eFriday Flash 3.9.12

Message from the President

This week marks a major milestone for The Coalition for Government Procurement as we launch our new and improved Friday Flash.  We hope you like (love) the new look and feel.  Over the last year we have consistently worked to improve the content of the Flash—and now we have tackled its presentation. The new Friday Flash also includes a new feature, our monthly “Legal Corner” highlighting current legal issues relating to government contracts.  The inaugural Legal Corner issue discusses a False Claims Act case.  Thank you to Jason Workmaster of McKenna Long & Aldridge LLP for providing our first Legal Corner commentary. The new Friday Flash is another step on the journey to excellence in all that we do. We look forward to continuing that journey with you!

Thank you to all our members for your support.  Thank you to GSA for its willingness to engage in constructive, Myth-Busters dialogue on key procurement challenges facing government and industry. Lastly, I want to thank my entire staff for all their hard work and without whom the new Friday Flash would not be possible.  Thank you Melissa, Aubrey, Sandy, Chelsea, Joan, Roy and Rob! We look forward to your comments and feedback on the new Flash template.

Comment of the Week

On February 28th, the Government Accountability Office (GAO) released its second annual report identifying federal programs, agencies, offices and initiatives, either within departments or governmentwide, which have duplicative goals or activities.  GAO identified 51 areas where government programs may be able to achieve greater efficiencies or become more effective in providing mission services.   The GAO report provides yet another opportunity to highlight the costs and burdens associated with unnecessary contract duplication.    The title of GAO’s 2012 Annual Report says it all, “Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue.”

Although the GAO report does not focus directly on the federal procurement system, the report’s title is an apt description of the current federal marketplace.   Too many contracts for the same or similar services and products are reducing maximum efficiency and increasing total government and industry costs, costs that are ultimately borne by the taxpayer.  At a time of significant budget challenges, reducing duplicative contracts will increase the efficiency and effectiveness of the procurement system saving money for government, industry and the taxpayer.  GSA’s governmentwide contracting programs, including the Multiple Award Schedules (MAS), IT GWACs, fleet management services and credit card programs, among others, provide a foundation for addressing contract duplication.

GSA has a wonderful opportunity to leverage its acquisition portfolio to reduce duplication, overlap and fragmentation in the federal marketplace.   The key will be the effectiveness of GSA’s contracting programs in bringing sound, cost effective solutions to customer agencies.   GSA’s $40 billion and the VA’s $10 billion MAS programs are the lynchpin.  They are the most successful commercial item contracting programs in government, period.

Yet, enormous potential still remains for both programs to provide greater value to customer agencies and increased opportunities to contractors.  In particular, the lack of Other Direct Costs (ODCs) on MAS contracts unnecessarily restricts the ability of contractors in offering complete solutions in response to customer agency requirements.  As a result, new duplicative contracts for commercial services (services that are already on MAS contracts) are created in order to provide customer agencies with complete solutions.  Providing an accountable and efficient contract framework for the inclusion of ODCs on MAS contracts and orders is an essential tactical and strategic step in addressing contract duplication.

The MAS program is positioned to accomplish this step.  First, the Administrator of GSA has the statutory authority for developing the policies and procedures governing the MAS program.  Second, the Federal Acquisition Regulation (FAR) commercial item clauses provide an effective, efficient and accountable framework for including materials and ODCs on MAS contracts and orders.   The Coalition has addressed ODCs in previous Friday Flashes.

The Office of Federal Procurement Policy (OFPP) could take another step in reducing contract duplication.  Last fall, OFPP issued a governmentwide memorandum entitled “Development, Review and Approval of Business Cases for Certain Interagency and Agency-Specific Acquisitions.”  The Coalition applauded the memorandum as a good first step.  Among other things the memorandum directs agencies to develop a business case when an agency specific contract or BPA would create significant overlap between the scope of the proposed acquisition and the scope of existing contracts or agreements established under FSSI, SmartBUY or an existing GWAC.  However, the memorandum does not require that a business case for a new agency specific contract address overlap with pre-existing MAS contracts.  The omission misses a real opportunity to reduce contract duplication.  If the services or products are available via MAS contracts, agencies should use them and if not, their business case analysis should address why not.  Which leads back to ODCs—well you get the point.

This month the Coalition will be sending out a survey to its members seeking feedback on the costs associated with contract duplication as part of the development of a white paper.   I hope you all will participate.

Finally, I would like to take this opportunity to welcome L-3 STRATIS as our newest Keystone member!

Sincerely,

Roger Waldron

President

 Small Business Procurement Improvement Act

The Small Business Procurement Improvement Act of 2012 (HR 4118) was introduced on March 1st and was voted out of the House Small Business Committee on March 7th. The bill has yet to be scored by the Congressional Budget Office.

The bill proposes to change the structure and operations of multiple award IDIQ contracting across government, including the GSA and VA Multiple Award Schedule programs.  If enacted, the bill would:

• Eliminate current statutory language providing that agencies may, at their discretion, set-aside task or delivery orders under multiple award contracts and replace it with language stating that agencies ‘‘shall,  to  the  maximum  extent  practicable,  include  small  business  concerns  in multiple  award  contracts…” by, among other things, setting aside orders and/or reserving contracts for small business.
• Raise the threshold for mandatory reserve for small business set-asides from $100,000 to $200,000 and require that all orders between $3,000 and $200,000 under all multiple award contracts, including GSA MAS contracts, be reserved for small businesses.
• Require the President annually to establish government-wide goals for the total dollar value of all task or delivery orders placed against multiple award contracts, Blanket Purchase Agreements, and basic ordering agreements awarded to small businesses and other statutory socio-economic entities.
• Enlarge the membership of the FAR Council to include the Administrator for Small Business.

The bill raises a number of questions regarding the spectrum of multiple award contracts across government, including:

• The potential for paperwork requirements for contracting officers placing orders under multiple award contracts addressing the decision to set-aside an order or not.  This potential requirement could impact hundreds of thousands of orders issued under multiple award contracts annually.
• The mandatory set-aside requirement for orders below $200,000 could represent a material change to multiple award contracts, including MAS contracts, as it could reduce the scope of contracts, especially those with medium and large businesses.  This change could prompt the renegotiation of terms and conditions, including pricing, on these contracts, and in the face of reduced contract scope, could warrant pricing adjustments.
• Given the reduction in scope of the MAS contracts for medium and large business, Most Favored Customer pricing may no longer apply under the MAS program, or reference customers would have to be re-defined.  Interestingly, however, Most Favored Customer pricing likely still would apply to MAS small business contractors, as the scope of their contracts would not be negatively impacted.   It may even require price reductions from small business MAS contractors.   GSA’s pricing policies likely would undergo revision.
• Medium-sized companies rely on multiple award contracts, including the MAS program, as a key channel for sales to the government.  It is unclear whether the impact of the bill would have a chilling effect on opportunities for medium-sized business and their employees.
• Contract duplication could increase as agencies move to reengineer their contract portfolio to address the new contracting requirements.
• Adding the SBA to the FAR Council could alter the Council’s primary role from implementing the procurement system’s rules to provide for effective and efficient outcomes benefiting the taxpayer.  It may also set a precedent for future additions to the Council, blurring the transactional responsibilities of the Council with the mediation of various policy activities.

The Coalition strongly supports providing opportunity for small businesses and stands ready to lend a constructive voice to securing the most efficient means to maximize participation of those firms in the government marketplace.  We also support the vitality of the GSA and VA MAS programs.  These programs arguably represent the most successful small business contracting programs across government.  Each year over 30 percent of the dollar value of orders under the GSA MAS program goes to small business concerns, well above the government-wide goal of 23 percent.

The Coalition will be monitoring this legislation and will be seeking feedback from our members.   Please contact Aubrey Woolley at awoolley@thecgp.org or (202) 315-1053 if you have any comments.

Treasury Moves to Electronic Invoicing

The Department of Treasury published a proposed rule on February 23rd to amend the Department of the Treasury Acquisition Regulation (DTAR) in order to implement a new web-based electronic invoicing and payment system that processes vendor payment data electronically.  This new Internet Payment Platform (IPP) will go into effect on October 1, 2012.  After this date, contractors will be required to submit payment requests electronically through the internet portal.  An exception exists for purchases made with governmentwide purchase cards.  The Department proposes to amend the DTAR by adding a new subpart 1032.70—Electronic Submission and Processing of Payment Requests to establish the IPP.  To assist vendors with the transition to the new system, Treasury plans to offer a series of webinar and video training courses.  Comments on the proposed rule are due April 23, 2012. If you have any questions or feedback, please contact Aubrey Woolley at awoolley@thecgp.org. 

Extension for GSA’s Networx

The transition for government agencies from an older GSA FTS2001 contract to the new Networx telecommunications contract is not yet completed.  FTS2001 offers wide area telecommunications services to government users worldwide.  GSA estimates that 96.5% of all transitions have been accomplished or are in progress. Currently, there are around 100 agencies with service on the FTS2001 contract. Frank Tiller of GSA’s Integrated Technology Services program stated that with transitions being completed at a rate of 2 to 3 per week, GSA expects between 12 and 15 agencies still to be active on FTS-2001 by the end of the transition period. In January of this year a “GSA Networx Transition Update” bulletin from Mary Davie, explained more details regarding the transition away from FTS2001. For “special exceptions” that have not completed the transition by May and June of 2012, GSA will implement clauses to extend services that will expire in March 2013. Agencies that fail to meet their respective transition deadline (March/June 2012 or March 2013 for special exceptions), will face “deactivation of dedicated network connections” among other things. GSA’s “action plan” contained in the bulletin maintains that next steps this month include the disconnecting of services behind GSA’s regional services and GSA-Assisted Transitions.

Legal Corner

In False Claims Act Case Involving GSA Schedules Program, Federal District Court Issues Troubling Decision Regarding Public Disclosure Bar

By Jason Workmaster, McKenna Long & Aldridge LLP

In a long-running civil False Claims Act (“FCA”) case, United States ex rel. Rille v. Sun Microsystems, Inc., No. 4:04-C-V00986-BRW, the U.S. District Court for the Eastern District of Arkansas recently denied a Government motion to dismiss, on public disclosure grounds, the relators’ claim that Sun had fraudulently provided inaccurate Commercial Sales Practices (“CSP”) data in support of the pricing of its General Services Administration (“GSA”) Schedule.  The court’s denial of the Government’s motion is troubling for several reasons.

The Sun case began in 2004 when the relators filed their initial qui tam complaint.  As relevant here, that complaint alleged that Sun participated in an industry-wide “strategic alliance” scheme that somehow resulted in violations of the requirement that a contractor be “truthful in negotiations, and … certify that the cost or pricing data they proffer to the Government is current, accurate, and complete.”  The relators’ 2004 complaint did not expressly allege that Sun had “defectively priced” any particular contract, let alone that it had submitted inaccurate CSP data in connection with its GSA Schedule.

At the same time the relators were filing their initial complaint, the GSA Inspector General (“IG”) was conducting a wholly independent audit of Sun’s GSA Schedule.  The IG’s findings, including allegations that Sun had defectively priced its GSA Schedule by providing inaccurate CSP data, began to be made available to Sun in 2004 and were the subject of press reports in 2005.  In 2006, the relators in the Eastern District of Arkansas case amended their complaint to allege that Sun had provided GSA with inaccurate information regarding its “best pricing.”

On the basis of the above chronology, the Government moved to dismiss, on public disclosure grounds, the relators’ claim that Sun had defectively priced its GSA Schedule.  The Government argued:  (1) that the relators did not assert this claim until 2006; (2) by that time, the claim had been publicly disclosed; and (3) that the relators were not original sources.

The court rejected all three of the Government’s arguments.  First, the court found that the 2004 qui tam complaint’s vague references to violations of the general requirement that contractors submit accurate cost or pricing data were sufficient to encompass the claim that Sun had defectively priced its GSA Schedule.  This finding is disturbing as it reflects a willingness to read relators’ complaints very liberally.  This has potentially negative implications for Rule 9(b) motions (in which defendants seek to have FCA complaints dismissed for failing to plead fraud with particularity) as well as for statute of limitations analysis.

Second, the court rejected the Government’s assertion that the pre-2006 disclosures constituted “public disclosures” within the meaning of the FCA.  Even though the disclosures notified the public that the Government was questioning the adequacy of the CSP data Sun had submitted, the court found that those disclosures did not provide notice that the Government considered Sun’s conduct to be fraudulent.  Without such disclosure, the court held, there could not be a “public disclosure” for FCA purposes.  This rule—that the public disclosure must specifically assert fraud—is yet another hurdle that, if more widely adopted, would make it harder for FCA defendants to obtain dismissals.

Third, and finally, the court found that, even if the Government had shown that the relators’ defective pricing allegation regarding Sun’s GSA Schedule was based upon a public disclosure, the relators in the case were “original sources.”  The court based this conclusion on relators’ knowledge of “contracts between Accenture [relator Rille’s former employer] and Sun,” as well as their possession of “hundreds of thousands of pages of documents at the onset of their qui tam cases” regarding the alleged strategic alliances.  This was an extremely low bar for the relators to clear in order to show themselves to be “original sources” regarding their defective pricing claim.  And, under this rule, it could be difficult for future defendants to show that a relator was not an original source.

That the court went to such lengths to disagree with the Government itself regarding whether the public disclosure bar required dismissal of the relators’ defective pricing claim in the Sun case is a cautionary tale for future defendants seeking to rely on this tool.

OMB Updates IT Dashboard

The Federal IT Dashboard, originally launched in 2009, has been updated and enhanced. Federal Chief Information Officer Steven VanRoeckel announced the new dashboard in a blog post on Tuesday, March 6th. The program was launched approximately two years ago in order to increase oversight and better track Federal information technology programs. According to VanRoeckel, “the dashboard now provides access to individual projects and activities associated with an investment, links investments to funding sources, and includes enhanced visualizations to better track investment performance year-to-year.” The new dashboard displays information concerning IT investments over the last decade including how IT spending is utilized across agencies and departments. VanRoeckel also hopes the enhanced performance data will allow agencies to root out duplication in their IT investments.

Small Business Legislation Update