Friday Flash, 05.25.12

 1. Comment of the Week 

Memorial Day marks the unofficial beginning of summer (growing up in small town in Northern Maine it usually seemed that summer didn’t begin till July 4th).  As a child I remember that in days leading up to Memorial Day, members of the Veterans of Foreign Wars (VFW) would stand outside the grocery store requesting donations and handing out “Buddy Poppies.”  To me, these men were a big deal, most were World War II or Korean War Veterans.  These men were considered local heroes, highly respected for their service.  One or two were World War I veterans—I grew up in the 1960’s and 70’s and there were still many World War I veterans who were in their 60’s and 70’s.  On Memorial Day our town would hold a parade honoring those who had fallen in service to our nation.  All the local veterans would march in the parade, accepting donations and handing out Buddy Poppies.

So what is a “Buddy Poppy?”  The Buddy Poppy was inspired by the poem “In Flanders Fields, honoring the fallen of the First World War.   The poem was written by Colonel John McCrae, a Canadian surgeon, who served in the War.  The poem is haunting:

In Flanders fields the poppies blow
Between the crosses, row on row
That mark our place; and in the sky
The larks still bravely singing, fly
Scare heard amid the guns below.
 
We are the dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields
 
Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold high.
If ye break faith with us who die
We shall not sleep though poppies grow
In Flanders fields.
 

The red poppy flower became the “Flower of Remembrance” for those who served on the Allied side in the First World War.  In 1921, the Franco-American Children’s League sold artificial poppies in America to support orphans and those left destitute by the war in Belgium and France.  Subsequently, the Franco-American Children’s League dissolved, and in the spring of 1922 the VFW began selling poppies made in France to support the orphans and destitute.  By 1924, the VFW began selling “Buddy Poppies” made by disabled veterans.

Since that time, the VFW’s National Buddy Poppy Committee has ensured that the artificial poppies are made by veterans located in VA Hospitals and facilities throughout the country.  The proceeds from the sales of a Buddy Poppies primarily go to support local veteran services.  So when you “contribute” or buy a Buddy Poppy at your local grocery store, it will support a veteran and a neighbor!   Please, when you make your grocery list for the Memorial Day barbecue, make sure you include a “Buddy Poppy.”

This Memorial Day, please make sure you take time to honor all service men and women who have fallen in defense of freedom.   God bless them and their families.  God bless and protect all those in harm’s way.  Please also remember those contractor personnel who have fallen while supporting our troops around the world.

More information regarding the history of the Buddy Poppy campaign can be found at the VA and the VFW websites.

2. Some Final Reflections on the Expo

The operative message from last week’s GSA Expo is that GSA has an opportunity for constructive change.  During his meeting with the Coalition, Acting Administrator Dan Tangherlini discussed the ongoing top down review of GSA’s operations and his outreach to customer agencies regarding how GSA can provide even greater value in delivering sound, efficient and effective governmentwide procurement programs.   In doing so, Administrator Tangherlini described GSA as the savings agency for the federal government.  Administrator Tangherlini’s top down review provides the framework for constructive change that enhances GSA procurement operations.  We look forward to an engaging GSA in a Myth-Busters dialogue on this important work.

At the FAS Myth-Busters panel discussion before the Coalition Partnership dinner, FAS Commissioner Steve Kempf and his team focused on their priorities for serving customer agencies.  Chief among the priorities is the Next Generation Schedules.  The Next Generation Schedules is a wonderful opportunity for constructive change based on a top down review of GSA schedule policies, procedures, and contract structure.   There are opportunities to further enhance the value of the GSA schedules program for customer agencies and industry partners.   In our view, the key to the Next Generation Schedules is focusing on and adopting commercial best practices that increase program efficiency and effectiveness through sound opportunities and competition for commercial services and products.

In particular, the Coalition is excited that FAS has made addressing “other direct costs” on GSA schedules a top priority item.  Utilizing existing Federal Acquisition Regulation clauses to effectively and efficiently incorporate ODCs on schedule service orders will increase competition and value for customer agencies while helping to reduce contract duplication.  It would be wonderful to start the new fiscal year with ODCs capability incorporated into the GSA schedules ordering process.  During the FAS Myth-Busters panel, the potential addition of “cost reimbursement” capability to the GSA schedules was also highlighted.  The Coalition strongly supports this strategic effort and looks forward to working with FAS.

Looking ahead, in June, the Comment of the Week will launch a series focusing on the Next Generation schedules.  As part of this series the Coalition will be reaching out to our members and the procurement community at large for feedback.  Finally, next week look for the Coalition’s draft document outlining Federal Supply Sechedule Blanket Purchase Agreement Best Practices.

Have a Happy and Safe Memorial Day Weekend!

3. Survey on Contract Duplication

During the Coalition’s Spring Conference, DoD Director of Pricing, Shay Assad, expressed interest in the results of the Coalition’s Contract Duplication Survey.  Therefore, we are extending the deadline for members to take the survey through Wednesday, May 30th.

The purpose of the Contract Duplication Survey is to collect data on the costs and impacts associated with duplicative government contracts for the same or similar services. Note: Members will need their Coalition Login information in order to access the survey. If you do not know your login information, please contact Roy Dicharry at (202) 331-0975 or rdicharry@thecgp.org.

Take the Contract Duplication Survey!

Please respond by COB Wednesday, May 30th.

Survey responses will be used to develop a white paper that will serve as the foundation for a dialogue with acquisition leadership, including the Department of Defense, on the impact of contract duplication.

4.GSA Postpones SAM Implementation until July

The General Services Administration (GSA) is moving the implementation date of the System for Award Management (SAM) from May 29, 2012 to the end of July 2012 to allow federal agencies to continue preparing their staff, give agencies and commercial system providers even more time to test their data transfer connections, and to ensure SAM contains the critical, documented capabilities users need from the system. In preparation for the launch, GSA conducted extensive testing internally and in coordination with federal agencies using the data from these systems in their own contracting, grants, finance, and other departments. The results will be used to focus the efforts of the next sixty days.

This first phase of SAM will include the capabilities of Central Contractor Registration (CCR)/Federal Agency Registration (FedReg), Online Representations and Certifications Application (ORCA), and the Excluded Parties List System (EPLS). The delay in the implementation of SAM means that CCR/ FedReg, ORCA and EPLS will continue to operate as usual until the end of July.

5. Member Questions for DPAP

The Coalition will hold its quarterly meeting with Defense Procurement and Acquisition Policy (DPAP) Director, Richard Ginman, in June. This is an opportunity for the Coalition to discuss procurement policy matters with the Department of Defense (DoD).  If there are any particular topics or questions that you would like us to address with DPAP, please contact Aubrey Woolley at awoolley@thecgp.org or (202) 315-1053.

6. Senate Committee Investigates Counterfeit Electronic Parts

The Senate Armed Services Committee released a report Monday on the findings of a year-long investigation of counterfeit electronic parts infiltrating the Department of Defense (DoD) supply chain. The investigation was launched by committee chair Sen. Carl Levin (D-Mich.) and  co-chair John McCain (R-Ariz.) to examine the risks and costs that counterfeit parts pose to national security and the economy. The investigation discovered over 1,800 instances where fake parts were used, finding over 1 million counterfeits within those cases. Cases where counterfeits were reported range from the Air Force’s largest cargo plane and Special Ops helicopters, to the Navy Integrated Submarine Imaging System and other military equipment and weaponry.  Although the investigation found that the major source of the counterfeit parts is China, the Chinese government has not intervened to stop counterfeiting operations, and denied U.S. officials access to further investigate.

In response to preliminary findings, a December 2011 amendment to the FY 2012 National Defense Authorization Act (NDAA) was passed to promote counterfeit avoidance and handle the infiltration of the supply chain. However, the report released Monday, concluded that DoD lacks the knowledge of the scope and impact of counterfeits, and that permitting contractors to recover costs linked with failed detection of fake parts is counteracting avoidance and detection efforts. The report explains that the weakness in detection stems from a lack of regulation and knowledge of the network of suppliers, weak testing and failure to report suspicion of counterfeiting. Counterfeit parts create a high risk for the safety of military personnel and the security of the nation, and can cost billions of dollars in lost revenue. Sen. McCain stated that the report makes it clear that the DoD and defense contractors must make a more aggressive effort to address the problem.

7. Senators Call for Evaluation of PBS Structure

On Monday, May 21, Senators Tom Carper (D-Del.), Rob Portman (R-Ohio), Tom Coburn (R-Okla.) and Mark Pryor (D-Ark.) sent a letter to Acting GSA Administrator Tangherlini asking GSA to assess the structure of the Public Building Service (PBS). In the letter, the Senators expressed concern about long-standing problems with property management that have cost the government and taxpayers billions of dollars annually. There are currently 14,000 Federal properties identified as excess and 45,000 as under-utilized. With the current economic climate and campaigns to cut waste, the Senators called for GSA to “strengthen internal controls and oversight within [PBS]” to develop a cost-effective plan to manage Federal real property, eliminate efficiencies and streamline the disposal process. To help eliminate wasteful spending, the Senators introduced the Federal Real Property Asset Management Reform Act of 2012 (S. 2178) that would facilitate excess property disposal. The Senators stressed that a closer look at the PBS organizational structure could aid the effort to better manage Federal property and cut waste.

8. OMB Releases Digital Management Strategy

On Thursday, May 23, the Office of Management and Budget released the Digital Government: Building a 21st Century Platform to Better Serve the American People, outlining the government’s new digital management strategy.  The strategy is designed to:

  • enable more efficient and coordinated digital service delivery by requiring agencies to establish specific, measurable goals for delivering better digital services;
  • encourage agencies to deliver information in new ways that fully utilize the power and potential of mobile and web-based technologies;
  • ensure the safe and secure delivery and use of digital services to protect information and privacy;
  • require agencies to establish central online resources for outside developers and to adopt new standards for making applicable Government information open and machine-readable by default;
  • aggregate agencies’ online resource pages for developers in a centralized catalogue on www.Data.gov; and
  • require agencies to use web performance analytics and customer satisfaction measurement tools on all “.gov” websites.

As part of the plan, GSA will establish and manage a new innovation center. GSA’s Digital Services Innovation Center will work with agencies to establish shared solutions and training to support infrastructure and content needs across the Federal Government.  The center’s activities are expected to cover source code sharing tools, video captioning, language translation, usability and accessibility testing, web hosting, and security architectures.

9. May Legal Corner

Federal Courts Begin To Lose Patience With Opportunistic Relators

Guest Bloggers:  Christopher Loveland and Jonathan Aronie, Sheppard Mullin Richter & Hampton LLP

Since 2005, anyone with even a passing familiarity with GSA’s Multiple Award Schedules Program knows that compliance with the Trade Agreements Act is a key enforcement area of the Office of Inspector General, the Department of Justice, and whistleblowers.  It was in 2005 (continuing into 2006), as many of you will recall, that several office products companies settled False Claims Act (“FCA”) cases with the Department of Justice.  The cases were brought by a whistleblower (known as a “relator” in FCA parlance) alleging that the companies had sold non-TAA products to the government through their Schedule contracts.  These cases, which collectively settled in the neighborhood of $27 million, made the TAA a household word – at least among those households holding GSA schedules.

The 2005 settlements had a significant impact on Schedule contractors and on the Schedules Program generally.  Following the settlements, the GSA Office of Inspector General issued some 200 subpoenas to Schedule vendors as part of a targeted enforcement effort.  GSA contracting officers began incorporating notices of the importance of TAA compliance in solicitation packages, on the GSA web site, and in training materials.  And, important for our purposes here, prospective relators were awakened by the scent of blood in the water, and the profit that that blood could bring.

The sharks began circling Schedule contractors almost immediately.  One of the first relators to test the FCA waters with a TAA case was Mr. Christopher Crennen, who filed a case in Massachusetts on March 28, 2006 against dozens of contractors.  Mr. Crennen was a lawyer by trade from Colorado who reviewed the country of origin labels on the backs of computers and computer accessories in several government offices in Denver, and in his local retail electronics store.  He then took the list of products made overseas and compared it to the products listed by Schedule vendors on the GSA Advantage! website.  When he found a match, he concluded he had identified a False Claims Act violation.  Based upon this “investigation,” Mr. Crennen filed a qui tam action alleging that the defendants had misrepresented and falsely certified that their products complied with the TAA.

Given the scope of Mr. Crennen’s “investigation” and his lack of any inside information, there obviously were a number of problems with his allegations, including his failure to identify even one actual false claim for payment that allegedly was submitted to the government.  It thus should have come as no surprise when, shortly after the complaint was ordered served on September 18, 2009, each of the defendants filed a motion to dismiss arguing that Mr. Crennen’s amended complaint failed to include enough particularity regarding the details of the alleged fraud as required by Rule 9(b) of the Federal Rules of Civil Procedure.

The Court agreed with the defendants, finding that “[a]rticulating a theory as to how a company could violate subsection (a)(1), without more, is insufficient to comply with the requirements of Rule 9(b).”  The Court dismissed Mr. Crennen’s case with prejudice on futility grounds because, “after three years and a government investigation, he still cannot allege that any specific claim was planned or submitted for a product listed on the GSA Advantage! website with a false country of origin.”

Shortly after Mr. Crennen gave it his best shot, Mr. Brady Folliard threw his hat into the ring, filing suit in Washington, DC on April 20, 2007 against a number of Schedule vendors, including several of those previously sued by Mr. Crennen.  Mr. Folliard was no stranger to the lure of the False Claims Act, having filed at least five other qui tam actions, all of which ultimately were dismissed.  Like Mr. Crennen, Mr. Folliard was not a whistleblower in the traditional sense.  He did not work for any of the defendants or have any insider information.  Instead, he based his claims entirely on purported “industry knowledge” and publicly available information.

Not long after the case was unsealed on June 22, 2010 (remember, FCA cases initially are filed under seal), each of the defendants moved to dismiss because Mr. Folliard’s second amended complaint did not satisfy the particularity pleading requirements of Rule 9(b).  Six of the defendants who were parties to the Crennen case also argued that the Court lacked jurisdiction pursuant to what is called the “first-to-file” bar because Mr. Folliard’s complaint alleged the same material elements of fraud as Mr. Crennen, and the claims did not give rise to a separate and distinct recovery by the Government.  The Court agreed that it did not have jurisdiction over those defendants who were parties to the Crennen case because “[a]llowing the complaint to go forward would not reduce fraud or return money to the federal fisc, and it would set a precedent that encourages opportunistic relators.”

Interestingly, while the Court granted the motions to dismiss on first-to-file grounds, it denied the motions based on Rule 9(b).  That resulted in the case proceeding against two of the defendants.  In its Order, however, the Court invited the two remaining defendants to file a motion for “summary judgment following on the heels of the complaint if . . . [their] records discredit the complaint’s particularized allegations.”  Both defendants filed a motion for summary judgment at the outset of discovery, arguing that their records discredited Mr. Folliard’s allegations.  The Court recently granted these motions in part and dismissed two of the relator’s four claims.  The Court further ordered that Mr. Folliard file an amended opposition to each of the defendants’ summary judgment motions regarding the remaining two claims.  Once briefing is complete, the Court will decide summary judgment.

Mr. Bryan Sandager was the most recent relator to jump on the qui tam bandwagon.  He filed an FCA action in Minnesota on July 31, 2008, alleging that almost two dozen contractors misrepresented the country of origin of products listed for sale on the GSA Advantage! website in violation of the TAA.  Like Mr. Crennen and Mr. Folliard, Mr. Sandager did not have any inside information regarding any of the defendants.  In fact, he readily conceded in his Amended Complaint that “[t]he details of each Defendant’s sales to the Government … are peculiarly within each Defendant’s private knowledge and are not known to Relator.”  Instead, he based his allegations entirely on publicly available information gleaned “through his long-held position in the industry.”  Mr. Sandager had worked as a corporate compliance officer since 1999 at one of the defendants’ competitors.

Given the lack of details alleged by Mr. Sandager, all of the defendants moved to dismiss in January 2012, arguing that the amended complaint failed to plead with particularity the “who, what, when, where, and how” of alleged fraud as required by Rule 9(b).  Many of the defendants also moved to dismiss pursuant to the first-to-file bar because Mr. Sandager’s allegations were based on the same underlying allegedly fraudulent conduct as several earlier-filed qui tam actions that were pending when Sandager filed his action, including Crennen and Folliard.

The Court agreed with the defendants.  Not only was the action jurisdictionally barred against many of the defendants under the first-to-file bar, the Court also found that Mr. Sandager’s failure to allege with particularity the existence of even one false claim was “fatal to his claims.”  The Court dismissed the action with prejudice because it did not believe that Mr. Sandager could resolve the “fundamental flaws” in his amended complaint by re-pleading.

The rulings in CrennenFolliard, and Sandager demonstrate that at least some courts are unwilling to grant opportunistic relators a “free pass.”  Claims need to be both properly plead and jurisdictionally sound to get to the discovery stage of a case.  It simply is not enough for a relator to allege a theory or methodology as to how a company could have violated the FCA.  Instead, compliance with Rule 9(b) mandates that specific details be alleged by a relator showing the “who, what, when, where, and how” of the alleged fraud.  Were courts to hold otherwise, it would open the floodgates of baseless lawsuits by opportunistic relators and cause companies to needlessly incur significant resources fending off countless discovery fishing expeditions.

While the outcomes in these cases are encouraging and show a positive trend of Courts standing up against baseless and harassing litigation, they also serve to provide valuable reminders to contractors.  TAA compliance remains a high profile issue and should not be an afterthought.  Products offered for sale to the government on a GSA Schedule must be from trade-compliant countries.  Contractors should take steps to make sure that their contracting personnel are well trained and have in place procedures to confirm compliance with the TAA.  A strong and effective compliance program is a good defense to claims of a “knowing” violation of the FCA. Moreover, it is important to maintain documentation showing that products sold to the government are TAA-compliant.  Contractors need to take the necessary steps not only to guard against whistleblower actions by employees, but also, as demonstrated in the Folliard and Sandager cases, potential actions by competitors.

No contractor expects to be sued under the FCA.  But if it happens, having in place effective safeguards will prove invaluable to a contractor’s defense, saving both time and money.[1]


[1] In the interest of full disclosure, the authors of this article represented several of the defendants in each of the CrennenFolliard and Sandager cases.

10. GAO Recommends More Work on IT Reform 

The Government Accountability Office (GAO) issued a report this week assessing the progress the government has made under OMB’s 25-Point IT Reform Plan. The review was requested by Senators Joseph Lieberman (I- CT), Susan Collins (R-ME), and Tom Carper (D-Del) of the Senate Committee on Homeland Security and Governmental Affairs. GAO assessed 10 action items in OMB’s IT Reform Plan including data center consolidation, the shift to a “cloud first” policy, and the issuance of contracting guidance and templates to support modular development. OMB reported greater progress on the ten action items assessed than GAO determined.  To ensure the success of the IT reform initiatives, GAO recommended that the Federal Chief Information Officer, work with responsible parties to complete the IT Reform Plan’s 18 month deadline of June 2012, or set a new target.  GAO also advised that OMB set more outcome-oriented measures for the 25 objectives in the IT Reform Plan. OMB’s ability to maintain the momentum for government-wide IT reform under the 25 point plan was one of GAO’s key concerns.

11. Federal Shared Services Update 

GSA will be rolling out a new blanket purchase agreement (BPA) for wireless products according to Federal Computer Week (FCW). As the government begins to scale back spending and find efficiencies, agencies are being encouraged to implement the recently released Federal Shared Services Strategy. William Lewis, program manager for workplace modernization at GSA’s Office of Integrated Technology Services, announced the new BPA on May 22 at the GITEC Summit. It is expected to be released this summer, and allow for agencies to purchase mobile technology in bulk. According to Federal Computer Week, Lewis claimed that the common blanket purchasing approach is driven by the Federal Strategic Sourcing Initiative and will help government organizations buy smart phones more easily – and more affordably. He expects agencies to save and streamline the acquisition process through this approach.

Also at the GITEC Summit, Department of Homeland Security Chief Information Officer Richard Spires explained that e-mail as a service and data center consolidation are just part of the comprehensive attitude toward federal IT contained in the new shared services strategy. “We want to get people working more on the mission outcomes and the mission outcomes for their clients than worrying about having to administer commodity IT,” Spires stated.

Source: FCW (http://s.tt/1cruT)

12. DPAP Collecting Sustainable Acquisition Data

Defense Procurement and Acquisition Policy (DPAP) Director, Richard Ginman, issued a memorandum this week requiring Department of Defense (DoD) procurement offices to submit data on their sustainable purchases.  Under DoD’s Strategic Sustainability Performance Plan, 95% of contract actions for applicable products and services must be “sustainable”.  Items meeting the following criteria would qualify:

  • Environmental Protection Agency (EPA)-designated recycled content products
  • Energy-efficient products
  • USDA-designated bio-based products
  • Environmentally preferred products
  • EPEAT-registered products
  • EPA Significant New Alternatives Policy (SNAP)/Non-ozone-depleting substances
  • Water-efficient products (WaterSense, etc.)
  • Other, as defined by agency (Toxic chemicals, etc.)

DoD procurement offices, including the Army Corps of Engineers and the Defense Logistics Agency, will review a sample of 100 applicable contract actions with a value greater than $3,000 from the first and second quarters of FY2012 to determine if the contract actions include requirements for sustainable products and services.  Findings from the review are due June 15, 2012.

13. MAS Basic Training in June

Don’t miss the Coalition’s upcoming MAS Basic Training, June 14 -15 at the offices of McKenna Long in Washington, DC. The intensive, two-day training workshop teaches the basics of utilizing the Multiple Award Schedules program. Over the course of the workshop you will learn how to obtain and manage your GSA schedule, market GSA contracts, comply with Federal procurement requirements, follow policy changes, and prepare for MAS audits. A highlight of the course is training on GSA’s electronic tools including, ebuy, GSAAdavantage! and GSA elibrary. Other material covered will include of structuring your contract to address the schedule compliance requirements while retaining flexibility to compete in the federal and commercial market place, as well as training on the new FAR 8.4 ordering procedures.  The courses will be taught by those on the front lines of GSA schedule negotiations and contract management, including experts from Baker Tilly, McKenna Long & Aldridge LLP, Washington Management Group and The Coalition for Government Procurement.  Attendees are eligible to earn up to 10 CLP credits with submission of an attendance certificate and course training packet available for pick-up after the event.

14DFARS Implementing New Free Trade Agreements

Three Defense Federal Acquisition Regulation Supplement (DFARS) interim rules were published on May 22nd implementing new U.S. free trade agreements.

1.      DFARS: United States-Korea Free Trade Agreement (DFARS Case 2012-D025)
DoD is issuing an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement the United States-Korea Free Trade Agreement. The Republic of Korea is already party to the World Trade Organization Government Procurement Agreement.
2.      DFARS: New Free Trade Agreement with Columbia (DFARS Case 2012-D032)
DoD is issuing an interim rule amending the DFARS to implement the United States—Colombia Trade Promotion Agreement. This Trade Promotion Agreement is a free trade agreement that provides for mutually nondiscriminatory treatment of eligible products and services from Columbia.
3.      DFARS: Defense Trade Cooperation Treaty with the United Kingdom (DFARS Case 2012-D034DoD is issuing an interim rule amending the DFARS to implement requirements of the Treaty Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland Concerning Defense Trade Cooperation (the Treaty) and the Security Cooperation Act of 2010 regarding export control regulations between the United States and the United Kingdom. The Treaty and statute establish an Approved Community that includes members of the U.S. Government and the government of the United Kingdom.

The effective date for these interim rules is May 22, 2012.  Comments are due July 23, 2012.