FAR and Beyond Blog
The latest developments under the Federal Strategic Sourcing Initiative (FSSI) include a move away from the GSA Multiple Award Schedule (MAS) program. The Office Supply 3 (OS3) FSSI procurement would establish a new set of indefinite quantity-indefinite delivery (IDIQ) contracts for office supply companies. The new IDIQ contracts, although separate from the MAS program, would essentially duplicate pre-existing MAS contracts for office supplies. It is contract duplication that will increase costs for companies and create confusion in the federal marketplace. The costs and confusion associated with this duplication will negatively impact customer agencies and contractors, especially small business contractors. On December 9, the Coalition submitted comments on the OS3 solicitation to GSA. The comment can be found here.
Our comments reflect significant and legitimate questions regarding the acquisition/logistic strategies for OS3. We look forward to discussion with GSA on these matters. At its core, the current government-wide, one size fits all strategic sourcing approach misses the “full services” mark. It does not recognize the importance of clear, consistent and firm customer requirements. In essence, the closer the procurement is to the requirements holder the more likely the resulting contract will provide a best value outcome for customers and contractors of all sizes. That is why the Coalition has endorsed the use of agency specific Blanket Purchase Agreements (BPAs) that leverage agency requirements to deliver best value outcomes. Agency specific BPAs provide a more effective, efficient and competitive alternative to the generic government-wide BPAs now being put in place through FSSI. It will also ensure a long term, vibrant supply chain for the federal government—a supply chain that continues to include companies across all socio-economic categories.
It is time for a “time out” review of the current strategic sourcing strategy. As part of the time out, GSA should release all studies, reports and/or analysis regarding savings, calculations for these savings, as well as the costs associated with the current FSSI. Such a release would be consistent with the Administration’s laudable focus on transparency in government. The release of this information should be the first step towards a fulsome, thoughtful and engaging strategic sourcing dialogue among all stakeholders. The Coalition looks forward to continuing the dialogue on strategic sourcing informed by the release and review of all FSSI studies, reports and analysis.
Protest Filed Against JanSan FSSI
Our periodic review of the Government Accountability Office (GAO) protest docket indicates that a protest has been filed against Request for Quote (RFQ) #832055. This is the FSSI RFQ for Janitorial and Sanitation Commodities (JanSan).
The Coalition is requesting member feedback on Low Price Technically Acceptable (LPTA) source selections in defense acquisitions for the Government Accountability Office (GAO). GAO has reached out to the Coalition and other stakeholders as part of a study for Congress on the use of LPTA by the Department of Defense (DoD). GAO has been tasked by Congress to assess how LPTA is being used in the source selection process by the DoD, what existing guidance exists on the use of LPTA, how the acquisition workforce is trained on LPTA, and how LPTA is being implemented under the Better Buying Power initiative. GAO’s LPTA report is due to Congress by June 30, 2014.
GAO will be interviewing the Coalition about LPTA in defense acquisition on January 16, 2014. To help us prepare, we are asking members to complete the LPTA Survey below. The Coalition will use the survey results to formulate our feedback and recommendations to GAO. As always, member responses will be for non-attribution and confidential.
Take the LPTA Member Survey now!
The LPTA survey will remain open through January 8, 2014. Thank you for your participation! If you have any questions, please contact Aubrey Woolley at firstname.lastname@example.org.
VA Halts Use of Reverse Auctions—Again
Federal News Radio reported this week that the Department of Veterans Affairs (VA) has stopped using reverse auctions to reassess whether they provide adequate efficiencies and savings. This is the second time that the VA has issued such a moratorium. The last time was March 2012. The 2012 moratorium was rescinded one month later with the release of a VA policy on the appropriate use of reverse auctions including training, documentation and review requirements, and accounting for the savings achieved through reverse auction tools and any fees paid.
According to Federal News Radio, it is not clear why the VA has decided to stop using reverse auctions again. Jan Frye, Deputy Assistant Secretary of the VA’s Office of Acquisition, Logistics and Construction, said in a House hearing on reverse auctions this week that, “the Veterans Health Administration is crunching the numbers in an effort to evaluate whether the dollar, time and process efficiencies estimated by the advocates of these tools are being realized. Efficiencies alone cannot be the only measure of value. The reverse auction process is also being evaluated to ensure compliance with regulation and policy.”
The VA was one of the top 4 agencies that use reverse auctions in FY2012 according to the GAO. The others were the Army, Department of Homeland Security, and the Department of Interior. For the Federal News Radio article, visit www.federalnewsradio.com/65/3523121/VA-puts-reverse-auctions-on-hiatus-again-to-study-value-proposition.
This Tuesday GSA held a virtual Industry Day for the Federal Strategic Sourcing Initiative (FSSI) Office Supplies – 3rd Generation (OS3) Program. The purpose of the meeting was to provide an overview of the OS3 Draft RFP and Draft Statement of Work and to receive industry’s comments and questions on GSA’s proposed acquisition strategy. OS3 will be an Indefinite Delivery Indefinite Quantity (IDIQ) contract and will not be based on the GSA Schedules program. The materials from the OS3 Industry Day are posted on Interact at https://interact.gsa.gov/document/thank-you-attending-fssi-os3-virtual-industry-engagement-event.
The Coalition provided GSA with our comments on the OS3 Draft RFP in advance of the virtual Industry Day. Carolyn Alston, CGP Executive Vice President and General Counsel, will have a follow-up meeting with GSA next Wednesday, December 18 in Washington, DC to discuss the specific issues raised in our letter. Members who would like to share their concerns or questions about OS3 with the Coalition, please contact Carolyn Alston at email@example.com or (202) 600-2915.
House Passes Two-year Budget Agreement
House and Senate Budget Committee chairmen Paul Ryan (R-WI) and Patty Murray (D-WA) have agreed upon and released a budget deal that passed the House of Representatives yesterday evening. Now heading to the Senate, the bill would fund the government with $1.012 trillion for fiscal year (FY) 2014, $520.5 going to defense and $491.8 billion to non-defense agencies. Additionally it would provide some relief from the automatic sequestration cuts, with a reduction of about $45 billion in FY 2014 and $18 billion in fiscal 2015. If passed, the bill would allow appropriators to write spending bills for the remainder of fiscal 2104 and for fiscal 2015 based on the amounts delineated in the bill. The deal contains a number of offsets including, changes to military and civilian federal employee pensions. Also, the bill reduces the cap on contractor executive compensation on federal contracts to $487,000, and adds certain “narrowly targeted exceptions for scientists, engineers or other specialists.” Also on Thursday, the House passed the National Defense Authorization Act (NDAA) for fiscal 2014 which proposes a $625,000 cap on contractor compensation and includes exceptions for certain high-tech categories, including cybersecurity. To review the budget deal in full, members are encouraged to link to it above.
NDAA for FY 2014 Passed by House
Thursday the House of Representatives, by a vote of 350-69, approved the National Defense Authorization Act (NDAA) for fiscal 2014. The legislation provides $607 billion for defense funding, $527 billion in base funding and $80 billion for America’s overseas conflicts. The passage represented a compromise negotiated by top Republicans and Democrats on the House and Senate Armed Services committees after a similar bill stalled in the Senate just before Thanksgiving. The bill includes a change in the contractor salary cap for fiscal 2014, setting the new cap at $625,000. The new cap is accompanied with exceptions for certain high-tech categories, including cybersecurity. Other provisions in the bill include a 1 percent salary increase for military personnel, ongoing construction on bases and an aircraft carrier in Virginia, pay for the destruction of chemical weapons in Syria and combat pay for war-fighters. Also of note for the contracting community, the Federal Information Technology Acquisition Reform Act (FITARA) was not included in the House bill. However, in a report accompanying the bill, lawmakers stressed that they “expect to continue working on improvements in [IT acquisition reform] and hope to bring a set of comprehensive reforms forward in the next fiscal year.”
DFARS Proposed Rule on Commercial Items
DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to clarify the applicability of two clauses to acquisitions of commercial items. The rule would amend DFARS part 212, “Acquisition of Commercial Items,” to clarify the applicability of DFARS 252.211-7008, “Use of Government-Assigned Serial Numbers,” and DFARS 252.232-7006, “Wide Area Work Flow Payment Instructions,” to the acquisitions of commercial items. The clauses would be added to the list at 212.301(f) and included in solicitations and contracts for acquisitions of commercial items using procedures at FAR part 12.
Gratuities – Cautionary Tales for Contractors and Government Employees
By: Tom Barletta, Partner, Steptoe & Johnson LLP; Fred Geldon, Senior Counsel, Steptoe & Johnson LLP; & Mike Navarre, Special Counsel, Steptoe & Johnson LLP
Recent events demonstrate that government investigators and prosecutors are taking more seriously the ethical regulations that govern gratuities. Cases in point:
- On April 25, 2013, the U.S. Department of Justice issued a press release announcing that a Bureau of Prisons (BOP) employee had pled guilty to a charge of receiving unlawful gratuities. The BOP employee, a supervisory traffic management specialist in the BOP Relocation Services section, was responsible for giving relocating BOP employees a list of approved movers and then referring their move to agents of the chosen carrier. While performing these duties the employee received spa and salon gift cards in the amount of $1,007 and $790 from one carrier’s agent, as well as free moving services from moving companies. The BOP employee was subsequently assessed a fine of $1,500 and placed on probation for 18 months.
- On June 5, 2013, the Washington Post reported that the Internal Revenue Service (IRS) had placed two managers on administrative leave for accepting free food and other gifts in violation of government ethics rules. These violations were discovered during an audit of a years-old conference, at which the managers “allegedly held an after-hours party in their private hotel suites.” It apparently was not clear who gave the managers the food, worth $1,162. Acting Commissioner Danny Werfel said in a statement to the Post that the IRS has started the process of firing the managers.
The basic rules applicable to government employees regarding gratuities are set forth in the Standards of Ethical Conduct for Employees of the Executive Branch (“Standards”), which are codified at 5 C.F.R. § 2635. The Standards generally prohibit federal government employees from accepting gifts from “prohibited sources,” a category that includes, among others, contractors (and employees of contractors) doing business with or seeking to do business with the federal government employee’s agency. 5 C.F.R. §§ 2635.102(k), 2635.203(d).
There are some exceptions, however. For example, under the Standards, federal employees may accept, even from “prohibited sources,” items worth $20 or less, as long as the total value of the gifts from the same source is not more than $50 in a single calendar year (calculated by including a contractor and its employees as a single source). 5 C.F.R. § 2635.204(a). The Standards also include other limited exceptions, such as gifts motivated by family relationships.
The size of the gratuities in the two recent examples discussed above far exceeds these thresholds. In the case prosecuted by the Justice Department, however, the amount at issue was significantly less than amounts usually cited in large corruption cases, and demonstrates that even these (relatively) small violations are attracting the attention of auditors, investigators, and prosecutors.
Although the Standards apply only to government employees who receive gratuities rather than to contractor employees who offer gratuities, contractors can face potential liability in relation to gratuities as well.
The federal criminal gratuities statute, 18 U.S.C. § 201, provides for fines or imprisonment for anyone who, for example,
directly or indirectly gives, offers, or promises anything of value to any public official, former public official, or person selected to be a public official, for or because of any official act performed or to be performed by such public official, former public official or person selected to be a public official.
18 U.S.C. § 201(c)(1)(A).
Unlike a bribe, an illegal gratuity does not require an intent to influence; rather, the illegal gratuity only need be given “for or because of” an official act. An illegal gratuity “may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken.” United States v. Sun-Diamond Growers of California, 526 U.S. 398, 404-405 (1999). There must, however, be a connection, i.e., the government must prove “a link between a thing of value conferred upon a public official and a specific ‘official act’ for or because of which it was given.” Id. at 414.
The risk to contractors is heightened, however, because the line between an acceptable gift and an illegal gratuity is nuanced. For example, in United States v. Hoffmann, 556 F.3d 871, 877 (8th Cir. 2009), the court rejected the defendant’s contention that the Government had failed to prove that he violated the gratuities statute because he did not reasonably believe that the government employee would take an official action and because the government employee never did so. Rather, the court upheld the conviction finding that a “reasonable juror could conclude” that the contractor gave the government project manager a set of golf clubs “to . . . reward future performance.”
The risk to contractors is demonstrated by yet another recent Justice Department announcement in a whistleblower “qui tam” case that included gratuities allegations. On March 7, 2013, DOJ announced that three CIA contractors (American Systems Corporation, Anixter International Inc., and Corning Cable Systems LLC) had agreed to pay $3 million to settle allegations they violated the False Claims Act and Anti-Kickback Act. The announcement included allegations that in pursuit of a 2009 contract the companies had provided gratuities (meals, entertainment, gifts, and tickets to sporting and other events) to CIA employees.
Prohibitions on gratuities applicable to contractors are also incorporated into various FAR provisions. For example, FAR 52.203-13(b)(3) (Contractor Code of Business Ethics and Conduct) requires that contractors “timely disclose, in writing, to the agency Office of the Inspector General, with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed . . . [a] violation of Federal criminal law involving . . . gratuity violations found in Title 18 U.S.C.” In addition, FAR 52.203-3(a) allows the government to terminate a contract if a contractor or contractor employee “[o]ffered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and [i]ntended, by the gratuity, to obtain a contract or favorable treatment under a contract.” The government also may recover damages and/or suspend or debar a contractor from federal contracting for violations of this clause. See FAR 3.204(c).
Finally, in addition to potential criminal penalties and suspension and debarment, providing gratuities to government employees can also result in other adverse effects for a contractor, such as negative past performance ratings that could affect current and future business.
In sum, to maintain healthy relationships with their government customers and to protect government employees and themselves from potential liability, contractors should understand the laws and regulations applicable to gratuities to government employees, have a clear policy regarding gratuities (which, for many contractors includes a prohibition on giving gratuities) and provide appropriate education and training to their employees.
Of course, contractors should also be aware of laws and prohibitions that apply in related contexts, including anti-kickback laws that prohibit certain improper payments between prime contractors and subcontractors, the Foreign Corrupt Practices Act, which prohibits certain types of payments to foreign officials, and laws and regulations that regulate payments that can be made to members of Congress and staff.
 “Gifts” include entertainment, favors, discounts, hospitality, transportation, and other things of value. 5 C.F.R. § 2635.203(b).
 The Court in Sun-Diamond also rejected the Government’s contention that the illegal gratuities statute is violated by providing a gift to an official because he is in a position (i) to act favorably at some unknown future time, or (ii) to “build a reservoir of goodwill that might ultimately affect one or more of a multitude of unspecified acts.” Sun-Diamond, at 405.
 The Justice Department also alleged that the companies improperly received source selection information from a CIA employee to whom they had provided gratuities.
Webinar – Fundamentals of Ethics and Compliance
Date: Friday, Jan. 21st
Time: 12:30 EST
Legal and ethical conduct in the government procurement process is critical to both contractor and government employees. It protects the credibility of that process and is important to maintaining the respect and trust of employees, partners, clients, and the public.
The purpose of this Webinar is to:
- Provide an understanding of the ethical and compliance rules that apply when dealing with customers and suppliers in the federal government marketplace
- Emphasize to contractors and employees the importance of ethical conduct when doing business with the federal government
- Help contractors and employees recognize ethical issues and compliance risks associated with doing business in the federal marketplace and know when to seek guidance
Topics to be covered include:
- Bribery and Gratuities
- Kickbacks and Contingent Fees
- Procurement Integrity Rules
- Organizational Conflicts of Interest
Who should attend:
- Government-facing contractor employees (not just attorneys and compliance experts)
- Government employees who deal with contractors.
Registration coming soon!
Webinar – The Cost-build Approach for GSA Schedule Labor Pricing
Date: Tuesday, Feb. 11th
Time: 12:30 EST
This session will address the disconnect between services contracting and the GSA contracting model. Attendees will learn about the pricing and compliance challenges services contractors face as well as best practices for mitigating potential compliance risk. Key points of discussion will include labor category mapping, pricing strategies, CSP disclosures, and obligations under the Price Reductions Clause. Additionally, this session will provide an examination of the pricing options available to services contractors who price their services commercially using a cost-build pricing approach. Attendees will gain an understanding of the fundamental issues and challenges associated with the use of cost-build rates under the Schedules.
The purpose of this webinar is to:
- Learn about the issues stemming from the current disconnect between the GSA contracting model and services contracting.
- Learn about labor category mapping and pricing strategies and how to effectively mitigate post-award compliance risk.
- Learn about the cost-build approach to pricing and the many challenges faced by services contractors under this approach.
Who should attend:
- GSA Schedule services contract holders, executives, contract administrators and sales personnel
- GSA Schedule services Contracting Officers, Contracting Specialists
- Legal counsel representing GSA Schedule services contract holders
Registration coming soon!