Friday Flash, 01.17.13

Comment of the Week

This has been a profoundly sad, heartbreaking week.  On Monday, our friend and colleague, Joe Caggiano, died suddenly.  Joe was only 48.  He leaves behind five beautiful children, his wife Kathleen and his parents Paul and Sue.  I am overwhelmed at the loss his family must now endure.  The light of his life was his family.  Joe was a wonderful father and a model husband.  During breaks in discussing Coalition business, Joe and I would often exchange stories about our kids.  You could hear the love for his family in his voice and see it in his eyes.

Over the last two years I got to know Joe as we collaborated on Coalition matters.  Just last year Joe became a member of our Board of Directors.  As those of you who knew him can attest, Joe brought unmatched enthusiasm and optimism to all of life’s challenges.  He saw opportunity where others only saw risk.  He always looked to turn a negative into a positive.  He believed in the Coalition’s mission.  His thoughts and actions always focused on what was good for the Coalition membership as a whole.  Joe, I thank you for your support and stewardship of the Coalition.  We will miss you.

Joe was also a patriot.  He served his country as an officer in the United States Navy.  His love of country was reflected in his concern and support of our wounded veterans.  Indeed, Joe was the driving force behind the Coalition’s Annual Charity Golf Tournament Supporting Wounded Veterans.  As Bill Gormley would say “Joe was a ninja!” encouraging potential sponsors to join the cause in support of the tournament.  It was a labor of love for him.   From now on the Coalition Charity Golf Tournament will be known as The Joseph P. Caggiano Memorial Tournament to honor Joe and his unwavering support of our wounded veterans!

Please keep Joe and his family in your thoughts and prayers.

Blessed are they that mourn: for they shall be comforted.  Matthew 5:4

Roger Waldron

President

 

Funeral Arrangements for Joseph P. Caggiano

Friends will be received at PUMPHREY’S BETHESDA-CHEVY CHASE FUNERAL HOME, 7557 Wisconsin Ave., Bethesda, MD on Thursday, January 17 from 7 to 9 p.m. Mass of Christian Burial will be offered at St. Jane Frances de Chantal Catholic Church, 9601 Old Georgetown Rd., Bethesda, MD on Friday, January 18, 2013 at 11 a.m.  In lieu of flowers contributions may be made to the Joseph P. Caggiano Children’s Trust Fund c/o Carolyn Curry, 2095 Royal Fern Lane, Hoover, AL 35244 or to the Coalition for Government Procurement for the Wounded Warriors Fund, 1990 M St., NW, Suite 450, Washington, D.C. 20036.

 

GSA Announces New Mission

This week, GSA Acting Administrator Dan Tangherlini sent a memorandum to all GSA employees announcing the agency’s new mission and priorities.  In the past year, Administrator Tangherlini has been working with employees to define a mission that captures the essence of who GSA is and what they do.  The new statement is:

The mission of GSA is to deliver the best value in real estate, acquisition, and technology services to government and the American taxpayer.

The Coalition supports this new clear and concise mission statement, which gets to the heart of the value and purpose of the agency.  As Administrator Tangherlini noted in his message to employees, GSA’s ability to provide the highest possible value to its customer agencies and the American people has never been more critical.

GSA also announced six new priorities this week that support the agency’s mission.

  1. Delivering Better Value and Savings
  2. Serving our Partners
  3. Expanding Opportunities for Small Business
  4. Making a More Sustainable Government
  5. Leading with Innovation
  6. Building a Stronger GSA

As GSA establishes how they will meet these objectives, the Coalition recommends that the agency also engage in a “myth-buster’s dialogue” with vendor partners.  The development of 10 new strategic sourcing contract vehicles to “deliver better value and savings” to customer agencies is just one area where input from the vendor community can be particularly helpful in creating an efficient and effective path forward.  Industry is also a valuable resource for new commercial technologies that support GSA’s goal of leadership in innovation in technology services, the federal workplace, and a more sustainable government.  The Coalition applauds GSA’s new mission and six priorities, and looks forward to continuing the dialogue towards the achievement of these goals.

 

OMB Directs Agencies to Plan for Reduced Funds

On January 14, the Director of OMB Jeffrey Zients released a memo entitled Planning for Uncertainty with Respect to Fiscal Year 2013 Budgetary Resources. The memo urges agencies to step up planning for potential sequestration cuts, and a possible government shutdown— both scheduled to take place in March of this year. In the memo, Zients wrote “in particular, unless Congress acts to amend current law, the President is required to issue a sequestration order, canceling approximately $85 billion in budgetary resources across the Federal Government.  Further uncertainty is created by the expiration of the Continuing Appropriations Resolution.  This memorandum directs agencies to take certain steps to plan for and manage this budgetary uncertainty”. OMB is ordering agencies to follow certain guidelines in preparing plans to operate with reduced budgetary resources. OMB directed agencies to be aware of the requirements of the WARN Act and to review grants and contracts to determine where cost savings may be achieved in a manner that is consistent with the applicable terms and conditions.

 

GSA Acting Administrator Addresses Strategic Sourcing

In a GSA Blog, GSA Acting Administrator Dan Tangherlini announced the agency’s plans to launch 10 new government-wide strategic sourcing solutions in 2012 and 2013.  Administrator Tangherlini specifically mentioned cleaning products, tools, and wireless devices as commonly purchased commodity items that could benefit from strategic sourcing.  GSA expects that this effort will save taxpayers hundreds of millions of dollars.  In addition, the agency plans to increase the percentage of dollars going to small business, increase green purchasing, and make it easier for customer agencies to comply with procurement rules through strategic sourcing.

OMB’s new Strategic Sourcing Leadership Council is expected to identify at least five products and/or services for which new government-wide acquisition vehicles or management approaches should be developed and made mandatory by March 2013.

For janitorial and sanitation supplies, and maintenance, repair, and operations supplies, a strategic sourcing industry day has been scheduled for January 30, 2013.  Members interested in participating can register and find more details at https://docs.google.com/a/gsa.gov/spreadsheet/viewform?formkey=dFlRdE5xbk1LWmYzYlNDeHprazdtX0E6MQ.

 

Air Force Prepares for Budgetary Uncertainty

The Air Force is advising the heads of its major commands to take immediate steps to start conserving cash in preparation for spending reductions due to budgetary uncertainty in FY 2013. Following guidance from Deputy Secretary of Defense Ashton Carter issued last week, the Air Force is preparing for two budget challenges: the prospect of a full-year continuing resolution and the possibility of sequestration. The Air Force expects that the biggest impact of a full-year continuing resolution would occur in their operations and maintenance accounts as well as its military construction programs. According to Federal News Radio, Gen. Larry Spencer, the Air Force’s Vice Chief of Staff and Dr. Jamie Morin, Acting Undersecretary, sent out specific directions on Monday to implement a freeze on civilian hiring, curtail spending on non-critical flight operations and travel, and cut back on all non-essential purchases. Although the Air Force has already begun to manage programs as though repeated continuing resolutions are the new normal, Morin warned that no amount of cash conservation could fully offset the potential budget impacts in March 2013.

 

Federal Employee Union Suggests Contractor Cuts

The American Federation of Government Employees (AFGE) sent a letter this week asking the Office of Management and Budget to be mindful of dramatic cuts, hiring freezes, and furloughs that could affect the federal workforce. The letter suggests that federal employees have already bore the majority of cuts while contractors have been minimally affected. AFGE states that contractors are more costly and numerous than federal employees. Additionally, AFGE proposes that OMB impose a freeze on new service contracts, the exercise of contract options and the approval of contract modifications. AFGE also recommends that where penalties associated with contract cancellations are lower than the costs of continuing to pay the balance, contracts should be reviewed for termination.

 

Upcoming FAR Council Actions in 2013

The Federal Acquisition Regulations Council expects to finalize as many as nine new regulations in 2013. A semi-annual regulatory agenda posted on the Government Printing Office website contains details on the upcoming proposed rules. Federal News Radio has also provided a list of the most significant upcoming rules.  The Coalition has submitted comments on a number of these regulatory proposals and will continue to do so in 2013.

 

Legal Corner 

Budget Sequestration, the WARN Act and Compliance Costs—Implications for Contractors

Jim Schweiter, Partner, McKenna Long & Aldridge LLP

Last August, Congress passed the Budget Control Act of 2011 (Pub. L. 112-25). This law authorized raising the debt ceiling, established caps on discretionary spending, and put in place a process known as sequestration to implement a total of $1.2 trillion in automatic spending cuts through fiscal year 2021, unless Congress passes a bill which the president signs to avert such a result. Sequestration is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled in order to achieve compulsory deficit reduction.

Much has been written about the draconian effects sequestration will have on the programs, projects and activities of executive branch agencies.   Senior executive branch officials, members of Congress and industry leaders all predict catastrophe if sequestration is implemented.  In the case of government contractors, the decline in new government work caused by funding reductions, or the truncation of existing government work through contract terminations, changes, or other mechanisms, may cause employers to consider terminating or laying off employees.  As a result, it is important for employers to understand their rights and obligations under the Worker Adjustment and Retraining Notification (WARN) Act.[1]

Notification Requirements under the WARN Act

The primary purpose of the WARN Act is to require certain employers to provide at least 60 days advance notice to employees who are impacted by a “plant closing” or “mass layoff.” Each of these terms has a lengthy statutory and regulatory definition but, in brief, a “plant closing” refers to a shutdown of a site of employment resulting in an employment loss for at least 50 employees, while a “mass layoff” means a reduction in force at a single site of employment impacting at least (1) 50 employees and 33 percent of the active employees at that site, or (2) 500 employees.

As a general rule, whenever an employer foresees that 50 or more employees could lose employment at a site of employment within a 90-day period, that employer should carefully analyze whether the definition of a “plant closing” or “mass layoff” may have been met, and thus whether WARN notice requirements have been triggered.  If the WARN notice requirements are triggered, the employer must provide written notice of the anticipated employment loss to (1) the affected employees (or to their representative if unionized), (2) a designated state official, and (3) the chief elected official of the unit of local government within which the layoff or plant closing will occur.  If the employer provides less than 60 days’ notice before the employment action, it may be subject to paying wages and benefits to the affected employees for the portion of the 60-day period in which notice was not given, in addition to other potential penalties.

The WARN Act recognizes that plant closings and mass layoffs cannot always be anticipated months in advance, and certain exceptions to the 60-day notice requirement exist.  The “unforeseeable business circumstances” exception is the relevant exception that would be associated with layoffs or plant closings resulting from the January 2, 2013 onset of sequestration.  This exception encompasses a “sudden, dramatic, and unexpected action or condition outside the employer’s control.”[2]  The Labor Department’s interpretive guidance[3] noted that although budget sequestration can be seen months in advance, the actual impact on a particular contractor may be unknown until much later.  Therefore, an abrupt termination of a particular contract might qualify under the “unforeseeable business circumstances” exception.  If contractors must lay off or separate their employees in less than 60 days, such announcements would be sudden and dramatic and therefore consistent with the WARN Act.  According to the Labor Department, in such cases employers would not have to provide the full 60-day notice.

Contractor Costs and the WARN Act

The Office of Management and Budget (OMB) just issued new guidance that certain liability and litigation costs associated with WARN Act compliance will be allowable costs under government contracts.[4]  Under the OMB memorandum, if sequestration occurs and an agency terminates or modifies a contract which causes the contractor to order a plant closing or layoffs subject to the WARN Act’s notification requirements, and that contractor has followed the Labor Department’s guidance, then any resulting court-determined, WARN Act-based employee compensation costs, attorneys fees and other litigation costs would qualify as allowable costs which would be reimbursable by the contracting agency, regardless of the litigation outcome.  Such costs would also have to be both allocable to the contract in question and reasonable in accordance with existing FAR principles.

This new OMB memorandum has prompted several large defense contractors to announce that they will not issue WARN Act notices before January 2, 2013.[5]  However, the guidance has exacerbated partisan tensions.[6]  Senators Charles Grassley (R-IA) and Kelly Ayotte (R-NH) announced jointly that they had sent a letter of inquiry “asking under what authority the administration is using to say it is okay to disregard the law,” and then promise contractors “a taxpayer funded bailout for their legal expenses if they do so.”[7]

Regardless of the seemingly inevitable partisanship that accompanies the run up to a presidential election, there are several points about the most recent OMB memorandum for contractors to bear in mind.  First, the implementation of sequestration alone does not portend layoffs or plant closings triggering WARN Act notice requirements.  There must be some adverse contract action flowing from sequestration’s funding reductions which affects an employer.  In addition, the OMB guidance clearly contemplates a court determination of both employee compensation costs, as well as attorneys fees and other litigation costs.  However, employers may incur substantial costs associated with the publication and dissemination of WARN Act notices or employee negotiations and settlements not resulting in litigation.  Under the OMB guidance, these costs would not seem to be allowable.  Contractors who anticipate potential WARN Act liability should seek guidance from contracting officers about the extent to which their WARN Act-related costs will be allowable.  Awareness of the OMB memorandum by DCAA and DCMA personnel will almost certainly also take time, and ignorance of the OMB guidance could complicate audits.  Finally, before allowable costs may be reimbursed, the Government must have funds available to do so.  If sequestration occurs, agencies may not have sufficient funding to reimburse WARN Act-related costs.  Even if litigation resulted from a WARN Act dispute, the Judgment Fund[8] would not be available for such purposes because the litigation would not involve the United States.

Prudent employers should prepare for various scenarios and have contingency plans in place to provide appropriate notice as soon as it becomes clear that a particular contract action will cause a WARN-triggering employment loss. Some companies are considering “provisional notices,” which communicate to all employees that federal budgetary issues could result in an employment loss.  However, because they do not indicate which specific employees will be impacted and the specific date on which the employment loss will occur, such provisional notices may be “better than nothing” (and may show the employer’s good faith efforts to try to comply with WARN) but are still unlikely to fully satisfy the requirements of WARN.  Finally, employers should be aware that several states have their own plant closing laws (sometimes referred to as “mini-WARN” statutes), and some of these laws have more stringent requirements that the federal law. Employers should thus analyze relevant state laws in states in which a significant employment loss may occur.


[1] Pub. L. 100-379, codified at 29 USC 2101 et. seq.

[2] 20 C.F.R. 639.9(b)(1); see also, 29 USC 2102(b)(2).

[3] Department of Labor, Training and Employment Guidance Letter No. 3-12, July 30, 2012.

[4] Office of Management and Budget, Guidance on Allowable Contracting Costs Associated with the Worker Adjustment and Retraining Notification (WARN) Act, Memorandum for the Chief Financial Officers and Senior Procurement Executives of Executive Departments and Agencies, Sept. 28, 2012.

[5] Sara Sorcher, White House Moves to Head Off Sequester Layoffs, National Journal, Sept. 29, 2012, at http://www.nationaljournal.com/nationalsecurity/white-house-moves-to-head-off-sequester-layoffs-20120928.

[6] Senators John McCain, R-Ariz., and Lindsey Graham, R-S.C., called the guidance “politically motivated” and said they’d block any contractor payments by the Pentagon to cover failure of issuing WARN Act notices.  Joyce Tsai, Partisan Debate Deepens over Layoff Notices Before Sequestration, Stars and Stripes, Oct. 5, 2012, at http://www.stripes.com/partisan-debate-deepens-over-layoff-notices-before-sequestration-1.192039.

[7] Letter from Senators Charles Grassley and Kelly Ayotte to Jeffrey Zients, Acting Director, Office of Management and Budget, (Oct. 1, 2012), at http://www.grassley.senate.gov/about/upload/100220121.pdf.

[8] 31 USC 1304.

 

DHS Invitation to Coalition Members

March 18th has been set as the date for the Annual DHS Industry Day to be held at the Washington Convention Center.  DHS is proposing to change things around this year so that the event is more informative for the vendor community.  First off, they would like to know what the “Perfect Industry Day Format” would be for our members.  Please send your thoughts and suggestions about what topics would be of most value to hear about during the DHS industry day to Roger Waldron at rwaldron@thecgp.org.

DHS will have a Vendor’s “Exhibit” Room available during the event.  Members should be on the lookout for a FedBizOpps announcement on Friday, January 18th.  If you have any questions concerning event logistics please contact Bob Namejko with DHS at robert.namejko@hq.dhs.gov.

 

DoD & NIH Speakers to Brief GWAC/MAC Committee!

The Coalition is pleased to announce that Mike Canales with Defense Procurement and Acquisition Policy (DPAP) will speak with Rob Coen, Acting Program Director of NIH’s NITAAC program at the next GWAC/MAC Committee meeting on January 22 at 9:30 am. If you would like to be added to the GWAC/MAC Committee email list for further details about the meeting or have questions about the committee in general, please contact Roy Dicharry at rdicharry@thegcp.org.

 

Strategic Sourcing Event, Jan 31 

The Coalition is excited to formally announce the combined association event, The Strategic Sourcing of Professional Services: Is it the Next Step? Is it the Right Step?. The event will take place on Thursday, January 31 from 1 – 3:15 p.m. at the NRECA Conference Center in Arlington, VA. The event will feature a discussion of the key challenges and opportunities associated with strategic sourcing. OFPP Administrator Joe Jordan will provide a keynote address. Mary Davie of the Federal Acquisition Service along with other senior government officials will conduct a panel discussion on strategic sourcing in federal acquisition and other issues. In addition to a government panel, The Coalition for Government Procurement’s Roger Waldron will participate in an industry panel on behalf of the Coalition and its members. To conclude the event, the government and industry panels will join each other for a “Superpanel” discussion and open Question & Answer with GSA, industry, and OFPP Representatives.

The event will include discussions on an overarching strategy for the acquisition of services, GSA’s vision for the anticipated OASIS contract vehicle and the future of strategic sourcing. The link above includes registration information and other details regarding the event. If you have any questions please contact Roger Waldron at rwaldron@thecgp.org.

 

Just Announced: Hearing on IT Investment Reform – Jan 22

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., has called a hearing next Tuesday at 1 p.m. focused on what the committee calls “wasteful” federal government spending on IT systems and services. The hearing will take place on January 22nd at 1pm in 2154 Rayburn House Office Building.

Witnesses

  • The Honorable Tom Davis, Former Member of Congress, and Chairman of the Government Reform Committee
  • Mr. Steven VanRoekel, Federal CIO, White House Office of Management and Budget
  • Mr. David Powner, Director, Information Technology Management Issues, GAO
  • Mr. Douglas Bourgeois, Vice President, Chief Cloud Executive, VMware, Inc.
  • Mr. Michael Klayko, Advisor and Former CEO, Brocade Communications Systems, Inc.
  • Mr. Chris Niehaus, Director, Office of Civic Innovation, Microsoft Corporation

 

Strategic Sourcing Industry Day for JanSan/MRO

GSA has announced a GSA Listen to Industry Day on FSSI Janitorial & Sanitation (JanSan) and Maintenance, Repair, & Operations Products (MRO). Current FSSI commodity solutions include: Express and Ground Delivery services, Wireless Telecommunications Expense Management Services, Office Supplies, and Print Management.  Two new solutions are now in development: 1) Janitorial and Sanitation Products and 2) Maintenance, Repair, and Operations Products (MRO). Specifically, GSA would like to hear from industry about commercial best practices that save money, provide for more efficient business activities, and educate GSA on ways the commercial sector procures these products more efficiently than the government. Attendees will have the opportunity to share best practices, help scope these two vehicles appropriately, identify key requirements, and be prepared to compete. GSA notes that seats are limited so please Register Here! If you have questions about this event, please contact FSSI.JanSan@gsa.gov or FSSI.MRO@gsa.gov.