Supply Chain Resiliency: Procurement Lessons Learned
February 24 marks the one-year anniversary of Russia’s invasion of Ukraine. As the conflict continued and Ukraine battled for its sovereignty, the United States, alongside allied nations, provided critical support for Ukraine. Ahead of this one-year anniversary, President Biden reinforced the U.S. pledge of unwavering support to that country. In providing this continuing aid, the U.S. industrial base will be called upon to increase its production of military supplies and weapons. The challenge will be to provide critical support to Ukraine while replenishing and maintaining our national stockpiles to support national defense.
The federal procurement system is the lynchpin in this effort. It connects government requirements to the industrial base, allowing the government to communicate effectively its needs to the supply chain. The procurement system, with all its procedural and customer requirements, essentially shapes the industrial base that supports the federal mission. Of course, fundamental economic and policy impacts and imperatives drive supply chain resiliency for all, including the federal government. Here, we are reminded of the nation’s response to the COVID-19 pandemic, which highlighted the scale, scope, and complexity of the supply chain across a host of healthcare industries. This complexity created both challenges and opportunities in responding to COVID-19. The procurement system allowed for the collaboration between industry and government that was key to response efforts.
Understanding this connection between the government and the industrial base facilitated by the procurement system, both the pandemic and the invasion of Ukraine provide lessons learned in promoting supply chain resiliency. We see these lessons in the areas of Financial Planning and Support, Requirements Development, and Buy American-Buy Allied Sourcing.
I. Sound, Consistent Financial Planning and Support
Sound financial planning and support over the long term is critical to successful execution of agency missions on behalf of the American people. From a procurement perspective, they are essential to maintaining the industrial base and addressing supply chain resiliency. For example, Defense Production Act (DPA) investments made in domestic healthcare supply chain manufacturing capabilities during COVID are at of risk “dying on the vine” without strategic, long term supply contracts that meet mission requirements while supporting these new domestic capabilities. Some items may need diligent rotation to avoid waste and assure the availability of useful products. Those efforts require planning and ongoing financial management that communicates to the market the continuing demand needed to sustain productive capacity. The fear is that, over time, we will lose our focus on addressing the gaps in the supply chain, leaving us right back where we were pre-COVID. Similarly, in the context of Ukraine, we see the importance of strategic contractual/financial commitments to maintain ammunition stocks and production capability.
II. Sound Requirements Development
Sound requirements development is foundational to successful procurement outcomes, including streamlining acquisitions. Part and parcel of sound requirements development is communication/engagement with industry around contract performance requirements, including volume and schedule. Engagement with industry early in the acquisition planning process reduces risk for government and industry. It helps set expectations in the market as to what will drive contract performance parameters. Some of the key contract techniques, practices, and/or features that are products of sound requirements development include the following:
- Clear articulation of contract performance requirements through the statement of work enhances the “meeting of the minds” during contract negotiations, award, and administration. Ultimately, clear, consistent communication of performance requirements ensures the government gets what it needs to meet mission requirements.
- Volume commitments over the long term ensure continued contract support and allow the industrial base to assess the viability of the opportunity.
- Surge capacity as a contract deliverable should be a best practice for critical supplies. Surge capacity as a deliverable ensures that the contract addresses not only the existing need for supplies and services, but also the critical need for supplies and services in exigent circumstances when demand is high.
- Stockpiling is part of a holistic, successful supply chain solution. Acquisition planning should address the stockpiling of critical supplies over time, consistent with developing volume commitments over multi-year contracts.
III. Buy American and Buy Allied
The government’s efforts to build up the nation’s manufacturing capacity and supply base are a positive lesson learned from the pandemic and the Ukraine war. The pandemic revealed challenges and complexities in meeting the healthcare needs of our citizens during an emergency. The Russian invasion of Ukraine and our response in supporting Ukraine’s homeland defense also have revealed challenges in defense industrial production during times of conflict.
Investing in the domestic industrial base, in part, through long term contracts that maintain surge capabilities, clearly makes sense. At the same time, given the scope, scale, and complexity of the global supply chain, Buy Allied should be considered as part of a holistic, strategic approach to a resilient supply chain. America’s relationship with Allies is a strength. Allies play a vital role in the supply chain, both economically and militarily, as they bring unique capabilities to mission needs. Embracing this strength, while investing in domestic capabilities, is a strategic imperative.
The procurement system provides a key opportunity in this regard. Although much of the focus recently has been on the application of the Buy American Act (BAA) to acquisitions, perhaps the Trade Agreements Act (TAA) provides a sound alternative. The TAA and the numerous Free Trade Agreements reflect the potential of a Buy Allied approach that can support a resilient, holistic supply chain. Moreover, under acquisitions subject to the TAA, products, and services from adversaries, like China, are prohibited from purchase by the federal government. In contrast, under acquisitions subject to the BAA, after applying a price differential, products from China can be purchased by the federal government. As such, the TAA approach protects against predatory pricing strategies and “gaming” that can undercut domestic capabilities by excluding products from certain countries. The net result is that the TAA supports domestic capabilities while at the same time including our Allies in the collective support of a mission.
Certainly, the pandemic and the attack on Ukraine represent global threats that have challenged nations seeking to address their effects. In addressing those challenges, however, they have prompted a discussion of the lessons learned for the future and, from the standpoint of government procurement, as discussed here, a recognition of the important connection between government and industry facilitated by the procurement system.
We look forward to continuing the discussion on the role of the procurement system in supporting supply chain resiliency.
Agencies to Increase Diversity in Federal Contracting through New Entrants and Small Business Preferences
The Office of Management and Budget (OMB) released a memo last Friday on the need for action from agencies to develop a diverse and resilient Federal marketplace. Citing the President’s Management Agenda goal of allocating 15 percent of Federal dollars to small, disadvantaged businesses, the memo provides a common definition of the terms “new entrant” and “recent entrant” into the Federal marketplace. A new entrant is an entity of any size that has received a prime Federal contract award over the micro-purchase threshold for the first time or after having not received an award in the previous five fiscal years. A recent entrant is an entity of any size that has received a prime Federal contract award over the micro-purchase threshold during the 3-year period following the fiscal year in which it is a first-time entrant.
According to the memo, “while agencies should seek to increase overall new entrant and recent entrant participation, they are expected to focus their attention on small businesses and the four socio-economic small business categories recognized in the Small Business Act: small disadvantaged businesses, women-owned small businesses, service-disabled veteran-owned small businesses, and small businesses in HUBZones.”
Additionally, the memo highlights the Supplier Base Dashboard, a new tool introduced by the General Services Administration (GSA) to help identify entities that have done business with the Federal Government.
The dashboard breaks down entities by entrant status, small business status or disadvantaged business status. Current information provided in the dashboard uses FY2022 data from FPDS to establish a baseline. Moving forward, FPDS will continue to be used as a resource in tracking agency performance. The memo also states that the OMB will manage the Federal supply chain by identifying market segments that lack contractors and then work with agencies to attract new contractors to these areas.
CBO Projects Debt Limit Timeline for Exhaustion of Extraordinary Measures
The Congressional Budget Office (CBO) issued an analysis stating that on January 19, the U.S. reached its debt limit of $31.4 trillion, and the Department of Treasury announced a “debt issuance suspension period” which allows the agency to take “well-established extraordinary measures to borrow additional funds without breaching the debt ceiling.” CBO predicts that the Federal Government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023 if the debt limit is not changed. The estimated exhaustion date is unclear because the timing and amount of revenue collections over the coming months could differ from CBO’s projections. If these amounts fall short of projections, then extraordinary measures may be exhausted at an earlier date than estimated by the CBO, meaning the Treasury Department could run out of funds before July. If the limit is not raised or suspended before these extraordinary measures are exhausted, then the government would not be able to pay its obligations fully, resulting in the government delaying payments for some activities, defaulting on debt obligations, or both.
New Coalition Event: Green Committee Meeting with Holly Elwood, EPA
On March 9, 10:00 – 11:00 AM EST, the committee will host a virtual, members-only committee meeting with Holly Elwood, Senior Advisor on the Environmentally Preferable Purchasing program at the Environmental Protection Agency (EPA). The meeting will start with an overview of how EPA supports sustainability in Federal procurement. Ms. Elwood will then give committee members an in-depth update on new developments in the Environmentally Preferable Purchasing program, which determines the standards and ecolabels Federal agencies use to identify and buy environmentally preferred products.
To register for the meeting, please click here. For questions or assistance with registration, please contact Ian Bell, Policy Analyst, at ibell@thecgp.org.
Upcoming Coalition Events: IT/Services Committee Meeting, Furniture & Furnishings Committee Meeting and Much More
With the end of February fast approaching and spring afoot, the Coalition has seven members-only events on our calendar. Next week will bring two committee meetings:
- February 28, 10:00 – 11:00 AM EST: IT/Services Committee Meeting with Cheryl Cameron-Thornton, Executive Director of the Office of Acquisition Operations (click here to register)
- March 2, 2:00 – 3:00 PM EST: Furniture and Furnishings Committee Meeting with Integrated Workplace Acquisition Center (IWAC) Leadership Team (click here to register)
At the February 28 meeting, Cheryl Cameron-Thornton, Executive Director at the Office of Acquisition Operations, will provide an update on price escalation adjustments. The event will be held from 10:00 – 11:00 AM EST at the offices of Northrop Grumman, 7575 Colshire Drive, McLean, Virginia. Virtual attendance will also be supported through Microsoft Teams. To register, click here.
For our March 2 Furniture and Furnishings meeting, we will hear from the IWAC Leadership Team, who will provide a general update on the work of IWAC as well as a more focused update on the Packaged Office Program. Our panelists will be IWAC Director Ryan Schrank; John Breen, Branch Chief, Projects; Shaun Kelly, Branch Chief, Multiple Award Schedules; Linda Valdes, Branch Chief, Contract Administration and Kristine Stein, Business Development Director. To register, click here.
Currently, our March calendar includes the following events (please note all times are in EST):
- March 8, 10:00 – 11:00 AM: All-Member Meeting with Erv Koehler, GSA Assistant Commissioner of the Office of General Supplies and Services (click here to register)
- March 9, 10:00 – 11:00 AM: Green Committee Meeting with Holly Elwood, Senior Advisor, EPA (click here to register)
- March 15, 10:00 – 11:00 AM: All-Member Briefing on FY 2023 NDAA: Healthcare Focus with Moshe Schwartz, President, Etherton and Associates (click here to register)
- March 21, 12:00 – 1:00 PM: Pharmaceutical Subcommittee Meeting with Dr. Jennifer Martin, VA PBM (click here to register)
- March 28, 10:00 – 11:00 AM: NASA SEWP Working Group Meeting with Joanne Woytek, NASA (click here to register)
Draft Executive Order to Expand Use of Login.gov
FCW reports that a draft executive order looks to make Login.gov, GSA’s Federal single sign-on platform, a digital identity service option for public benefits programs. The draft executive order aims to cut down on fraud and identity theft in benefits programs after a large number of incidents were reported in pandemic-related programs. The order would task GSA with making Login.gov’s services available across the entire U.S. Additionally, the draft requires that Login.gov services are made available for use in state and local programs. All public benefits programs would be required to offer users access to a publicly-operated digital identity service like Login.gov. The draft requires agencies that offer “high impact” public services, as determined by OMB, to create plans to implement Login.gov as an identity verification option. A release date has not been determined yet for the order.
Technology Modernization Fund Announces New Investments in Cybersecurity
The Technology Modernization Fund (TMF) will invest $40.6 million in improving cybersecurity and digital services at the Social Security Administration (SSA), the Treasury Department, and the U.S. Agency for Global Media, NextGov reports. Announced last Friday by GSA, the investments are the “latest in 38 projects that TMF has provided funding for across 22 agencies.”
At SSA, TMF investments totaling $23.3 million will be used to deploy multi-factor authentication to internal SSA systems, improving the security of personally identifiable information. The Treasury Department will receive $11.1 million to secure the Treasury Foreign Intelligence Network, a system used to share intelligence with other agencies and monitor economic threats, by moving to a more resilient hybrid cloud network. Finally, USAGM will receive $6.2 million to implement Zero Trust technology to protect journalists and employees in hostile media environments and “better control network access.”
The three projects pull total TMF spending past $650 million. Previously, Federal agencies have used the fund to finance Login.gov upgrades, digitization in worker visa programs, and the protection of critical infrastructure. Federal agencies generally reimburse GSA, which manages the operational aspects of the program, for the cost of TMF projects over an agreed-upon period. The fund’s administrators, however, have emphasized that Federal agencies who wish to pursue TMF funding should do so if their project “would produce significant positive impact or would address critical security or capability gaps,” even if they do not expect “a financial return that supports full repayment.”
Recovering Bid Preparation and Proposal Costs for Government Contractors: ARxIUM Provides Helpful Guidance
The Legal Corner provides the legal community with an opportunity to share insights and comments on legal issues of the day. The comments herein do not necessarily reflect the views of The Coalition for Government Procurement.
By Katherine E. Burrows and Eric Valle, PilieroMazza
Filing a bid protest and ultimately recovering bid preparation and proposal costs after winning may not be a primary concern for contractors as they pursue a new contract. However, a recent Court of Federal Claims decision provides useful, but often overlooked, guidance for government contractors hoping to recover costs in such situations. This blog summarizes the Court’s decision in ARxIUM, Inc. v. United States [1] and suggests best practices for contractors to maximize cost recovery and improve bid preparation processes in the future.
ARxIUM comes on the heels of a successful protest. In the initial protest, the Court found that the agency arbitrarily excluded the protester from the competitive range. The agency thereafter took corrective action by amending the solicitation in a manner that precluded the protester from competing for award. The Court concluded the protester was entitled to award of bid preparation and proposal costs and directed the protester to submit to the government “a detailed reckoning” of such costs. The Court requested that the parties return to Court only if they could not reach an agreement on the amount of the recovery.
The protester sought to recover $80,164.48, which it broke down into three cost buckets: (1) employee time and labor, (2) legal advice and counsel, and (3) opportunity costs. The government agreed to pay a majority but not all of the first category of costs and did not agree to pay any costs from the remaining two categories. So the parties returned to the Court.
The Court generally agreed with the government’s position and awarded the protester $20,442.74, approximately one quarter of the amount it sought:
Regarding employee time and labor costs, the Court found that although the protester “did not keep time records like a law firm, records in this form are not necessary to support a small business’s request for proposal costs.” The protester provided “the fully burdened hourly rate for each of the ARxIUM employees who worked on plaintiff’s proposal,” “descriptions of the time spent by ARxIUM employees in preparing the proposal,” and a declaration describing “the work performed and the reasonable methodology . . . adopted to estimate the time taken to perform the various tasks involved.” Given this support, the government “agree[d] with nearly ninety percent of the employee costs” and the Court found the costs “well-explained, documented, and justified.” The Court, however, declined to award any recovery for costs incurred after the agency had revised the solicitation and which “did not result in a revised proposal submission.”
Regarding the legal advice and counsel costs, the government argued that the protester could not recover such costs because “legal fees are only recoverable under the Equal Access to Justice Act, 28 U.S.C. § 2412.” The Court disagreed, noting there may be “otherwise proper circumstances” in which a protester may recover bid preparation and proposal costs for work performed by an attorney—although the Court declined to identify any such circumstances. The Court, however, held that the protester was not entitled to the legal fees it claimed because it incurred those costs after it had submitted its proposal and, thus, the costs were not considered proposal preparation costs.
Regarding the opportunity costs, the Court squarely rejected the protester’s claim, holding such costs would represent a “double recovery” and liked the claim to one for “lost, anticipated profits”—a type of recovery that is not available in bid protests.
No contractor ever wants to file a protest, but protests are a typical part of the procurement process. To ensure that your company can recover as much as possible in the event of a successful protest, ARxIUM suggests you keep as detailed a record as possible of all proposal preparation activities. Having a system in place prior to pursuing a contract, which allows employees to track time contemporaneously, is desired but not required for recovery. At a minimum, contractors should be able to identify specific employees and corresponding fully burdened rates, describe the tasks those employees performed (making sure to only account for the time spent preparing, submitting, or supporting the proposal efforts), and reasonably estimate for how long each employee performed those tasks. It is also important to keep records of any proposal preparation work that other “agents,” potentially including attorneys, perform, as those costs may be recoverable as well. Finally, a successful protest does not entitle a contractor to lost profits or “opportunity” costs.
Even if your company does not end up protesting a procurement, diligently tracking the time spent preparing proposals is not an exercise in futility. The extra data may reveal inefficiencies and help improve proposal preparation processes, which may ultimately result in more contract wins.
While the discussion of bid and proposal costs in ARxIUM was tangential to the merits and could be overlooked, it contains nuggets of gold for contractors. If you have questions about filing a bid protest or bid protest-related matters, please contact Katie Burrows or Eric Valle, the authors of this blog, or another member of PilieroMazza’s Bid Protests or Government Contracts practice groups.
[1] ARxIUM, Inc. v. United States, No. 17-1407C, 2023 WL 1428625 (Fed. Cl. Jan. 24, 2023)
Healthcare Corner:
CBO Publishes Outlook that Shows PACT Act as Major Cost Driver—But Estimates Vary
Last Wednesday, the Congressional Budget Office (CBO) released its 10-year budget and economic outlook. Among its projections, The New York Times reports, is that the Honoring our Promise to Address Comprehensive Toxics (PACT) Act will increase Federal spending by 789 billion dollars over the next decade—but it is possible that the cost will only be about half as much.
The act, signed into law by President Biden in August 2022 and intended to address the effect of open-air burn pits on veteran health, expands the number of veterans eligible to receive health care from the Department of Veterans Affairs (VA) by 3.5 million. It also creates a presumption of service connection for 23 conditions and codifies the VA’s new process for evaluating conditions connected to “military environmental exposure,” increasing the number of veterans who will be to claim these benefits and reducing barriers to claiming them. As of last week, VA had received 309,000 PACT Act claims and approved “almost 60,000 of the nearly 70,000 claims that it has processed.”
The CBO’s 789 billion dollar estimate would make the PACT Act responsible for roughly half of all budgetary outlays over the next decade. The Times notes, however, that the CBO’s estimate does not assume that Congress will decrease discretionary spending on veteran care. According to observers who spoke with the Times, including some White House officials, a decrease in discretionary spending is likely because the PACT Act moved much veteran healthcare spending to the mandatory spending track which does not require annual reauthorization. Were this to occur, “the actual deficit impact of the new law would be about half what it was projected to be” in the CBO’s report.
By Ken Dodds, Live Oak Bank
The following blog does not necessarily represent the views of the Coalition for Government Procurement.
More Joint Venture Developments
Unanimous Consent
SBA’s joint venture (JV) rules provide that the protégé must be the managing venturer of the JV and an employee of the protégé must be the ultimate, responsible manager.[1] SBA’s rules further provide that the managing venturer must be responsible for controlling the day-to-day management of the JV and administration of the contracts, but the consent of other members may be required for some decisions to the extent it is commercially customary.[2] In a case involving a JV agreement which required unanimous approval to initiate a contract claim or litigation, OHA initially found that the JV was ineligible because initiating contract litigation concerns the day-to-day management of the JV.[3] The JV filed a complaint at the Court of Federal Claims, and the case was remanded back to OHA.[4] Based on SBA’s input, in the remand decision OHA found that requiring unanimous consent to pursue contract litigation is permissible and does not deprive the protégé of control of the day-to-day management of the JV or contract administration.[5] SBA intends to clarify in forthcoming regulations that unanimous consent from JV partners can be required to initiate litigation or pursue specific contract opportunities.
Similar Experience
An agency’s solicitation for an order under STARS III required offerors to provide two examples of similar experience. Similar experience was defined as the extent of the contractor’s experience as a firm in providing like or similar services. An 8(a) JV submitted two examples. The first was an example referencing the experience of the non-8(a) minority partner of the JV in a different JV comprised of the same members. The second example was a contract awarded to the non-8(a) minority partner of the JV. An unsuccessful offeror protested the award to the JV, arguing that the agency unreasonably evaluated the experience of the JV. In accordance with the Small Business Act and SBA’s regulations, if a JV does not have the required experience the agency should consider the experience of the individual members of the JV.[6] Based on the record, the awardee submitted examples from the non-8(a) minority partner to the JV, by itself and as part of a different JV entity. The agency did not review an experience example from the JV that submitted the quote or the 8(a) protégé that was the managing partner of the JV submitting the quote. GAO sustained this ground of protest, finding the agency’s evaluation of the experience of only one member of the JV was unreasonable and violated SBA’s regulations.[7]
Do you have a topic you wish to be covered or a question on how Live Oak Bank can support your business? Email me at ken.dodds@liveoak.bank.
[1] 13 CFR 125.8(b)(2)(ii).
[2] 13 CFR 125.8(b)(2)(ii)(A).
[3] Strategic Alliance Solutions LLC, SBA No. VET-277 (September 22, 2022).
[4] Strategic Alliance Solutions LLC v. United States, No. 22-1562C, 2022 WL 17097233.
[5] Strategic Alliance Solutions LLC, SBA No. VET-278 (January 12, 2023).
[6] 15 USC 644(q)(1)(C); 13 CFR 124.513(f), 125.8(e).
[7] AttainX, Inc., B-421216; B-421216.2, Jan. 23, 2023.
Coalition Updates VA Electronic Healthcare Records Modernization Resource for Members
The Coalition has updated its comprehensive resource on the VA EHR modernization effort on the Coalition’s Member Resource Portal. The resource details how VA aims to improve data access and management, a timeline of VA’s deployment of the new EHR system, and VA’s future deployment plans.
The timeline organizes all information regarding VA’s new EHR system, from its initial announcement and development to the current status of deployments. It includes information on delays in deployments, Government Accountability Office (GAO) reports and VA’s strategic review, new approaches VA is incorporating in its deployments, and adjustments to the deployment schedule. The slide deck concludes with maps and tables displaying past and future deployments by Veterans Integrated Services Networks (VISN). Hyperlinks are included throughout the presentation to resources that supplement the content in the slides. Please click here to access the slide deck.
For questions about how to access the VA EHR resource on the Member Portal, contact Ian Bell at ibell@thecgp.org.
DoD OIG Finds Branches, Incorrectly Relying on FedRAMP, Improperly Issue ATOs for Commercial Cloud Services
The Department of Defense Office of the Inspector General (DoD OIG) released an audit last Thursday that found that the Army, Navy, Air Force, and Marine Corps may have been unaware of systemic risks associated with using authorized commercial cloud service offerings (CSOs). Authorizing officials working with CSOs “focused on internal network and system-specific risks, such as the vulnerabilities identified by network security alerts and internal system scans,” incorrectly believing that “FedRAMP and DoD authorization and continuous monitoring processes were sufficient to mitigate risks.” They consequently failed to review all required documentation when granting and reassessing system-level authorizations to operate (ATO) for CSOs and did not know of issues that could impact their branch’s “overall cybersecurity posture, network, or mission.”
To address this issue, the DoD OIG recommended re-evaluating ATO’s for the five CSOs the report studied and that the Chief Information Officer “emphasize the importance of following the DoD Cloud Computing Security Requirements Guide when using commercial CSOs.” Additionally, OIG recommended that the Defense Information Systems Agency (DISA) work with the “Joint Authorization Board for FedRAMP to require that commercial cloud service providers remediate all vulnerabilities or provide documentation that describes why the risk to mission impact is low.”
DLA Receives Small Business Agency of the Year Honor
On February 15, the Defense Logistics Agency (DLA) received the Agency of the Year award from the National (8)a Association and National HUBZone Council at the National Small Business Conference in New Orleans. DLA won the award because of their ability to meet FY22 small business contracting goals set by DoD, as well as because of the agency’s assistance to small businesses with understanding and navigating Federal contracting processes.
For the tenth consecutive year, DLA exceeded its small business contracting goal of 35.1 percent in FY22, with 39 percent of obligations going to small businesses. The agency also exceeded its HUBZone category goal of 3 percent for the second consecutive year. Small business contract obligations totaled nearly $16 billion in FY22. DLA has raised its small business contracting goal for FY23 to 37.3 percent.
GSA Will Host Virtual High-Performance Computing Summit, April 20
On April 20, GSA will host a virtual High-Performance Computing Summit for government and industry attendees to discuss HPC implementation progress, opportunities, and best practices. Guest speakers include panelists from both government and industry who will discuss their experiences with high-performance computing. Participants can register for the event here, and questions can be submitted to panelists in advance of the summit to dccoi@gsa.gov by Thursday, April 13, 2023.
