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Centre Law & Consulting

Small Business and Working With Similarly Situated Entities | Centre Law & Consulting in Tysons, VA
 
If you are like me and work for a small business, you have been patiently waiting for the FAR Council to implement the Small Business Administration’s final rule from June 2016 that made major changes to the way performance requirements apply to small business in set-aide contracts.

For those who don’t know, this change allows for a prime small business, WOSB, SDVOSB, EDWOSB, 8A, or a HUBZone company to subcontract in service contracts to similarly situated firms and not count towards the 50% subcontracted work amount that typically cannot be exceeded. For example, if you win a WOSB set-aside contract and want to subcontract to another WOSB, the work the second firm does would not count towards the 50% subcontract amount limit. As you can imagine, this a huge boon to small businesses and provides great flexibility to compete on larger contracts.

As of March 22, 2017, the Defense Acquisition Regulatory Council (DARC) agreed to draft an interim FAR rule. Remember, this change isn’t automatically included in your current contracts. Under FAR 1.108(d)(3), the Contracting Officer (CO) “may, at their discretion, include changes in any existing contract with appropriate consideration.” Therefore, if you want to get credit for your subcontractor’s work to meet your set-aside requirements, make sure you petition your CO to update your contract with the new FAR rule when it is eventually implemented.

Find more information concerning this rule change in the Federal Register.
 
About the Author

Colin Johnson | Centre Law & Consulting in Tysons VA Colin Johnson
Contracts Manager

Colin Johnson is a Contracts Manager who focuses on business development and federal contracts management. His expertise is in preparing quotes and responses for both government and commercial entities for training and legal support services.

 

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My granddaughter recently lost a baby tooth in the ‘usual way.’ One morning, she felt the tooth begin to move the slightest bit. She wiggled it back and forth throughout the day and by dinner…Voile! Only one day later, she lost two more courtesy of her dentist to make room for the incoming ‘permanent’ ones. The Tooth Fairy kept the commitment of retrieving the lost teeth from under her pillow in a timely fashion – in this case staying up late on two consecutive nights – and rewarded her for pain and suffering with a selfie stick. (Wow, times have changed!)

This made me wonder, does the Tooth Fairy earn overtime for work performed in excess of a statutory number of ceiling hours or is that position salaried? (I’ve had a long term and continuing relationship with the Tooth Fairy, so I want to proceed carefully.) The question of overtime relates to the Fair Labor Standards Act (FLSA). The FLSA provides for a federal minimum wage, a standard 40-hour workweek, and pay at time-and-a-half rate for all overtime hours. The Act also includes several exemptions under which certain employees are not entitled to overtime pay. Currently to meet most exemptions, in addition to meeting a duties test, an employee must be paid on a salary basis at least $455 per week ($23,600 annually). There is a belief that payment of a salary is the only requirement to avoid overtime pay obligations. This is not correct. Also, a new regulation will more than double this minimum salary threshold later this year, but these are topics for tomorrow!

If the Tooth Fairy is not FLSA-exempt, there is a federal entitlement for a time-and-a-half rate for any hours worked in excess of 40 hours. Conversely, if the Tooth Fairy is FLSA-exempt, hours worked in excess of 40 hours weekly are considered Uncompensated Overtime (UCOT).

I’ve always had nagging concerns about UCOT – that it’s somehow a ‘bad’ thing – so I researched UCOT. The Regulation requires the solicitation provision at FAR 52.237-10 (Identification of Uncompensated Overtime) in requirements for technical or professional services which will be acquired on an hourly basis:

Uncompensated overtime means the hours worked without additional compensation in excess of an average of 40 hours per week by direct charge employees who are exempt from the Fair Labor Standards Act. Compensated personal absences such as holidays, vacations, and sick leave shall be included in the normal work week for purposes of computing uncompensated overtime hours.

FAR goes on to provide this example:

Uncompensated overtime rate is the rate that results from multiplying the hourly rate for a 40-hour work week by 40, and then dividing by the proposed hours per week. For example, 45 hours proposed on a 40-hour work week basis at $20 per hour would be converted to an uncompensated overtime rate of $17.78 per hour ($20.00 × 40 divided by 45 = $17.78)

The key to both the provision and the example might be the term ‘proposal’. If an offeror proposes UCOT, then it is part of its technical and pricing plan that should be evaluated during cost realism. What if a contractor does not propose UCOT yet incurs UCOT? Unforeseen situations requiring additional labor hours or surge efforts are not uncommon in professional service industries. In this situation, can the contractor invoice for these uncompensated hours? Invoicing – always a significant issue – becomes more important when fee is linked to achieving a level of effort. Can the contractor profit on UCOT hours?

UCOT is not illegal. How a contractor motivates its employees, both FLSA and FLSA-exempt, to satisfy employee and customer seems a matter for industry not Government. If you are pondering the loss of revenue on the part of the employee, consider that there may be other opportunities and means to compensate employees, such as additional benefits, compensatory time, or bonuses. As in so many other federal procurement matters, competition will affect retention rates of those who propose intentionally to overwork their employees. UCOT is discussed as a subtopic in Centre’s Federal Contract Basics Course.

As for the Tooth Fairy, there are an increasing number of ‘clients’ for whom Tooth Fairy must provide services. I know from experience that each ‘client’ has at least one parent and probably others (grandparents, for example!) standing by to ensure success. Tooth Fairy and I aren’t so close these days that we can discuss FLSA status, but I’d like to think with all those hours and all those satisfied ‘clients’ Tooth Fairy has earned many overtime hours as a non-exempt worker.

And Tooth Fairy, what’s a selfie stick anyhow?

About the Author:

Rich Zimmerman | Centre Law & Consulting Rich Zimmerman
Project Manager

Richard E. Zimmerman has more than 25 years of experience as a contracts professional both in Government and the private sector. His excellent background in FAR, Agency supplements, and their application over the procurement life cycle make him a critical resource for PMs, prime contractors, and subcontractors.

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On June 7, 2016, the U.S. Department of State announced that it is implementing “catch-up” adjustments to the maximum amounts of the monetary penalties it assesses for regulatory violations. Under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, federal agencies must make a one time “catch-up” adjustment to their civil monetary penalties in order to account for inflation. Federal agencies are required to publish interim final rules with the initial penalty adjustment amounts by July 1, 2016, and the new penalty levels must take effect not later than August 1, 2016.

The Penalties

The U.S. Department of State Directorate of Defense Trade Controls assesses penalties for violations of the Arms Export Control Act and International Traffic in Arms Regulations. The following amounts will be assessed for certain violations after August 1, 2016, regardless of when the actual violation occurred:

Each violation of The Arms Export Control Act, 22 U.S.C. §2778. This Act imposes export and import controls on certain defense articles and defense services. This includes registration, reporting, record keeping, and due diligence requirements, among many others. Previously, the maximum penalty was $500,000. The new maximum penalty will not exceed $1,094,010 per one violation.

Each violation of the The Arms Export Control Act, 22 U.S.C. §2779a. This section of the Act prohibits incentive payments to satisfy any offset agreements under certain circumstances. Generally, any U.S. supplier of defense articles or services sold, licensed, or exported, among others, is prohibited from making any incentive payments for the purpose of satisfying, in whole or in part, any offset agreement with a foreign country. Defense offset agreements are understood as side agreements that provide additional incentives to the purchaser. Previously, the maximum penalty was $500,000. The new maximum penalty will not exceed $795,445 per one violation.

Each violation of The Arms Export Control Act, 22 U.S.C. §2780. This section of the Act prohibits transactions with countries supporting acts of international terrorism. Transactions include exporting (directly or indirectly) or otherwise providing (by sale, lease, loan, grant, or other means) of any munitions items, providing credit guarantees, or otherwise facilitating the acquisition of any munitions. Previously, the maximum penalty was $500,000. The new maximum penalty will not exceed $946,805 per one violation.

What Can I Do Before August 1, 2016?

Have no fear and double-check whether you are compliant. The U.S. Department of State Directorate of Defense Trade Controls expects each U.S. exporter of defense articles and services to have comprehensive operational compliance programs. This may include policies and procedures on:

  • Corporate commitment to the International Traffic in Arms Regulations (ITAR) compliance
  • Tracking of controlled items and technical data
  • Due diligence and internal monitoring
  • Training and awareness
  • Penalties for violations
  • Reporting non-compliance issues

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 allows the U.S. Department of State to exercise its discretion to determine whether it should assess civil monetary penalties lower than the maximum amount. If your compliance program identifies at least one ITAR violation, it may be beneficial to consider whether mandatory reporting is required and whether to report it before the maximum penalties increase on August 1, 2016.

You can learn more about the U.S. export controls and compliance requirements on June 23, 2016 during our webinar on New Opportunities for Small Businesses and U.S. Exporters.

Register Now | Centre Law & Consulting
Note that is post is for educational use only and does not constitute legal advice.

About the Author:

Wojciech Kornacki | Centre Law & Consulting Wojciech Kornacki
Government Contract and Compliance Counsel

Wojciech Kornacki focuses on federal Government contract compliance, bid protests, and federal litigation. He represents clients in matters involving Government Accountability Office bid protests, federal agency debarments, Boards of Contract Appeals litigation, and Export Controls (ITAR and EAR) and Trade Agreements Act compliance.

 

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The System for Award Management (SAM) is a system in which contractors must register in order to do business with the federal government. SAM was created to consolidate and eliminate some of the legacy systems. SAM’s goal is to consolidate a majority of the federal procurement systems into one user friendly system. The next phase for SAM modernization is due to be released in September 2017. The new beta.SAM.gov being released is the Office of the Integrated Award Environment’s (IAE) effort to consolidate the following ten IAE systems, listed here by functionality:

Entity Information: System for Award Management (SAM.gov) – Registrations and Exclusions

Contract Opportunities: Federal Business Opportunities (fbo.gov)

Contract Data: Federal Procurement Data System (fpds.gov)

Sub-Award Data: Electronic Subcontracting Reporting System (eSRS.gov), Federal Funding Accountability and Transparency Act Subaward Reporting System (fsrs.gov)

Wage Determinations: Wage Determinations OnLine (wdol.gov)

Past Performance: Contractor Performance Assessment Reporting System (cpars.gov), Past Performance Information Retrieval System (ppirs.gov),  Federal Awardee Performance and Integrity Information System (fapiis.gov)

Assistance Listings: Catalog of Federal Domestic Assistance (cfda.gov)

IAE’s ultimate goal is to bring together the personnel who award, receive, and manage federal awards and assistance under one web site. The enhanced beta.SAM.gov will reduce reporting burdens, increase accountability and transparency in the award process, and improve data quality for both government and industry personnel. The new beta.SAM.gov will feature a Google-like search tool able to query data simultaneously from all ten combined systems or by filtering by the seven functionalities listed above. The new site will also feature a help desk as well as a cross mapping of the ten legacy systems to their new beta.SAM.gov functional area to better direct transitioning users to the information they need.

Migration of the ten systems to beta.SAM.gov will be incremental to allow incorporation of user feedback. The new beta.SAM.gov will run in parallel with the ten legacy systems, which will remain the authoritative sources, until testing is fully complete and the previous systems are decommissioned. Beta.SAM.gov will eventually inherit the SAM.gov domain. The following timeline presented by IAE reflects completion in late Fiscal Year 2020:

SAM-timeline.png

 

There can be multiple accounts affiliated with an entity in the new beta.SAM.gov. Users will need to create a new account and migrate their roles which will control privileges on the new site. Entities will be able to assign one or more administrators to manage site users’ associations with their entity and delegate roles on the new site.

Over 200 users, many of which are federal employees, are currently testing the alpha version of the new SAM.gov which began in December 2016. Focus groups will be held in July and August to provide input on the new beta.SAM.gov. If you are interested in participating in the focus groups, sign up information can be found on the Integrated Award Environment (IAE) Industry Community on GSA Interact at https://interact.gsa.gov/group/integrated-award-environment-iae-industry-community.

 

About the Author:

J. Moore
Consultant
J. Moore is a GSA and VA Contract Consultant at Centre Law & Consulting. She collaborates with the consulting team to provide proposal and contract management assistance to clients, focusing on various modification packages, market analysis, and catalog/pricing updates.

 

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As many contractors are approaching the end of their 20-year contract period in the FSS program, the General Services Administration (GSA) has made it possible for successful legacy contractors to follow a streamlined offer process for their new 20-year contract. Clause A-FSS-11 has been updated so that a contractor can now submit an offer for a new contract under the same Schedule at any time during the existing contract period.

Process Requirements

In order to follow the streamlined offer process, contractors must meet ALL of the following criteria:

  • The contractor has an existing Schedule and is submitting a new offer for the same SINs and Schedule
  • Sales under the existing contract have averaged a minimum of $25,000 per year for the previous five years of reported sales
  • There is a demonstrated pattern of satisfactory past performance under the existing contract

To simplify the process for successful legacy contractors, GSA added clause SCP-FSS-001-S Instructions Applicable to Successful FSS Program Contractors to all solicitations. The following requirements were eliminated from SCP-FSS-001-S:

  • Readiness Assessment
  • Financial Statements
  • Corporate Experience
  • Past Performance (Open Ratings)
  • Relevant Project Experience

The Pathway to Success training requirement is also expected to be eliminated from SCP-FSS-001-S in all solicitations via a refresh/mass mod that is due to be released shortly. The Pathway to Success training has already been removed from Schedule IT 70 via Refresh 40.

Notes on Proposal Submissions

The eMod system has not been updated to distinguish between successful legacy proposals and new contractor proposals, however. In order to override the eMod system, contractors will need to either add a note manually in the system on the applicable page or upload a blank document for all items that are not required by SCP-FSS-001-S.

When submitting your legacy proposal, you should include a listing of all active submitted quotes, established BPAs, and awarded orders under the existing contract. For each, the contractor must include the ordering activity name and point of contact, RFQ/BPA/order number, dollar value, and period of performance (including options). This information can be uploaded in eOffer as an “Other (optional – offeror defined)” document. The new legacy contract will overlap with the existing one until the agreed upon cancellation date of the existing contract. Contractors will utilize the new legacy contract for all new business opportunities.

Our Recommendation

In order to ensure a smooth transition from the existing contract to the new legacy contract, Centre recommends updating your existing contract prior to submitting a new legacy proposal. Review the labor categories, pricing, and other terms and conditions. If changes need to be made, modify your existing contract now so you can move the existing contract to the new legacy contract. However, please note an updated CSP-1 is required when submitting your legacy contract.

About the Author:

Julia Coon | Centre Law & Consulting in Tysons VA Julia Coon
Consultant

Julia Coon is GSA and VA Contract Consultant at Centre Law & Consulting. Julia works with the GSA/VA team in preparing new schedule proposals and post-award contract administration. She has experience in producing schedule renewal packages, various modification packages, small business subcontracting plans, and updates to GSA pricelists.

 

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Trump Notwithstanding, Employment Law Compliance Should Remain A Top Concern in 2017 | Centre Law & Consulting in Tysons, VA
 
Over the last few years, the contractor community has braced itself to comply with a slew of new employment regulations issued as a result of Executive Orders by President Obama. These include Paid Sick Leave (up to 7 days), Minimum Wage ($10.20), Fair Pay and Safe Workplaces (reporting of labor law violations and paystub requirements, among others), and the Department of Labor’s regulations increasing the dollar threshold for overtime exemptions under the Fair Labor Standards Act (FLSA). However, several of these regulations are currently being enjoined by courts; and, with the upcoming transition to a new administration, it is likely that many of these requirements will be set aside.

It would be a mistake, though, for contractors to be lulled into complacency as a result of the recent federal election as state and local governments have been increasingly active in passing legislation governing employers. For example, many states, counties, and cities passed increased minimum wage requirements, paid sick and family leave laws, wage equality measures, limits on the use of background checks, laws related to medical and recreational use of marijuana, and gender-based restroom ordinances.

Federal contractors should continue to monitor legal requirements for the localities they operate in. For those in the D.C. Metro area, additional paid leave requirements are on the horizon. Just last week the D.C. Council passed the “Universal Paid Leave Amendment Act” providing for eight weeks of parental leave, six weeks to care for sick family member, and two weeks for your own personal illness. The leave will be funded through a payroll tax and administered through the government with limits on the benefit amounts workers would receive. The bill must still go through a second vote later this month, but is expected to pass with a veto-proof majority. For those in Maryland, Governor Hogan has announced plans to introduce legislation requiring employers with 50 or more employees provide up to five days of paid sick leave per year. Maryland’s legislature has made advancements towards enacting other paid leave laws as well.

So with the incoming new Administration and continuing legal advancements for localities, 2017 appears to be ripe for action and continued change.

About the Author

Marina Blickley | Centre Law & Consulting Marina Blickley
Senior Attorney

Marina Blickley is primarily focused in the Government Contracting and Non-Profit industries. She regularly assists clients in all aspects of employment and labor law including representation and defense of employers against claims of employment discrimination, harassment, retaliation/whistleblower, and wage and hour violations before administrative agencies and state and federal courts.

 

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GSA OIG Reviews Industrial Operations Analysts:  What's In Your IOA’s Report Card? | Centre Law & Consulting in Tysons, VA
 
As a consultant assisting clients prepare for their Industrial Operations Analyst (IOA) visit, I am surprised by the anxiety that precedes these “I’m here to help you” visits. I receive comments from “I didn’t sleep all night” and “I forgot my Basis of Award (BOA) customer” to “Will the IOA cancel my contract as I forgot to pay my Industrial Funding Fee for the last quarter.” The anxiety has increased over the last two years as the IOAs are now reviewing your GSA Schedule annually if you have annual sales exceeding $150,000. While the majority of IOAs are trying to help you understand compliance with your schedule requirements, there are a few that want to add to your anxiety. I witnessed the IOA who started the visit with the comment that she was there to get money back for GSA and an IOA who threatened cancellation of the schedule (and no, IOAs cannot cancel your schedule contract).

In GSA’s Office of Inspector General (OIG) Semiannual Report to Congress for the period of April 1, 2016 through September 30, 2016, the tables were turned and the IOAs were reviewed.

IOA Assessment Report Purpose

The OIG conducted an audit of the contractor assessments program to determine if:

  1. Contractor assessments were effective to determine contractors’ compliance with schedule contract terms and conditions
  2. IOAs were conducting their assessments in accordance with FAS guidance
  3. IOAs were communicating those results in a timely fashion and in the appropriate format
  4. IOAs were developing and completing training in accordance with program requirements

 

IOA Assessment Report Findings

As a result, the OIG concluded the following:

  1. Assessments add value as a method to monitor contractor compliance with terms and conditions of schedule contracts
  2. IOAs are generally conducting assessments in accordance with guidance
  3. OAs are effectively communicating those results in a timely fashion and in the required format

 

IOA Assessment Areas of Improvement

The OIG also concluded that although the assessments were generally effective, they identified areas that could be improved “to enhance the consistency, completeness, and value of the assessments and reports.” For example:

  1. FAS guidance does not provide specific requirements for sampling schedule sales transactions to ensure that contractors are properly reporting and remitting Industrial Funding Fees and resumes to verify that qualified labor for services are being provided for customer agencies.
  2. IOAs are not consistently reporting on labor qualifications. As a result, FAS does not have assurance that labor qualifications were assessed.
  3. FAS has not established a formalized, national training curriculum for experienced IOAs.

 
Therefore, recommendations from the OIG to the FAS Commissioner include:

  1. Revising the IOA Training Manual to include details on a risk-based sampling methodology
  2. Revising the assessment report template to include a specific section for reviewing labor qualifications to ensure consistent assessments
  3. Establishing and implementing a formal national training curriculum for experienced IOAs

 

What Can I Do?

In summary, Contract Clause 552.215-71 (Examination of Records) allows the IOA to review contractors’ records to verify contractual compliance. Their role is to conduct contractor assessments as well as monitor sales reporting, sales adjustments, and Industrial Funding Fee remittance (previously conducted by your Administrative Contracting Officer).

Remember that the results of the IOA visit are advisory to your Contracting Officer (CO). Their assessment will be included in your GSA file for review prior to your Option Renewal. If you receive a negative assessment or don’t agree with a finding, you should submit a letter of clarification to your CO.

The best thing you can do to in advance of your IOA visit is to be prepared. Gather all documents requested by your IOA prior to the visit or virtual call. Review the terms and conditions of your schedule and know your Basis of Award and discounting. Ensure your GSA Schedule catalog is up to date and matches the last awarded modification. If you stay compliant with the requirements of your Schedule, then you will have a successful IOA review.

Your IOA contact information can be found at https://vsc.gsa.gov/tools/aco_ioa.cfm and Centre’s GSA Consultants are available to assist you through the process as well.

About the Author:

Maureen Jamieson | Centre Law & Consulting Maureen Jamieson
Executive Director of Contracts and Consulting

Maureen Jamieson has more than twenty-five years of experience managing federal contracts. She is highly experienced in solving client pricing problems and implementing effective pricing strategies for placing products and services on GSA Schedule contracts.

 

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Are you selling your products or services to the U.S. Government? If so, what does your compliance program look like?

There are seven different elements that you should have in place in order to be confident that your compliance program can be effective. The Buy American Statute (BAS) requires the U.S. Government to give a preference to U.S.-made goods over foreign-made goods in federal procurements. The Trade Agreements Act (TAA) prohibits the U.S. Government from buying products and services from non TAA-eligible countries such as China. The TAA is applicable to all federal supply schedules. Both acts are discussed in detail in the Federal Acquisition Regulation (FAR) Part 25, Foreign Acquisition.

  1. Accountability:
    Accountability must permeate your entire organization. It must reside within upper management and each employee alike. Accountability consists of committing sufficient resources for compliance and designating appropriate senior business representatives to ensure overall responsibility. Accountability also means that your business will correct errors, conduct internal investigations, report certain violations, and recognize your employees who ensure that your business stays TAA and BAS compliant every day of the year.

Due Diligence:
Due diligence is always required to ensure all sales are TAA and BAS compliant. Each federal contractor who sells to the U.S. Government must comply with the federal law and FAR. When determining whether a particular product is compliant, each contractor should be able to answer the following questions:

• What is the country of origin for this product?
• How do I know this and what are my records?
• How current is the information?
• Who do I contact when I am not sure?

While vendor-provided letters of supply show due diligence, it is always important to ensure that such letters are current. Another way to ensure due diligence is to conduct an annual review of all the letters of supply and to sample individual transactions for compliance. In close-call situations, federal contractors may submit a request to the U.S. Government for a country of origin determination.

Internal Policies:
Your business operations will be more efficient and predictable if your employees can understand and follow updated written policies and internal checks. Your policies will allow your employees to quickly make right decisions and seek assistance when necessary. It is generally a good idea to have internal policies on compliance monitoring, due diligence, recordkeeping, training, reporting of TAA and BAS violations, and code of business ethics. Other policies may be applicable based on your specific risks.

Training and Awareness:
There are always new developments in the areas of BAS and TAA. Recently, Montenegro and New Zealand became the newest “designated countries” under the World Trade Organization Government Procurement Agreement. In May 2016, U.S. Congressman Pete Visclosky included certain Buy American Statute requirements in the Fiscal Year 2017 National Defense Appropriations Act. This may require the U.S. Department of Defense to purchase U.S.-made armor plate, mooring chains, ball bearings, and certain engine components among others. Another bill seeks to redefine “U.S.-made” altogether. Staying current with the new developments is a critical part of your compliance program.

Track and Automate:
It is difficult to accurately track hundreds of individual transactions in a program like MS Excel all the time. This is why it is important to automate as much as possible. Automation also means preventing employee over-rides and having a reliable backup. You will know that your tracking system is working, for example, when it reflects the latest update from one of your vendors reporting that its products are made in Morocco this month and now your sales department will be able to sell more to the U.S. Government.

Communicate and Cooperate:
Communication with vendors and across your business is a must. Your vendors must understand the importance of letting you know that their products that were made in Japan last month are made in China this month. Your compliance department must notify your sales department whether the products you sell to the U.S. Government must be TAA and BAS compliant or not. At the same time, the U.S. Government requires federal contractors to make mandatory disclosures regarding selling TAA non-compliant products. When such disclosures are made, the U.S. Government expects full cooperation. This requirement has been recently highlighted by the U.S. Department of Justice September 2015 Memorandum commonly known as the “Yates Memorandum”.

Revise and Update:
Since there are always new changes and requirements, it is important to revise and update your policies and internal checks. This should be done immediately or at least on a monthly basis. Currently, the General Services Administration requires all vendors to verify that their products are TAA compliant. If they are not, they must be removed from their GSA/Federal Supply Schedule. Federal contractors with effective compliance policies will ensure having only compliant products on their schedules.

Effective Trade Agreements Act and Buy American Statute compliance allows large and small businesses to sell more to the U.S. Government and to seize on new opportunities.

If you have questions or would like to learn more about compliance and the latest Trade Agreements Act and Buy American Statute developments, contact Mr. Kornacki at 703-288-2800 or info@centrelawgroup.com.

Note that is post is for educational use only and does not constitute legal advice.

About the Author:

Wojciech Kornacki | Centre Law & Consulting Wojciech Kornacki
Government Contract and Compliance Counsel

Wojciech Kornacki focuses on federal Government contract compliance, bid protests, and federal litigation. He represents clients in matters involving Government Accountability Office bid protests, federal agency debarments, Boards of Contract Appeals litigation, and Export Controls (ITAR and EAR) and Trade Agreements Act compliance.

 

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You are still at risk of Government oversight/review even if you fall below the threshold for the Contractor Purchasing System Review (CPSR).1 While, CPSR is a total business system review, there is a series of other Government activities that will look into your procurement business processes. Some of these other activities include; proposal analysis, interim payment reviews, incurred cost submissions, and compliance reviews with DFARS business system clauses.

Proposal analysis by the Government can include subcontracted effort, especially when cost analysis is performed. Your procurement procedures on solicitation, cost/price analysis, competition, flow down requirements, procurement file organization and others will form the basis for developing and documenting the information the Government will want to review. Does your current documented process produce adequate analysis and documentation to support your proposals?

Interim payment reviews start in with your Accounting Department’s invoice, but can quickly move to the Procurement Department for backup on subcontract billing terms, invoice review and approval, evidence of adequate funding, basis for indirect billing rates and subcontractor hours and timesheets. What do your post-award administration procedures say about administration of payments to subcontractors, and do your records support your due diligence when approving subcontractor invoices?

The annual incurred cost submission (ICS pronounced “ICE”) seems like a cost accounting exercise, but the Government auditors will find their way into procurement records! In addition to the due diligence of invoice review in the preceding paragraph, be prepared to provide closeout documentation that supports; successful completion of subcontracted work, proper subcontract final billing/payment, and deobligation of excess funds. Do you procurement procedures cover when and how these steps will be taken? Do you know where the documentation is located?

The DFARS clause 252.244-2001, Contractor Purchasing System Administration, isn’t just for the big guys. The DFARS clause will be included in all defense contracts containing FAR 52.244-2, Subcontracts. This FAR clause can be found in cost-reimbursement contracts and most other contracts exceeding the simplified acquisition threshold, currently $150,000. The one break you may get is DFARS 252.242-7005, Contractor Business Systems, (this is the one that requires withholds for “significant deficiencies”) only goes in your contract if you are subject to Cost Accounting Standards.2 The DFARS 252.244-2001 clause lists 24 system criteria, covering what Defense Contract Management Agency sees as 29 major purchasing areas. These areas cover everything from make or buyer decisions, funding authorization, solicitation, competition, cost/price analysis, small business, and all other points up through and including closeout!3 Are your company policies, procedures and records up to the task of proving you meet the requirements of this business system clause?

As you can see, just because you fall below the radar for a formal CPSR, you are not off the hook! You are still vulnerable for withholds, delayed payments, cost disallowance, and poor performance ratings effecting new awards. The best protection against these vulnerabilities is good procedures that adequately cover requirements, and a well trained staff that documents compliance with your procedures.

 

1 On October 7, 2016, DCMA executed a Class Deviation raising the CPSR threshold to $50M effective through December 31, 2017. The rationale is the current $25M threshold has not changed since 1996.

2 However, the Contracting Officer can still take measures to protect the Government’s interest if problems are thought to exist within your procurement system.

3 See DCMA CPSR Guidebook

 

About the Author

Jack Hott headshot | Centre Law & Consulting in Tysons, VA Jack Holt
Jack R. Hott has more than four decades of experience as a contracts professional in Government and the private sector.

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GAO Won’t Reconsider Protests Dismissed During Jurisdiction Lapse | Centre Law & Consulting in Tysons VA
 
Back on November 28, 2016, both Analytic Strategies LLC and Gemini Industries, Inc.’s protests were dismissed by the GAO for lack of jurisdiction. The firms initially protested the General Services Administration’s (GSA) exclusion of their proposals under a task order to provide mission support services for the Joint Improvised-Threat Defeat Agency (JIDA). The protests were subsequently dismissed by the GAO as its statutory grant of jurisdiction to consider such protests had expired. Congress subsequently reinstated the GAO’s jurisdiction and, as such, the contractors requested that their initial protests be reinstated.

By way of background, in 1994, Congress enacted the Federal Acquisition Streamlining Act (FASA) which, in part, established a general bar against protests filed in connection with military and civilian agency task and delivery orders issued under multiple award IDIQ contracts, with limited exceptions. However, the National Defense Authorization Act (NDAA) for Fiscal Year 2008 amended FASA to grant GAO jurisdiction to hear protests in connection with orders placed under IDIQ contracts where the order exceeded $10 million. The Fiscal Year 2012 NDAA amended the GAO’s jurisdiction and established a sunset date whereby the grant of jurisdiction to hear protests in connection with orders placed under IDIQs valued in excess of $10 million expired after September 30, 2016. On December 14, 2016, the Protest Authority Act was signed into law, which removed the sunset provision and reinstated GAO’s jurisdiction over protests of task orders placed under civilian agency IDIQ contracts valued in excess of $10 million.

With specific relevance to this protest, on April 20, 2016, GSA issued a task order request (TOR) to contractors under a specific IDIQ, including Analytic Strategies and Gemini Industries. The solicitation estimated the total value of the cost-plus-award-fee portion of the task order to be between $126,081,247 and $132,717,104. On September 21 and October 18, 2016, GSA informed Analytic Strategies and Gemini Industries, respectively, that it would no longer consider their responses to the TOR for award. Analytic Strategies filed its protest on October 3, and Gemini Industries filed its protest on October 28. Approximately one month later, GSA dismissed the protests as its jurisdiction to consider these protests had expired on September 30. The contractors subsequently filed requests for reconsideration once the GAO’s jurisdiction was reinstated.

In denying the reconsideration request, the GAO noted that it has repeatedly determined that its authority to hear a protest, including its jurisdiction to hear task and delivery order protests, is based on the filing date of the protest. The GAO, in finding that it did not possess jurisdiction at the time the protests were filed, noted that merely because the Protest Authority Act removed the sunset provision did not change the fact that the sunset provision did previously exist. The Act contained no statement as to its effective date, thus it is deemed to take effect on the date of its enactment. Furthermore, the GAO noted that retroactive application of a law is disfavored and should not be done in this case.

For more information, read the GAO decision in Analytic Strategies LLC; Gemini Industries, Inc. – Reconsideration; B-413758.4; B-413758.5 (Mar. 8, 2017).

About the Author:

Heather Mims | Centre Law & Consulting in Tysons VA Heather Mims
Associate Attorney

Heather Mims is an associate attorney at Centre Law & Consulting. Her practice is primarily focused on government contracts law, employment law, and litigation. Heather graduated magna cum laude from the George Mason School of Law where she was the Senior Research Editor for the Law Review and a Writing Fellow.

 

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GSA’s Streamlined Offer Process for Successful Legacy Contractors | Centre Law & Consulting in Tysons VA
 
As many contractors are approaching the end of their 20-year contract period in the FSS program, the General Services Administration (GSA) has made it possible for successful legacy contractors to follow a streamlined offer process for their new 20-year contract. Clause A-FSS-11 has been updated so that a contractor can now submit an offer for a new contract under the same Schedule at any time during the existing contract period.

Process Requirements

In order to follow the streamlined offer process, contractors must meet ALL of the following criteria:

  • The contractor has an existing Schedule and is submitting a new offer for the same SINs and Schedule
  • Sales under the existing contract have averaged a minimum of $25,000 per year for the previous five years of reported sales
  • There is a demonstrated pattern of satisfactory past performance under the existing contract

To simplify the process for successful legacy contractors, GSA added clause SCP-FSS-001-S Instructions Applicable to Successful FSS Program Contractors to all solicitations. The following requirements were eliminated from SCP-FSS-001-S:

  • Readiness Assessment
  • Financial Statements
  • Corporate Experience
  • Past Performance (Open Ratings)
  • Relevant Project Experience

The Pathway to Success training requirement is also expected to be eliminated from SCP-FSS-001-S in all solicitations via a refresh/mass mod that is due to be released shortly. The Pathway to Success training has already been removed from Schedule IT 70 via Refresh 40.

Notes on Proposal Submissions

The eMod system has not been updated to distinguish between successful legacy proposals and new contractor proposals, however. In order to override the eMod system, contractors will need to either add a note manually in the system on the applicable page or upload a blank document for all items that are not required by SCP-FSS-001-S.

When submitting your legacy proposal, you should include a listing of all active submitted quotes, established BPAs, and awarded orders under the existing contract. For each, the contractor must include the ordering activity name and point of contact, RFQ/BPA/order number, dollar value, and period of performance (including options). This information can be uploaded in eOffer as an “Other (optional – offeror defined)” document. The new legacy contract will overlap with the existing one until the agreed upon cancellation date of the existing contract. Contractors will utilize the new legacy contract for all new business opportunities.

Our Recommendation

In order to ensure a smooth transition from the existing contract to the new legacy contract, Centre recommends updating your existing contract prior to submitting a new legacy proposal. Review the labor categories, pricing, and other terms and conditions. If changes need to be made, modify your existing contract now so you can move the existing contract to the new legacy contract. However, please note an updated CSP-1 is required when submitting your legacy contract.

About the Author:

Julia Coon | Centre Law & Consulting in Tysons VA Julia Coon
Consultant

Julia Coon is GSA and VA Contract Consultant at Centre Law & Consulting. Julia works with the GSA/VA team in preparing new schedule proposals and post-award contract administration. She has experience in producing schedule renewal packages, various modification packages, small business subcontracting plans, and updates to GSA pricelists.

 

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Uh-oh, Lenovo…

On September 26, the Pentagon’s Directorate for Intelligence, J-2, reportedly issued an internal report warning against the use of equipment made by computer manufacturer Lenovo because of concerns regarding potential cyber spying against defense networks. J-2 supports the Chairman of the Joint Chiefs of Staff, the Secretary of Defense, Joint Staff, and Unified Commands, and it is the national focal point for crisis intelligence support to military operations, indications, and warning intelligence in DoD as well as Unified Command intelligence requirements.

Per a report from Bill Gertz of The Washington Free Beacon, the Chinese Academy of Science, a Chinese government research institute, owns a 27 percent stake in Lenovo Group Ltd. The J-2 report purportedly states that “cyber security officials are concerned that Lenovo computers and handheld devices could introduce compromised hardware into the Defense Department supply chain, posing cyber espionage risks.” The report also purportedly contains a warning that Lenovo is seeking to purchase U.S.-based IT companies in order to gain access to classified defense networks.

The cyber security concern surrounding Lenovo is evidently not a new one as Gertz’s article reports that, following the company’s 2014 purchase of IBM’s BladeCenter line of computer servers (for a cool $2.1 billion), the U.S. Navy replaced the IBM servers within the “Aegis” battle management systems deployed on guided missile destroyers and cruisers over concerns that China could hack the warships through the server.

And, for those wondering, “why isn’t this a TAA issue?,” the server business Lenovo purchased is based out of North Carolina. Perhaps “country of ownership” will become as relevant as “country of origin.”

About the Author:

David Warner | Centre Law & Consulting David Warner
Partner

David Warner is a seasoned legal counselor with extensive experience in the resolution and litigation of complex employment and business disputes. His practice is focused on the government contractor, nonprofit, and hospitality industries. David leads Centre’s audit, investigation and litigation practices.

 

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Much has been said on the security breach that exposed up to 145 million Americans’ most sensitive information. Not only had Equifax,  some say negligently, exposed half of America’s social security numbers, credit card information, and just about anything else needed to steal an identity, but the company thoroughly botched the cleanup by directing customers to a dubiously credentialed website and made a not-so-subtle attempt to induce its customers to waive any right to sue. The remarkable nature of the incident even received a 15-minute break down by HBO’s John Oliver, which is by far the most entertaining way to catch up on the breach if you have been in hiding for the last month.

The IRS award of a seven million dollar contract to Equifax, made shortly after the security hack, seemed to put a cherry on top of a perfect media outrage story. And rage they did. After Politico “discovered” the “sole-source award” by the IRS to Equifax, every major media outlet from Fox News to CNN ran stories mocking the agency’s poor decision. Senators from both sides of the aisle openly scolded the IRS for handing Equifax government funds without even allowing other companies to compete for the contract. Through a grin, Mr. Oliver told his crowd of the award, made on the very same day the former CEO was being chewed up in an open Senate hearing. How could something like this happen? Simply put, because a law aimed at preventing fraud and abuse required the IRS to give Equifax the contract, without any competition.

Federal contractors are well aware of what is called a “statutory stay.” When the government wants to buy goods or services, most of the time it must follow very strict and complicated rules. One such rule requires the government agency to give a debriefing to disappointed contractors when their bid was passed over in favor of another’s. For a variety of reasons, the contractor may believe the government made a mistake in its decision or perhaps something more sinister is to blame for the loss. If the contractor “protests” the decision within five days of the debriefing, the contract at issue is automatically frozen while the Government Accountability Office takes a look under 31 U.S.C. § 3553. The reason behind the law is fairly plain – i.e., to avoid a situation where a company begins performing for the government, and racking up costs, only to have that contract overturned at a much later date.

So about this infamous IRS “award” to Equifax; it was made after the IRS chose a different company to perform on a contract where Equifax was the incumbent. Equifax protested, activated the automatic stay described above, and the IRS was forced to grant a short extension to Equifax’s previous contract while the protest was decided. Notably, the short extension was publicly made, because “a sole source order is required to cover the timeframe needed to resolve the protest on contract TIRNO-17-Z-00024. This is considered a critical service that cannot lapse.” The protest was quickly denied, and now a new company will take over performing services to the IRS.

Notably, the IRS decision to take the contract away from Equifax was made long before the media “put pressure on the IRS,” or before both sides of the aisle joined together in decrying the purported incompetent waste of government funds. While the vagaries of government procurement procedure may not be as shocking as the story told by the major outlets, and it is certainly not nearly as funny as the John Oliver segment, it is however the real explanation to the latest chapter of the Equifax security breach.

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This guide pinpoints some of the major government contracts-related developments that occurred over the last six months. These developments create new opportunities and compliance requirements that people who conduct business with the Federal Government need to know about.

Major Regulatory Developments

Compliance: False Claims Act Penalties Almost Double
The U.S. Department of Justice issued an interim rule increasing monetary penalties for contractors. Civil monetary penalties under certain sections of the False Claims Act are increased from $5,500 to $10,781 (minimum penalty), and from $11,000 to $21,563 (maximum penalty). Considering that each transaction or invoice could be considered as a separate violation, compliance is paramount. You can read the entire rule, and it will be effective on August 1, 2016.

Compliance: New Cybersecurity Requirements For Federal Contractors
The U.S. Department of Defense, NASA and GSA issued a final rule amending the Federal Acquisition Regulation by adding a new subpart for the basic safeguarding of contractor information systems that process, store, or transmit Federal contracting information (FCI). (FAR 52.204-21) FCI means “information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government, but not including information provided by the Government to the public (such as on public Web sites) or simple transactional information, such as necessary to process payments.” This rule is expected to be applicable to most, if not all, of the new contracts. It is effective as of June 15, 2016.

Opportunity: Small Business Mentor-Protégé Program
The SBA is amending its regulations to establish a Government-wide mentor protégé program for all small business concerns. The new rule also makes changes to the current joint-venture provisions. This development is expected to create many new opportunities for small and not so small businesses. This rule will be effective on August 24, 2016.

Compliance: No Discrimination on the Basis of Sex
The U.S. Department of Labor’s Office of Federal Contract Compliance Programs created new nondiscrimination obligations that affect certain Federal Government contractors and subcontractors. The new obligations relate to the Executive Order 11246 – Equal Employment Opportunity. This order prohibits discrimination in employment on the basis of sex and requires employers to take affirmative action to ensure that applicants and employees are treated without regard to their sex. You can read our article on this major development or read the final rule, which will be effective on August 14, 2016.

Opportunity: Export Control Reform Revisions
As part of the Export Control Reform initiative, the Department of State updated the definitions of “export”, and “reexport or retransfer” in the International Traffic in Arms Regulations (ITAR). This is seen as a positive development by many because now the new ITAR definitions will be better synchronized with the Export Administration Regulations definitions. This rule will be effective on September 1, 2016.

Opportunity: GSA Transactional Data Reporting
GSA amended its rules to now require Federal Supply Schedule (FSS) contractors to report transactional data from orders placed against certain FSS contracts, Government-wide Acquisition Contracts and Government-wide Indefinite-Delivery, Indefinite-Quantity (IDIQ) contracts. Some experts believe that this rule could potentially result in significant savings to federal contractors because it may eliminate other reporting requirements. You can read our article on this development or review the rule, which became effective as of June 23, 2016.

Opportunity: The Freedom of Information Improvement Act of 2016
This law is designed to make major changes to the current Federal Government record disclosure practices. Among others, federal agencies are expected to post more records online and make records available to requesters in an electronic format. You can read a good summary on the White House website. This act became Public Law No. 114-185 on June 30, 2016.

Compliance: The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015
This law requires federal agencies to adjust the level of civil monetary penalties with an initial “catch-up” adjustment through an interim final rulemaking, and make subsequent annual adjustments for inflation. This act became Public Law 114-74 on November 2, 2015. Now, federal agencies are required to publish interim final rules with the initial penalty adjustment amounts by July 1, 2016, and the new penalty levels will be legally binding on August 1, 2016. You can read our article on this development.

Significant Legal Decisions

Compliance: Universal Health Services, Inc. v. United States Et Al. Ex Rel. Escobar Et Al. (2016)
In this case, the U.S. Supreme Court considered whether a defendant should face False Claims Act (FCA) liability only if it failed to disclose the violation of a contractual, statutory, or regulatory provision that the Federal Government expressly designated a condition of payment. The Court answered this question by stating that defendants could be liable for violating certain requirements even if the requirements were not designated as conditions of payment. Any misrepresentation about compliance with a statutory, regulatory, or contractual requirement had to be material to the Federal Government’s payment decision in order to be actionable under the FCA. This case was decided on June 16, 2016.

Opportunity: Kingdomware Technologies, Inc. V. United States (2016)
In this case, the U.S. Supreme Court considered whether the Department of Veterans Affairs had to award contracts to veteran-owned small business concerns when there was a reasonable expectation that 2 or more such concerns would bid for the contract at a fair and reasonable price that offered best value to the U.S. Government. The Court answered this question with a unanimous yes! This decision creates many new opportunities for veteran-owned small business concerns. This case was decided on June 16, 2016.

Compliance: Remington Arms Co., LLC, v. The United States, and Colt Defense, LLC, and FN America, LLC (2016)
In this post-award bid protest, the U.S. Court of Federal Claims examined whether the contracting officer’s (“CO”) decision to award a contract to Colt while Colt was still in bankruptcy and labeled “high risk” by the Defense Contract Management Agency was arbitrary, capricious, and an abuse of discretion. The Court concluded that the CO’s decision was arbitrary and capricious because it was not supported by the record which showed that Colt was undergoing bankruptcy proceedings. This case was decided on March 30, 2016.

Opportunity: B-411466.3, Fluor Energy Technology Services, LLC
In this matter, the Government Accountability Office (“GAO”) recommended full reimbursement of costs for filing and pursuing protest where the agency unduly delayed taking corrective action in the face of a clearly meritorious protest. The protester was able to show that a reasonable agency inquiry into initial protest allegations would have revealed prejudicial errors in the agency’s cost realism evaluation. This matter was decided on June 7, 2016.

Note that is post is for educational use only and does not constitute legal advice.

About the Author:

Wojciech Kornacki | Centre Law & Consulting Wojciech Kornacki
Government Contract and Compliance Counsel

Wojciech Kornacki focuses on federal Government contract compliance, bid protests, and federal litigation. He represents clients in matters involving Government Accountability Office bid protests, federal agency debarments, Boards of Contract Appeals litigation, and Export Controls (ITAR and EAR) and Trade Agreements Act compliance.

 

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If you have been working on GSA Schedules for the past few years, you may remember that in May 2012, GSA’s initiative was the end of the Schedule Input Program (SIP) and the mandatory use of the new Formatted Price List (FPL) for the Financial and Business Solutions (FABS) Schedule. There was much excitement generated by this news as we were all ready for the end of SIP. In January 2014, GSA announced that FABS would no longer utilize the FPL and all vendors were to return to SIP. As we look into the years ahead, I am optimistic that eventually the Formatted Product Tool (FPT) will truly be the end of SIP.

What is the FPT?

FPT is a systems upgrade that will be activated within the existing eOffer and eMod platforms and NOT in a separate application. There will be an automatic upload of products and prices to GSA Advantage!

The General Services Administration (GSA) Federal Acquisition Service (FAS) is planning to implement the FPT across the Multiple Award Schedules (MAS) program beginning with select pilot Schedules in late July 2016.

The order of the FPT rollout, with approximately two week intervals, is as follows:

  • Schedule 58 I – Professional Audio/Video
  • Schedule 72 – Furnishings & Floor Coverings (to be released with Schedule 58 I)
  • Schedule 75 – Office Products/Supplies
  • Schedule 73 – Food Service, Hospitality & Cleaning Equipment
  • Schedule 51 V – Hardware Superstore
  • Schedule 70 – Information Technology Products, Software & Services

What Do I Have to Do?

If you accept the FPT, you will be required to complete the one-time “rebaselining” of price list data as well as other data fields for proper display of these items. GSA can then ensure all of your currently awarded products are uploaded to GSA Advantage! For baselining, the contractor will utilize a provided template in eMod to submit all awarded products and associated product data, to include Manufacturer Part Number (MPN) and Universal Product Code Type A data, when applicable. All descriptive information required by SIP will be captured in one submission via eMod and uploaded to GSA Advantage!. This will become your FSS Price List upon execution of the modification.

If you accept the FPT bilateral modification, you will have 60 days to complete the rebaseline process. Please note that with the FPT, Contracting Officers will now have additional data analytics and transparency in helping them determine that pricing is fair and reasonable. Phase I of FPT is focused on collecting standard part numbers for items on Schedule.

Is Participation Mandatory?

No. At this time, acceptance of the upcoming Schedule Refresh/Mass Modification is optional if you are on one of the pilot Schedules. However, FPT will soon be mandatory for all new offers on product Schedules.

Does FPT Include Products and Services?

No. Phase 1 of this pilot program only includes products. If you have both products and services on the pilot schedule (such as IT 70), you are to enter the product information in the FPT pricing template and enter the services information in a text file. Both documents are to be uploaded via FPT, but in different file formats.

Recommendations

My recommendation is to completely understand the FPT process prior to accepting the upcoming Refresh Solicitation/Mass Modification for one of the pilot schedules. Continue to follow GSA Interact for updates on the Formatted Product Tool and for notice of the Refresh Solicitation/Mass Mod release.

I highly recommend attending the next GSA FPT training by registering for the next webinar on July 27, 2016 from 1:00pm – 3:00pm ET.
 
 
About the Author:

Maureen Jamieson | Centre Law & Consulting Maureen Jamieson
Executive Director of Contracts and Consulting

Maureen Jamieson has more than twenty-five years of experience managing federal contracts. She is highly experienced in solving client pricing problems and implementing effective pricing strategies for placing products and services on GSA Schedule contracts.

 

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A New Source Selection Procedure You May Not Know | Centre Law & Consulting in Tysons VA
 
In April 2016, the Department of Defense (DoD) published a memorandum expanding DoD Source Selection Procedures beyond Tradeoff and Lowest Price Technically Acceptable (LPTA) to include Value Adjusted Total Evaluated Price (VATEP) Tradeoff. This newer procedure’s intent is to help define how the government evaluates contractor capabilities that go beyond minimum requirements and reach the government’s objective.

Although it’s been an option since April, we’re finding that many people still are unfamiliar with it. And we’ve certainly not seen it used in many solicitations yet either.

What does VATEP do?

VATEP Tradeoff monetizes a contractor’s performance and capabilities that exceed the minimum threshold and reach a maximum level. It provides a dollar amount or percentage that would then be “credited” to the contractor’s price proposal. This “credit” will not affect the amount awarded, only the government evaluated price. It is important to keep in mind that if the contractor’s price falls outside the affordability cap, this “credit” would still not bring a price below it.

For example, let’s say the government wants a chair made. The government states that the chair needs a minimum of three legs so it won’t fall over, but they would prefer a chair with four legs. Being the entrepreneur that you are, you have the capability to make chairs that have both three and four legs. Making a chair with three legs is considerably cheaper than four, but you are not sure how much the government values that extra leg if a traditional Best Value Tradeoff evaluation was used. VATEP puts a dollar figure on that leg, which would then be subtracted from your proposed price to reach the government evaluated price.

How does it help me?

By putting a specific value on a contractor’s performance and capabilities that reach the objective level, it provides the contractor clarity on whether to pursue additional performance beyond the government’s minimum requirements. If a company know it will cost them $500 to put that extra leg on all the chairs and the government only values the leg at $250, then the company knows it should only offer the government the three-legged chair instead.

This new procedure certainly won’t make sense for every requirement, but it does offer the government a way to make the process less cryptic. Could we see more agencies start to use this?

Only time will tell.

 
About the Author

Michael Glazer | Centre Law & Consulting in Tysons VA Colin Johnson
Contracts Manager

Colin Johnson is a Contracts Manager who focuses on business development and federal contracts management. His expertise is in preparing quotes and responses for both government and commercial entities for training and legal support services.

 

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The Federal Government continues to issue more and more cybersecurity rules, Executive Orders and guidance for federal contractors, and the latest addition is the Federal Acquisition Regulation Part 52.204-21 – Basic Safeguarding of Covered Contractor Information Systems, published in June 2016. This new rule establishes new definitions of “Covered Contractor Information System”, “Federal Contract Information”, and outlines 15 new safeguarding requirements and procedures for federal contractors. FAR Part 52.204-21 supplements many other existing cybersecurity rules that Federal contractors have to already comply with.

When it comes to meeting cybersecurity requirements, the first question is whether the new rule applies. For example, vendors of commercial items may not be affected by the rule in the same way as contractors storing and managing government information containing non-public and sensitive data. The new rule applies to “Covered Contractor Information System” which is defined as an information system that is owned or operated by a contractor that processes, stores, or transmit Federal Contract Information. Thus, it is important to understand your specific contract requirements relating to such information, and to check whether your contract includes FAR Part 52.204-21. Most experts agree that this rule could have a very broad application.

What is “Federal Contract Information”?

It is information that is not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government, but not including information provided by the Government to the public (such as on public websites) or simple transactional information, such as necessary to process payments.

What is “Safeguarding”?

The new rule defines “safeguarding” as measures or controls that are prescribed to protect information systems, and it lists 15 different security controls. Essentially, the security controls can be divided into (1) user controls, (2) use controls, and (3) information system controls. User controls involve limiting access to authorized users. Use controls refer to limiting the types of transactions and functions that authorized users are permitted to execute. Finally, information system controls refer to periodic scans of the information systems and real-time scans of files from external sources as they are being downloaded, opened or executed. Read the details of all the 15 requirements.

What Are Other Cybersecurity Requirements?

There are many. Probably, one of the most important ones is the new publication setting out the minimum standards on protecting controlled unclassified information.

The National Institute of Standards and Technology Special Publication 800-171 “Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations” is designed to help federal agencies in protecting the confidentiality of controlled unclassified information when it is stored on nonfederal information systems and organizations. This in turn means that federal contractors have to comply with the recommended requirements. This publication has been developed pursuant to the Federal Information Security Modernization Act of 2014.

What Are Some of the Best Ways to Satisfy the New 15 Cybersecurity Safeguarding Requirements and Procedures?

It all starts with appropriate policies and internal procedures, proper training, contingency planning, periodic assessments and remedial actions, and constant risk monitoring.

If you have further questions about the new cybersecurity rules, or require training, feel free to contact us.

About the Author:

Wojciech Kornacki | Centre Law & Consulting Wojciech Kornacki
Government Contract and Compliance Counsel

Wojciech Kornacki focuses on federal Government contract compliance, bid protests, and federal litigation. He represents clients in matters involving Government Accountability Office bid protests, federal agency debarments, Boards of Contract Appeals litigation, and Export Controls (ITAR and EAR) and Trade Agreements Act compliance.

 

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Yes, you read the title correctly – a protester actually protested its own future award. In an interesting twist of fate, a company recently filed a pre-award bid protest only to find out that the agency had already evaluated the protester’s bid and intended to award the contract to the protester.

Daekee Global Company, Ltd., a South Korean company, protested the terms of a solicitation issued by the Department of Navy for ship husbanding services arguing that the evaluation scheme failed to evaluate offerors’ technical capabilities or past performance. The agency subsequently requested the dismissal of the protest because Daekee had not been prejudiced by the terms of the solicitation. Specifically, the agency argued that Daekee submitted an offer that was evaluated by the agency and that the agency intended to award a contract to Daekee. In response, Daekee argued that the merits of its protest should still be addressed as, even though it would be an awardee, the issues Daekee raised would not be addressed or corrected if its protest were to be dismissed.

Unsurprisingly, the GAO did not bite on Daekee’s argument. In its decision, the GAO found that Daekee was not an interested party as it did not suffer any competitive prejudice because Daekee did not suffer any competitive disadvantage or otherwise affect its ability to compete. Because the agency represents that once the protest is resolved and the stay of the award is lifted it will award a contract to Daekee, the GAO found that it does not have jurisdiction to entertain the protest.

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You've Accepted Transactional Data Reporting (TDR), Now What? | Centre Law & Consulting in Tysons, VA
 
The Transactional Data Reporting (TDR) Rule requires vendors to electronically report the price that the federal government paid for an item or service purchased through GSA acquisition vehicles and other data elements. The rollout of TDR across all pilot schedules is now complete. If you accepted TDR willingly or unwillingly, it’s time to understand the reporting requirements.

When are the TDR Requirements Effective?

Upon acceptance of the TDR pilot bilateral mass modification, the requirement for providing a Commercial Sales Practice (CSP) disclosure to accompany modification requests will be eliminated. In addition, vendors will no longer be required to track price reductions granted to their Basis of Award (BOA) customer or category of customers. Price Reduction Clause liability for current contractors ends with acceptance of the TDR mass modification, which will be effective on the first day of the business quarter following acceptance of the modification.

In order to ease the transition from the current 72A reporting database to the TDR reporting module, the requirement for commencement of reporting will not begin on the date the modification is signed; rather, reporting will begin at the beginning of the next full business quarter as shown below:

Modification Accepted Requirements Effective
 July 1 – September 30  October 1
 October 1 – December 31   January 1
 January 1 – March 31  April 1
 April 1 – June 30  July 1

 
If a current contractor accepts the modification during the last 15 days of a standard business quarter, reporting begins on the first day of the second business quarter following modification acceptance.

What Data Am I Required to Report?

The clause requires contractors to submit the following data elements:

  1. Contract Number
  2. Order Number or Procurement Instrument Identifier (PIID)
  3. Non Federal Entity, if applicable
  4. Description of Deliverable
  5. Manufacturer Name
  6. Manufacturer Part Number
  7. Unit of Measure (each, hour, case, lot, etc.)
  8. Quantity of Item Sold
  9. Universal Product Code (UPC), if applicable
  10. Price Paid per Unit
  11. Total Price Sold

Contractors should report Firm Fixed Price (FFP) orders as single line item representing the lump sum total for the order. For services time-and-materials (T&M) or labor hour orders, reporting should be done by labor categories and rates.

Manufacturer Name is not a mandatory field for service contractors in TDR, but Description of Deliverable is a mandatory field for both products and services. Service providers would place a brief description of the project or service offered in the Description of Deliverable field.

How Can I Complete the Reporting?

FAS Sales Reporting  (Contracts must have a digital certificate to gain access to the reporting system)
Reporting Tutorial

Contractors have multiple options to submit their sales data such as:

  • Form entry – where you fill out a form in your web browser
  • File upload – where you upload an excel or .csv template populated with your sales data
  • Electronic Data Interchange / EDI
  • Web Services / API

In summary, TDR data is reported monthly and there is a 30-day window to report after the end of the month. Your Industrial Funding Fee (IFF) must be paid quarterly. Contractors may, however, choose to remit IFF on a monthly basis when they report their sales if they prefer and must do so through the TDR system. For TDR Pilot contractors under Schedules 70 and the Professional Services Schedule, if TDR SINs are included on a contract alongside non-TDR SINs, the entire contract is subject to TDR terms and conditions, and CSP and PRC requirements are removed for the entire contract. Remember that participation in the TDR Pilot does not exempt the contractor from existing reporting requirements found elsewhere in the contract.

About the Author:

Julia Coon | Centre Law & Consulting in Tysons VA Julia Coon
Consultant

Julia Coon is GSA and VA Contract Consultant at Centre Law & Consulting. Julia works with the GSA/VA team in preparing new schedule proposals and post-award contract administration. She has experience in producing schedule renewal packages, various modification packages, small business subcontracting plans, and updates to GSA pricelists.

 

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By now you have probably heard that the Department of Labor’s regulations for the white-collar exemptions to overtime compensation were finalized and will be effective December 1, 2016. You are probably also aware that your company should be analyzing how its employees are classified to ensure it is prepared to comply with the regulations come December 1. What you may not have thought about is how your analysis (and any changes to employee exemption status) may impact your federal government contracts covered by the Service Contract Labor Standards (formerly the Service Contract Act).

The final overtime regulations implement significant changes to the salary threshold required for employees in order to be considered exempt. Specifically, the salary level for the executive, administrative, and professional exemptions will become $913 per week or $47,476 annually. Although this is only half of the exemption analysis (which also requires employees meet a duties test), the DOL estimates that roughly 4 million workers will be affected by the change.

How Does the Service Contract Labor Standards Come Into Play?

The Service Contract Labor Standards (SCLS) generally requires contractors with covered service contracts pay their “service employees” a minimum wage and fringe benefits that have been determined by the Secretary of Labor as prevailing in the locality where the employee is working. These wages and fringe benefits are reflected in one or more wage determinations attached to the SCLS contract. However, only “service employees” are subject to the wage and fringe benefit requirements of the wage determination. Thus, properly classifying a worker as a service employee is extremely important for determining compliance with the SCLS.

“Service employees” are in turn defined as any employee that is not exempt from overtime under the administrative, executive, or professional exemptions. Thus, for government contractors, one very likely result of reclassifying employees from exempt to non-exempt under the new FLSA regulations is that these now non-exempt employees will also become subject to SCLS wage and fringe benefit obligations. The difficulty will be in aligning or mapping these now non-exempt “service employees” to the positions on the wage determination (or directory of occupations). Assuming these employees otherwise meet the duties test for the white-collar exemptions (which typically require higher level responsibility and decision-making), the directory of occupations and wage determinations likely do not currently contain positions of a similar nature. Thus, absent proactive action by the DOL, contractors may need to make conformance requests for covered contracts for these newly exempt positions.

What Should Contractors Be Doing Now?

It is important that contractors assess proper classification of its employees over the next few months to determine which positions may need to be reclassified as non-exempt from overtime starting December 1. In addition, contractors should assess the resulting increase in SCLS applicability for those employees that will now be considered “service employees” and ensure proposals and existing contracts account for any increased costs as a result.

The DOL has jurisdiction to pursue claims against contractors that fail to classify workers appropriately. For example, last week the DOL announced a $1.5 million settlement in back wages and fringe benefits with a contractor that allegedly misclassified workers subject to SCLS. Notably, the settlement also covers workers with 10 subcontractors.

While the consent findings reflect that the contractor will seek an equitable adjustment to account for its increased costs based on the applicability of SCLS to additional employees, being in the position of paying seven figures worth of back pay while waiting for the government to decide whether an equitable adjustment will be provided is certainly less than ideal. Contractors can be far better positioned when engaged in proactive analysis of proper employee classification along with ensuring that subcontractors are also aware of the applicability of SCLS.

About the Author

Marina Blickley | Centre Law & Consulting Marina Blickley
Associate Attorney

Marina Blickley is primarily focused in the Government Contracting and Non-Profit industries. She regularly assists clients in all aspects of employment and labor law including representation and defense of employers against claims of employment discrimination, harassment, retaliation/whistleblower, and wage and hour violations before administrative agencies and state and federal courts.

 

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Alleluia! Inconsistence SCA implementation from GSA be gone!

GSA has finally issued guidance on the implementation of the Service Contract Labor Standards (formerly called the Service Contract Act). It seems like dog years ago and certainly several changes of leadership at GSA when I first met with them about issuing uniform SCLS guidance.

How Do We Know This?

GSA published a draft refresh of Schedule 23V (firetrucks, auto, and auto parts and accessories) which contains the draft guidance along with some SCA/SCLS questions and answers. However, GSA tells us that this (draft) guidance will be finalized pronto and implemented across the board on all schedules. The grand Wizard of Oz will finally speak to all in Munchkin Land.

What You Need to Know Now:

  1. We finally have some (forthcoming) guidance from DOL and GSA. In summary, current Wage Determinations (WDs) will be deleted from all existing schedule contracts.
  2. GSA policies and procedures will be updated to direct ordering activity contracting officers to incorporate the appropriate Wage Determinations at the task order level.
  3. I have always said the FAR directs the contracting officers to make this determination and not the contractor. This is consistent with the FAR.
  4. A GSA Mass Mod will be issued in approximately 10 days across all Schedules incorporating these changes.
  5. Although the revised Schedule 23V Refresh is a DRAFT summary of what is to come, it highlights the significant changes. There are FAQs that provide a good summary specific to SCA.

 
Centre’s Concerns:

  1. You can’t bid higher than your Schedule rates.
  2. If you are bidding on a task order proposal that incorporates a WD for an area that is higher priced than your schedule rates, you may have to modify your GSA Schedule. We don’t know if GSA will process modifications to support bidding and not billed rates but GSA, this can be an issue. I predict mass confusion here, just like when the Wicked Witch of the West flies over Oz.
  3. All GSA Catalogs will need to be revised to remove the SCA matrix. There will be less work at the Schedule level now on SCA/SCLS.

 
Need More Information?

Email me at bkinosky@centrelawgroup.com if you want the GSA FAQs and Schedule 23V with the pertinent sections. I will also be posting more details on our SCA LinkedIn Forum. For even more help, consider reaching out to us if you need legal or GSA consulting services. We are all about the SCLS/SCA compliance.

Want Training?

We offer a variety of educational courses throughout the year on these and many other topics. See what’s coming up on our Course Calendar or browse our complete Course Catalog.

About the Author:

Barbara Kinosky Barbara Kinosky
Managing Parnter

Barbara Kinosky has more than twenty-five years of experience in all aspects of federal government contracting and is a nationally known expert on GSA and VA Schedules and the Service Contract Act. She has a proven track record of solving complex issues for clients by providing strategic and business savvy advice. Barbara was named a top attorney for federal contracting by Smart CEO magazine in 2010, 2012, and 2015.

 

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The Payment of Subcontractors proposed rule, which appeared in the Federal Register in January 2016, is the latest in a series of efforts to hold the Prime accountable for timely payments to its Subs.

Those who follow these blogs know that ‘payment’ is a hot button topic for me whether it is payment to the Prime by the Government or payment to the Subcontractor by the Prime. We’ve previously highlighted the “Accelerating Payments to Small Businesses” rule whose aim is to enable small businesses subcontractors to receive payments within 15 days of receipt of a proper invoice. And not quite a year ago, I reviewed the finer points of the “Paid to Cost” rule, which requires payment to Subs thirty days after the Prime submits its invoice to the Government.

This Payment of Subcontractors proposed rule has made a long trip. It originated as Section 1334 of the Small Business Jobs Act of 2010! This statute requires the Prime to self-report to the Contracting Officer (CO) when the Prime makes late or reduced payments to small business subcontractors. In addition, the CO is required to record the identity of contractors with a history of three or more unjustified reduced payments to small business subcontractors within a 12-month period [FAR 42.1502(g)(2)] in the Federal Awardee Performance and Integrity Information System (FAPIIS).

What Does It Mean?

That’s a lot to take in, but essentially:

  • In an era of mandatory disclosure, the contractor must turn itself in to the CO along with the reason(s) for the reduced payment.
  • The CO will add the contractor’s identity to FAPIIS, the database that has been established to track contractor misconduct and performance.

The FAPIIS database also contains Federal contractor criminal, civil, and administrative proceedings in connection with federal awards, suspensions and debarments, administrative agreements issued in lieu of suspension or debarment, non-responsibility determinations, contracts terminated for fault, and defective pricing determinations – truly a tough neighborhood!

What Are the Points to Consider in This Rule?

First, what does a reduced payment mean? FAR 19.701 defines it as a payment that is less than the amount agreed upon in a subcontract in accordance with its terms and conditions for supplies and services for which the Government has paid the prime contractor.

Second, are any other processes affected? FAR 42.1502 is revised to include reports of reduced payments in the past performance evaluation in each of the ratings definitions found at Table 42-2. A new clause, FAR 52.242-XX, implements the rule.

Finally, to which contracts does this apply? This statute defines a ‘covered contract’ as a contract under which a prime contractor is required to develop a subcontracting plan. I was almost through an initial reading of this rule before that point was made clear. That narrows the scope of affected Prime contracts but only a little. FAR 19.702 [The Small Business Subcontracting Program] instructs that in negotiated acquisitions, each solicitation of offers to perform a contract or contract modification, that individually is expected to exceed $700,000 and that has subcontracting opportunities, shall require the apparently successful offeror to submit an acceptable subcontracting plan.

As of last week the Councils were comparing notes with the objective of issuing a final rule. Payment rules are typically welcomed by one party and dreaded by the other, but the dynamics are universally interesting.

Contact me if you have questions about this, but I’ll also review – probably the final rule – in my Federal Contract Basics or Subcontracting Under the FAR courses this fall.

About the Author:

Rich Zimmerman | Centre Law & Consulting Rich Zimmerman
Project Manager

Richard E. Zimmerman has more than 25 years of experience as a contracts professional both in Government and the private sector. His excellent background in FAR, Agency supplements, and their application over the procurement life cycle make him a critical resource for PMs, prime contractors, and subcontractors.

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Reproduced with permission from Federal Contracts Report, 105 FCR (June 21, 2016). Copyright 2016 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Effective Trade Agreements Act and Pricing Compliance Programs for Federal Supply Schedules

Recent scrutiny by Sen. Charles Schumer (D-N.Y.) and a $75.5 million settlement stemming from allegations of overcharging the U.S. government send a clear message: Vendors must be compliant with their Trade Agreements Act (TAA) and pricing obligations on their Federal Supply Schedules (FSS). This article describes some of the most common TAA and pricing issues and points out some of the best practices.

The U.S. government created the FSS to streamline its acquisition process through volume buying from pre-approved vendors known as schedule contractors. Pursuant to the Federal Property and Administrative Services Act of 1949, 40 U.S.C. 101 et seq., the Government Services Administration (GSA) administers the FSS. This is why the FSS is also known as GSA Schedules or Multiple Award Schedules. In the past 67 years, the FSS have grown into a multibillion-dollar industry of vendors specializing in providing products and services to the U.S. government.

The Federal Acquisition Regulation (FAR) Parts 8, 12 and 38 govern the FSS. In accordance with FAR Part 12, FSS contracts are “commercial item contracts.” This means they may be awarded with less than full and open competition. When placing an order through the FSS, each agency is exempt from the small-business set-aside programs under FAR Part 19.

Compliance Issue 1: Buy American Statute and Trade Agreement Act

The U.S. government requires that products sold on the FSS are Buy American Statute (formerly the Buy American Act) and Trade Agreements Act compliant. In 1933, Congress passed the Buy American Act, 41 U.S.C. §§ 10a-10d (BAA), which required the U.S. government to give a preference to U.S. made goods over foreign-made goods in federal procurements to protect American workers and businesses.

Congress subsequently passed the Trade Agreements Act, 19 U.S.C. § 2512 (TAA) which allows the president to waive the BAA requirements for eligible products from countries that have signed an international trade agreement with the U.S. The TAA waiver applies only once certain dollar thresholds are met. The GSA has determined that since the estimated dollar value of each schedule it administers exceeds the established TAA thresholds, the TAA is applicable to all schedules. Both acts are discussed in detail in FAR Part 25, Foreign Acquisition.

Schedule contractors must comply with the BAA and TAA requirements. Specifically, the FAR states that schedule contractors must certify that each end product offered to the U.S. government is a U.S.made or designated country end product as defined in the “Trade Agreements” solicitation clause. Many schedule contractors purchase products from European or Asian suppliers or manufacturers and resell them to the U.S. government. Thus, it is critical to ensure that each product sold to the U.S. government has adequate compliance documentation.

The GSA has recently contacted schedule contractors to verify that their products are TAA and BAA compliant. This comes, in part, in response to the recent push from Schumer, who said several schedule contractors were listing products as “Made in America” when they were actually made overseas. So far, the GSA has removed 11 vendors. In addition to being removed from the FSS, schedule contractors risk debarment, financial liability and criminal penalties.

Compliance Issue 2: Pricing Issues and Requirements

The regulation controlling the GSA schedules requires schedule contractors to provide the U.S. government with the most favorable price. General Services Administration Acquisition Regulation (GSAR) Section 552.238-75 Price Reduction Clause, states, in part, that schedule contractors and the contracting officer must agree upon “(1) the customer (or category of customers) which will be basis of award and (2) the Government’s price or discount relationship to the identified customer (or category of customers). This relationship shall be maintained throughout the contract period.

The GSAR requires schedule contractors to provide current, accurate and complete pricing policies and practices to the U.S. government during negotiation. Schedule contractors must also notify the U.S. government when they deviate from their standard written pricing policies.

Compliance with the Price Reduction Clause (PRC) is an ongoing obligation. However, many schedule contractors often change their business partners; their business partners change their points of production; and market prices fluctuate. Thus, it is important to monitor all of the changes affecting pricing — not only from the perspective of profitability, but also compliance.

Failure to comply with the PRC may result in substantially overcharging the U.S. government. This, in turn, could trigger a qui tam action against a schedule contractor and the involvement of the Department of Justice. According to the Justice Department, in 2015, two companies agreed to pay $75.5 million to settle claims that they misrepresented their commercial pricing practices and overcharged the U.S. government. Another company agreed to pay $44.5 million to resolve allegations that it overcharged the U.S. government for storage services. In 2016, the first major PRC noncompliance matter involved a company that agreed to pay $11 million to settle alleged false claims relating to overbilling the U.S. government on a GSA contract for six years.

Compliance Issue 3: Mandatory Disclosures of Violations

The Mandatory Disclosure Rule applies to the FSS and schedule contractors. It requires that schedule contractors report fraud and significant overpayments related to the contracts awarded by the U.S. government to the agency Office of Inspector General when a violation relates to ‘…an order against a Governmentwide acquisition contract, a multi-agency contract, a multiple-award schedule contract such as the Federal Supply Schedule, or any other procurement instrument intended for use by multiple agencies…” and to also copy the contracting officer.

This may often place schedule contractors in a difficult position of notifying all of the ordering U.S. government agencies. Failure to comply with the Mandatory Disclosure Rule is considered a cause for debarment. The GSA Office of Inspector General semiannual reports show TAA violations continue to be reported every year.

Best Practices for FSS Compliance

  • Detail one or two individuals who are directly responsible for BAA and TAA compliance.
  • Establish clear and easy to follow standards and policies.
  • Automation prevents human errors.
  • Invest in comprehensive compliance IT safeguards and internal checks early on.
  • Proper preventive training and decision flowcharts will ensure that your compliance program is responsive to market changes and fluctuating prices.
  • Conduct a third-party review of your policies and compliance practices. For close questions, seek legal advice.
  • Report TAA and pricing noncompliance issues with your FSS. This includes notifying the ordering agency, the agency responsible for the contract, and your contracting officer.
  • It may be best to hire an experienced outside counsel or consultant to handle this.

 
Conclusion

According to the GSA, the FSS are “fast, easy, and effective contracting vehicles for both customers and vendors” and are designed to mirror commercial business practices. Schedule contractors are automatically connected to multiple procurement opportunities across a wide array of U.S. government agencies. In the past six decades, the FSS have become more complex and require greater compliance. While the FSS offer many benefits, recent congressional and Justice Department scrutiny shows that compliance is paramount.

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Cooperating with DOL Investigation Does Not Protect You From Debarment | Centre Law & Consulting in Tysons VA
 
On December 28, 2016, the Department of Labor (DOL) filed a complaint with the DOL Office of Administrative Law Judges seeking debarment of a contractor for violation of the Service Contract Labor Standards (formerly the Service Contract Act). The contractor, Restaurant Associates LLC, runs the cafeteria in the Dirksen Senate Office Building. Even though Restaurant Associates won a seven year contract extension in December 2015 to continue operating the cafeteria, the company would be prohibited from bidding on future government contracts but would be permitted to retain that contract through the extension.

The DOL’s investigation began in July when they first alleged that Restaurant Associates violated the SCA by misclassifying hundreds of workers. However, what makes this case particularly interesting is that the company had no history of previous SCA violations and fully cooperated with the DOL investigation. In complying with the DOL investigation, the company agreed to and did pay $1,008,302 in back wages for 674 cafeteria workers. Despite paying the back wages, the DOL is now seeking to debar the contractor.

Perhaps the DOL is seeking debarment based on the circumstances surrounding the DOL investigation. The investigation first began after a complaint was submitted to the DOL alleging that Restaurant Associates unlawfully changed worker job classifications to avoid giving raises that were contained in the December 2015 contract renewal. After the investigation, the DOL found that the company had improperly classified workers both by paying them for lower-paying jobs than they actually performed and by requiring employees to work prior to their scheduled starting times without compensation.

This will be an interesting case to follow as it develops.

In the meantime, you can read the DOL Complaint and the DOL news release from the July investigation.

About the Author:

Heather Mims | Centre Law & Consulting in Tysons VA Heather Mims
Associate Attorney

Heather Mims is an associate attorney at Centre Law & Consulting. Her practice is primarily focused on government contracts law, employment law, and litigation. Heather graduated magna cum laude from the George Mason School of Law where she was the Senior Research Editor for the Law Review and a Writing Fellow.

 

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Many “small” businesses listed in Federal Procurement Data Systems find themselves in a paradox—they’re at once too small to compete with large contractors, but also too large to benefit from small business set-asides. These growing firms have achieved what every small business owner hopes for—start small, gain market traction, and grow. But when a firm graduates from the benefits of small business set-asides, they enter the “mid-tier” — a murky limbo that can leave them vulnerable and, potentially, unable to compete.

The government should, as a matter of policy, continue to support and foster the growth of firms that enter the mid-tier. Research suggests maturing small businesses produce more jobs than established companies or startups. But today, these mid-tier firms have nowhere to “grow” in the federal marketplace. It’s a double-edged sword that’s not good for the economy or the federal agencies that rely on relationships with maturing small businesses.

Size Does Matter…

When it comes to professional services, mid-tier contractors simply cannot compete with the large contractors that dominate the space. Larger firms have several competitive advantages that make true competition between mid-tier firms and the largest firms illusory.

Multi-billion dollar companies have the resources to commit the talents of well-paid business development and marketing staffers solely to proposal development across multiple industries. This increases the competitiveness of the largest companies in the bidding process — potentially freezing out emergent smaller companies. In contrast, mid-size companies have limited bid and proposal budgets and typically do not have teams of individuals solely dedicated to business development and marketing. This lack of infrastructure at mid-size companies constrains their ability to compete successfully against larger actors.

What can a mid-size firm do? Often, they’re forced to sell. Competition is stifled when multi-billion dollar companies force these businesses into their supply chain through acquisition once these companies have become ineligible for small business awards. If not acquired, an advanced small or mid-size company may have to modify its business model to focus on subcontractor relationships with other large or small companies. Being limited to subcontractor roles impairs the mid-tier firm’s ability to gain project management experience essential for further growth.

…Especially in a Shrinking Market

Over the last decade, the competitive dynamics of the federal procurement market – and in particular the federal professional services industry – have changed drastically. The federal market continues to shrink in the short-term, along with the diversity of companies that supply government customers. Industry consolidation appears to have run its course in terms of efficiency, and now it simply means fewer choices for government managers.

Uncertain procurement strategies by government agencies — owed partially to congressional gridlock — challenge agencies and industry to see and prepare for future requirements. This uncertainty has adverse effects on competition and deprives the federal government of the opportunity to realize a return on its initial investment in emergent small businesses.

As in any market, there are winners and losers. But for today’s small contractors, winning might just be what sets them up to be losers. Finding opportunities to help mid-tier companies mature into strong businesses is essential — both for the competitiveness of the market and the ability of agencies to meet their mission with the most innovative solutions.

Advanced small firms have done what we all want to do. They began small, became seasoned, and grew. The government should as a matter of policy, support and foster such growth since previous data from Christopher Yukins and other researchers suggest that maturing small businesses produce more jobs than either very large or new companies. Presently, these advanced small firms have nowhere to “grow” in the federal marketplace. That is not good for the economy or federal agencies that have derived benefits from their relationships with growing small contractors.

Sizing Up the Competition

Increased concentration of Federal Professional Services Industry contract awards being performed by large companies stifles competition because advanced small companies simply cannot successfully compete with the largest players. Larger firms have several advantages that make competition between advanced small and the largest firms illusory. Multi-billion dollar companies leverage the talent of well-paid business development and marketing staff as well as teams of professional technical writers and graphic artists that can dedicate their efforts solely to proposal development. Additionally, large size companies can use their expertise to operate in multiple industries. This increases the relative competitiveness of the largest companies in the bidding process. In contrast, mid-size companies have limited bid and proposal budgets and typically do not have teams of individuals solely dedicated to business development and marketing. This lack of infrastructure at mid-size companies constrains their ability to compete successfully against larger actors.

Competition is stifled when multi-billion dollar companies force these businesses into their supply chain through acquisition after these companies have become ineligible for small business awards. If not acquired, an advanced small or mid-size company may have to modify its business model to focus on subcontractor relationships with other large or small companies. Being limited to subcontractor roles impairs the advanced small firm’s ability to gain project management experience essential for further growth.

The Government Market is Shrinking

The federal market continues to shrink in the short-term, along with the diversity of industry choices that supplies those customers. Industry consolidation appears to have run its course in terms of efficiency, and now simply means fewer choices for government managers. Uncertain strategies by government agencies — owed partially to congressional gridlock -challenges agencies and industry to see and prepare for future requirements. This uncertainty, however, has an adverse impact that shuts down competition and deprives the Federal Government from realizing any return on its initial investment in advanced small companies during their early growth.

While significant policy change will occur next year regardless of who takes control of various levels of government is an easy prediction to make, those working within today’s contracting community can expect to be asked to get things done faster and more effectively. Within federal contracting, all its many constituencies define success differently (whether you are a small, advanced small, mid-sized, or large business) and almost never achieving a consensus. As in all business, there are winners and losers. “Where you stand depends on where you sit.” In the worst-case scenario, an Advanced Small firm will fail.

To learn even more, plan to attend “Federal Procurement Opportunities for Small Businesses and Middle Market Contractors“, a breakfast seminar hosted in partnership with Mid-Tier Advocacy on June 23 in Tysons Corner, VA.

Register Now | Centre Law & Consulting

Mid-Tier Advocacy, Inc. (MTA) is a 501(c) 3 non-profit organization was established to work toward the elimination of the competitive disadvantage facing mid-tier government support service companies. A nonpartisan organization, MTA provides resources and public awareness through issue forums and structured branded events. As such, we leverage the collective voice for mid-tier firms in response to federal policies that impact their growth and sustainability. MTA hosts scheduled business events “MTA Business Focused Breakfast” in the DMV area where industry meets policy.

About the Author:

Tonya Saunders, Founder of Mid Tier Advocacy | Centre Law & Consulting Tonya M. Saunders
Founder of Mid-Tier Advocacy, Inc.

Tonya Saunders is the founder and principal for Washington Premier Consulting and Washington Premier Group. Among her accomplishments is founding and directing Mid-Tier Advocacy, a national coalition of small, emerging, and medium-sized businesses.

 

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