November 17, 2005, after being nominated by President GeorgeW.Bush.  Although President Obama has not nominated a replacement, Mr.Opfer’s long-time Deputy, RichardGriffin, is currently serving as Acting Inspector General.  Mr.Griffin has been a Deputy Inspector General since November 23, 2008, and previously served as Inspector General from November 1997 to June 2005.

A change in Inspector General can have a significant effect on the priorities, policies, and procedures of an office – as demonstrated by the GSA’s OIG under the direction of the current IG, Brian Miller.  Given his status as Acting Inspector General and his long service under Mr.Opfer, it would be surprising if Mr.Griffin made dramatic changes to the VA OIG’s policies or procedures.  Significant changes will likely come, if at all, under the next IG.

The Office of Counselor provides counsel to the OIG on False Claims Act cases affecting the VA and serves as liaison to the Department of Justice on False Claims Act cases.  The Office of Counselor also manages the Office of Contract Review, which  provides pre-award and post-award audits of contractors’ proposals and contracts under an agreement with VA’s Office of Acquisition, Logistics and Construction (OALC).[3]  The majority of pre-award audits of proposals for contracts or modifications under the VA’s Federal Supply Schedule (FSS) program.  The Office automatically reviews the pricing for all proposals when the estimated contract or modification exceeds $5,000,000 under Schedule 65IB, Drugs, Pharmaceuticals, and Hematology Related Products, and $3,000,000 for the other VA Schedules.  The Office of Contract Review also reviews pharmaceutical manufacturers’ compliance with the pricing requirements of the Veterans Health Care Act.  Thus, the Office of Contract Review reviews pricing for major VA contracts and ensures the pricing is compliant with contractual, regulatory, and statutory requirements, and provides a recommendation to the contracting officer on the prices the VA should pay for items on large FSS contracts.

So how did the pricing proposed by potential contractors fare with Office of Contract Review?  During fiscal year 2013, the Office conducted 83 pre-award audits of proposals of all types, and identified $655,056,285 in cost savings, or an average of $7.9 million in cost savings per audit.[4]  It’s safe to say that the Office did not routinely accept pricing as proposed by the contractors.

How about proposals for FSS awards, renewals or modifications?  Forty-six of the 83 pre-award audits were of proposals for awards, renewals or modifications under the FSS program^[5] – 32 for initial award, ten for renewals, and four for modifications to add products.[6]  The Office recommended a price reduction for 72% (23 of 32) of the audited proposals for initial award.  The Office recommended a total of $470,428,110 in price reductions, with an average of $14.7 million per audit (including all 32 audits).  Thus, offerors submitting proposals for an initial award of an FSS contract fared worse than the average contractor subject to pre-award audits.

With pricing established by the existing contracts, one would expect that the contractor would fare better in pre-award audits for contract renewals.  Contractors did fare better but the Office frequently challenged the proposed pricing.  The Office recommended a total of $18,577,827 in price reductions, with an average of $1,857,783 per audit.  The OIG recommended a price reduction for 60% (six of ten) renewal proposals.

Contractors seeking product additions fared the best over the past year with the OIG recommending price reductions in only 25% (one of four) of its audits.  The one price reduction was a significant one though — $8,615,256.

So, here are the lessons learned from the pre-award audits:

• Most obviously, the OIG takes a hard look at proposed pricing, in the past year rejecting 72% of pricing proposed for initial award, 60% for renewals, and 25% for modifications.
• A contractor needs to be prepared to support its pricing not only when it is seeking the initial FSS contract, but also at renewal and for each modification.

Now let’s look at post award audits – audits conducted to determine whether a contractor is complying with its pricing obligations.  The Office reported 33 post-award audits in fiscal year 2013, which resulted in the VA recovering contract overcharges totaling over $17.6 million.  According to the OIG, approximately $11.7 million of that recovery resulted from Veterans Health Care Act compliance with pricing requirements, recalculation of Federal ceiling prices, and appropriate classification of pharmaceutical products.

Fourteen of the post-award audits were of voluntary disclosures.  The Office claimed more than offered by the contractor in nine of 14 voluntary disclosures.  The average recovery to the VA from voluntary disclosures was $1,157,117.[7]

The VA recovered 100 percent of recommended recoveries for post-award audits.

Lessons learned from post-award audits:

• Pay close attention to your Veterans Health Care Act pricing – it is a major compliance area for the OIG, comprising the largest recovery area.
• Be prepared to support your accounting and rationale for any voluntary disclosures.  The disclosure is likely to be audited and the proposed repayment amount is likely to be challenged.
• Your opportunity to affect the government’s view of your liability is through negotiations with the OIG.  The Office has an excellent record – 100% of the time – of recovering what it determines the VA is due.

Now, a look at the focus of the Office of Investigations over the past fiscal year.  The Office of Investigations (OI) investigates crimes committed against programs and operations of the VA.  Within the OI, the Criminal Investigations division investigates all types of crimes (including criminal fraud as well as rape and murder) and civil fraud.  For fiscal year 2013, the OI reported opening 45 cases, making 11 arrests, and obtaining more than $564.1 million[8] in fines, restitution, penalties, and civil judgments “in the area of procurement practices.”

The OI specifically identified twelve criminal cases involving procurement violations by contractors – all twelve involved service-disabled, veteran-owned small business fraud.  In those cases, the SDVOSB business either misrepresented the eligibility of its owner, or the true ownership of the business.

Lessons learned from the OI:

• Exposure under the False Claims Act for VA contracts can be very significant – reaching over $500 million in 2013.
• People get arrested and go to jail for defrauding the VA.
• If you tell the VA that you are a serviced-disabled veteran and own and operate a SDVOSB, you better be a service-disabled veteran and own and operate the SDVOSB.

Finally, one other lesson learned – this one from the structure of the VA OIG.  Contact by the Office of Contract Review and the Office of Investigations can both lead to civil or even criminal liability, but there is a significant difference.  If the contact comes from the Office of Investigations, the issue has already likely been determined to be a potential civil fraud or criminal violation.  There is no doubt that it is time to call your lawyer.

 

Roger Discusses OFPP with Francis Rose

With Joe Jordan leaving the top position at the office of Federal Procurement Policy, Roger Waldron discusses with Francis Rose why a new leader at OFPP will likely mean a few changes for federal contractors. In Depth with Francis Rose features daily interviews with top government executives and contractors. To listen to the program, visit http://media.dev-cms.com/wtop/32/3234/323429.mp3.

 

Implementing Complex Government Programs

This week on “Off the Shelf”, Peter Andrejev, principal in Booz Allen Hamilton’s Strategic Innovations Group, discusses acquisition management and implementation of complex systems.

In the wake of Healthcare.gov, Andrejev provides his insights into successful planning and execution of complex government programs. He also addresses the unique challenges government program managers face when implementing a major system, including the critical role stakeholder communication management plays in setting expectations and avoiding trouble down the road. To listen to the program online, visit www.federalnewsradio.com/80/3544969/How-to-implement-complex-government-programs.

 

Alliant II Speakers Join GWAC/MAC Committee – Jan. 28

The Coalition will host a GWAC/MAC Committee meeting on January 28 at 10:00am in McLean, Virginia featuring GSA guest speakers on the upcoming Alliant II and Alliant II Small Business contracts.

• Chris Fornecker (Director, GSA GWAC Program)
• Casey Kelley (Director, GSA Enterprise GWAC Division and Program manager for Alliant and Alliant II / Alliant Small Business II)
• Richard Blake (Technical Lead, GSA Alliant GWAC)
• Paul Martin (Alliant, Supervisory Contract Specialist)

Members will have the opportunity to engage in a Myth-buster’s dialogue concerning the upcoming Alliant II contracts with the team from GSA to include a discussion of labor categories (posted on GSA Interact this week).  You do not want to miss this one! If members are interested in attending, they can RSVP to Roy Dicharry at rdicharry@thecgp.org. In response, Roy will send attendees more logistics information including the address.

 

Join The Coalition for a Myth-Busters Dialogue with Brian Miller, GSA, Inspector General 

February 5, 2014

Join Brian Miller, GSA Inspector General and Aleksandra Doran, Assistant Counsel to the GSA Inspector General as the Coalition hosts a Myth-Busters forum focusing on the Mandatory Disclosure Rule, Multiple Award Schedule audits, and contract compliance. In particular, the Forum will examine the impact and implementation of the Mandatory Disclosure Rule and what it continues to mean for MAS Contractors.   Joining Inspector General Miller and his staff will be Jonathan Aronie, Partner at the law firm of Sheppard Mullin.  Look for more details in your inbox and register at www.thecgp.org

Topics will include:

• Mandatory Disclosure Rule policies and procedures
• Best practices for identifying, addressing, and making disclosures
• What to expect after a disclosure is made
• MAS audit expectations and contractor best practices, including keys to the Price Reduction Clause compliance
• The realities and myths surrounding the Mandatory Disclosure Rule program
• Office of the Inspector General frustrations with contractors (and contractor frustrations with the Office of the Inspector General)
• More than price—the other contract compliance requirements that can get you in trouble

About Brian Miller:

As GSA Inspector General, Mr. Miller leads over 300 auditors, special agents, lawyers, and support staff in conducting nationwide audits and investigations that address fraudulent conduct, deficiencies in GSA programs and operations, and the internal controls that govern those activities. Mr. Miller provides strategic and creative leadership by developing new ways to investigate fraud, resulting in over $1 billion in civil recoveries.

What you don’t know can get you in Trouble!

 

Webinar: Fundamentals of Ethics and Compliance – Feb. 6