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Fifteen New Cybersecurity Safeguarding Requirements and Procedures Take Effect

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
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.   The post Fifteen New Cybersecurity Safeguarding Requirements and Procedures Take Effect appeared first on Centre Law & Consulting.
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Don’t be late! eSRS Submissions Due October 30, 2017

By Wayne Simpson Prime contractors with contracts containing commercial subcontracting plans are required to file a Summary Subcontract Report (SSR) (formerly Standard Form 295), reporting the accomplishments under their respective subcontracting plans in the Electronic Subcontracting Reporting System (eSRS) for the 12-month period ending September 30, 2017, no later than October 30, 2017. eSRS is the official Governmentwide System designated for small business subcontracting program reporting.  The system is web-based and is located at http://www.eSRS.gov. The eSRS website contains quick reference materials useful for reporting subcontracting accomplishments. Prime contractors with individual subcontracting plans, and higher-tier large business subcontractors, are required to file an Individual Subcontracting Report (ISR) (formerly Standard Form 294).  These same contractors are required to ensure compliance by lower-tiered subcontractors, and to accept or reject reports filed by these subcontractors.  ISRs are due within 30 calendar days of the following reporting periods: For non-Department of Defense (DOD), National Aeronautics and Space Administration (NASA), and General Services Administration (GSA) Contracts: 1st reporting period: October 1st through March 31st 2nd reporting period: October 1st through September 30th For contracts with DOD, NASA, and GSA Multiple Award Schedule Contracts 1st reporting period: October 1st through March 31st 2nd reporting period: October 1st through September 30th For GSA non-Multiple Award Schedule Contracts: 1st reporting period: October 1st through December 31st 2nd reporting period: October 1st through March 31st 3rd reporting period: October 1st through June 30th 4th reporting period: October 1st through September 30th It is important to note if an eSRS submission is rejected by the contracting agency, the contractor must submit a corrected report within 30 calendar days of the report’s rejection.  It is important to keep a signed copy of your submission on file. If your subcontracting program is becoming more labor intense and resource consuming than you desire, Centre Law & Consulting offers turn-key subcontracting program services.  These services include subcontracting plan preparation and negotiation, surveying existing subcontractors and suppliers to ascertain appropriate size status and socioeconomic procurement preference program category status for eSRS reporting purposes, preparation of justification for goaling shortfalls, and assistance with eSRS submissions.  Increasingly companies are finding outsourcing these efforts is more efficient than using internal resources, using personnel who often performing these functions as a collateral responsibility.  Internal resources are not always sufficiently trained and lack the expertise to ensure these efforts fully comply with Federal requirements and ensure these efforts can withstand the scrutiny of a small business program review by the U.S. Small Business Administration, the contracting agency, or the Defense Contract Audit Agency. About the Author: Wayne Simpson
Consultant
Wayne Simpson is a seasoned former Federal executive and acquisition professional who is also a highly-motivated and demonstrative small business advocate, with nearly 38 years of Federal Civilian Service with the U.S. Department of Veterans Affairs (VA), and its predecessor organization, the Veterans Administration. The post Don’t be late! eSRS Submissions Due October 30, 2017 appeared first on Centre Law & Consulting.
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Centre Law & Consulting

Centre Law & Consulting

 

Proper Classification of Workers is Important for Compliance with FLSA and SCLS

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
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.   The post Proper Classification of Workers is Important for Compliance with FLSA and SCLS appeared first on Centre Law & Consulting.
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GSA Proposes New Rule Allowing Other Direct Costs into Schedules Program

GSA has finally acted on the request from customer agencies and industry partners to allow Order Level Materials (OLMs), frequently called Other Direct Costs (ODCs), into the Multiple Award Schedule (MAS) program. GSA is proposing to amend the General Services Administration Acquisition Regulation (GSAR) to establish special ordering procedures per FAR 8.403 (b). These new procedures will clarify the authority to acquire OLMs when placing an order or establishing a BPA against a Federal Supply Schedule contract. As background, currently most commercial Indefinite-Delivery/Indefinite Quantity (IDIQ) contracts have the flexibility to acquire OLMs. This authority extends to contracts awarded pursuant to FAR Part 12 and orders awarded pursuant to FAR Subpart 16.5 and 8.4. However; Subpart 8.4 was never updated and as a result the ability to acquire OLMs was never fully implemented in the MAS program. The proposed GSA rule includes some of the following amendments (a full list can be found in the proposed rule): Add to GSAR 515.408 (c) that “offerors are not required to complete the commercial sales practices disclosure for order level materials” Prohibiting order-level materials from being the primary basis of the order Limiting the total value of order-level materials to 33 % of the overall order value Require the order-level materials to be purchased under a separate Special Item Number (SIN) to allow GSA to monitor sales and evaluate use Requiring the ordering activity contracting officers to determine that all prices for these materials are fair and reasonable Include controls to ensure any ceiling increases have been justified and approved in accordance with FAR 8.405.6. The final rule will only apply to the following GSA Schedules: Federal Supply Schedule 03 FAC: Facilities Maintenance and Management Federal Supply Schedule 56: Buildings and Building Materials/Industrial Services and Supplies Federal Supply Schedule 70: General Purpose Information Technology Equipment, Software, and Services Federal Supply Schedule 71: Furniture Federal Supply Schedule 84: Total Solutions for Law Enforcement, Security, Facilities Management, Fire, Rescue, Clothing, Marine Craft, and Emergency/Disaster Response Federal Supply Schedule 00CORP: All Professional Services Federal Supply Schedule 738X: Human Resources and EEO Services The proposed GSAR rule was published September 9, 2016 and is open for a 60 day comment period. About the Author: 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.   The post GSA Proposes New Rule Allowing Other Direct Costs into Schedules Program appeared first on Centre Law & Consulting.
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Centre Law & Consulting

Centre Law & Consulting

 

Cooperating with DOL Investigation Does Not Protect You from Debarment

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
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.   The post Cooperating with DOL Investigation Does Not Protect You from Debarment appeared first on Centre Law & Consulting.
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Centre Law & Consulting

Centre Law & Consulting

 

Trump’s 2-for-1 Reducing Regulation Order – What Does It Mean?

On January 30, 2017, President Trump issued an executive order (EO) entitled Reducing Regulation and Controlling Regulatory Costs. The aim of the EO is to reduce the number of regulations in order to “manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.” Specifically, the EO requires that whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed. The EO further dictates that the total incremental costs of all new regulations, including repealed regulations, shall be no greater than zero. The EO defines “regulation” or “rule” as an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency but specifically excludes regulations issued with respect to the military, national security, or foreign affairs function of the United States. Moving forward, the EO also imposes a regulatory budget for fiscal year 2018, which would limit the amount of new regulatory costs agencies can impose on individuals and businesses each year. While the regulation seems straightforward, its implementation is likely going to be subject to inherent difficulties. For example, some of the challenges include: The EO does not define what constitutes an “executive department or agency”. It is not entirely clear if independent establishments or government corporations within the executive agency are intended to be included. The definition of regulation contained in the EO is rather vague. If interpreted narrowly, it may only involve a minor set of regulations each year. In a notable – and rather bold – claim, President Trump stated, “We think we can cut regulations by 75 percent. Maybe more, but by 75 percent.” According to Politico, there are more than 171,000 pages of regulations. So even with Trump’s 2-for-1 regulation, the administration would need to issue 85,000 pages just to cut that number in half. NPR has written that even conservative economists say that cutting regulations by 75% is not believable. See Politico for the full text of the executive order. About the Author: 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.   The post Trump’s 2-for-1 Reducing Regulation Order – What Does It Mean? appeared first on Centre Law & Consulting.
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Centre Law & Consulting

Centre Law & Consulting

 

Pentagon Issues Internal Warning Against Use of Lenovo Equipment

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
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.   The post Pentagon Issues Internal Warning Against Use of Lenovo Equipment appeared first on Centre Law & Consulting.
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Centre Law & Consulting

Centre Law & Consulting

 

GAO Threads The Needle With Clarifications Versus Discussions

In September of 2016, Aurotech Inc. won an award for a blanket purchase agreement with Health and Human Services, FDA. Discover Tech made a persuasive protest of that award, resulting in the FDA taking corrective action, and to reevaluate Aurotech’s and Discover Tech’s quotations. After the FDA revised its initial award, now choosing Discover Tech in the award determination, Aurotech filed an unsuccessful protest. Aurotech challenged the Agency’s evaluation of how Discover Tech’s reductions to its quoted price would affect the technical and management approaches, and therefore its ratings. It also alleged Discover Tech did not explain in full how it had reduced its price from the first award determination. The GAO found the agency had reasonably evaluated the vendor’s explanation for the price reduction.  Specifically, that Discovery Tech’s new understanding of initial deadlines for the contract, allowed them to reduce labor costs without hurt quality. Which brings us to the more interesting bid protest topic; when does a clarification become a discussion? Aurotech next alleged that the FDA held unequal exchanges with the two vendors.  Similar to Aurotech’s accusation Discovery Tech failed to explain its price reduction, the Agency was also curious of the price drop during its evaluation. The Agency contract specialist contacted Discovery Tech asking how the reduction in staffing could happen, without adjusting the technical quotation/management approach. Discover Tech explained its initial mistake evaluating deadlines which had caused the previous higher staff prediction. The GAO considered this a clarification, or limited exchange used to resolve clerical mistakes. Aurotech obviously disagreed, calling this exchange an opportunity for Discovery Tech to cure a crucial failure in its proposal. The GAO was most persuaded by the fact no change to the proposal occurred.  Had the vender been allowed to modify its technical and management approach, the GAO would have considered this a discussion, requiring both parties to be involved. Given Aurotech was also asked for a clarification on a different subject, the GAO denied the bid on the ground the FDA treated the vendors unequally. About the Author: Tyler Freiberger
Associate Attorney
Tyler Freiberger is an associate attorney at Centre Law & Consulting primarily focusing on employment law and litigation. He has successfully litigated employment issues before the EEOC, MSPB, local counties human rights commissions, the United States D.C. District Court, Maryland District Court, and the Eastern District of Virginia. The post GAO Threads The Needle With Clarifications Versus Discussions appeared first on Centre Law & Consulting.
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Subcontracting Payment Rules: Make the Payment or Incur the Penalty

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
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. The post Subcontracting Payment Rules: Make the Payment or Incur the Penalty appeared first on Centre Law & Consulting.
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Too Big to Be Small, Too Small to Be Big

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.

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 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.   The post Too Big to Be Small, Too Small to Be Big appeared first on Centre Law & Consulting.
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“Professional Compensation” Sinks Contract Award

Last week, the Government Accountability Office (GAO) released the public version of its decision sustaining the protest of contractor A-P-T Research, Inc. with respect to a procurement with the National Aeronautics and Space Administration (NASA) for various support services. In addition to a potential impaired objectivity organizational conflict of interest, the protest was sustained because the awardee’s proposed professional compensation was at the low end of the experience and compensation scales used for evaluation. With that, the contemporaneous record lacked a reasoned basis for finding the professional compensation and related costs to be acceptable or realistic. Because a cost-reimbursement contract’s cost is driven in significant measure by labor costs, the procuring agency is required to evaluate each offeror’s direct labor rates to ensure that they are realistic. The purpose of a review of compensation for professional employees under the provision at FAR § 52.222-46 is to determine whether offerors will obtain and keep the quality of professional services needed for adequate contract performance and to evaluate whether offerors understand the nature of the work to be performed. As the FAR provision states, the “professional compensation proposed will be considered in terms of its impact upon recruiting and retention, its realism, and its consistency with a total plan for compensation.” Further supporting information including “data, such as recognized national and regional compensation surveys and studies of professional, public, and private organizations, used in establishing the total compensation structure” are to be provided. In brief, the Agency sustained the protest because “the record contains no meaningful explanation of how [NASA] concluded that [the awardee] would be able to retain” the proposed incumbent employees at the compensation offered, which would result in significant pay decreases. Rather, the record contained only general statements that concerns regarding compensation had been addressed via discussions. Notably, the Agency did not express a view on the argument that FAR § 52.222-46 requires a direct comparison of proposed compensation and actual incumbent compensation rates. However, it is clear that under-cutting on professional salaries can be a dangerous gambit. About the Author: 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.   The post “Professional Compensation” Sinks Contract Award appeared first on Centre Law & Consulting.
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America’s Continuing Independent Contractor Conundrum

Employees are expensive. It’s little surprise market forces incentivize companies to search for a way to get the same work out of people without paying for holidays, accommodating disabilities, and paying overtime, among countless other requirements. Imagine if you could save all this money within the law and avoid the risk of employment discrimination lawsuits. With all these savings your company could lower the price of your services/goods and edge out the competition. Figure out how to replace the lion’s share of your workforce as independent contractors and you could be living the dream, right? Well, if your current company is currently staffed entirely by “independent contractors,” then madam/sir I am happy to meet with you to discuss both your unique staffing model and your likely immediate need for outside legal services.  Very rare is the government contractor that truly has “no employees” (though we’ve seen a few try). That said, statistics show that there are currently an estimated 40 million independent contractors in America.  Clearly not everyone who takes money from you in exchange for a service should be called your employee. But where is the line between my contracting with a freelance plumber and a commercial company drawing billions in revenue from hundreds of thousands of its drivers? As we’ve discussed in prior blog posts, the government contracts industry is rife with the use (and abuse) of independent contractor status; and federal regulators have been tightening the screws on the use of the status.  This past year, arguably more than ever, the courts and legislators across the country are wrestling with the employee/independent contractor distinction with messy results. Federal courts have increasingly grown skeptical of massive independent contractor agreements but don’t seem sure how to address it given the long precedent defining the relationship. One way is to decrease the incentives of an independent contractor relationship like the 1st Circuit recently did in Oliveira v. New Prime, Inc., restricting the use of mandatory arbitration agreements on independent contractors. In California, the court forced an extra $15 million out of Lyft in a settlement agreement designed to avoid the costly test of their independent contractor classification. Coast to coast, states are trying to get a handle on independent contractors too. New York’s recent “Freelance Isn’t Free Act” requires that all entities that engage a freelance worker for $800 or more in services execute a written agreement. Where Nevada is attempting to tackle the problem industry by industry rather than with general rules.  Not everyone wants to put breaks on the independent contractor train though. Alaska and Florida have more clearly defined boundaries in favor independent contracting status, though it may just add problems for employers still wrestling with federal regulations on the same issues. Perhaps the most hopeful part of the confused situation, is this wide variation in responses. There will certainly continue to be growing pains as the legal standards develop, but the unique effects of these policies may offer a chance to evaluate which can keep independent contractor status alive and appropriately limited.   About the Author: Tyler Freiberger
Associate Attorney
Tyler Freiberger is an associate attorney at Centre Law & Consulting primarily focusing on employment law and litigation. He has successfully litigated employment issues before the EEOC, MSPB, local counties human rights commissions, the United States D.C. District Court, Maryland District Court, and the Eastern District of Virginia. The post America’s Continuing Independent Contractor Conundrum appeared first on Centre Law & Consulting.
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This Blog Is Subject to Change in a Twitter Moment

How many of you now go to bed wondering, “What presidential tweet am I going to wake up to next?” The federal contracting space has been shaken, not stirred. In the old news department, President Trump instituted an immediate hiring freeze this Monday, signing a presidential memorandum that would affect a large swath of the executive branch. There are exemptions, of course, for those working in the military, national security, and public safety. In my discussions with officials at several federal agencies, it appears that the language is vague enough that different agencies are interpreting this in different ways. If your entire team is on the airplane that has the “water landing” does this mean that no one can be hired to do the work? Maybe it will become more clear in the next couple of months. The executive order directs the Director of OMB, in consultation with the Director of OPM, to recommend a long-term plan to reduce the size of the Federal Government’s workforce through attrition. The order does say that contractors cannot be hired to circumvent the intent of the order. However, a big problem is that the federal workforce has not been growing. Federal News Radio is reporting that the size of the federal workforce has been decreasing, not increasing. The size of the federal workforce has steadily declined over the past 50 years. Approximately 2 million people worked for civilian agencies in 2015—nearly a 10 percent decline since 1967. Regarding the workforce, and in specific the federal contracting workforce, the Obama Executive Orders are in the twilight zone. Executive Order 13673, Fair Pay and Safe Workplaces, was stopped cold by a Texas federal district court in 2016. Since this was a unilateral act by the President, it will most likely be undone along with the Executive Order on Sick Leave. On the minor but still need to know information, a final rule came out on Privacy Act training. At a minimum, contractors must educate employees about: The provisions of the Privacy Act of 1974, including penalties for violations The appropriate handling and safeguarding of personally identifiable information The authorized and official use of a system of records or any other personally identifiable information The restriction on the use of unauthorized equipment to create, collect, use, process, store, maintain, disseminate, disclose, dispose, or otherwise access personally identifiable information The prohibition against the unauthorized use of a system of records or unauthorized disclosure, access, handling, or use of personally identifiable information Procedures to be followed in the event of a suspected or confirmed breach of a system of records or unauthorized disclosure, access, handling, or use of personally identifiable information Those are today’s latest updates, but we’ll see what Twitter has to say about it in the coming days.
 
About the Author Barbara Kinosky
Managing Partner
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.   The post This Blog Is Subject to Change in a Twitter Moment appeared first on Centre Law & Consulting.
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GSA Schedule Update: Breaking News on Service Contract Act (SCLS) – What To Do Now

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: We finally have some (forthcoming) guidance from DOL and GSA. In summary, current Wage Determinations (WDs) will be deleted from all existing schedule contracts. GSA policies and procedures will be updated to direct ordering activity contracting officers to incorporate the appropriate Wage Determinations at the task order level. I have always said the FAR directs the contracting officers to make this determination and not the contractor. This is consistent with the FAR. A GSA Mass Mod will be issued in approximately 10 days across all Schedules incorporating these changes. 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: You can’t bid higher than your Schedule rates. 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. 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
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.   The post GSA Schedule Update: Breaking News on Service Contract Act (SCLS) – What To Do Now appeared first on Centre Law & Consulting.
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Quick Guide to the Bid Protest Process

If you’ve ever encountered the need to file a bid protest, you may remember feeling lost or overwhelmed the first time through the process. Maybe you were just confused and unsure of what would happen as you progressed from one step to the next. If you’re in the middle of a bid protest or foresee the need to enter into one in the future, the quick guide below walks you through a potential scenario of what can be expected. SITUATION Your company just received a non-award letter or have been excluded from the competitive range. You know your team worked hard on the proposal and you have proof that there have been some serious procurement law violations. PROTEST GROUNDS There are two types of protest grounds: pre-award and post-award. Pre-award grounds include protests that solicitations were unduly restrictive, ambiguous, unfair, or biased. Post-award protest grounds include protests that agencies did not follow evaluation criteria; engaged in misleading discussions; or had conflicts of interest, unstated criteria, or unequal treatment. In some situations, the Government Accountability Office (GAO) will also consider non-procurement protests when agencies did not follow their own rules and regulations. STRATEGY Step 1: Do you request a debriefing? Agency debriefings are mandatory in some but not all procurements. Centre
will assist you in determining whether the debriefing is mandatory, in drafting questions, and in preparing for it. The debriefing may reveal agency errors and procurement violations. Not all violations warrant filing a protest. Step 2: Decision Point Deciding whether to protest, at what level, and based on what protest ground(s) is critical. In such a case, Centre Law & Consulting will quickly conduct legal research and fact analysis to advise you on whether you should file a protest, where, and what relief could be expected. Step 3: Review the Agency Report Once you protest, a federal agency has 30 days to file its report along with additional documents relating to its source selection decision. Centre Law & Consulting will review all the documentation. In some cases, the report uncovers new protest grounds that were not apparent during the debriefing. Emails or other documents may also reveal agency bias, conflicts of interest, inaccurate calculations, misleading discussions, or improper evaluations. Step 4: Corrective Action or Outcome Prediction Once an agency realizes that it made serious mistakes, it may take corrective action. In other situations, the GAO may conduct an outcome prediction analysis. This allows all parties to get to the result quicker and cut costs. If everything else fails, the GAO will issue a decision either sustaining, denying, dismissing, or sustaining in part the protest within 100 days. Step 5: Cost Reimbursement Centre Law & Consulting will request cost reimbursement during the initial protest filing when appropriate. We will also document all costs associated with protest litigation to ensure that agencies reimburse the protester once the GAO recommends it. IMPACT The bid protest process is designed to ensure equal competition, fair evaluation, and prejudice to none. Successful protests ensure procurement integrity and result in favorable GAO recommendations including: Re-evaluation of proposals Corrective actions Re-solicitation Cost reimbursement Other remedies include contract termination, contract re-compete, or a new solicitation. The post Quick Guide to the Bid Protest Process appeared first on Centre Law & Consulting.
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Barbara Kinosky Quoted in Bloomberg BNA Article on Proposed FAR Rule

Reproduced with permission from Federal Contracts Report, 105 FCR (Dec. 6, 2016). Copyright 2016 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com Talk More, Fret Less, Proposed Rule Urges Feds, Contractors Federal acquisition officials are encouraging increased communication between industry and government, in the hope of ensuring a more efficient process for both parties. An updated regulation would make it clear that it’s in the government’s best interests to talk to industry during all phases of the purchasing process, according to a proposed Federal Acquisition Regulation (FAR) rule published Nov. 29 in the Federal Register. It bolsters the notion, detailed in procurement policy memos issued in 2011 and 2012, that acquisition officials need to fret less about possible negative ramifications of talking to industry, and instead open lines of communication. Some government contracts attorneys say they approve of the renewed emphasis. “For a long time, there has been a fear of communication between agencies and contractors, but that needs to continue to change,” Jeff Chiow, a shareholder with the law firm Rogers Joseph O’Donnell PC in Washington, told Bloomberg BNA. “I think it’s absolutely appropriate.” ‘Must Not Hesitate.’
The proposed rule would mandate that the FAR adopt a section of the 2016 National Defense Authorization Act, which made it clear that agency acquisition personnel are “permitted and encouraged to engage in responsible and constructive exchanges with industry, so long as those exchanges are consistent with existing law and regulation and do not promote an unfair competitive advantage to particular firms.” The proposed language to the FAR takes this one step further, specifically suggesting that government officials “must not hesitate” to communicate with industry as early as possible in the acquisition cycle to help determine what exactly is available in the commercial marketplace. The rule also would add language to the FAR ensuring that agencies maximize their use of commercial products and services in meeting their requirements. The key is that agencies should be broadcasting their plans to all competitors, and then have “frank conversations about what’s needed” with them to help determine if their proposals might be tweaked to fit the government’s needs. “The emphasis should be at the beginning of the process, but communication should be ongoing,” he said. Not all government contracts attorneys agree on the impact of the proposed rule. Some say it wouldn’t do anything to stop the process from tilting toward larger contractors. “In my opinion, the proposed rule does not materially change the current government and industry procurement cycle interaction or lack thereof,” Barbara Kinosky, managing partner of Centre Law & Consulting, told Bloomberg BNA in an e-mailed statement. “The large companies and those with savvy sales people will always be on the front end of procurements. They did not get to be large businesses by finding out about procurements on eBuy for the first time.” The rule won’t change a government culture that, as it pertains to smaller procurements, “believes in low price and minimum engagement with contractors,” Kinosky said. Common Misconceptions.
The proposed FAR rule was spurred by a pair of detailed procurement policy memos titled “Myth-Busting” and “Myth-Busting 2” that discussed “misconceptions” about communication between industry and government during the acquisition process. The first of the memos, issued Feb. 2, 2011, and authored by Dan Gordon, then the administrator of the Office of Federal Procurement Policy, addressed what he said were 10 common misconceptions, including ungrounded fears that contractor-government communications are often the source of bid protests, and that because contractors are akin to registered lobbyists, conversations with them should be avoided to reduce disclosure burdens. “While agencies do not have the resources and are not required to meet with every vendor at every step of the acquisition process, information gathered from industry sources plays an invaluable role in the acquisition process,” Gordon wrote. “For this reason, agencies must develop practices that will ensure early, frequent, and constructive communication during key phases of the process.”
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Of Mistletoe and Misclassification

Earlier this week, a U.S. Department of Labor webpage dedicated to the issue of employee misclassification went live. Just in time for the holidays! While much ink has been spilled in recent weeks regarding potential changes of direction at the DOL in a Trump Administration, the new webpage suggests that the agency will continue to view the abuse of independent contractor status as an enforcement priority for the foreseeable future. The new page does not provide any novel substantive content, but it does bring together at a single location a wealth of information in what the DOL self-describes (accurately, one must admit) as a “user-friendly webpage where workers, employers, and government agencies can find information and resources.” For example, some of the substantive topics appearing on the “Pay and Misclassification” page include: Myths About Misclassification Get the Facts on Misclassification Under the FLSA Know Your Rights Video: Employee v. Independent Contractor Employment Relationship Under the FLSA Elaws: Independent Contractors Am I an Employee: Employment Relationships Under the Fair Labor Standards Act Coverage Under the Fair Labor Standards Act Wage-Hour Division Administrator’s Interpretation, The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees who are Misclassified as Independent Contractors WHD Press Releases about Employee Misclassification as Independent Contractors It is clear that the webpage is intended to arm individuals with the information and tools needed to understand the boundaries of independent contractor/employee status as well as the rights appurtenant to such status. Given the widespread use (and abuse) of independent contractor arrangements in the government contracts industry, contractors would be well counseled to review their current 1099s to ensure that the status can withstand scrutiny as this issue is unlikely to move to the backburner, even with new leadership coming onto the scene in early 2017. About the Author: 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.   The post Of Mistletoe and Misclassification appeared first on Centre Law & Consulting.
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As One Protest Door Closes, Another One Opens

By Heather Mims The protest saga of the Department of Education’s contracts for collection services for defaulted student loans has now been going on for over a year – and the contracts are worth fighting for as it is for a roughly $2.8 billion debt collection procurement. As a refresher, forty-seven companies originally submitted bids in response to the Department of Education’s RFP but only seven companies originally received contract awards back in December 2016. The unsuccessful offerors successfully protested that award at GAO on March 27, 2017. At that time, the GAO recommended that the agency conduct a new evaluation of proposals, potentially amend the solicitation and receive revised proposals, and subsequently document a new source selection decision. The GAO also took the fairly unusual step in awarding costs to several of the protesters. A subsequent bid protest was filed at the Court of Federal Claims on March 28, 2017, the day after the GAO decision was entered (docket number 1:17-cv-00449-TCW). On December 12, 2017, the Court of Federal Claims ordered the Department of Education to complete its corrective action, which the Department of Education completed on January 16, 2018. This corrective action resulted in an $800 million contract award to only two contractors –  Windham Professionals Inc. and Performant Recovery Inc. The Court subsequently dismissed the bid protest on February 14, 2018. However, the action did not stop there. A new bid protest was filed February 9, 2018, alleging that the Department of Education’s corrective action and new awards didn’t fix material procurement errors (docket number 1:18-cv-00204-TCW). That matter currently has seventeen plaintiffs arguing against the allegedly improper award. To keep the matter even more interesting, one of the awardees is alleged to have financial ties to Education Secretary Betsy DeVos. As the fight over this large value procurement does not appear to be winding down, Judge Thomas Wheeler of the Court of Federal Claims has remarked that the Court may see a large uptick in the number of bid protest cases filed in 2018, due in part to this Department of Education procurement. Judge Wheeler stated that the Court is on track to receive 200 bid protests this calendar year, which is a large increase over the 129 protests that were filed in 2017, which is an average number of bid protests for the Court.   About the Author: 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.   The post As One Protest Door Closes, Another One Opens appeared first on Centre Law & Consulting.
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Increased Micropurchase and Simplified Acquisition Thresholds May be Implemented Sooner Than Later

By Wayne Simpson, Centre Consultant, CFCM, CSCM Good news for Federal contractors and buyers.  On February 16, 2018, the Civilian Agency Acquisition Council (CAAC) issued CAAC Letter No. 2018-02 to Federal agencies regarding a class deviation to the Federal Acquisition Regulation (FAR) for implementing the new increased micropurchase and simplified acquisition thresholds.  The National Defense Authorization Act (NDAA) for Fiscal Year 2018 (Public Law 115-91, December 12, 2017) (NDAA 2018), raises the micropurchase and simplified acquisition thresholds for Federal acquisitions. Section 806 of NDAA 2018 increases the micropurchase threshold for products only from $3,500 to $10,000.  The micropurchase thresholds for acquisitions involving services and construction services remain unchanged.  The micropurchase threshold for services remains $2,500 (Service Contract Labor Standards—formerly the Service Contract Act of 1965), and $2,000 for construction services (Construction Wage Rate Requirements Statute—formerly the Davis-Bacon Act). Section 805 of NDAA 2018 increases the simplified acquisition threshold from $150,000 to $250,000. FAR Case 2018-004 was established to implement these statutory changes in the FAR.  CAAC Letter No. 2018-02 indicates agencies may have a need to use the increased thresholds prior to publication of the FAR changes.  The CAAC letter constitutes the consultation required under FAR with the CAAC allowing agencies to authorize a class deviation to implement the changes effective immediately.  Some agencies may elect to implement through a FAR class deviation immediately, while others may wait for publication of the actual rule. A change to the micropurchase threshold contained in Section 217(b) of NDAA for Fiscal Year 2017 (Public Law 114-238) (NDAA 2017), not yet implemented, was overtaken by NDAA 2018.  NDAA 2017 changed a portion of the micropurchase threshold definition in FAR 2.101, to increase the micropurchase threshold for acquisitions from institutions of higher education or related or affiliated nonprofit entities, or from nonprofit research organizations or independent research institutes to $10,000.  The new micropurchase threshold of $10,000 set by NDAA 2018 makes no such distinction. There are some exceptions to the new $10,000 micropurchase threshold.  Acquisitions for supplies or services, as determined by the Agency Head, to be used to support contingency operations; to facilitate defense against, or recovery from cyber, nuclear, biological, chemical or radiological attack; to support a request from the Secretary of State or the Administrator of the United States Agency for International Development to facilitate provisions of international disaster assistance or to support a response to an emergency or major disaster (except for construction) have a higher micropurchase threshold, $20,000 in the case of any contract to be awarded performed, or purchase to be made, inside the United States, and $30,000 if outside the United States. The simplified acquisition threshold increase will affect the applicability of many FAR-prescribed provisions and clauses which are tied to the simplified acquisition threshold, as well as FAR Part 13, Simplified Acquisition Procedures.  The increase will allow government contracting officers to buy more efficiently using FAR Part 13.  FAR clauses applicable at the new simplified acquisition threshold should benefit government contractors by reducing the compliance burden for those clauses and provisions. Please also note changes to FAR Part 19, Small Business Programs because of the threshold changes.  Specifically, FAR 19.203, Relationship Among Small Business Programs, requires the acquisition of supplies and services with anticipated values exceeding $10,000 (and the exceptions noted above) and $250,000 are automatically reserved for small business (see also FAR 19.502-1). There are also some exceptions to the new $250,000 simplified acquisition threshold. Acquisitions for supplies or services, as determined by the Agency Head, to be used to support contingency operations; to facilitate defense against, or recovery from cyber, nuclear, biological, chemical or radiological attack; to support a request from the Secretary of State or the Administrator U.S. Aid to facilitate provisions of international disaster assistance or to support a response to an emergency or major disaster (except for construction) is $750,000 in the case of any contract to be awarded performed, or purchase to be made, inside the United States, and $1.5 Million if outside the United States. Lastly, the simplified acquisition threshold for acquisitions for supplies or services, as determined by Agency heads, to be used to support a humanitarian or peacekeeping operation is $500,000. About the Author: Wayne Simpson
Consultant
Wayne Simpson is retired from the U.S. Department of Veterans Affairs (VA) after 38 years of federal service. He served as the Executive Assistant to VA’s Deputy Assistant Secretary for Acquisition and Logistics where he was the primary staff advisor to the Deputy Assistant Secretary, who serves concurrently as VA’s Senior Procurement Executive and Debarring Official.   The post Increased Micropurchase and Simplified Acquisition Thresholds May be Implemented Sooner Than Later appeared first on Centre Law & Consulting.
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Top Five Reasons To Have an Approved Contractor Purchasing System

Let’s face it. We’d all rather be out selling and growing our businesses than having to deal with paperwork and audits, right? So when you hear that you have a Contractor Purchasing System Review (CPSR) coming up, it may cause a little anxiety and leave you wondering if it is really time well spent. Now the government will tell you that the purpose of a CPSR is to evaluate the efficiency and effectiveness of the way a contractor spends federal funds and complies with federal policy. It provides the Administrative Contracting Officer (ACO) a basis for granting, withholding, or withdrawing approval of the contractor’s purchasing system. So what does that really mean to you? Here are the Top 5 reasons that having an approved contractor purchasing system is important: Advance Notification and Consent: The first reason that usually comes to mind is the FAR Part 44 requirement for advance notification and consent to subcontract. If the purchasing system hasn’t been approved or the approval has been withdrawn, then the ACO will be required to perform consent reviews under flexibly price contracts and unpriced contractual actions to insure the Government’s interests are protected. The down side of that is these reviews take time, and while the ACO is performing the review, the subcontract award is delayed. In other words, nobody is happy about it! The client’s program manager and the company program manager want the award made to meet schedule, but the ACO has other things to do and may not put your subcontract award at the top of the list. The result is that you (the buyer/subcontract administrator) are under pressure to somehow make it happen and tensions can rise on all sides. Consent Doesn’t Mean Approval: Okay, you’ve gone through the gauntlet and the ACO has issued the consent to subcontract notice. But, the notice will have a disclaimer that reserves the Government’s rights to second guess all aspects (i.e. adequate competition, price reasonableness, audit disallowance) of your subcontract award. You feel like you have gained nothing, and the program manager is still upset with you because of the delay in award. You want an approved system, not just a consent to subcontract. So without that approval, you’re just sitting in limbo. Business System Clause: The Department of Defense added clauses to their contracts – 252.242-7005, Contractor Business Systems and 252.244-7001, Contractor Purchasing System Administration – that have become key components of the CPSR process. In addition, should a “significant deficiency” be identified in your purchasing system, the ACO is obliged to reduce your interim payments (i.e. progress payments, cost-reimbursement vouchers, monthly Time and Materials invoices) by as much as 5% to protect the government’s interests until the deficiency has been corrected and re-audited. The impact for you is that not only is the program manager upset with you, but so is the CFO! Impact on Other Major Proposals: With subcontracting being a large part of major contracts, the impact of your purchasing system on proposals for new work can be critical. First, having a government approved purchasing system gets you a better rating on the management portion of your major proposals. Second, with subcontracts often accounting for as much as 60% or more of major proposal costs, the ability of an approved purchasing system to provide good quality pricing support can make the difference between winning or losing. Documentation: Securing approval of your purchasing system relies largely on your documentation. In my earlier article, CPSR Easy As 1-2-3?, all three steps rely on clear and complete documentation. Think of it this way: an approved system by its nature should produce good documentation. So when the government reviews your work product for proposal support, business system adequacy, incurred cost, small business plan efforts, sustainability initiatives, or anything else, you can be confident that your procurement files will clearly demonstrate how efficiently and effectively your purchasing system is spending government funds and implementing government policy.  
Take the Next Step
If you’d like to dive more in depth to the details of CPSR, learn best practices, and set yourself up for successful CPSR audits, then join us for our upcoming course on March 28-29 at our national training center in Tysons, VA.  
About the Author Jack Hott
Instructor
Jack Hott is an Instructor for Centre Law & Consulting. He has more than two decades of experience as a contracts professional in Government and the private sector. A retired Air Force officer, he served multiple acquisition related assignments where he managed administration, pricing, CAS and overhead approvals, supplier quality, and subcontract management.   The post Top Five Reasons To Have an Approved Contractor Purchasing System appeared first on Centre Law & Consulting.
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Wojciech Kornacki Writes Article on Pricing Compliance Programs for Bloomberg BNA

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. The post Wojciech Kornacki Writes Article on Pricing Compliance Programs for Bloomberg BNA appeared first on Centre Law & Consulting.
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GSA Ushers in New Era with Release of Cybersecurity SINs for IT 70

Have you been hacked yet? Has your personal information been exposed by foreign hackers? Worried this year’s election results might be tampered with foreign cyber attacks? Well, you are not the only one worried about future cyber attacks. The U.S. Government is worried too, and to combat that, the General Services Administration (GSA) will release four Cybersecurity Special Item Numbers (SINs) for its GSA Schedule 70 for Information Technology procurement. A refresh of the Schedule 70 solicitation is expected to be released in September that will include these new Cybersecurity SINs. GSA is referring to these new SINs as Highly Adaptive Cybersecurity Services (HACS) SINs. The HACS SINs were mandated by the Obama Administration’s Cybersecurity National Action Plan. This is no small initiative, but rather a plan to invest $19 billion in an attempt to ensure “Americans have the security tools to protect their identities online, that companies can protect and defend their operations and information from hackers, and that the U.S. Government protects the private information citizens provide for federal benefits and services” (Source). The HACS SINs will be divided into four distinct SINs: Penetration Testing under SIN 132-45A Incident Response under SIN 132-45B Cyber Hunt under SIN 132-45C Risk and Vulnerability Assessment under SIN 132-45D The vetting process for vendors will be the most thorough and detailed of any SIN on Schedule 70. While vendors will have requirements similar to those for services SINs such as SIN 132-51, the HACS SINs will also require vendors to pass an oral technical evaluation. These oral technical evaluations will be scenario-based in an attempt by GSA to ascertain the knowledge level of the prospective vendor. Vendors will be given a pass/fail grade after an undetermined time (target is seven days) from the completion of the oral evaluation. Vendors who are not able to pass this oral evaluation will not be allowed to submit an offer or modification for any HACS SIN for at least six months from the date of their previous evaluation. Oral evaluations will be conducted virtually and each SIN will have its own scenario that vendors will have to address and complete. GSA will allow up to five key personnel to attend these oral evaluations from the vendor, but no recording devices of any kind will be allowed during the evaluation. These evaluations could take anywhere between forty minutes to three hours by GSA’s estimates, depending on how many HACS SINs the vendor is proposing in their offer/modification. There will be no limit to the number of awardees of the HACS SINs, but GSA is targeting to have an initial fifteen vendors awarded once the HACS SINs are officially rolled out. The turnaround time for GSA will be dependent on the number of vendors who propose the HACS SINs, but GSA is creating a dedicated tiger team to evaluate new offers and modifications that include the HACS SINs. GSA’s target for evaluation is seven days for modifications and forty five days for new offers. While there is still more to be revealed about these new HACS SINs, it is clear GSA is making a concerted effort to put these new SINs at the top of their priority list. If you want to be in the front of the line to get these new SINs awarded on your contract, be sure to check the GSA Interact site and submit your modifications/offers through the eMod/eOffer site. For more information regarding GSA and the HACS SINs, be sure to register to attend Centre Law and Consulting’s next Boot Camp for GSA Schedules training course on November 9-10, 2016. About the Author Michael Glazer
Contracts Manager
Michael Glazer focuses primarily on GSA/VA Schedule consulting. He regularly assists clients in all aspects of FSS contract management including contract negotiations, modifications, IFF reporting, subcontracting plans and reporting, IOA assessments, and other contract compliance issues. Michael also provides experience with GSA Alliant 1 & 2, ITES 3H and 3S, CIO-CS and SP3, and other large IDIQ contracts on an as needed basis to clients. The post GSA Ushers in New Era with Release of Cybersecurity SINs for IT 70 appeared first on Centre Law & Consulting.
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Trending Government Contracting News

So later today I am hosting a lunch at my house. And unless Desoto (the Spanish explorer who looked for the Fountain of Youth in Florida) has been visiting my family room, I have a major water leak. There is water everywhere. I just lost a small business set-aside contract to an unfathomably low, low, low price bidder, and the cat barfed all over my new carpet. It’s not even noon yet! So in an attempt to turn my day around, I hopped online to see what others are up to in hopes of finding something more interesting and uplifting! Here is a round up of trending Government Contracting news I found that caught my eye. SBA Expands Mentor-Protégé to All Small Businesses
Kudos to the Small Business Administration for great rule drafting. The SBA just expanded the mentor-protégé program to include all small businesses. The program is government wide. The primary incentive for large businesses to participate as mentors is the ability to form a joint venture (JV) with their protégé to pursue small business set-aside contracts without worrying about affiliation issues. And that sticky wicket, past performance is addressed in the rule. Agencies must evaluate the past performance of each member of the JV as opposed to just the JV. NextWin posted a great white paper on this. Applications must be submitted through the www.certify.sba.gov.portal. The new rule allows mentors to own up to 40% of their protégé’s. SBA has confirmed that they will be receiving applications starting October 1. And for those of you who suffer from insomnia, here is the complete rule for your late night reading pleasure. Key Person Departs and So Does URS Contract
URS Federal Services protested the loss of a Navy contract. The solicitation required offerors to propose eight key personnel. After proposal submission one of the key staff left URS. As a result, the URS proposal was given a deficiency which cost it the award. URS protested. The GAO held that when an agency has notice of the withdrawal of key personnel during the proposal evaluation process it can either evaluate the proposal as submitted or reopen discussions. Here the Navy evaluated the proposal as having only seven key people instead of the required eight. Read more in the GAO decision. Update on GSA Transactional Data
GSA just issued an update on the schedule for implementing the transactional data pilot program. This link shows what schedules will be impacted and the roll out date. Open Source Code
GSA published a good comprehensive blog on open source code. It’s part of the federal government’s big push toward open source development. GSA has a CIO policy that supports releasing GSA software as open source, but this is a very controversial issue with industry. P.S. – With all the changes that happen in the world of federal contracting, you need a dependable resource to keep you advised on best practices. So keep us in mind for meeting your small business WOSB goals when it comes to acquisition support and training. About the Author Barbara Kinosky
Managing Partner
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.   The post Trending Government Contracting News appeared first on Centre Law & Consulting.
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Maintaining an Approved Purchasing System – Things That Get in the Way

In the past I have written about subcontracting compliance from the Contractor Purchasing System Review (CPSR) audit prospective. The three step process of system existence, system procedure adequacy and compliance is a very effective way to meet the FAR 44.3 CPSR goal of “efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting”. How efficient and effective the contractor procurement system performs goes beyond these three steps. Some of the factors that commonly impact on the acquisition process include planning, proper description of needs and funding. This article touches on a few aspects of these factors that if ignored can degrade the efficiency and effectiveness of your outsourcing processes. Planning is the major factor and can encompass the other two, but each is worth discussing. Planning encompasses many things that don’t always get the attention they deserve. One thing is certain, if you don’t take the time to do a good comprehensive job up front you will pay for it later! One of the major aspects of planning is in the proposal phase make or buy decisions. The make or buy analysis is part of the process for creating a winning team. You want to offer the client a winning team that meets their needs on time and at the right price. Do you provide the goods, components and services in-house or can you improve the “product” and pricing through partnering and subcontracting? The answer is to look for the best combination to win the contract. Is the outsourcing function within your company adequately represented on the proposal team? The subcontracting team can add value through market research identifying potential source and supporting small business plan development. Additionally, the subcontracting team can work with proposal team members on issue including flow down requirements, terms and conditions and pricing support. Have you ever hear the complaint that the government wants you to competitively award scope that was promised to a team member? If the original proposal clearly identifies the team member as the teaming source for a specific scope, then the source selection issue is complete. In fact, you may be able to get the Contracting Officer to include the team member in clause 52.244-2(j) excluding them from the consent process. Unfortunately I have seen cases where the winning proposal used information from a subcontractor but did not clearly describe the teaming arrangement in line with FAR 9.6. If the original proposal had included a clear description of the teaming arrangement, you have a solid basis for the subcontract source selection and a solid response when the CPSR team questions the adequacy of your subcontract competition activities. The outsourcing function needs to be an active member of the proposal team to make sure the ground work is laid right up front! A proper description of needs is not a new subject. Too often the internal customer (aka end user or requisitioner) is left to his or her own to come up with what is needed. The outsourcing function should be involved with the internal customer working with them to identify the best ways to meet their needs. If it is a recurring need, do you set up a competitively awarded catalog or blanket purchase arrangement? Or, do you set up a larger order with multiple deliveries coordinated with the internal customer’s schedule? If the internal customers’ needs are so specific that it limits competition, then you have the opportunity to work with them to do the market research to find alternatives or to substantiate the single or sole-source justification. In either case, you have a solid response when the CPSR team questions the adequacy of competition activities or basis for a commercial item determination. The outsourcing function needs to be actively involved with the internal customer right up front! Funding is a subject that doesn’t always get the attention it deserves. Sure, you need money to support a purchase order/subcontract, and Under DFARS 252.244-7001 (c) (4), properly authorized requisitions are required.  But there are other issues around funding that can hamper efficient and effective outsourcing. One issue that can negatively impact you is adequate funding. Inadequate funding on a requisition can lead to delays and increased costs in prime contract performance. Proper project planning and budgeting helps, but the funding source(s) and acquisition planning need to be worked together. For example, rental of heavy construction equipment should be based on the construction schedule the equipment is supporting. You would think that means a six month rental should be funded for six months. But, sometimes you see it “incrementally” funded through a series of requisitions. Here is where efficiency and effectiveness go out the window. The buyer/subcontract administrator must issue a series of monthly modification to add funds (buyer time away from other work). If the funding requisition is delayed, then invoices sit in Accounts Payable waiting for sufficient committed funds to pay the invoice (both buyer and A/P clerk have time away from other work). Late payments leads to stop work threats, complaints to the Contracting Officer, and questions/findings on accounting and purchasing audits (now management, buyers, A/P clerks and others have more time away from other work). When payment is slow, disgruntled subcontractors are less inclined to bid new work or offer better pricing (more work again and potential system audit issues related to a variety of issues such as; timely award, adequate competition, fair and reasonable pricing, subcontract closeout and file documentation).  Again, early involvement of the outsourcing function can help eliminate problems before they occur saving time and resources that would otherwise be consumed trying to patch and fix things later in the process. I hope my point is clear. Early involvement by your subcontracting and purchasing staff pays big rewards to the overall success of your company. Beyond timely and successful prime contract performance, another benefit is improved compliance. When I see problems during compliance audits and CPSR reviews, the “root cause” is frequently the result of a “reactive procurement system” trying to fix things that could have been avoided by early, effective involvement with internal customer. With time being taken away from the primary task of procuring the goods and services needed, quality and compliance suffer. When people have the time and tools to do their jobs, they are going to give you the kind of results you need, successfully perform the prime contract and meet client audit expectations. That’s how you maintain an approved purchasing system! About the Author Jack Holt has more than four decades of experience as a contracts professional in Government and the private sector. A retired Air Force officer, he served multiple acquisition related assignments with The Air Force and Defense Contract Management Agency. These assignments included Assistant Professor of Acquisition Management, Air Force Institute of Technology, multiple in-plant assignments where he functioned as Principle Administrative Contracting Officer/DACO managing contract administration, pricing, government property, CAS and overhead approvals, supplier quality, and subcontract management. After leaving the Air Force, Mr. Hott became principle consultant to a small veteran owned business developing and presenting training on a variety of government contracting subjects including cost/price analysis, contract administration and Cost Accounting Standards. The post Maintaining an Approved Purchasing System – Things That Get in the Way appeared first on Centre Law & Consulting.
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What I Hate About Incurred Cost Proposals

If you remember the late 1990’s romantic comedy “10 Things I Hate About You” you might know that it did a lot of great things. It provided the platform for the venerable Heath Ledger’s coming out party, introduced the world to Julia Stiles, reminded us the kid from Third Rock from the Sun was, in fact, still here on Earth, and made more than $50M at the box office. Not too bad. But as the law of unintended consequences often works, it also inspired this blog article about Incurred Cost Proposals. With all apologies to the awful heading, the Incurred Cost Proposal does evoke some very specific emotion from those tasked with preparing, auditing, re-auditing, reading, reviewing, negotiating, or most importantly – signing them. They are a necessary evil for most services-based U.S. Government contractors. While the purpose of the Incurred Cost Proposal is a simple enough merit – to settle indirect costs under cost-type contracts between contractors and the U.S. Government – the evolution of the Incurred Cost Proposal has caused pain easily on par with that of Ms. Stiles’ loss of her Australian beau. And while Ms. Stiles was capable of some beautiful poetry to express her torment, I am not as skilled in that trade and so you will simply get an unpoetic list of 10 Things I Hate About Incurred Cost Proposals. The ICE Model – Using a model that every time you open it tells you “An error has occurred” is not a confidence inspiring event for a document that is supposed to be current, accurate, and complete. Your Name – Why did the FAR give you one name, the “Indirect Cost Rate Proposal”, but the industry and DCAA give you so many others? The Incurred Cost Proposal, the Incurred Cost Submission, the Indirect Cost Submission, The Indirect Cost Proposal, the ICS, the ICE Model, etc. We are happy to call them anything the government desires – just don’t call them delinquent. Audits Focused on Direct Costs – While I also hate that audits are untimely, I think I more dislike that the current audit environment is focused on direct costs. We had a recent experience where not a single indirect cost was sampled. For an “Indirect Cost Rate Proposal” audit, it’s a little odd that the indirect cost rate received so little attention. And, of course, forget the fact that all the direct costs have been submitted for government review already on each and every monthly invoice. This trend has found its way into the T&M labor costs specifically through MRDs, which have cost enormous sums of questioned costs to contractors who don’t have labor qualification support in the way of resumes more than 5 years ago. Unallowable cost sampling – What would this list be without mention unallowable costs. It must be done, but it sure is tedious. Now if we could just get to an agreement on which costs are expressly unallowable. Schedule J Subcontract Information – How much more information on my supply chain can I provide? Every new iteration of the ICE Model asks for more. It is becoming easier to acquire a subcontractor than monitor and report on them. Inconsistent Application of the DCAA Adequacy Checklist – The concept is great; however, the execution lacks some consistency. We’re even okay with the annual updating of the checklist to provide even greater comfort that our submissions are in fine shape for an audit. What we do hate is the inconsistent application of what meets adequacy within the checklist. DCAA is provided great liberty to accept or not accept certain elements of adequacy for purposes of commencing with an audit. Some consistency would nice. And, worst of all, the off-checklist item that leads to inadequacy determination takes the prize for most frustrating element of the process. When Total Cost Absorption reconciliation doesn’t work – Okay, not everything about the Indirect Cost Rate Proposal is a procedural flaw of our friends at the Government. Few accounting frustrations rival completing your proposal and performing the total cost reconciliation only to see that something isn’t working. You can always diagnose them, but not without a strong cup of coffee. Corporate Home Office “Incurred Cost Proposals” – If you have a corporate home office you may have been asked for one of these. Or maybe you haven’t. It’s impossible to tell since the request for these is not consistent across DCAA offices. In the event you are unfamiliar with what they are, they are a summary of those corporate home office costs allocated to the G&A pools of cost accounting segments. They’re easy to hate since all of this information is already included in the segment-level indirect cost rate proposal. It’s duplicative and with all the work done to be compliant, duplication of effort is not something we like to deal with (or clients like to pay for). However, it has been our experience that if you don’t submit it, you risk being deemed inadequate – even though this isn’t on the adequacy checklist, see # 7 above. They are a particular quagmire for entities with overseas parents where certification of G&A costs for U.S. Government accounting is an unfamiliar task. Executive Compensation – Figuring out the award dates of contracts in the middle of the year, determining which agencies each contract belongs to, then evaluating which employees the executive compensation applies to. Determining executive compensation limits in the current environment is a game of labyrinth. Once you figure this rubix cube out, you have to get an Advance Agreement with your customer to use blended rates in order to comply. Then once you have the maximum allowable amount determined, you need to evaluate if the labor costs beneath that are “reasonable” through market data searches, surveying, and a host of similar corroborative evidence. IR&D and B&P costs – These are everyone’s favorite bouncing ball. They’re in the overhead base, but also the G&A pool. This topic dominates almost all new contractors’ first FAR lesson. And when they’re not specifically identified in the project ledger they can become quite tricky. Forget if you’re a major contractor with heavy IR&D expenses and have to now both report on them and get pre-approval from your Contracting Officer or risk them being deemed unallowable.  
But wait, there’s more!
If you’d like to share your own stories of Incurred Cost Proposals, or – even better – learn more about best practices for handling them, then join us for the “Incurred Cost Proposals: A Year In Review” webinar on January 12. Just one hour of your time now might save you many more if you’re up to speed on these current insights! AUTHOR’S NOTE: As consultants, we routinely assist clients with the preparation of their Indirect Cost Rate Proposals. Please do not take our poor attempt at humor in this article as a lack of enthusiasm in any way for these services. We just liked the article heading as a forum to illustrate some of the contracting community’s frustrations. The post What I Hate About Incurred Cost Proposals appeared first on Centre Law & Consulting.
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