On Wednesday the Coalition submitted comments in response to GSA’s Federal Register Notice regarding the Federal Acquisition Service’s (FAS’s) intent to institute a Demand Based Model (DBM). Central to the DBM is the prospect of FAS eliminating continuous open seasons for selected schedule solicitations. As stated in our comments to GSA, although the Coalition appreciates GSA’s focus on improving the overall management of the Multiple Award Schedule (MAS) program, the Coalition opposes closing schedules from new commercial offers. This “Comment of the Week” further elaborates on our concerns regarding the potential elimination of continuous open seasons.
Continuous open seasons are foundational to the success of the MAS program. It sets the MAS program apart from all other government-wide contracting programs demonstrating faith in the commercial market’s ability to meet customer agency needs. Through the MAS program, customer agencies have continued access to the latest commercial services and products. Commercial firms seeking to enter the federal marketplace have an ongoing, continuous opportunity to submit, offer and compete for government requirements. As a result, commercial firms bring their latest services and products to the federal marketplace through the MAS program. This enhances competition, increases efficiency and reduces customer agency costs. The success of the MAS program is based on the flexibility, innovation and competition inherent in the commercial marketplace.
Moreover, continuous open seasons are consistent with the statutory framework authorizing the MAS program as a competitive procedure under the Competition in Contracting Act (CICA). The MAS program is considered a competitive procedure under CICA as long as contracts and orders are open to all sources. Continuous open seasons ensure that the program is open to all potential sources wishing to submit an offer.
Continuous open seasons support small, medium and large firms seeking to enter the federal marketplace. In particular, the MAS program provides a low-cost entry point for emerging small business concerns. Historically, at least one third of the dollar value of orders under the MAS program have gone to small business on an annual basis. Closing schedules for new offers will likely significantly reduce opportunities for small business. At the same time, the MAS program is increasingly vital in providing opportunities to medium-sized businesses. These business opportunities translate into hundreds of thousands of jobs across the private sector. By closing solicitations for new offers, GSA will make it more difficult for contractors to team across schedule contracts to meet customer agency needs. It will also likely restrict the ability of commercial firms to bring new products or services to the MAS program and reduce choice for customer agencies. If choice is reduced where will customer agencies go to meet their requirements?
Finally, in lieu of closing solicitations, there are other steps that can be taken to address workload issues in the MAS program. The Coalition has highlighted these steps through prior “Comments of the Week” and in conversations with GSA. These steps include the following:
- Merge solicitations and restructure the SINs to increase the efficiency of the proposal process. Merging solicitations would allow for increased standardization and create consistency across the MAS program which will reduce transactional costs for both GSA and contractors/offerors.
- Reinvigorate Consolidated or Corporate Schedules to allow contractors the improved option to merge their existing schedule contracts into a single Consolidated/Corporate contract. Many firms hold multiple contracts across various schedules but would be interested in consolidating to a single schedule in order to reduce administrative costs. This would benefit GSA, customer agencies and the contractors.
- Update the pricing practices and policies and proposal preparation guidance to better reflect commercial practice. The current pricing practices are outdated. As a result, FAS acquisition centers have crafted unique guidance regarding price negotiations. There is a lack of consistency across centers and from one contracting officer to another. This increase FAS’s costs as well as contractor/offer costs.
- Conduct a pilot project for a new Competitive Services Schedule for Professional IT Services where pricing is set via competition at the order level as recommended by the Acquisition Advisory Panel (AAP). The AAP found that pricing for services is increasingly requirement specific, focusing on creating a framework for enhanced competition and innovation at the task order level rather than pricing at the contract level. GSA could conduct such a pilot and assess the results to see if such an approach would improve program performance.
- Address low or no sales contracts in accordance with existing MAS contract terms and procedures. For at least 15 years, MAS contracts have included terms that address low or no sales contracts. As such, GSA already has the authority and mechanism to address the number of MAS contracts.
The Coalition looks forward to continuing the dialogue with GSA on improving the MAS program.
GSA Tapping Employee Ideas to Save
As part of GSA’s top-to-bottom review, the agency has asked employees for ideas about how to improve performance and efficiency. The program is called The Great Idea Hunt and was launched in May 2012.
“When we began our Top-to-Bottom review of the entire agency, we wanted to look for ways to engage employees in a meaningful way about how to improve the agency and make it more efficient,” said Acting Administrator Dan Tangherlini. “The Great Ideas Hunt originated from there, and I am impressed with the quality of responses received from GSA employees across the country.”
To date, GSA has received over 630 ideas submitted from employees nationwide. This week, GSA announced the top 5 ideas which they plan to implement for an estimated savings of $5.53 million.
- Expand the PrintWise Policy: Two employees suggested that GSA default print settings to ‘double-sided’ to save money on paper and be more environmentally friendly. GSA plans to implement the policy agency-wide. Estimated cost savings: $2.7 million.
- Reduce Subscriptions: An employee suggested reducing the number of newspaper and magazine subscriptions, and using online versions instead. Estimated costs savings: $630,000.
- Eliminate Redundant Survey: Three employees suggested eliminating an employee survey that includes questions already covered by a free Office of Personnel Management survey. GSA has stopped using the survey saving the agency $1 million.
- Create Web-based Surveys: There were four submissions to change the paper-based PBS Tenant Satisfaction Survey with a web-based version. Estimated cost savings: $1.2 million.
- Expand “Great Ideas” Externally: Three employees suggested that GSA reach out to its Federal partners and vendors for more great ideas about how the agency can better manage its offerings. GSA plans to create an external website for this purpose.
The top ideas were voted on by GSA staff, with nearly 20,000 votes received. GSA is also reviewing 40 additional ideas and expects to implement them on a rolling basis. The Coalition applauds GSA’s efforts and looks forward to the implementation of cost savings ideas like Other Direct Costs (ODCs).
DHS Proposes Changes to T&M Contracts
The Department of Homeland Security (DHS) is proposing to amend its Homeland Security Acquisition Regulation to require contracts for time and material or labor hours to
- include separate labor hour rates for contractors and subcontractors and
- a description of the method that the contractor will use to record and bill labor hours for both contractors and subcontractors.
Fixed hourly rates—FAR 16.601(e)(1) allows for three approaches in structuring solicitations for T&M/LH contracts and orders. FAR allows agencies to make one of the three approaches identified in FAR 52.216–29(c) mandatory. The proposed rule would make the procedure at FAR 52.216–29(c)(1), separate rates for each labor category, mandatory for DHS T&M/LH contracts and orders. The proposed rule would require offerors to propose separate, individual labor hour rates for each category of labor to be performed by the prime contractor, each subcontractor, and other divisions or subsidiaries or affiliates of the prime contractor under common control. The procedure would apply only to T&M/LH actions for non-commercial items to be awarded using adequate price competition.
Recording and billing hours under T&M/LH contracts and orders—The proposed rule would require all offerors seeking a T&M/LH contract or order to include a description of their method and their subcontractors’ methods of accounting for uncompensated overtime performed by employees who are exempt from the Fair Labor Standards Act (FLSA). It also includes a requirement that billings and payments under the resulting contracts or orders be made consistent with that description. The procedure would apply to all T&M/LH contracts and orders that exceed the Simplified Acquisition Threshold (SAT).
We would anticipate that the provisions regarding fixed hourly rates will not be applicable to orders against GSA Schedules because the contracts are for commercial items. The provisions regarding the recording and billing hours may be applicable because the rule is applicable to any T&M order over the SAT.
You can read the entire rule at http://www.gpo.gov/fdsys/pkg/FR-2012-08-21/pdf/2012-20442.pdf. Comments are due to the government by October 22.
Golf Tournament August 29 – Support our Service Members and Operation 2nd Chance
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 Operation 2nd Chance 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 Operation 2nd Chance, that support our returning servicemen and women. Operation 2nd Chance is an organization of citizens committed to serving our wounded, injured and ill combat veterans. They support Veterans and their families while they recover in military hospitals, by building relationships and identifying and supporting immediate needs and interests. Operation 2nd Chance is dedicated to promoting public awareness of the many sacrifices made by our Armed Forces.
Last year, we were honored to donate over $10,000 to benefit wounded 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.
DoD Accelerates Payments to Small Businesses
On August 21 Defense Procurement and Acquisition Policy (DPAP) released a memorandum entitled, Class Deviation – Update to Accelerated Payments to Small Businesses. The memo, from DPAP Director Richard Ginman updates a class deviation concerning accelerated payments to small businesses. The memo states that effective immediately, the following DoD entitlement and payment systems are processing all payments to small business concerns in accordance with Defense Federal Acquisition Regulation Supplement (DFARS) 232.903 and 232.906. The systems are:
· Transportation Financial Management System (TFMS)
· Corps of Engineers Financial Management System (CEFMS)
· Automated Voucher Examining and Disbursement System (AVEDS)
· Fuels Automated System (FAS)
· Standard Automated Voucher Examination System (SAVES)
· Mechanization of Contract Administration Services (MOCAS) System
The DoD revised the DFARS to assist small businesses by paying them as quickly as possible after receipt of an invoice and proper documentation. The Department is phasing in the accelerated payments so all DoD systems can implement the required modifications.
Hear from Acquisition Leaders on Off The Shelf
Missed this week’s Off The Shelf program on Federal News Radio 1500AM? Listen online to Coalition President, Roger Waldron’s latest interviews with acquisition leaders both inside and outside government on Off The Shelf.
Sequestration: What it Means for the Federal Market
Beth Farrell and Jim Schweiter, partners at McKenna Long & Aldridge LLP, join Roger Waldron, Coalition President to discuss sequestration and its potential ramifications for government agencies and contractors. Farrell and Schweiter provide an overview of the legislative history and statutory framework of sequestration and what it means for contractor spending. Listen now!
DHS’ Strategic Vision for the Future
Nick Nayak, Chief Procurement Officer for the Department of Homeland Security, also sat down with Roger Waldron to discuss DHS’s strategic plan for acquisition operations for Fiscal Year 2012 through 2014. Nick Nayak outlines the priorities for the DHS Strategic Plan, which includes quality contracting and industry-government communications. Nayak also highlights DHS’ commitment to the professional development of its acquisition workforce as vital to ensuring that the Department’s acquisition operations deliver best value mission support for the American taxpayer. Listen now!
DARPA Enlists Industry for Cyber War
On August 20, the Defense Advanced Research Projects Agency (DARPA) posted to FedBizOpps.gov a special notice seeking industry input on cyber war. The announcement invites companies to attend a “Proposers’ Day” in support of the anticipated Broad Agency Announcement (BAA) for the Plan X program. Put on by the Information Innovation Office (I2O), the Proposers’ Day Workshop will be held on 27 September at the DARPA Conference Center, 675 N. Randolph Street, Arlington, VA from 9:00 am to 4:00 pm EDT. There will be an unclassified morning session and a classified SECRET session, requiring attendees to hold a US DOD SECRET clearance or higher. These sessions will not be open to the public or media.
The solicitation states that the Plan X program objective is to create revolutionary technologies for understanding, planning, and managing cyberwarfare in real-time, large-scale, and dynamic network environments. The program will also conduct research into the nature of cyberwarfare and support development of fundamental strategies and tactics needed to dominate the cyber battlespace. DARPA seeks innovative research in four key areas in support of Plan X:
- Understanding the cyber battlespace
- Automatically constructing verifiable and quantifiable cyber operations
- Developing operating systems and platforms designed to operate in dynamic, contested, and hostile network environments
- Visualizing and interacting with large-scale cyber battlespaces
Attendees are asked to register no later than noon on September 18, 2012. For more information, please see DARPA’s special notice.
Treasury Rule on Contractor Workforce Inclusion
The Department of Treasury issued a proposed rule to amend the Department of Treasury Acquisition Regulation (DTAR) to include a contract clause on the inclusion of minorities and women in the contractor workforce. The rule was published August 21 and is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011 (the Dodd-Frank Act). Per Section 342(c)(2) of the law, Treasury contractors are required to provide a written statement that the contractor shall ensure, to the maximum extent possible, the fair inclusion of women and minorities in the workforce of the contractor, and as applicable, subcontractors. The rule also states that remedies, including termination, may be applied to contractors who fail to make good faith efforts towards these goals. The Treasury interprets “good faith efforts” consistent with Title VII of the Civil Rights Act of 1964, including the identification and elimination of barriers, the widespread publication of employment opportunities, and other forms of outreach to minorities and women.
Treasury proposes that the clause apply to all service contracts above the Simplified Acquisition Threshold. The proposed rule also states that the minority and women inclusion clause be included in all contracts in support of requirements originating from the Treasury Departmental Offices. Comments are due October 22. If you have any feedback on the rule, please contact Carolyn Alston at firstname.lastname@example.org.
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.
September 11 Forum: 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 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 in the upcoming fiscal year and what that means for agencies, contractors and acquisition stakeholders.
Join the “Limited Scope Audits, with a Focus on Labor” Webinar Sept 11
Join Cherry, Bekaert & Holland for an educational webinar on Tuesday September 11 at 12:30 PM.
- 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.
Cloud Brokerage Twitter Chat Next Week
Following the release of the Cloud Brokerage Request for Information (RFI) and the enormous interest and feedback received at the Cloud Brokerage Industry Day, GSA has scheduled a Twitter chat on August 28 from 2:30 – 3:30 pm EDT. GSA has also extended the deadline to respond to the RFI to September 7.
In an August 21 blog post announcing the Twitter chat, Kevin Youel Page, acting assistant commissioner of GSA’s Integrated Technology Service, invited the public to join Mark Day, Director of Strategic Programs at ITS for a Twitter Chat by following @GSA_ITS. Be sure to also follow @TheCGPOrg for updates!
ACI Forum on Government Subcontract Management, Compliance & Enforcement
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