This week the Office of Management and Budget (OMB) issued a memorandum “Improving Acquisition through Strategic Sourcing.” The memorandum establishes a new Strategic Sourcing Leadership Council (SSLC) and directs each of the 24 Chief Financial Officer (CFO) Act agencies to designate a Strategic Sourcing Accountable Official (SSAO). The SSAO is to have the authority to coordinate each agency’s internal strategic sourcing activities and participation in government-wide efforts. The SSLC is tasked with making recommendations regarding strategies, product areas, data analysis and management structures to support strategic sourcing. In addition, GSA has been tasked with implementing five new government-wide strategic sourcing solutions in both FY 2013 and FY 2014. This marks the latest effort to strategically source products and services across the federal government.
There are other opportunities in the procurement system to increase competition, cost savings efficiency and effectiveness for the American taxpayer. The Coalition for Government Procurement supports efforts to improve the acquisition system for government customers, the taxpayers and industry partners. The current trend towards noncommercial, government unique requirements and mandatory use provisions will, over the long term, reduce competition from, and access to, the latest commercial technologies and solutions. There are several steps the government can take to accelerate and achieve savings across the federal enterprise. An open, commercial based, acquisition system will sustain savings while providing opportunities for small, medium and large businesses – opportunities that mean jobs.
First, put “commercial” back in commercial item contracting. It is the fundamental key to a more efficient, effective and competitive procurement system that delivers best value for government agencies and the taxpayer. This means streamlining the acquisition process, reducing government unique requirements and clauses, and creating a more open system that fosters early adoption of the most current commercial technologies, solutions and pricing techniques. Streamlining the process and reducing government unique requirements will lower costs across the federal acquisition system for government agencies, taxpayers and contractors. It will also increase competition as unnecessary barriers to commercial firms entering the federal market are reduced. Putting “commercial” back in commercial item contracting also means growth and jobs for the private sector.
Second, reduce contract duplication. In a time of tightening budgets, government and industry cannot afford contract duplication that increases bid and proposal, administration and overhead costs for all. These increased costs ultimately get passed onto the taxpayer. There are too many IDIQ contracts across the government enterprise providing the same or similar services and products. It is time for contract rationalization across the government enterprise. It is time to “right-size” the government contract portfolio to an efficient/effective mix of GWACs, MACs and Enterprise contracts. At the same time, steps need to be taken to improve the efficiency and effectiveness of the GSA’s Multiple Award Schedule (MAS) program. For example, the lack of ODCs on the MAS contracts increases contract duplication across government as agencies create their own contract vehicles that include ODCs. This increases costs to the taxpayer. The Federal Acquisition Regulation clearly authorizes ODCs on commercial item contracts like GSA’s MAS contracts. GSA could reduce contract duplication by implementing ODCs on its MAS contracts.
Third, continue a robust “Myth-Busters” dialogue between government and industry regarding our procurement system. The OMB memorandum makes no mention of engagement with the private sector. The partnership between government and industry is vital to ensuring our procurement system provides best value outcomes for the American taxpayer. By continuing the dialogue with contractors and the private sector, the government can gain valuable insight regarding requirements development, commercial best practices and the latest technological developments.
The Coalition and its membership look forward to a continuing dialogue with OFPP on improving the efficiency and effectiveness of the acquisition system.
GSA Expo is the signature annual training and marketing event of the General Services Administration. It is the place where industry meets the marketplace to display the incredible array of services and products available through the GSA Schedule program.
Do you want to know GSA’s vision for Expo in May 2013? Should you expect changes in attendees, the theme, or overall logistics of the conference? Join us in a dialogue with Tamela “Tami” Riggs, Assistant Commissioner, Office of Customer Accounts and Research General Services Administration, Federal Acquisition Service to find out what’s new for Expo 2013. Keeping today’s economic climate in mind, this is a fantastic opportunity to convene directly with the client to ensure your company has the most cost-effective and engaging plan to market your product to the GSA Schedule.
GSA will begin booth sales in mid-January. At this forum, Tamela “Tami” Riggs and the GSA Expo team will share their plans and answer questions to help you develop your marketing strategies for Expo. Our Mythbuster Planning Forum is just in time to position your company to get the most out of this year’s GSA Expo.
All GSA Schedule contractors should plan to attend this forum on January 9th at 8:00am (registration opens at 7:15) at the Crystal Gateway Marriott. We look forward to seeing you there!
To Register, Click Here!
This week, the Coalition hosted a forum on the Election Results and Outlook for the 113th Congress featuring keynote remarks from the Honorable Tom Davis with Deloitte & Touche, former Virginia Congressman and Chairman of the Government Reform and Oversight Committee. Based on comments from Congressman Davis, the political pressures on Members of Congress in the fiscal cliff debate are immense and the parties are still far from a solution. The dynamics of the past election also reveal the cultural and demographic divide between the constituencies of the two parties that are contributing to the impasse.
In addition, members received analysis on sequestration and the impact of the fiscal cliff on contractor business opportunities from a panel of experts including Robert Levinson with Bloomberg Government, Jon Etherton of Etherton & Associates, and John Heath with McKenna Long & Aldridge. Levinson spoke to how sequestration would impact the budget of the Department of Defense (DoD) and the challenges for defense decision-makers about how to implement the automatic cuts. Levinson also advised members about what they should be doing to prepare and how sequestration may impact their government contracts. On the National Defense Authorization Act (NDAA) for FY 2013, Etherton spoke to the aspects of the Senate version of the bill that are of concern for contractors and its prospects moving forward. Heath with McKenna Long provided an overview of the Budget Control Act and how it led to the sequestration debate we are having today. Heath also spoke to future trends that members can expect over the next year in the Schedules program.
On December 5, the Office of Management and Budget (OMB) released a new memo detailing efforts to increase strategic sourcing initiatives across government. The memo “establishes a broad strategic sourcing initiative to ensure that all agencies manage their acquisitions effectively and that, wherever possible, agencies join together to negotiate the best deal for the taxpayer.” OMB goes on to describe that this initiative “puts additional responsibilities for designing and implementing government-wide strategic sourcing solutions on large agencies, which make up the vast majority of all Federal contracting.” As a part of these efforts, OMB is calling for each of the 24 Chief Financial Officers (CFO) to “designate a Strategic Sourcing Accountable Official (SSAO), who will have the authority to coordinate the agency’s internal strategic sourcing activities and its participation in government-wide efforts.”
The OMB memo also establishes an interagency Strategic Sourcing Leadership Council (SSLC) which will be chaired by Administrator for Federal Procurement Policy, Joe Jordan, and includes members from a number of agencies. The memo tasks the newly created council with leading the government’s efforts to increase the use of government-wide management and sourcing of goods and services. Under this obligation, the SSLC will release to OMB a “set of recommendations for management strategies for specific goods and services, including several IT commodities.” Set to be released by March 2013, the report will include the following:
- Identify at least five products and/or services for which new government-wide acquisition vehicles or management approaches should be developed and made mandatory, to the maximum extent practicable
- Identify existing contract vehicles and relevant contract renewal dates that could be used to develop transition strategies to the new solutions
- Propose vendor management or other strategies that could be used to reduce the variability in the prices paid for similar goods and services
- Propose other savings strategies that could be implemented, such as adapting existing vehicles (e.g., Multiple Award Schedules, GWACs, and Multi-agency Contracts) to ensure that certain characteristics of strategic sourcing are followed.
OMB has also laid out specific strategic sourcing initiatives for GSA. These include the implementation of five new government-wide strategic sourcing vehicles each year in FY 2013 and FY 2014. Additionally, GSA is tasked with increasing the transparency of prices paid for common goods and services for use in market research and negotiations. The new strategic sourcing vehicles will include tiered pricing, or other appropriate strategies, to reduce prices as cumulative sales volume increases, and require vendors to provide sufficient pricing, usage, and performance data.
At a press conference this week, Department of Defense (DoD) officials announced that internal planning for sequestration has begun as a result of guidance received from the Office of Management and Budget. “We are at the very start. We don’t have all of the details firmed up. Naturally, we hope very much that sequestration will be avoided. We don’t want to go off the fiscal cliff,” said DoD press secretary George Little. DoD will have to do some detailed planning at some point on the numbers and the specific consequences of sequestration, explained Little. Top defense officials, including Defense Secretary Leon E. Panetta and Chairman of the Joint Chiefs of Staff Army Gen. Martin E. Dempsey, have warned that sequestration would result in devastating cuts to the defense budget and put national security at risk. According to Little, DoD expects the planning efforts to include how the Department can best communicate to its three-million-plus workforce and prepare them for the sequester’s potential impact. “Hopefully, Congress will come to a resolution on sequestration, but we have looked at those impacts and will plan against them.”
On Tuesday, the National Defense Authorization Act (NDAA) for FY 2013 (S. 3254) was passed by the Senate. The bill will authorize a total of $631 billion in defense spending, including $525.3 billion for the base budget and $88.5 billion for operations in Afghanistan. It would require the DoD to reduce the civilian workforce by 5 percent over the next five years and cap government contractor salaries at $230,700. The Senate version of the bill has drawn a veto threat from the White House as it advances to a House-Senate conference committee to resolve the differences between the two bills.
The OASIS team posted a question on the GSA Interact blog this week, asking industry to share their thoughts on geographic pricing for the upcoming OASIS contract vehicle. They have received feedback from federal agency representatives that this capability would potentially make OASIS even more attractive. Please visit the original blog post for more details about how to provide feedback to the OASIS team.
The USDA issued a proposed rule in the Federal Register this week that adds eight new categories of biobased products. These product categories would be afforded Federal procurement preference. The proposed categories are aircraft and boat cleaners; automotive care products; engine crankcase oil; gasoline fuel additives; metal cleaners and corrosion removers; microbial cleaning products; paint removers; and water turbine bearing oils. The rule proposes minimum biobased content levels for each these product categories based on the USDA’s market research. Military equipment is exempt from the biobased procurement preference. However, the proposed rule states that the “exemption does not extend to contractors performing work other than direct maintenance and support of spacecraft or launch support equipment or combat or combat-related missions.” As an example, the rule states that when a paint remover product is used in the refurbishment of office furniture on a military base the biopreferred procurement preference would apply.
Budget Sequestration, the WARN Act and Compliance Costs—Implications for Contractors
Jim Schweiter, Partner, McKenna Long & Aldridge LLP
Last August, Congress passed the Budget Control Act of 2011 (Pub. L. 112-25). This law authorized raising the debt ceiling, established caps on discretionary spending, and put in place a process known as sequestration to implement a total of $1.2 trillion in automatic spending cuts through fiscal year 2021, unless Congress passes a bill which the president signs to avert such a result. Sequestration is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled in order to achieve compulsory deficit reduction.
Much has been written about the draconian effects sequestration will have on the programs, projects and activities of executive branch agencies. Senior executive branch officials, members of Congress and industry leaders all predict catastrophe if sequestration is implemented. In the case of government contractors, the decline in new government work caused by funding reductions, or the truncation of existing government work through contract terminations, changes, or other mechanisms, may cause employers to consider terminating or laying off employees. As a result, it is important for employers to understand their rights and obligations under the Worker Adjustment and Retraining Notification (WARN) Act.
Notification Requirements under the WARN Act
The primary purpose of the WARN Act is to require certain employers to provide at least 60 days advance notice to employees who are impacted by a “plant closing” or “mass layoff.” Each of these terms has a lengthy statutory and regulatory definition but, in brief, a “plant closing” refers to a shutdown of a site of employment resulting in an employment loss for at least 50 employees, while a “mass layoff” means a reduction in force at a single site of employment impacting at least (1) 50 employees and 33 percent of the active employees at that site, or (2) 500 employees.
As a general rule, whenever an employer foresees that 50 or more employees could lose employment at a site of employment within a 90-day period, that employer should carefully analyze whether the definition of a “plant closing” or “mass layoff” may have been met, and thus whether WARN notice requirements have been triggered. If the WARN notice requirements are triggered, the employer must provide written notice of the anticipated employment loss to (1) the affected employees (or to their representative if unionized), (2) a designated state official, and (3) the chief elected official of the unit of local government within which the layoff or plant closing will occur. If the employer provides less than 60 days’ notice before the employment action, it may be subject to paying wages and benefits to the affected employees for the portion of the 60-day period in which notice was not given, in addition to other potential penalties.
The WARN Act recognizes that plant closings and mass layoffs cannot always be anticipated months in advance, and certain exceptions to the 60-day notice requirement exist. The “unforeseeable business circumstances” exception is the relevant exception that would be associated with layoffs or plant closings resulting from the January 2, 2013 onset of sequestration. This exception encompasses a “sudden, dramatic, and unexpected action or condition outside the employer’s control.” The Labor Department’s interpretive guidance noted that although budget sequestration can be seen months in advance, the actual impact on a particular contractor may be unknown until much later. Therefore, an abrupt termination of a particular contract might qualify under the “unforeseeable business circumstances” exception. If contractors must lay off or separate their employees in less than 60 days, such announcements would be sudden and dramatic and therefore consistent with the WARN Act. According to the Labor Department, in such cases employers would not have to provide the full 60-day notice.
Contractor Costs and the WARN Act
The Office of Management and Budget (OMB) just issued new guidance that certain liability and litigation costs associated with WARN Act compliance will be allowable costs under government contracts. Under the OMB memorandum, if sequestration occurs and an agency terminates or modifies a contract which causes the contractor to order a plant closing or layoffs subject to the WARN Act’s notification requirements, and that contractor has followed the Labor Department’s guidance, then any resulting court-determined, WARN Act-based employee compensation costs, attorneys fees and other litigation costs would qualify as allowable costs which would be reimbursable by the contracting agency, regardless of the litigation outcome. Such costs would also have to be both allocable to the contract in question and reasonable in accordance with existing FAR principles.
This new OMB memorandum has prompted several large defense contractors to announce that they will not issue WARN Act notices before January 2, 2013. However, the guidance has exacerbated partisan tensions. Senators Charles Grassley (R-IA) and Kelly Ayotte (R-NH) announced jointly that they had sent a letter of inquiry “asking under what authority the administration is using to say it is okay to disregard the law,” and then promise contractors “a taxpayer funded bailout for their legal expenses if they do so.”
Regardless of the seemingly inevitable partisanship that accompanies the run up to a presidential election, there are several points about the most recent OMB memorandum for contractors to bear in mind. First, the implementation of sequestration alone does not portend layoffs or plant closings triggering WARN Act notice requirements. There must be some adverse contract action flowing from sequestration’s funding reductions which affects an employer. In addition, the OMB guidance clearly contemplates a court determination of both employee compensation costs, as well as attorneys fees and other litigation costs. However, employers may incur substantial costs associated with the publication and dissemination of WARN Act notices or employee negotiations and settlements not resulting in litigation. Under the OMB guidance, these costs would not seem to be allowable. Contractors who anticipate potential WARN Act liability should seek guidance from contracting officers about the extent to which their WARN Act-related costs will be allowable. Awareness of the OMB memorandum by DCAA and DCMA personnel will almost certainly also take time, and ignorance of the OMB guidance could complicate audits. Finally, before allowable costs may be reimbursed, the Government must have funds available to do so. If sequestration occurs, agencies may not have sufficient funding to reimburse WARN Act-related costs. Even if litigation resulted from a WARN Act dispute, the Judgment Fund would not be available for such purposes because the litigation would not involve the United States.
Prudent employers should prepare for various scenarios and have contingency plans in place to provide appropriate notice as soon as it becomes clear that a particular contract action will cause a WARN-triggering employment loss. Some companies are considering “provisional notices,” which communicate to all employees that federal budgetary issues could result in an employment loss. However, because they do not indicate which specific employees will be impacted and the specific date on which the employment loss will occur, such provisional notices may be “better than nothing” (and may show the employer’s good faith efforts to try to comply with WARN) but are still unlikely to fully satisfy the requirements of WARN. Finally, employers should be aware that several states have their own plant closing laws (sometimes referred to as “mini-WARN” statutes), and some of these laws have more stringent requirements that the federal law. Employers should thus analyze relevant state laws in states in which a significant employment loss may occur.
 Pub. L. 100-379, codified at 29 USC 2101 et. seq.
 20 C.F.R. 639.9(b)(1); see also, 29 USC 2102(b)(2).
 Department of Labor, Training and Employment Guidance Letter No. 3-12, July 30, 2012.
 Office of Management and Budget, Guidance on Allowable Contracting Costs Associated with the Worker Adjustment and Retraining Notification (WARN) Act, Memorandum for the Chief Financial Officers and Senior Procurement Executives of Executive Departments and Agencies, Sept. 28, 2012.
 Sara Sorcher, White House Moves to Head Off Sequester Layoffs, National Journal, Sept. 29, 2012, at http://www.nationaljournal.com/nationalsecurity/white-house-moves-to-head-off-sequester-layoffs-20120928.
 Senators John McCain, R-Ariz., and Lindsey Graham, R-S.C., called the guidance “politically motivated” and said they’d block any contractor payments by the Pentagon to cover failure of issuing WARN Act notices. Joyce Tsai, Partisan Debate Deepens over Layoff Notices Before Sequestration, Stars and Stripes, Oct. 5, 2012, at http://www.stripes.com/partisan-debate-deepens-over-layoff-notices-before-sequestration-1.192039.
 Letter from Senators Charles Grassley and Kelly Ayotte to Jeffrey Zients, Acting Director, Office of Management and Budget, (Oct. 1, 2012), at http://www.grassley.senate.gov/about/upload/100220121.pdf.
 31 USC 1304.
GSA’s SPF program is a professional development program that provides federal employees in-depth training on sustainability. The fellowship covers regulatory requirements, industry trends, systems thinking concepts, and provides hands on sustainability project experience. As part of the fellowship, each employee will receive training in relevant sustainability in procurement topics, perform substantive work on sustainability initiatives, and assume an active role in the government-wide sustainability community.
This intensive program aims to empower its alumni to serve as tomorrow s federal sustainability leaders and enable them to serve as knowledge resources for staff government-wide. The fellowship is open to all federal employees.
Applications are being accepted for the program, as well as projects that the fellows can work on as a part of the fellowship. The deadline for applications and project submissions is Friday, January 11, 2013. For more information, and to download the applications, please go to: www.gsa.gov/spf.
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.