Friday Flash, 08.17.12

Comment of the Week

I am back!  Thanks to Carolyn for handling the “comment of the week” during my absence.   As Carolyn announced last week, the Coalition is launching a new Excellence in Partnership (EIP) 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.”   This new EIP Savings award reflects the central, fundamental principle of government procurement: effective communication of sound requirements is the key to enhancing competition, achieving savings, and ensuring best value outcomes for government, the taxpayer and industry.

Many of our recent Coalition committee meetings and conversations with government acquisition officials have focused on contract types, structures and processes.  These conversations reflect the common interest in ensuring that multiple award contracts, including the Multiple Award Schedules program, provide effective platforms for efficient competition for agency requirements.   As last week’s Comment noted, communication between government and industry is vital to achieving greater efficiency and cost savings.  Multiple award contracts must be flexible and accountable.  Flexible contract structures enhance the ability of agencies to effectively and efficiently compete requirements at the order level.  Flexible contract structures also empower contractors to offer new commercial technologies and comprehensive solutions to meet customer needs.   Sound, flexible contract structures are at the heart of some of the ongoing discussions regarding GSA’s MAS program and meeting customer requirements.   Here are some of our thoughts on modernizing the GSA schedules program to better address customer needs:

  • Other Direct Costs (ODCs).  Utilizing the existing flexible and accountable procedures and contract terms (FAR Clause 52.212-4, Alternate I) to address the acquisition of materials, ODCs and indirect costs at the task order level would allow customer agencies to more effectively and efficiently compete and acquire requirements under the MAS program.  It will also fundamentally enhance the ability of MAS contractors to offer comprehensive solutions to customer agency requirements,
  • Cost-reimbursement capability.  Adding a cost-reimbursement capability to the MAS program for service requirements would further enhance the ability of customer agencies to compete and acquire their requirements through the program.
  • Contract consolidation.  Allowing companies greater flexibility to consolidate their MAS contracts will enhance the ability to efficiently offer comprehensive solutions to agency requirements.   It will also reduce administrative overhead and paperwork costs for both GSA and its MAS contractors.
  • Demand based model.  Closing schedules is not the answer.  It sacrifices innovation and access to the commercial marketplace.  It puts GSA in a position of trying to pick winners and losers in an ever changing commercial marketplace.  It also will inevitably reduce the ability of MAS contractors (large, medium and small) to team and/or offer complete solutions to meet agency requirements.  One of the hallmarks of the MAS program is its access to the competitive commercial marketplace through continuous open seasons.
  • Blanket Purchase Agreement (BPA) best practices.   The Coalition has developed a statement of MAS BPA best practices.  The best practices focus on the importance of establishing BPAs based on accurate requirements and usage commitments in order to achieve savings.

The Coalition appreciates the willingness of GSA to engage in a Myth-Busters dialogue on these key issues.  We look forward to continuing our conservations with GSA on modernizing the MAS program structures to further enhance competition, efficiency,  innovation and savings.

Next week I will focus on GWACs, MACs and Enterprise contract vehicles.

 

August 29th – Support our Service Members and Hope For the Warriors

The wounds of war, seen and unseen, are a testament to our men and women in uniform who assume great risk to keep us safe at home.

Join us for The Coalition’s Annual Golf Tournament, our major fundraiser for Hope For The Warriors® and a fun filled day of golf and fellowship with some of our nation’s heroes!

The proceeds from this tournament will be donated to non-profit organizations, like Hope For The Warriors®, that support our returning servicemen and women. The mission of Hope for the Warriors® is to enhance the quality of life for post-9/11 service members, their families, and families of the fallen who have sustained physical and psychological wounds in the line of duty. Hope For The Warriors® is dedicated to restoring a sense of self, restoring the family unit, and restoring hope for our service members and our military families.

 

 

 

 

 

 

Last year, we were honored to donate over $10,000 to benefit our veterans.  To do this again, we need support from you!  Please consider participating either as a player or a corporate partner.  This is a great opportunity to network, brand your company and, most importantly, support a worthy cause.  We look forward to seeing you on the links and appreciate your continued support.

 

Athena Oliff Joins the  Coalition

Recently The Coalition for Government Procurement hired Athena Oliff as its new Director of Marketing and Events. In this capacity, Athena manages the marketing and logistics as well as partnerships for all of the Coalition’s annual and monthly events including the Golf Tournament to Benefit the Wounded Veterans Fund, Excellence in Partnership Awards Ceremony, Fall Conference as well as various forums and training. Prior to joining the Coalition, Athena was with the International Association of Fire Chiefs (IAFC), where she worked with industry partners on seven annual trade-shows as the Exhibit Sales & Sponsorship Manager. The largest annual show consisted of over 65 sponsors, 600 companies exhibiting, and 14,000+ attendees. Prior to her IAFC tenure, she worked with the Consumer Electronics Association where she was a sales coordinator for the Consumer Electronics Show (CES).

Athena has a strong knowledge base of exhibits and associations having worked on various shows at Convention Management Group, Water Environment Federation and National Trade Productions. Athena holds a Bachelors of Arts degree in Communications from Longwood College. Welcome Athena!

Members who are interested in sponsorships and upcoming events can reach Athena at 202.315.1052 or aoliff@thecgp.org. Welcome Athena!

 

OASIS Small Business Set-Aside Announced

This week, Jim Ghiloni, Director of the OASIS Program Management Office announced GSA’s

plans to maximize opportunities for small business through the issuance of two OASIS solicitations: one as a small business set-aside and the other unrestricted.  The announcement was made to the OASIS Industry Community on GSA’s Interact.   According to Jim Ghiloni’s blog post, GSA envisions allowing agencies to set aside task orders for direct award or competition under the OASIS Small Business set aside contracts based on socioeconomic category, such as 8(a) business development participants, HUBZone, service-disable veteran-owned, and women-owned small business concerns.  GSA is accepting feedback and questions about this approach at oasis@gsa.gov.

In addition, the OASIS Program Management Office (PMO) is seeking feedback from industry on the timing of the release of the OASIS draft RFP.   Visit Jim Ghiloni’s August 13th blog post for further details.

 

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.

 

DoD Details Strategic Energy Investments

In a press statement on August 15, the Department of Defense said that its proposed budget supports the military’s operational energy goals. The report, entitled Energy Investments for Military Operations: for Fiscal Year 2013, announces that For FY 2013, DoD budgeted approximately $1.6B for operational energy initiatives and approximately $16.3B for fuel purchases.  The Future Years Defense Program (FYDP) budget total for operational energy initiatives is approximately $9.0B. “These investments in new energy technologies, more than 90 percent of which are for energy efficiency or energy- performance upgrades will enable our forces to operate longer and at greater distance while enhancing our energy security at home and, in many cases, reducing costs,” Defense Secretary Leon E. Panetta said in a statement. Sharon Burke, assistant secretary assistant secretary of defense for operational energy plans and programs, stated that the plan seeks “to promote the energy security of military operations in three ways, by reducing the demand for fuel, diversifying energy supplies and incorporating these considerations into building the future force.”

 

GAO Issues Report on Federal Buildings Fund

A newly released GAO report examines GSA’s Federal Building Fund (FBF) that provides funding for GSA’s real property acquisition, operation, maintenance and disposal through deposited rent.  The fee has been in place since 1972 and funds GSA’s Public Buildings Service operations. The study was conducted to examine the factors affecting the resources of the FBF, GSA’s potential repair liability and the implications for the FBF, and how GSA evaluates capital investments in comparison to commercial best practices.

The GAO found that the FBF has increased from $56 million in FY2007 to $2.2 billion in FY2012 due to the growing difference between the resources provided to the FBF and GSA’s use of these funds as determined through the budgeting and appropriations process. GAO also notes that while the fund’s balance has grown, a number of factors have limited its income. Parts of GSA’s inventory operate at a loss. In 2011, approximately 30 percent of GSA’s owned assets decreased in value in 2011, while the total portfolio of leased buildings lost $75 million. Also, GSA holds $4.6 billion in maintenance and repairs, some of which might need to be deferred increasing the cost of the future work. GAO stated that while the information GSA uses to base capital investment decisions largely conforms to GAO and OMB guidance, the process lacks transparency, prioritization and a long-term capital plan. GAO recommends that GSA document how it prioritizes capital investments in its budget guidance and submit a 5-year capital plan to OMB and Congress on an annual basis.

 

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

 

Cloud Brokerage Industry Day

GSA’s Cloud Program Management Office held an Industry Day on August 2 as part of their engagement with the vendor community under the Cloud Brokerage RFI.  Interest in attending the Industry Day was so great that GSA had to turn some away.  Given the overwhelming interest in the RFI, GSA has decided to extend the deadline to September 7th to maximize the opportunity for industry to engage with GSA on the cloud brokerage concept.

The purpose of the RFI is to collect information about how the Government can further leverage cloud computing to achieve savings and increase efficiency, and to learn more about cloud brokerages in particular.  GSA is also asking whether industry is prepared to offer cloud brokerage services today and what potential alternatives are available to help the Government realize the advantages of cloud computing.

GSA’s Cloud Brokerage Industry Day featured cloud experts from GSA as well as the Department of Homeland Security.  The government panel provided more details about what they are interested in hearing from industry as part of the RFI and some of the current challenges agencies are facing.  GSA would like to learn more about how a contract could be structured to allow for a cloud brokerage and how the government could move to a model that would support pay-per-use cloud services like a utility.  Some of the challenges agencies are facing under current cloud computing BPAs are security, vendor lock-in, standardization, and what is viewed as a funding model that is not ideal for procuring cloud services.  While GSA is seriously considering adopting a cloud brokerage model, at this point, it is not the defined solution and GSA is open to new and innovative ways to deliver cloud services to the government.

 

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

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!

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!

 

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.

Register here!

The webinars continue with a two-part series that will be held on October 9th and November 13th.  Please join Baker Tilly for educational webinars to discuss:

Beyond Commercial Item Contracting: A Two-part Primer on Negotiated Contracting Under FAR Part 15

PART 1: FAR Part 15 vs. FAR Part 12 – A New World of Risk

In tough economic times, many commercial companies attempt to maintain or grow revenues by securing contracts with the US Federal Government.  Commercial item contracting (Part 12 of the Federal Acquisition Regulation (“FAR”)) carries the least risk.  When stepping outside the commercial item arena and into the world of negotiated government contracting, unpleasant surprises await the unwary and unprepared.  Expectations of reasonable profits may ultimately yield real losses and latent liabilities. Rewards accrue to those who know beforehand what they’re getting into.  In this one-hour webinar, we will discuss:

    • How the size of your company, contract value, and contract type govern the applicability of contract and regulatory compliance requirements;
    • The essential prerequisites necessary to identify, manage and mitigate compliance risks successfully;
    • The current state of the negotiated government contracting environment, including several hot topics every FAR Part 15 contractor must know.

PART 2: Cost-based Pricing and Billing – Fundamental Government Contract Accounting and Pricing Principles Every Senior-level Manager Must Understand

This fast-paced webinar distills the Government’s cost accounting and cost- based pricing rules into a handful of key principles that every contractor executive must know.  These key concepts, presented in layman’s terms, form an important framework that will help contractors design compliant accounting and pricing practices to avoid significant compliance pitfalls.  While this session is not designed to provide “everything you need to know” in the tedious world of government contract cost accounting and contract pricing, it will help responsible executives prevent or detect potential issues that may significantly impact profitability, competitive positioning, and the Company’s reputation.

Key concepts include:

    • Full absorption cost accounting
    • Direct vs. indirect costs
    • Cost allowability
    • Cost reasonableness
    • Cost allocability and indirect cost rates
    • Consistency
    • Profit or “fee”
    • Disclosure and certification of “cost or pricing data”
    • Game-changer Contract Value Thresholds

Registration info coming soon!