Friday Flash, 08.10.12

Comment of the Week

Roger is still out of town so I get to do the Comment of the Week.   I’m sure Roger will have more to say on this topic when he returns.

This week the Coalition staff started preparing for the Excellence in Partnership (EIP) Award program which will occur on October 24, 2012 (please “save the date”).  The EIP has long acknowledged and recognized the accomplishments of government and industry acquisition professionals associated with the GSA Multiple Award Schedule program.  This will be the 14th year that the Coalition has hosted the event.  This year’s program marks a significant expansion in the scope of the awards; categories have been broadened to include awards that align with 1) the Administration’s acquisition  goals, and 2) the addition of the Coalition’s new GWACs and MACs Committee.

In looking back over previous award categories and awardees, I am struck by the breadth and significance of programs that agencies have launched using established multiple award contracts.  Customer agencies previously recognized as loyal and innovative users of the GSA Multiple Award Schedule program include Department of Justice, Office of Justice Programs, the Facilities Support Unit, Federal Bureau of Investigations, the Pentagon Renovation Program and NASA’s Glenn Research program.

These acquisition programs could only be developed and sustained through effective collaboration and communication by government and industry.  The EIP celebrates and encourages the type of open communications necessary to run a government that citizens expect and can be proud of.  The Office of Federal Procurement Policy’s (OFPP) mythbuster initiative also embraces effective communications and to that end OFPP has issued two memoranda aimed at breaking down obstacles to communications.

In recent months, there has been a lot of attention, widely reported in the media, on the cost of government spending for conferences and travel. The reports have stimulated a flurry of reaction.  Legislation was introduced that would cap conference expenses and limit travel.  GSA is reportedly reconsidering how per diem rates are calculated in order to lower hotels expenses.  Closer to home, we understand that GSA Acquisition centers have canceled or do not plan on having various industry meetings.

As taxpayers we all recognize the need to use tax dollars wisely.  In the process of getting expenses under control, however, we urge agency officials not to take away one of the fundamental tools that helps government succeed – the power of communication. Electronic communication is great.   We can use webinars, social media and e-mail, however, the power of face to face communication should not be underestimated even as us boomers become outnumbered by Gen Y.

This is definitely not a business as usual time for either government or industry.  The economy and downward pressures on the federal budget make cost savings a high priority for all.  In recognition of these circumstances, the EIP will revise its award categories to include a Savings Award which will go to a government and industry activity based on sound acquisition planning and use of well-defined requirements that lead to significant savings for the government/taxpayer.  We believe this addition aligns the award categories consistent with government priorities as well as industry interests.  Significant achievements are realistic only with effective communications among all parties.  I don’t often get to quote historical figures when I’m talking about acquisition but I like this one so I’ll share it with you.  “If all my possessions were taken from me with one exception, I would choose to keep the power of communication, for by it I would soon regain all the rest.”  Daniel Webster.

We will keep you posted as the EIP details are finalized. But for now, go ahead and take the first step (if you didn’t take it earlier) in joining the Excellence in Partnership Award Program. SAVE THE DATE!!

Carolyn Alston, Executive Vice President and General Counsel

 

Limited Spots Remaining at the 2012 Wounded Veterans Charity Golf Tournament

Less than three weeks remain until the 2012 Wounded Veterans Charity Golf Tournament and players are registering quickly! Limited spots remain, so don’t get shut out! Sponsorships are still available and will be integral to raising the necessary funds to promote the hiring of returning wounded service men and women, providing the training necessary to rejoin the workforce. We are still in need of a Title Sponsor and Beverage Sponsors. Become an Honor America Hole sponsor and bring three people to play with one of these deserving American heroes. Join us on August 29th at the Whiskey Creek Golf Club in Ijamsville, MD, for a day of golf in support of a great cause. Register here>>

Our thanks to those companies who have already made a sponsorship commitment: Luncheon & Reception sponsors: Bridgeborn Inc. and Cachendo; Honor Americans Hole Sponsors: CBRE and Integrity Consulting; Hole and Foursome Sponsors: Accenture, Baker, Tilly; Corporate Care; Dynanet Corporation, Koniag Services Inc.; Metters Inc.; Reznick Government; Toro and TWD; Strategic Sponsor: SAP America. A special thanks to our Keystone Members for their support: Allsteel, Booz Allen Hamilton, GDIT, HON, L-3, McKenna, Long & Aldridge, and Northrop Grumman. Consider joining these great supporters by sponsoring today! Become a Sponsor>>

 

Congress Weighs in on VA Small Business Contracting Debate

Small business contracting processes at the Department of Veterans Affairs are being hotly debated, specifically the Department’s Service-Disabled Veteran-Owned Small Business (SDVOSB) program. In a report released last week, the Government Accountability Office (GAO) advised that while the VA has made significant positive steps in improving the SDVOSB program, the Department should implement additional oversight and align with GAO’s previously made recommendations.

Meanwhile, Congress is claiming that the rules concerning eligibility requirements for the SDVOSB program should be loosened. Members of the House Veterans Affairs Subcommittees on Oversight and Investigations and Economic Opportunity Thursday criticized the requirement that veterans maintain 100 percent control of their companies’ decision making, reported Federal News Radio. Some are worried that the stipulation is too strict, discouraging firms from participating in the program all together. The VA’s rationale for the 100 percent requirement is to eliminate the subjectivity that could complicate the final determination for the SDVOSB program. During the hearing last week, Thomas Leney, executive director of VA’s Office of Small and Disadvantaged Business Utilization stated that a significant amount of firms have been rejected after applying to the program. Rep. Bill Johnson (R-Ohio) is now drafting legislation to remove the requirement for firms to prove that the veteran owns 100 % of the company. According to Federal News Radio, Rep. Johnson believes that because the VA is not implementing the law in the way it was intended, Congress should intervene.

 

President Signs Sequestration Transparency Act

President Obama has signed into law the Sequestration Transparency Act. The law will require the Administration to report on details on how sequestration will be implemented, if need be. The report will be released within 30 days. In addition, it will require the Office of Management and Budget (OMB) to delineate what could be cut if Congress fails to strike a deal to avoid sequestration. Specifically, the contents of the report will include the following:

For discretionary appropriations;
an estimate for each category of the sequestration percentages and amounts necessary to achieve the required reduction including details concerning the impact on accounts and programs that have already been funded through a regular FY2013 appropriation and those that were not.
For direct spending:an estimate for the defense and nondefense functions based on current law of the sequestration percentages and amount necessary to achieve the required reduction; and
an identification of the reductions required for each nonexempt direct spending account at the program, project, and activity level.

The automatic suits would arbitrarily cut $1.2 trillion over the next ten years.

 

GSA Seeks Comments on Demand Based Model

GSA recently published a notice in the Federal Register on a new Demand Based Model (DBM) designed to improve the performance of Multiple Award Schedule (MAS) contracts.  The goal is to realign MAS suppliers based on the demands of the current Federal market.  GSA reports that the MAS program has grown to more than 31 Schedules and over 19,000 contractors in the last 20 years under continuous open “seasons” to receive new offers.  In addition, GSA projects that over 50 percent of MAS contacts awarded in 2011 will not have significant sales, and that the Federal Acquisition Service will spend millions of dollars supporting and managing these low/no sales contracts.  The concern is that this system results in significant costs and burdens for both Government and industry.

GSA is proposing the Demand Based Model to modernize and enhance the performance of the MAS program.  In addition, the plan is intended to maintain the program’s value to Federal agencies as a streamlined vehicle by reducing duplicative contracts, improving contract administration, and increasing the level of GSA customer support.

The Demand Based Model would modify the current practice of a continuous open season for all Schedules.   Under the new model, GSA is proposing to-

  1. Assess each Special Item Number (SIN) level requirements in terms of Federal demand, existing sources, sales performance under existing contracts, changing market dynamics, socio-economic considerations, etc.
  2. Based on this assessment, GSA would determine whether to-
    1. Maintain a continuous open season for the entire Schedule
    2. Maintain a continuous open season for only certain SINS under a Schedule
    3. Close the Schedule or certain SINS on a temporary basis to new offers
    4. Publish the decision in FedBizOpps.  Options would be to-
      1. Maintain a continuous open season for the Schedule or SIN
      2. Temporarily close the Schedule or SIN
      3. Temporarily re-open after a decision to close the Schedule or SIN temporarily
      4. Merge the Schedule or SIN into one or more other Schedules or SINs
      5. Cancel the Schedule or SINs
      6. Temporary closures would be posted in the Federal Register with at least 30 days notice.  No new offers would be accepted after the effective date, except that contractors may submit an offer for a new contract during or after the third year of their third contract option period.
      7. Schedules or SINS that are closed temporarily would be assessed on a periodic basis and would re-open via an open season at least once every 3 years.

Please review GSA’s notice for more details on the plan.  The proposed effective date for the DBM is September 21, 2012.

GSA is seeking public comments on this model, especially from small business.  In addition to general feedback, GSA is requesting responses to the following six questions.  Please note that GSA is particularly interested in detailed comments that address specific operational implementation recommendations.

Questions

  1. There are a wide range of considerations GSA should employ in determining whether additional capacity is needed on a certain Special Item Number (SIN). This includes considerations such as number of contracts, sales trends, average sales per contractor, geography, socio-economic status on the SIN, degree of innovation in the industry, and views from other Federal Agencies. What else should GSA consider in making this decision?
  2. How much advance notice should GSA provide before making a decision for temporary closure? What business factors drive the amount of notice needed?
  3. Once GSA makes an announcement for temporary closure, there is potential for a high number of new offers before the effective date of the temporary closure. It is highly likely that nearly all of these offers will not generate business. What should GSA do with offers received in this window?
  4. To help industry best plan, should GSA’s reassessment be conducted annually, every two years, or every three years? What actions can GSA take to assist industry with planning? For example, is it better to know with certainty when a schedule or SIN will reopen even if that means the duration of closure is longer, or is it better for GSA to take a shorter term view of the question?
  5. Currently, over 50 percent of schedule contracts will not meet the sales retention criteria. Is reducing this percentage to 30 percent an appropriately aggressive interim goal?
  6. Are there other considerations on how to ensure minimum impact to industry with the implementation?

The Coalition will submit comments to GSA on the Demand Based Model due August 22, 2012.  We are collecting feedback from members to incorporate into our comments and want to hear from you.  Please contact Carolyn Alston at calston@thecgp.org or (202) 315-1053 if you have any input or concerns.

 

Administration Considers Executive Order for Cybersecurity

This Wednesday, The Hill reported that the White House is considering using its executive authority to implement cybersecurity standards and requirements after the comprehensive Cybersecurity Act of 2012 failed to reach a vote last week. Possible actions include introducing cybersecurity measures through presidential executive orders, said John Brennan, chief counterterrorism adviser to President Obama. Mr. Brennan’s remarks concerning possible cybersecurity executive orders came during a speech to the Council on Foreign Relations this week. Brennan also detailed that any potential action would be closely aligned with the Administration’s legislative proposal that it submitted to Congress in May 2011. The White House proposal includes a number of provisions that deal with a host of cybersecurity issues including the harmonization and bolstering of cyber crime penalties, voluntary sharing of cyber information between government and industry and the establishment of cybersecurity standards for critical infrastructure companies through third-party commercial auditing.

 

Army Announces $7 billion Green Energy Contracts

The Department of Defense has released a solicitation for $7 billion worth of renewable energy contracts. The procurement covers the installation of solar, wind, biomass, and geothermal power plants at Army installations worldwide. According to NextGov, Assistant Secretary of the Army for installations, energy and environment Katherine Hammock stated that the Army will buy power through 30-year purchase agreements. The procurement comes on the heels of a formal agreement between the Departments of Defense and Interior on renewable energy. The agreement seeks to develop solar energy projects on military installations in the Southwest. The partnership guarantees that land owned by the Bureau of Land Management that DoD will use is available for the 30 year periods. Additionally, the partnership covers 5,300 square miles. The new solicitation was released after the Army issued a draft request for proposals in February of this year. That draft RFP, which attracted 130 companies, was an indication that the service will attract a large amount of bidders said Hammock. Bids are due October 5, 2012.

 

Legal Corner

A Significant Expansion of Public Access – Executive Compensation Disclosure Rule Is Finalized

Guest Bloggers: Jay Gallagher & Phil Seckman, McKenna Long & Aldridge LLP

Pursuant to an interim rule, published July 8, 2010, contractors awarded certain prime contracts and first-tier subcontractors under those prime contracts have been obligated to disclose, among other information, details regarding the total compensation of their five most highly compensated executives.  The interim rule represented a phased implementation of the 2006 Federal Funding Accountability and Transparency Act (Pub. L. 109-282) and its 2008 adjustments (Pub. L. 110-252).  The final rule, published July 26, 2012 and effective August 27, 2012, has made only minor adjustments to the interim rule despite significant public comments.

Absent the applicability of certain exceptions discussed below, based on the phased approach in the interim rule, as of March 1, 2011, any newly awarded prime contract valued at $25,000 or more must contain FAR § 52.204-10.  Pursuant to that clause, among other things, a prime contractor must report the names and total compensation (without regard to the limits on amounts treated as allowable costs) of its five most highly compensated executives for its preceding fiscal year.  Moreover, the prime contractor must report its first-tier subcontract awards valued at $25,000 or more through the Federal Funding Accountability and Transparency Act Subaward Reporting System (“FSRS”), and for each such subcontract, also must report the names and total compensation for the prior fiscal year of each of the five most highly compensated executives of such first-tier subcontractor.

The standard FAR clause also contains a definition for total compensation.  The definition is not necessarily an exhaustive list of sources of compensation, but includes both the cash and noncash executive earnings, including: salary and bonus; stock awards, options, and appreciation rights; earnings for services under non-equity incentive plans; changes in pension value; above-market earnings on deferred compensation that is not tax-qualified; and other compensation such as severance and termination payments that exceed $10,000.  Contractors should take care when determining whom in the organization qualifies as its executive and should consider establishing a procedure to ensure that changes in the identity of the highest paid executives are captured and accurately reflected in the required periodic reporting.

There is a change in the final rule that is likely to cause some consternation for contractors awarded classified contracts.  The interim rule had made clear, in FAR 4.1403(b), that the standard contract clause at FAR 52.204-10 was not required in classified solicitations and contracts.  The final rule makes an important change, now stating that the rule does not require the disclosure of “classified information.”  In other words, classified contracts no longer are likely to be exempt from the reporting requirement and, therefore, may include FAR 52.204-10 in the future.  Prime contractors facing this circumstance should assess, based on the security agreement for each classified contract, whether any of the information to be disclosed under the rule constitutes classified information.  Another consideration would be to seek approval prior to disclosure regarding the information to be released, consistent with DFARS 252.204-7000.

In addition to the foregoing, prime contractors awarded contracts subject to this requirement need to ensure that they flow appropriate requirements down to their first-tier subcontractors.  In this regard, prime contractors may wish to seek indemnity from subcontractors to address a subcontractor’s failure to provide accurate and updated information.

There are important exceptions to the requirement imposed on the prime contractor to disclose the compensation information called for by the rule.  Specifically, disclosure is required only if the contractor received:

  • 80 percent or more of its annual gross revenues, totaling at least $25 million in revenues from federal sources (i.e., contracts, subcontracts, loans, grants, etc.); and
  • The public does not have access to the contractor’s compensation information through reports filed with the SEC or IRS.

In addition to the foregoing, if the contractor or first-tier subcontractor had gross income, from all sources, of less than $300,000, the contractor or first-tier subcontractor is exempt from the reporting requirement.

These exceptions may enable some small businesses and private firms with modest government sales to avoid the reporting obligation.  Nonetheless, the very low $25,000 threshold for applicability of the rule and the fact that it is applicable to commercial item procurements and small businesses means that  executive compensation information will be required from literally hundreds of thousands of contractors.  Moreover, this information must be updated whenever it changes, and prime contractors in particular face yet another on-going compliance responsibility, which, given the statutorily-imposed low contract value threshold, would appear to be of questionable value to the U.S. taxpayer.

The preamble to the final rule makes clear that prime contractors are obligated to ensure compliance by their first-tier subcontractors.  Accordingly, primes will be imposing, by contract, that compliance obligation and any liability associated with non-compliance, on its first-tier subcontractors.  This makes sense given that the subcontractor is in the best position to ensure the accuracy of its information reported in FSRS and will also know when a change occurs that warrants updating reported information.  For these reasons, to the extent prime contractors have not already done so, they must have methods in place to ensure the required information is reported and periodically updated.

The rule represents a significant expansion of the public’s access to federal award information with the stated goal of reducing ‘‘wasteful and unnecessary spending.’’  From the perspective of the legislation’s drafters, this goal will be achieved by “empowering” the American taxpayer with information that can be used to demand greater fiscal discipline from both executive and legislative branches of the federal government.  In other words, government officials ostensibly will be less likely to earmark funds for special projects, because the public will have access to information regarding the transaction.

Avoiding unnecessary federal spending is, of course, a laudable objective.   Unfortunately, the cost of this new rule is estimated to exceed $20 million in added reporting costs and the FAR Council concedes the rule could result in anti-competitive behavior.  Specifically, contractors can use the information regarding subcontract awards and executive compensation to improve their competitive position in future procurements and to lure away executive talent.

Particularly important, however, is the fact that the rule continues the persistent retrenchment from the reforms in commercial item and commercial-off-the-shelf procurements represented by the Federal Acquisition Streamlining Act.  And, while the preambles to the interim and final rules state that 41 U.S.C. §§ 1906, and 1907 (which require affirmative findings by the FAR Council to impose the requirements of new regulations on commercial item or commercially available off-the-shelf item procurements, respectively) were considered when making the decision to impose the reporting requirement on commercial procurement, the actual justifications in the preambles are bereft of any meaningful analysis.  75 Fed. Reg. 39,414 (July 8, 2010).

Only time will tell, but at this point there is no evidence that the taxpayers are using the newly disclosed information to realize the legislators’ vision of greater fiscal discipline from the executive and legislative branches.  In its absence, the estimated cost required to implement the rule appears likely to achieve just the opposite of its intended objective, i.e., more, not less, wasteful and unnecessary spending.

DN:32230783.8

 

OMB Updates Circular A-11

Last Friday, the Office for Management and Budget (OMB) issued an update to Circular A-11, which provides direction to agencies about the preparation, submission, and execution of the Federal budget. In addition, the updated circular includes new guidelines implementing the Government Performance and Results (GPRA) Modernization Act of 2010.  These new requirements cover agency strategic plans, annual performance plans, and quarterly progress reports toward agency priority goals.  Agencies are to post their performance management reports on Performance.gov, a central web-based system where agencies will submit information in a machine-readable format instead of printing agency-specific reports.  An overview of additional changes to Circular A-11 is available at http://www.whitehouse.gov/sites/default/files/omb/assets/a11_current_year/summary.pdf.

 

Upcoming Regulatory Comments

Coalition members please note the following regulatory comments due in September.

Fair & Reasonable Price Analysis

Proposed Rule

Due Sept. 10, 2012

On July 10, a proposed rule was published to modify the price analysis technique used to establish fair and reasonable prices.  The rule would narrow the options available for contracting officers to establish a fair and reasonable price by changing what is considered “adequate price competition”.  The rule would restrict adequate price competition to two offers. 

Improving Contracting Officers’ Access to Relevant Integrity Information

Notice of Request for Comment

Due Sept. 17, 2012

On July 18, the Office of Management and Budget’s Office of Federal Procurement Policy (OFPP) posted a notice of request for comment to the Federal Register. OFPP invites comments from the public on whether changes to current regulations and other guidance might improve contracting officers’ access to relevant information about contractor business ethics in the Federal Awardee Performance and Integrity Information System (FAPIIS). FAPIIS is designed to facilitate the Government’s ability to evaluate the business ethics of prospective contractors and ensure the Government is awarding contracts to responsible sources. OFPP also published a full notice which provides supplementary details about what information they are looking for from the public.

If you have any feedback on the FAR Price Analysis Technique proposed rule or the FAPIIS request for comments, please contact Carolyn Alston at calston@thecgp.org or (202) 600-2915.

 

Coalition Announces September Forums

 Prioritizing for the Future: The DHS Strategic Plan

September 26, 7:15 a.m.

City Club

What’s to come in FY2013 – A Conversation with Joe Jordan

September 11, 7:15 a.m.

City Club

Prioritizing for the Future: The DHS Strategic Plan

 In the current fiscal climate, the procurement community faces significant challenges, as uncertainty weighs heavily on agencies, contractors and acquisition stakeholders; agencies are deciding how to adapt to budget and market concerns.

Join the Coalition on September 26, 7:15 a.m., at the City Club for a forum featuring Nick Nayak, DHS Chief Procurement Officer, providing insight into how DHS plans to meet contracting goals over the next three years.

Learn firsthand about the Department’s initiatives:

  • Promoting small business opportunities
  • Improving workforce training
  • Standardizing policy & oversight
  • Leveraging buying power through strategic sourcing

Gain insight into the future strategic plan:

  • Enhancing contract efficiency through the lifecycle
  • Increasing fiscal responsibility
  • Providing outstanding program support
  • Increasing government & industry communications

Register here!

What’s to Come in FY2013 – A Conversation with Joe Jordan

Join the Coalition for a dialogue with new OFPP Administrator, Joe Jordan, on September 11, 7:15 a.m.  at the City Club, for an in-depth look at the Office of Federal Procurement Policy’s initiatives for FY 2013 and a conversation about the potential impact on contractors.

After being appointed as Administrator, Office of Federal Procurement Policy in May, Joe Jordan introduced a set of agency goals to buy smarter, lead the federal government in strategic sourcing, provide small business opportunities and streamline the procurement process.

Become part of the conversation and learn more about how OFPP plans to address the challenges facing Federal agencies and what that means for agencies, contractors and acquisition stakeholders.

Register here!

 

Coalition Launches Educational Webinar Series

Mark your calendars now!  The Coalition introduces a monthly Educational Webinar Series to address issues relevant to our membership.   Join us the 2nd Tuesday of each month for a 1 hour lunchtime webinar featuring topics of interest to Coalition members presented by a  number of industry experts.

The series kicks off Tuesday, September 11th at 12:30 PM.   Join Cherry, Bekaert & Holland for an educational webinar to discuss Limited Scope Audits, with a focus on Labor, to include a summary discussion of:

  • Overview of what Limited Scope Audits entail
  • Explanation of the different audit objectives between Department of Defense Limited Scope Audits and the Department of Labor limited-scope audit exemption option under ERISA
  • Why do these audits occur?
  • Potential Impacts of Limited Scope Audits on your business and business systems

Brad Smith, CPA and Chris Wade, PMP, CFCM  from Cherry, Bekaert & Holland’s Government Contractor Services Group will be presenting.

Registration details coming soon.