Friday Flash 3.23.12

1. Comment of the Week

Wednesday was a special day for The Coalition for Government Procurement and for the procurement community at large. We honored two outstanding leaders in federal acquisition with our highest honor. Over the 33 year history of The Coalition for Government Procurement, the Common Sense in Government Procurement Award has been presented only 10 times.  Past recipients include Congressman Frank Horton, Senator Lowell Weicker, Congressman William Clinger, Congressman Tim Penny, Congressman Pete Hoekstra, Congressman Tom Davis and Vice President Al Gore. We are honored to add the Senators to this illustrious list. Their years of dedicated public service can best be described as “Common Sense for the Common Good.” 

Throughout their careers, Senator Lieberman and Senator Collins have worked tirelessly for common sense solutions to the procurement challenges facing our federal government. 

Senator Lieberman was an early co-sponsor of the Federal Acquisition Streamlining Act of 1994. Based on an analysis of hundreds of acquisition laws, FASA streamlined the acquisition process. It established commercial item contracting as a critical norm in government procurement, which profoundly changed the way government purchased goods and services. I saw its effects first hand as an attorney at GSA. The era of government detailed specifications and item descriptions ended. Instead, where it could, the government bought commercial products and services. This increased access to the commercial marketplace spawned an increase in competition, which reduced procurement cycles, triggered savings of billions and billions of dollars from downward price pressure, and, equally as important, opened the government to technological refreshment with new innovations. I also witnessed this fundamental change throughout government with an increase in value to the agencies. From my viewpoint, after spending 25 years in the procurement trenches, I would submit that the  Competition in Contracting Act (CICA) and FASA remain the two most important, ground-breaking procurement reforms that have saved the taxpayer’s money.

Senator Lieberman has been a staunch supporter of competition in contracting for years, but it might come as a surprise to some of you that staff leadership of CICA was executed by our second awardee, Senator Collins. Before ascending to the office of Senator, as a staff expert in the Senate, she worked without rest until this landmark legislation was crafted, and when she was finished, Congress laid what is now the prime directive of federal procurement— full and open competition. Unquestionably, this feature alone makes CICA the most profound and important procurement reform of the last century.  From the role of sealed bids and negotiated procurements to the statement and use of evaluation criteria (and evaluation of price) to the statement of work requirements, CICA’s imperative of full and fair competition permeates every aspect of our system. Simply put, CICA is the Constitution of federal procurement, providing structure and operational guidance that has saved the taxpayers billions of dollars over the last three decades. 

Throughout their tenures over the last ten years as Chairman and Ranking Member respectively of first the Senate Committee on Government Affairs Committee and the Senate Committee on Homeland Security and Government Affairs (I note during the last decade Senator Collins and Senator Lieberman have at alternately  served as Chairman and Ranking Member), Senator Collins and Senator Lieberman have worked in a bipartisan manner to address new challenges facing our procurement system; always with the goal of improving the system for government, industry, and most importantly the taxpayer. Again, as a former government employee and as a member of the Service Acquisition Reform Act (SARA) Acquisition Advisory Panel, I have a unique perspective on their efforts. The Senators took the SARA Panel Report very seriously; indeed the Chairman of the SARA Panel testified before the Committee on its findings. Chief among the reform measures championed into law by Senators Lieberman and Collins were: (1) requirements for increased competition for task and delivery orders under multiple award contracts, including the GSA schedules program; (2) the creation of a Contingency Contracting Corps to respond to national emergencies; (3) appropriate limitations on sole source contracts;  (4) measures to further prevent abuse and increase accountability, in particular with regard to unauthorized spending through interagency transactions; and (5) measures to improve the federal procurement data system to include timely data regarding interagency contracting actions to provide the public with greater transparency of government spending. 

These reforms represent common sense approaches to the procurement challenges of the last decade. To their credit, however, and consistent with their common sense approach, both Senators have worked steadfastly to address the key to the future health of the procurement system, that is, the care and feeding of the acquisition workforce. Their leadership in addressing the acquisition workforce is an investment in the future. As Senator Collins has said, “no matter how many laws we pass or OMB guidance documents are issued, the effectiveness of our federal acquisition system depends on a vital human component—the acquisition workforce.”  This statement reflects the shared values of the Senators. And as a result of their efforts, key legislation addressing the acquisition workforce has become law, including the requirement for OFPP and FAI to prepare a Strategic Plan for Acquisition Workforce Development, as well as the Federal Acquisition Institute Improvement Act of 20ll, which will deliver improved training and professional development for the federal acquisition workforce. 

Most recently, Senator Collins efforts to keep politics out of the procurement system reflect yet another common sense approach.

It should come as no surprise to anyone here that our nation faces a significant threat in cyberspace. On a daily basis, those who wish to do us harm or who seek to steal our innovation and know-how probe our networks daily to find points of vulnerability to exploit. The Senators’ Cybersecurity Act of 2012 represents their coordinated effort to confront this problem, but, behind the scenes, it represents so much more for our community. 

Over three years ago, the Senators and their staffs began the hard work of defining the problem and crafting a solution.  In a sense, if there is a cybersecurity bandwagon today, it is fair to say that they had a leading role in building it. At that time, some thought it made sense simply to leverage the procurement system outright. It took the thoughtful analysis of the Senators to make sure that any use of the procurement process to affect cybersecurity respected, to the maximum extent practicable, the foundational principles of the system: full and open competition and leveraging commercial items and practices. In this regard, they reached out to all stakeholders of the system in an effort to minimize any unintended negative consequences. Their stewardship in this regard is emblematic of their statesmanship, and deeply appreciated by our community.

The problem with honoring two such noble and deserving candidates is that they have an enormous record behind them. Suffice it to say, however, the Senators’ balanced, thoughtful common sense reforms of our procurement system have helped ensure our system continually strives for efficient and effective results and best value for the American taxpayer.   Finally, some thoughts on the Senators and the Common Good: Senator Lieberman’s and Senator Collins’ bipartisan efforts to address the challenges of our procurement system demonstrate how achieving the common good need not be blood sport. Their leadership on the Senate Committee for Homeland Security and Government Affairs has and continues to be balanced, prudent, and collaborative approach. They get things done in a positive way, and this constructive approach has resulted in sound solutions for government, industry, and the taxpayer. The importance of the common good is also reflected in their committee staffs, which work together in a collegial, respectful, and cooperative manner. If staffs are a reflection of their Members, then it is safe to say that their bosses are among the finest, open, and decent people you could meet.

We should all thank the Senators for their public service and their “Common Sense for the Common Good.” 

Sincerely,

Roger Waldron

President

2. Reducing Cumulative Effects of Regulations

 The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs issued a memorandum this week urging federal agencies to reduce the cumulative effects of regulations on both the public and private sectors.  In the memo, OMB recognizes the negative impact of cumulative burdens, especially for small businesses.  To mitigate these effects, OMB suggests that agencies actively engage with stakeholders “well before the issuance of notices of proposed rulemaking.”  According to OMB, this dialogue should be used to identify similar rules and their cumulative effect, and to harmonize and streamline existing rules.  In addition, agencies should identify opportunities to increase the net benefits of regulations and reduce administrative and other costs.  OMB’s Cumulative Effects of Regulations Guidance is a practical approach to simplifying existing rules and reducing the costs of regulatory burdens on both government and industry.  The guidance is effective immediately. 

3. Ghiloni to Lead Integrations

 Last week, GSA announced that Jim Ghiloni will oversee the recently approved governmentwide professional services contract, Integrations. In a blog post on March 20th, Jeff Koses, Director of Acquisition Operations in the Office of General Supplies and Services, welcomed Jim Ghiloni to the new Program Executive Officer position at Integrations. Jim Ghiloni has served as the director of Business and Acquisition Operations for the Assisted Acquisition Service in FAS, deputy director for Governmentwide Acquisition (GWAC) programs and Alliant GWAC program manager. According to the blog post, the Integrations team plans to finalize the business case, draft a Request for Proposal and engage industry throughout the program’s development. The Coalition welcomes Jim Ghiloni to his new post and looks forward to working with him as Integrations develops.  

4. Contractor Pay-Cap Bill Resurrected

Despite a pay cap for contractors negotiated in last year’s National Defense Authorization Act (NDAA), the issue has come up again. The Common-Sense Contractor Compensation Act (S. 2198) introduced by Senators Barbara Boxer (D-CA) and Chuck Grassley (R-IA) revisits an initial proposal to limit the amount of government reimbursed contractor salaries to $400,000, down from the current $693,951. The $400,000 cap is based on the President’s salary.  As a part of the NDAA for FY 2012, a provision was negotiated to extend the current salary cap of $693,951 to cover all contractor employees instead of only applying to the five most senior executives. 

5. New Civilian BRAC Bill Passed by House

On March 20th, the House of Representatives unanimously voted to approve the Federal Building and Property Disposal Act (H.R. 665). The bill, originally sponsored by Congressman Jason Chaffetz (R-UT) will “establish a pilot program for the expedited disposal of Federal real property.” The pilot program would last five years and be managed by the GSA Administrator and the Director of OMB.  GSA and OMB would develop a list of 15 Federal real properties “that are excess or surplus and have the highest fair market value and the greatest potential to sell” and dispose of them through “public auction.” The head of each executive agency would recommend properties to OMB. Then GSA and OMB are to “select properties for disposal under the pilot program and notify the recommending executive agency accordingly.” 

6. DFARS Final Rule on Commercial Determinations

The Department of Defense (DoD) issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to require approval above the level of the contracting officer for commercial item determinations over $1 million.  The rule applies to determinations that are based on “of a type” commercial procurements, items “offered for sale” but not yet sold to the general public, and items that would qualify as commercial but with minor modifications.  It also allows use of FAR Part 12 for performance based contracts under $29.5 million.  The rule clarifies that the contracting officer must document that an acquisition exceeding $1 million and using part 12 procedures either meets the commercial item definition or the criteria in FAR 12.102(g)(1).  The rationale used to justify issuance of a final rule was that it would not have a significant effect beyond DoD’s operating procedures nor a significant cost impact on contractors.

7. Shay Assad to Keynote Spring Conference

Shay Assad, Director of Defense Pricing at DoD, will provide the Keynote address on the second day of the 2012 Spring Conference.  He joins speakers Congressman Jeff Denham (R-CA), who will provide the opening address on the first day, GSA FAS Commissioner, Steve Kempf, GSA Public Building Service Commissioner, Bob Peck, VA Office of Acquisition and Logistics Deputy Assistant Secretary, Jan Frye, and former Congressman Tom Davis.

The 2012 Spring Conference will be held April 26-27 at The Westin Tysons Corner. The two-day conference, Government Acquisition Market: How Do You Grow Your Slice of the Pie?, will focus on congressional, budget, federal buildings trends, and legal issues that affect your government business. To see the full two-day agenda and sponsorship opportunities visit our website. Early bird discounted rates end today!

8. March 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

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.