Global Regulatory Enforcement Law Blog : Global Regulatory Enforcement Lawyers & Attorneys: Reed Smith Law Firm: Government Contracts & Compliance

This post was written by Joelle E.K. Laszlo.

If you are a Federal government contractor, please take a moment to recall the name of your “Past Performance Primary POC,” or P4OC for short. [In the unlikely event that this acronym catches on, you saw it here first.] Don’t know who your P4OC is? Don’t have one? If not, remedy the situation promptly: starting this year, a good P4OC may be the only thing standing between you and unfavorable information posted by the government on the Internet for all to see.

P4OCs can attribute their recent surge in significance to the Final Rule on the Federal Awardee Performance and Integrity Information System (“FAPIIS”), which was published in the Federal Register just after the new year. Followers of this ’blog will be well-acquainted with FAPIIS by now [click here if not]. Mandated by the 2010 Supplemental Appropriations Act, FAPIIS is designed to be a one-stop-shop for information on Federal contractors – particularly information associated with contractor wrongdoing. Conceptually FAPIIS has been praised by advocates of transparency in government contracting, but it has not quite lived up to the hype in its initial months of existence.

Nevertheless, we and others have advised contractors to take FAPIIS seriously and proactively, something the new Final Rule more or less requires. The Final Rule creates a procedure under Federal Acquisition Regulation (“FAR”) clause 52.209-9 whereby a contractor’s P4OC will be notified whenever a Federal agency proposes to post new information about the contractor on FAPIIS. The contractor will have seven calendar days to review the information and object to the post under an exemption to the Freedom of Information Act (“FOIA”). If within the seven-day time frame the contractor asserts that any of the information proposed for posting is covered by a FOIA exemption, that information must be removed within another seven days and the issue must be resolved according to FOIA procedures. Importantly, and as clarified in a second Federal Register Notice, these new procedures for the review of information proposed for FAPIIS posting took effect on January 17, and apply to any government contract that contains FAR 52.209-9 (not just the January 2012 version of the clause).

Given these developments, the first step for any contractor is to ensure that its P4OC and other past performance contacts are included in the Central Contractor Registration database. Because of the short turn-around time for reviewing information proposed for posting to FAPIIS, every government contractor will want to make sure their P4OC is punctual. Even if information proposed for posting is not exempt from the FOIA, contractors will have the opportunity to comment on the data to be posted (in larger data fields than before). This means that a good P4OC will also be able to marshal the information needed to put unfavorable performance records into their proper context. So your P4OC could very well become an MVP.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine Mullings Campos.

Last Thursday, Defense Secretary Leon Panetta outlined the Pentagon’s plan to change the priorities of the American military and implement budget cuts accordingly. This follows from last year’s Budget Control Act, which automatically cut $1.2 trillion of defense and non-defense spending when Congress did not pass legislation to reduce the budget. The Pentagon is now undertaking half a trillion dollars in cuts through its proposed budget. Although the budget is not final until February 13, Panetta’s remarks reveal two things: the pace of these cuts, and which industries will win and lose.

For FY2013, the pace is relatively slow—the Pentagon aims to cut $6 billion from its budget, down $531 billion to $525 billion. Over the long term, the Pentagon budget is expected to shrink by $487 billion over ten years, with $259 billion of cuts taking place in the next five years. However, commentators like former director of the Office of Management and Budget, Peter Orszag, note that the anticipated budget cuts are larger than what would likely be implemented.

If implemented, however, the Pentagon’s new priorities give some idea as to which industries will win and lose. On one hand, the proposed budget favors makers of unmanned aerial systems, along with cybersecurity, surveillance, and intelligence contractors. On the other hand, makers of certain weapons systems will likely feel some contraction. The proposed budget discards 108 to 144 fighter aircraft, reduces the number of littoral combat ships by two, and retires seven cruisers earlier than scheduled, affecting a number of well-established defense companies.

Although defense contractors have had an opportunity to prepare for the Pentagon’s budget cuts since August of 2011, this year’s reductions might give some indication of which companies and industries will successfully weather nine more years of increasingly aggressive cuts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Peter Teare, Lorraine Mullings Campos and Alexandra A. Nelson.

In an effort to open up the European market for defense and sensitive security products to greater international competition and transparency in its contracting processes, the EU member states have recently adopted a series of measures including the EU Directive on Defense and Sensitive Security Procurement (Directive 2009/81).

The European market for defense and security products is currently worth more than $220 billion. But historically less than 25% of that value is awarded through a public tender process, and 75% of the defense spending of national governments within the EU goes to domestic suppliers. This new law aims to mandate the greater use of public tendering procedures in defense and security programs and reduce the ‘national preference’ that often prevails in Europe. The aim is also to introduce, for the first time, an effective system for bid protests in defense and security procurement. The legality of imposing off-sets and other discriminatory requirements as a condition of contract awards has also been placed into question.

The Defense and Sensitive Security Procurement Directive forms a part of a package of new legislative measures known as the “European Defense Package” which aims both to promote competition, eliminate discriminatory obligations such as off-sets, and to simplify the current national licensing systems for cross-border transfers of military equipment and technology. Each EU member state was required to transpose its terms into the national law by 21 August 2011.

Reed Smith is holding a roundtable seminar at its Washington DC office on Tuesday, February 7, 2012 from 3:00 pm to 5:30 pm to discuss these legislative developments.

Please click here for more information.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Monahan.

On January 12, 2012, the Small Business Administration (“SBA”) issued an interim final rule amending certain regulations governing the Women-Owned Small Business (“WOSB”) Program. These amendments to threshold amounts and protest procedures make the WOSB Program more consistent with other SBA government contracting programs. Given the public benefit of consistency in small business programs, SBA found good cause to publish the changes in an interim final rule, as opposed to a proposed rule, and made the rule effective from the date of publication.

The WOSB Program, which was established by a final rule issued on October 7, 2010, authorizes contracting officers to set aside contracts for WOSBs and economically disadvantage women-owned small businesses (“EDWOSBs”) in certain industries where such concerns are shown to be underrepresented. To qualify as a WOSB, a business concern must be at least 51 percent unconditionally and directly owned by at least one woman who is a U.S. citizen. WOSB qualifications also require one or more women to control the management and daily business operations of the business concern. To qualify as an EDWOSB, a business concern must meet the same requirements as a WOSB and demonstrate that the owner or owners’ ability to compete in business has been impaired due to diminished capital and credit opportunities. Further, an EDWOSB owner’s personal net worth, adjusted gross yearly income averaged over the three years, and asset fair market value cannot exceed $750,000, $350,000, and $6 million, respectively.

Originally, under the WOSB Program, contracting officers could restrict competition for federal contracts not exceeding $5 million for manufacturing contracts and $3 million for all other contracts. The interim final rule changed those amounts to $6.5 million and $4 million, respectively, to be consistent with other SBA regulations. In addition, the interim final rule acknowledges the Federal Acquisition Regulation Council’s authority to adjust competitive thresholds for inflationary adjustments. These changes allow WOSBs and EDWSOBs to obtain larger contracts to grow their businesses.

In addition, under the interim final rule, contracting officers may now proceed with a contract award during the course of a protest, if necessary to protect the public interest, without having to make such a determination in writing. It also allows contracting officers to move forward with contract awards if the SBA does not respond concerning the status determination of the WOSB or EDWSOB filing the protest within 15 days from receipt of the protest. These changes allow contracting officers to award contracts more easily in protest situations.

Comments on the interim final rule are due by February 13, 2012.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Monahan.

To mandate or not to mandate the use of suspension and debarment - that is the current question up for debate among federal agencies and government officials. As criticism of agencies for failure to utilize or enforce suspension and debarment procedures continues, the idea of mandating the use of these procedures as punishment for indictments and convictions related to federal contracts is gaining momentum. Interest in this idea reached a high point in recent weeks with issuance of a memorandum from the Office of Management and Budget (“OMB”) and agency testimony before the Senate on the matter.

The OMB memorandum identifies the use of suspension and debarment a “powerful tool” for protecting taxpayer resources and the integrity of federal government processes from government contractors who “lack business integrity because they have engaged in dishonest or illegal conduct or are otherwise unable to satisfactorily perform their responsibilities.” The memorandum, which was issued in response to an August 2011 Government Accountability Office (“GAO”) report, found that more than half of the ten agencies it reviewed lacked characteristics common among active and effective suspension and debarment programs. In particular, the GAO discovered that the agencies investigated did not have: (i) sufficient dedicated staff resources, (ii) well developed internal guidance, and (iii) processes for referring cases to officials.

To remedy the issues addressed in the GAO report, the OMB set forth a new set of directives that apply to agencies and departments subject to the Chief Financial Officers Act. These directives include the following: (1) appointing senior accountable officials to assess agency suspension and debarment programs; (2) reviewing internal policies and procedures to ensure effective use of suspension and debarment tools; and (3) checking federal databases to guarantee that only responsible contractors receive federal awards. The OMB tasked the Interagency Suspension and Debarment Committee (“ISDC”) to serve as support structure by helping agencies develop trainings and share best practices related to suspension and debarment tools.

The OMB issued its memorandum one day before the Senate Committee on Homeland Security and Government Affairs (“Committee”) held a hearing on the matter. The Committee obtained testimonies from agency heads and officials, including Daniel Gordon, outgoing OMB procurement chief, and Steven Shaw, deputy general counsel of the U.S. Air Force. While committee members, including Senators Susan Collins and Joseph Lieberman, support implementing mandatory suspension and debarment, agency officials advocated against mandating such procedures. Mr. Gordon stated that the current regulations provide the necessary authority and discretion to combat dishonest or incompetent federal contractors. Mr. Shaw argued against taking away agency discretion and stated that automatic suspensions and debarments would remove contractor incentive to work in creative ways to benefit the government.

Although the question concerning mandatory suspensions and debarments is still up for debate, contractors should use this time to ensure that they and their businesses would not fall prey to the proposed automatic measures if they became law. Accordingly, contractors need to take an internal look at their compliance policies and procedures to make certain they meet all federal contract requirements. By taking advantage of the opportunity to “clean house” concerning contract provisions and ethical regulations, contractors can obtain a clear conscience about their compliance and prevent any violations that could potentially lead to suspensions and debarments.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Gunjan Talati.

Earlier this month, the government issued an interim rule amending the Federal Acquisition Regulation (FAR) to implement set-aside requirements of the Small Business Jobs Act of 2010. The Small Business Jobs Act amended the Small Business Act to require the government to set aside parts of a multiple-award contract for small businesses; set aside orders placed against multiple-award contracts for small businesses; and reserve one or more contract awards for small businesses under full and open multiple-award procurements.

The interim rule attempts to implement these requirements through additions and revisions to a number of FAR parts and subparts:

• FAR Subpart 8.4—Federal Supply Schedules: The interim rule revises this subpart to clarify that even though the set-aside requirements of FAR Part 19—Small Business Programs—are not mandatory for procurements under Federal Supply Schedules, the ordering activity is allowed, at its discretion, to set aside orders and Blanket Purchase Agreements, or BPAs, for small businesses

• FAR Subpart 12.2—Special Requirements for the Acquisition of Commercial items: The interim rule also clarifies that agencies can set aside orders under multiple-award contracts for the acquisition of commercial items

• FAR Subpart 16.5—Indefinite-Delivery Contracts: The interim rule revision acknowledges that set-asides can be used for orders under multiple-award contracts

• FAR Part 19—Small Business Programs: The interim rule adds a new section that allows agencies to use set-asides under multiple-award contracts and reserve one or more contract awards under multiple-award contracts for small businesses

• FAR Subpart 38.1—Federal Supply Schedule Program: The interim rule includes a reference to the changes in FAR Subpart 8.4, clarifying that set-asides can be used for orders and BPAs under Federal Supply Schedules

Even though many of these changes grant the agencies discretionary authority to use set-asides, whereas many of the existing set-aside requirements in the FAR are mandatory, they present additional avenues through which agencies can increase the credit they receive toward their small business goals.

With agencies under the spotlight for missing these goals, there will likely be a lot of activity under these changes. While the impact on small businesses is obvious—increased set-aside contracting opportunities, the impact on large businesses is not so clear. Certainly, there will be the loss of some opportunities, as large businesses cannot submit proposals on set-aside competitions. However, with careful planning, such as identifying potential subcontracting opportunities, large businesses may be able to soften any blow from the potential loss of work and perform a value service by supporting a small business.

The interim rule went into effect November 2, 2011, and companies or trade groups interested in submitting comments to be considered before a final rule is issued will have until January 3, 2012 to submit their comments.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Monahan.

A final rule issued by the Department of Labor (“DOL”) August 29, 2011 provides final regulations to implement Executive Order (“E.O.”) 13495, Nondisplacement of Qualified Workers Under Service Contracts. E.O. 13495, which was signed by President Obama January 30, 2009, establishes a general policy for the federal government with regard to staffing successor service contracts where performance is for similar services at the same location as the prior contract. In particular, the policy provides qualified employees who worked under a preceding contract the opportunity to work under a successor contract if they so choose.

Under the new rule, it is now mandatory for service contracts to include a clause requiring successor contractors to offer qualified employees, who were employed under the prior contract and would otherwise be terminated at the award of the successor contract, a right of first refusal of employment under the successor contract. This requirement to include a right of first refusal extends to subcontractors as well.

Since E.O. 13495 does not establish wage or fringe benefit rates, the final rule does not mandate that a successor contractor offer jobs to employees at the same wage as the former contractor. However, the rates offered by successor contractors will have to meet the minimum wage and fringe benefit rates established under the Service Contract Act (“SCA”). Accordingly, successor contractors may base their bids on the minimum wage rates and fringe benefits required by the SCA.

The final rule clearly states that when a collective bargaining agreement governs the wage and fringe benefits on the predecessor contract, a provision of the SCA requires a successor contractor to pay no less than the predecessor’s collective bargaining agreement rates. However, many questions have been raised concerning whether the successor contractor would be required to accept all the terms and conditions of the predecessor’s collective bargaining agreement for National Labor Relations Act (“NLRA”) purposes.Unfortunately, the DOL has taken the position that the potential interplay between the nondisplacement provisions of the final rule and the NLRA exceeds its authority. Hopefully, additional guidance will be provided when regulations are issued that implement the final rule.

Although the final rule has been published, the effective date for this rule is still pending. Once the date has been determined, the DOL will publish a notice in the Federal Register announcing the date.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Melissa E. Beras.

On October 14, 2011, just one week after the release of the "WikiLeaks Order," the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) proposed a rule that would require certain contractors to complete training that addresses the protection of privacy and the handling and safeguarding of personally identifiable information (PII). Specifically, the rule requires contractors who access government records, handle PII, or design, develop, maintain, or operate a system of government records on behalf of the government, to undergo training upon award of a contract and at least annually thereafter. Further, according to the rule, contractors would have recordkeeping requirements for documents indicating that employees have completed the mandatory training and would be required to produce those records upon government request.

In addition, the proposed Federal Acquisition Regulation (FAR) text provides that the required privacy training must, at a minimum, address seven mandatory elements. Those elements include training on privacy protection in accordance with the Privacy Act of 1974, restrictions on the use of personally owned equipment that implicates PII, breach notification procedures, and other “agency-specific” training requirements. The proposed FAR text also provides alternative language for instances where an agency would prefer that the contractor create the privacy training package, as opposed to attending an agency-developed privacy training. Additional alternative language is proposed for instances where the government determines it is in its best interest for the agency itself to conduct the training. Moreover, the clause requires that it be flowed down to any subcontractors who: (1) have access to government records; (2) handle PII; or (3) design, develop, maintain, or operate a system of records on behalf of the government.

The proposed rule is a part of a broader effort to enhance cyber security. It follows the “WikiLeaks Order,” an executive order issued October 7, 2011, and formally titled “Structural Reforms to Improve the Security of Classified Networks and the Responsible Sharing and Safeguarding of Classified Information,” which directs governmental change to ensure that classified information is shared responsibly and safeguarded on computer networks in a manner consistent with appropriate protections for privacy and civil liberties. The order expressly states that agencies bear “the primary responsibility for meeting these twin goals.” The proposed rule also comes shortly after the DoD requested the extension of a pilot program through November 2011, which helps protect the networks of its prime defense contractors by sharing intelligence about threats to their data with these contractors.

Contractors interested in sharing their views on the proposed rule have the opportunity to comment. Written comments are due by December 13, 2011.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Michael A. Grant.

• The Wolfsberg Group recently published its Anti-Corruption Guidance, which leads me to assume that someone, somewhere, is drafting Corruption Guidance. Perhaps those old cartoons were on to something?
• More evidence that when it comes to cloud computing, no one knows what to do.
• People do bad things on the internet? Say it 'aint so.
• For those of you who have watched one too many Pirates movie (is there really another one?), and for those of us who have day dreamed about high stakes treasure theft  (did I just share too much?), this is your warning.
• Its OK to Laugh.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Did you hear that the U.S. sanctioned a company that doesn't exist? Of course you did, it was kind of a big deal. But in case you didn't and wanted to sound current in your legal circles.
• Some people like to claim that higher education is a racket. Turns out some if it is.
• A Short List of job growth ideas by someone who might actually know something: a small business owner.
• Dilemma: You just ordered a pizza and the Noid guaranteed it would be there in 30 minutes, when suddenly you realize you have no reports on the cost effectiveness of government contractors. Been there … been there. This ought to get you through.
• Since the Solyndra investment was such a big hit, here's a summary of 9 stimulus studies.  Armchair politicians prepare for battle.
• Blogs are allowed to self promote, right?
• Speaking of taxes, whenever I have to cut the government a check, I always dream of pulling a Lebowski: rather than paying the tax man, I think of spending my money on a rug that really ties the room together. It seems as though a bunch of government contractors have a little Dude in them, with outstanding payments of 209 Million.
• In Fake Legal news: Its OK to Laugh

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher L. Rissetto and Stephanie E. Giese.

Those of us who have an interest in compliance with the federal Cost Accounting Standard (“CAS”) are not surprised that the CAS Board eliminated the Overseas Exemption effective October 11, 2011. See 76 Fed. Reg. 49365 (Aug. 10, 2011). What may be more surprising than the elimination of the exemption is that the CAS Board is eliminating the exemption that it first promulgated in 1973 without ever offering its interpretation of how the exemption should be applied. So, for contractors who have relied on this exemption or will rely on this exemption for contracts and subcontracts awarded prior to October 11, 2011, we will never know which federal agency’s interpretation of the exemption is correct. The CAS Board’s failure to interpret this exemption introduces some uncertainty for contractors who have relied on the exemption, particularly in the event of a CAS compliance audit.

Federal Agency Interpretations of the Overseas Exemption Differ. Some federal agencies such as the U.S. Agency for International Development (“USAID”) have interpreted the application of the exemption narrowly in acquisition policy guidance such that the vast majority of U.S. companies could not rely on the exemption (if any costs, direct or indirect, are incurred in the U.S. and charged to a USAID contract). Other federal agencies, including the U.S. Department of Defense (“DoD”), have stated in acquisition policy guidance that a U.S. company may rely on the Overseas Exemption if all direct costs incurred in connection with a government contract are incurred overseas.

The CAS Board’s Limited Jurisdiction was the Basis for the First Promulgation of the Overseas Exemption. You may ask why the Overseas Exemption was first promulgated in light of the fact that the federal agencies do not agree on its application. The Overseas Exemption was first promulgated in the Armed Services Procurement Regulation (“ASPR”) in 1973. The original basis for the exemption was that the CAS Board’s jurisdiction was limited to contracts awarded in the U.S., its territories and possessions pursuant to Section 2168 of the Defense Production Act (“DPA”). Thus, by default, contracts and subcontracts executed and performed entirely outside the U.S. were exempt from CAS. The CAS Board ceased to exist under the DPA in 1980, but was reestablished in 1988 under the Office of Federal Procurement Policy (“OFPP”) Act without the overseas limitation on the Board’s jurisdiction. In 1992 and again in 2008, during the time when its jurisdiction included contracts performed overseas, the Board reviewed its rules and chose to retain the Overseas Exemption without offering any further interpretation of the applicability of the exemption.

CAS Compliance May Depend on Your Agency’s Interpretation of the Overseas Exemption. This month the CAS Board again offered no further interpretation of the Overseas Exemption when it eliminated the exemption. So a government contractor may want to consider the federal agency that awarded the contract before relying on the Overseas Exemption to CAS -- while the exemption lasts!
 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos and Joelle E.K. Laszlo.

Full and open competition is a bedrock principle in federal contracting, so government initiatives to expand competition, like the interim rule on multiple-award schedule (“MAS”) contracts that took effect this summer, should come as no surprise. But competition breeds a lot of different things, and enhanced competition for orders placed under MAS contracts could have a number of unintended consequences. Schedule contractors will do best to keep their heads about them in this brave new world.

The interim rule, issued on March 16th and effective two months later, applies only to MAS contracts with civilian agencies, including the General Services Administration’s and the Department of Veterans Affairs’ Federal Supply Schedule contracts. (Department of Defense agencies already follow competitive procedures similar to those set forth in the interim rule.) The interim rule amends the MAS ordering procedures in the Federal Acquisition Regulation (“FAR”) to require contracting agencies to take certain steps when placing MAS orders valued above $3,000 (the current micropurchase threshold). For example, for orders valued between the micropurchase threshold and the simplified acquisition threshold (“SAT,” currently $150,000), an agency must request quotes from at least three schedule contractors (or, for orders to be issued with a statement of work (“SOW”), provide the SOW to at least three schedule contractors), and must justify in writing any decision not to solicit its requirement so broadly. For any order above the SAT, an agency must post a request for quotations (“RFQ”) to GSA eBuy, or provide the RFQ to “as many schedule contractors as practicable.” As with orders under the SAT, an agency is only permitted in specified circumstances to limit competition, and must document its reasons for doing so.

The interim rule sets out similar competition requirements for placing orders under existing Blanket Purchase Agreements (“BPAs”), and for establishing new BPAs. In addition, where new BPAs are to be established the interim rule expresses a preference for multiple-award BPAs, and limits such awards to five years in duration. Except in limited circumstances single-award BPAs over $100 million are no longer permitted, and any new single-award BPA may only be awarded for a year (with up to four, one-year options).

The new competition requirements implement Section 863 of the 2009 National Defense Authorization Act, which was promulgated in part to respond to criticism that has continued to build over the insufficiency of competition under MAS contracts. In a September 2009 report on BPAs, the Government Accountability Office (“GAO”) essentially found that the lack of competition in MAS ordering was based on the absence of regulations and procedures requiring it, and the failure by contracting officers to follow existing regulations and procedures. It thus stands to reason that without at least better training of contracting officers, the new competition requirements won’t make the positive difference for which they are designed. At the same time, the increased competition may force schedule contractors into low-bidding wars, especially for BPAs which, with their new durational limits, may end before a contractor is able to break even (let alone make a profit). And with GAO’s recent determination that it has the authority to hear bid protests of task orders of any value (and Congress expected to pass a bill to this end), any order that doesn’t hue closely to the new competition requirements may be up for challenge. These factors together could make the future of MAS contracting a tempestuous one, even for the most seasoned offerors.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Steven D. Tibbets and Lorraine M. Campos.

 There is a long history of federal court cases distinguishing which items of information that contractors disclose to the Government may be obtained by the public and which items may not. Currently, there is much debate regarding how well the relatively new Federal Awardee Performance and Integrity Information System accomplishes the goal of providing public access to contractor responsibility information.

On a related front, on May 26, 2011, the Office of Governmentwide Policy in the U.S. General Services Administration (“GSA Office”) issued a notice explaining exactly which elements of the Government Central Contractor Registration (“CCR”) are subject to Freedom of Information Act (“FOIA”) requests and which are not. Virtually any person or company that sells any goods or services to, or receives financial assistance in the form of grants, from the federal Government provides information to the Government that is subject to FOIA. There are 260 distinct data fields that contractors may be required to complete – most data fields apply to all contractors, but a few fields apply only to contractors that perform contracts over certain dollar thresholds. Information submitted in completing these fields is presumptively subject to FOIA – as is all information submitted to the federal Government – but GSA has determined some fields are exempt.

Specifically, data fields 156 and 165 through 260 are exempt from FOIA. These fields cover information regarding contractors’ corporate parents, “Austin Tetra” and “Dun & Bradstreet Monitoring” information regarding contractors’ creditworthiness, information regarding security clearances, information regarding executive compensation, and information regarding proceedings involving poor contract performance, fraud, and similar matters. Examples of non-exempt data fields include: (1) average number of employees (field 144); (2) the identity of the owner(s) of the company (field 137); and (3) the company’s annual revenue (field 145).

It is currently not clear whether industry watchdogs, journalists, or contractors seeking information about a competition or an interesting contract award will challenge GSA’s determinations regarding which items of information are exempt from FOIA. In addition, it is not clear how GSA’s findings will apply to or influence determinations regarding the scope of information that is publicly-available via the FAPIIS database. What is clear is that, for now, a great deal of information contractors furnish to the Government via the CCR system will be kept from public view.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Steven D. Tibbets and Lorraine M. Campos.

In early 2011, Congress passed the James Zadroga 9/11 Health and Compensation Act of 2010 (“9/11 Act”). A last-minute amendment to the statute imposed a two-percent excise tax on foreign contractors to fund health benefits for 9/11 emergency responders. The tax has been much remarked-upon, but we want to highlight a fantastic bit of scholarship that helps to understand the context and fundraising effectiveness of the tax.

In her paper titled “The Revenue Impact of the 2% Excise Tax”, Nicole R. Best sets forth an economic analysis of the statute and concludes that the revenue-generating estimates of a Congressional Budget Office (“CBO”) report – concluding that the tax would be an effective revenue-generator – were incorrect. (The paper apparently was presented as part of an academic conference and copies are available only through a paid subscription service). The reason? CBO completely failed to account for the treatment of foreign contractors under U.S. procurement laws.

Under the 9/11 Act, any “foreign person that receives a specified Federal procurement payment” must pay a tax equal to 2 percent of the amount of a “specified Federal procurement payment.” However, the tax applies only to contracts for goods manufactured outside the United States and outside certain countries that are parties to “non-discrimination” trade treaties with the U.S. (i.e., “designated countries” under the Trade Agreements Act). Now, generally speaking, when the value of a procurement of tangible goods is under a particular dollar threshold, only U.S.-manufactured goods are eligible for the procurement. When the value is over the threshold, only U.S.- or designated country-manufactured goods are eligible. Products from non-designated countries – the only products that trigger the foreign contractor tax – are never eligible. As such, the foreign contractor tax applies to products that the U.S. government would not purchase anyway. Therefore, as a practical matter, contractors from outside the United States can take comfort in the fact that the tax probably does not apply to them.

Best’s paper goes on to point out additional mathematical and empirical errors that were inherent in the CBO’s estimates. From a policy perspective, Best’s arguments invite scrutiny of the flimsiness of the CBO’s calculations processes that led to their use. Why impose a tax that will not raise money? Does the tax serve a symbolic purpose of some sort? What drove CBO’s error – was it just ignorance of the Trade Agreements Act? Why single out foreign contractor’s for a tax in the first place, particularly one tied to September 11? To serve some sort of nationalistic impulse? Neither Best’s paper nor any other source of which we are aware answers these questions. Nevertheless, they are questions that get to the impetus for public policies affecting firms involved in cross-border government contracts work. Such firms would be well-advised to examine these forces that shape the policies with which they must live.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Monahan.

A proposed rule issued by the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration on June 28, 2011 proposes to amend the Federal Acquisition Regulation (“FAR”) to provide a single set of standards for contract officers reviewing contractor past performance. In 2010, agencies were required to transition their various information systems for storing performance reviews into the Contractor Performance Assessment Reporting System (“CPARS”), which would serve as a single performance feeder system governmentwide. Now, regulators seeks to continue implementing streamlining procedures by standardizing the evaluation factors and rating scales in past performance reviews.

The proposed changes stem from a 2009 Government Accountability Office report on the need for better performance information in making contract award decisions. The basis for the proposed rule also gained momentum with the issuance of an Office of Federal Procurement Policy memorandum concerning strategies for improving the assessment of contractor past performance.

Under the proposed rule, regulators plan to implement a five-point scale to standardize the contractor past performance evaluation process. In particular, contractors will be evaluated based on rating definitions found in CPARS guidance that range from exceptional to unsatisfactory. All evaluations are intended be tailored to the contract type, size, content, and complexity of contractual requirements.

According to regulators, while the proposed rule may be new, it only intends to codify in the FAR existing guidelines and practices, Further, the proposed language for the amended FAR provisions is language already used by Federal agencies. Contractors interested in commenting on the proposed rule must submit their comments by August 29, 2011.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Of Russians and nuclear energy …
• Line of the Day goes to Sen. Patrick Leahy (D-VT) from this article about the Civilian Extraterritorial Jurisdictions Act: "CEJA will also protect Americans by providing the option of prosecuting them in the United States." Finally, what we have all been waiting for, multiple international jurisdictions chomping at the bit to lock us up. If this goes through, what's going to happen to my favorite show? 
• I'm not sure how much traction this will get, but if you are in the bribery business, consider this your warning. The standard search for recording devices 'aint going to cut it anymore. (Fighting the urge to write: "there's an app for that." Oh well.)
• With kids heading off to camp, I'm finding myself a bit nostalgic for summer days spent making up games and then fighting endlessly with friends over the rules. It seems like a few senators share my feelings
• Who doesn't love a top 10?  Spoiler alert: contractors who didn't make the list.
• And to think, we all used to complain about the late fees at Blockbuster
• Its OK to Laugh

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Stephanie E. Giese.

Contractors for the U.S. Department of Defense, as well as the civilian agencies should expect to start seeing the Defense Contract Audit Agency (“DCAA”) recommend disallowance of certain contract costs on grounds that a contractor or subcontractor fails to “add value” when it subcontracts out more than 70% of its work under a federal government contract. As a result of new DCAA guidance, now such contractors and subcontractors may be required to provide evidence of “adding value” to DCAA during forward pricing rate proposal audits, incurred cost audits, and audits of final vouchers.

In February 2011, DCAA published guidance regarding auditing compliance with FAR 52.215-23, Limitations on Pass-Through Charges. FAR 52.215-23 is a clause that applies to prime contractors and subcontractors at all tiers with cost reimbursement contracts that exceed the simplified acquisition threshold. For DoD contractors and subcontractors FAR 52.215-23 applies not only to cost reimbursement contracts, but also fixed-price contracts, except those for commercial items or those awarded with adequate price competition. For example, DCAA may disallow a contractor's indirect costs and fee on work performed by a subcontractor if the subcontractor is performing 70% of the total cost of the work under the contractor's prime contract. In this case, DCAA may disallow the prime contractor's indirect costs and fee related to the subcontract if the prime contractor is not successful in proving its subcontract management functions "add value" to the performance of its government contract. The same rule applies to a subcontractor who subcontracts 70% of the work under its subcontracts to lower-tier subcontractors. In other words, the federal government does not want to pay a government contractor for indirect costs and fee associated with managing a subcontractor (in addition to the subcontractor’s indirect costs and fee) if the subcontractor is actually doing most (more than 70%) of the work, unless such a contractor can show it “adds value”.

Determining whether a contractor complies with the FAR 52.215-23 clause is going to be very subjective based on the definition of “added value” in the clause. “Added value” means “that the Contractor performs subcontract management functions that the Contracting Officer determines are a benefit to the Government (e.g., processing orders of parts or services, maintaining inventory, reducing delivery lead times, managing multiple sources for contract requirements, coordinating deliveries, performing quality assurance functions).”

Contractors and subcontractors should look for this FAR 52.215-23 clause in their solicitations and contracts with the government and be prepared to comply with it. Compliance includes, but is not limited to preparing evidence for DCAA to show that its subcontract management function "adds value", as well as flowing the same requirements down to suppliers.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos, Melissa E. Beras and Joelle E.K. Laszlo.

t has been called “a steaming pile,” posited as “the worst government website . . . ever seen,” and emblazoned with two giant red thumbs pointed downward. And those were the reviews of its proponents. Just a handful of weeks after much of its content it became publicly available, the Federal Awardee Performance and Integrity Information System (“FAPIIS”) looks like a database only a mother could love. That is not to say, however, that FAPIIS can be ignored. As its content and its navigability improve, FAPIIS could become a formidable obstacle for contractors seeking to demonstrate their responsibility to do business with the Federal government. Contractors should become familiar with FAPIIS now, to be positioned, if necessary, to mount a good defense later.

As a quick recap, FAPIIS consolidates information from existing Federal databases, including the Excluded Parties List System, the Past Performance Information Retrieval System (“PPIRS”), and the Contractor Performance Assessment Reporting System (“CPARS”), and also accepts inputs from contracting officers and contractors (via the Central Contractor Registration database) on an ongoing basis. In the latter category, as of April 22, any contractor with more than $10 million in active contracts and grants that is bidding on a Federal contract over $500,000 is required to report any finding or admission of its fault in a criminal, civil, or administrative proceeding in the preceding five years. The contractor is further required to certify that the information provided is “current, accurate, and complete as of the date of the submission,” and to provide updates on a semi-annual basis. These details, along with Government-supplied data posted since April 15 about contractor terminations for default; suspension, debarment, and other penalties; non-responsibility determinations; defective pricing determinations; and contract-related criminal, civil, and administrative proceedings and their outcomes are now publicly available through FAPIIS.

The recency of the information available through FAPIIS is responsible for some of the criticism about its usefulness, and this should only improve with time. But at a recent open colloquium about FAPIIS, certain other downsides to the database emerged, without similarly clear solutions. For example, currently when past performance information is posted by a Government official to a contractor’s record in CPARS, the contractor is notified and receives thirty days to review and comment on the information before it is transferred to PPIRS. (A contractor that wishes to comment on a past performance review after the thirty-day period must do so through PPIRS.) The contractor’s comments are ultimately to be posted in FAPIIS along with the Government’s review, though it appears uncertainties remain about how much space (in characters) a contractor will have for its defense, how easily contractor comments may be located in FAPIIS, and even how quickly and thoroughly a contractor must comment in order to preserve the ability to protest the loss of a contract because of its negative reviews in FAPIIS. What is clear, however, is that FAPIIS imposes a duty on every contractor to pay close attention to its past performance reviews, and to have a plan for commenting on those that may be detrimental to future contracting opportunities.

What that duty is exactly and the advisable dimensions of a response plan will probably take shape as FAPIIS does. In the interest of providing greater structure to the database, the Office of Management and Budget will soon publish a final rule setting forth standardized past performance evaluation factors and procedures for their reporting. Governmentwide training for contracting officers in the entry and use of FAPIIS data is also reportedly in the works. And for now, anyone who conducts a search in FAPIIS is presented with a pop-up window meant to remind contracting officers that “use of the information in [FAPIIS] should not result in de facto debarment.” … On further thought, one can only hope that the FAPIIS training comes sooner rather than later.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos, Christopher L. Rissetto, and Melissa E. Beras.

Just as the 2012 political races are heating up and taking shape, Judge James Cacheris of the District Court for the Eastern District of Virginia expanded the reach of Citizens United v. FEC, 130 U.S. 876 (2010), by rendering unconstitutional limits on corporate contributions to federal candidates. In the opinion, filed May 26, 2011, Judge Cacheris dismissed one of seven charges filed against Virginia businessmen William P. Danielczyk, Jr. and Eugene R. Biagi (together “Defendants”).

Mr. Danielczyk, Chairman of Galen Capital Group, LLC, and Galen Capital Corporation (together “Galen”) and Mr. Biagi, an executive at Galen, are accused of illegally soliciting and reimbursing contributions to Hillary Clinton’s 2006 Senate Campaign and 2008 Presidential Campaign. Specifically, federal prosecutors contend that Mr. Danielczyk and Mr. Biagi subverted federal campaign contribution limits by soliciting employees of their financial firm to make campaign donations to two fund-raisers hosted by Mr. Danielczyk and then reimbursing the employees with company money. According to the Wall Street Journal, Mr. Danielczyk and approximately a dozen of his employees and their spouses, some of whom were Republicans, allegedly gave about $100,000 to Mrs. Clinton’s 2008 Presidential Campaign alone.

Federal prosecutors argued the Defendants’ actions violated, among other laws, section 441b(a) of the Federal Election Campaign Act (FECA), which bans direct corporate contributions to campaigns for federal office. Alternatively, Defendants maintained that under Citizens United, such a ban violated the First Amendment and thus the count should be dismissed.  In Citizens United, the Supreme Court found another provision of the FECA, the independent expenditure ban, was unconstitutional as the Court held there was no distinction between an individual and a corporation with respect to political speech and thus the First Amendment did not allow political speech restrictions based on a speaker’s corporate identity.

Ruling that the logic employed in Citizens United was “inescapable” in the case before it, the Danielczyk court reasoned if an individual can make direct contributions within FECA’s limits, a corporation cannot be banned from doing the same.

Nevertheless, the trajectory of the Danielczyk decision seems uncertain. The Danielczyk court acknowledged that the U.S. District Court for the District of Minnesota disagreed with this outcome in Minnesota Citizens Concerned for Life, Inc. v. Swanson, 741 F. Supp. 2d 1115 (D. Minn. 2010), where that court found the Citizens United holding was limited to corporate independent expenditures and was not a repudiation of the limitation on direct contributions to candidates. The case has already been criticized for ignoring another Supreme Court decision, Federal Election Commission v. Beaumont, 539 U.S. 146 (2003), which upheld the ban on direct corporation contributions to federal candidates and was not specifically overturned in Citizens United. Furthermore, on Tuesday, May 31, 2011, Judge Cacheris ordered prosecutors and defense lawyers to submit additional briefs by Wednesday, June 1, 2011 on whether he should reconsider his ruling. A hearing is scheduled for Friday, June 3, 2011.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Andrew C. Bernasconi.

As many government contractors are aware, the Trade Agreements Act (“TAA”) and its implementing regulations generally provide that the government may only acquire end products made in the United States or other “designated countries.” Government contracts frequently incorporate TAA regulations and require contractors to certify that products sold to the government derive from the U.S. or designated countries.

Liability under the False Claims Act (“FCA”) can arise when contractors sell and supply products to the government from non-designated countries like China and Malaysia, despite their certifications to the contrary. The FCA’s treble damages, civil penalties, and unique qui tam provisions – which allow private whistleblowers to bring claims of fraud against the government and receive a percentage of any recovery – make the FCA a powerful and popular vehicle for current and former employees of contractors, competitors, the Department of Justice, and others to assert claims of fraud under the FCA against government contractors.

The FCA has been used with increasing frequency and financial force to prosecute claims of TAA violations. There are currently several FCA cases involving alleged violations of the TAA pending throughout the country, and there have been substantial settlements of FCA/TAA allegations in recent years. The Bottom Line: Government contractors should examine their contracts to determine whether they incorporate the TAA requirements and certifications, and if so, take steps to verify that their supply chain of products sold to the government satisfies all applicable requirements.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• The US military does the Hokey Pokey in Iraq.
• Edward Siedle of Forbes provides some insight into the failure of effective whistleblower enforcement.
• The Obama Export Initiative is starting to resemble Punxsutawney Phil, whenever either rear their head we are left with several months of the same.
• Ezra Klein is back at it, this time breaking down the stimulus / deficit connection.
• It's OK to Laugh.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• I never figured the Oracle of Omaha to be much of a Parrot Head -- they do spell their names differently. But in this piece  the FCPA Compliance and Ethics Blog breaks down Warren Buffet's Changes in Latitudes, Changes in Attitudes.
• Some anti-trust football analysis that isn't related to the NFL.
• I know people love to complain about how expensive lawyers are. Don't worry, we love to listen. So while I know that my legal services aren't free, at least it's not a 21,000% (thats right) mark-up.
• While we are on the topic of government spending, how about some US debt history?
• Week 2 of Its OK to Laugh.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christoper L. Rissetto and Robert Helland.

The Internet has been ablaze over the past 24 hours with reports that the Obama Administration is considering requiring "all entities submitting offers for federal contracts to disclose certain political contributions and expenditures that they have made within two years prior to the submission of their offer". This was first disclosed by Hans A. von Spakovsky, a former Federal Election Commissioner and scholar with the Heritage Foundation. The Public Policy and Infrastructure and Government Contracts Groups offer this analysis of the Administration’s proposal, as it is known so far, and will monitor efforts to implement it as well.

The proposed order requires the following to be disclosed:

(a) All contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control; and
(b) Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditure or electioneering communications.

The Impact of these Rules on the Contracting Community Will be Significant. If implemented, these disclosure requirements would have a broad impact both in terms of what needs to be disclosed and who needs to disclose it They would apply, for example, to any entity seeking to do business with the federal government. So those seeking to contract with the federal government would have to put a compliance system in place – as part of putting together its bid – in order to keep track of the contributions and expenditures made. Also, the proposed disclosure requirements would reach far into the bidding entity, to include affiliates or subsidiaries under its control. For an entity with many subsidies, this would not only mean creating an effective compliance system but enabling the coordination within that system among many pieces and players, in order for effective disclosure. Finally, they would apply not only to political contributions to candidates and political parties but also to contributions made to a third party that spends money for advertisements advocating the election or defeat of a candidate for federal office. So, for example, if an officer of a bidding entity also belongs to an organization that runs ads calling for the defeat of a candidate, then he or she must disclose dues any other payments made to that organization, in the context of the bidding entity seeking the federal contract. That goes beyond any requirement in place today and in real terms means that those entities which run these advertisements could see the disclosure of those behind them.

Many legal issues are likely raised by an Executive Order that would be issued with this content. Among these issues are: (1) constitutional, third party, and other statutory rights that might be disturbed by compliance with the requirements of the Executive Order; (2) whether such an Executive Order exceeds the President's authority; and, (3) potential third party liability that might be incurred by implementation activities of covered entities (e.g., employment disputes), among others.

This proposed executive order is clearly a response to the Supreme Court’s decision in Citizens United v. FEC, which reverses decades of statutory and case law that prohibit corporations from using their general treasuries to fund independent political advertising supporting or opposing candidates for local, state or federal office.  And those on the right clearly consider it to be drafted in favor of organizations favoring the Democratic Party. van Spakovsky, for example, notes “federal employee unions that negotiate contracts for their members worth many times the value of some government contracts are not affected by this order. Neither are the recipients of hundreds of millions of dollars of federal grants”. We would note that this is a proposal only and the final details of the Executive Order are still not in place.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christoper L. Rissetto and Robert Helland.

Late Friday evening, with only minutes remaining before a partial shutdown of the federal government, the White House, Senate Democrats and House Republicans came to an agreement on spending and policy decisions necessary to fund the federal government for the remaining six months of Fiscal Year 2011. In the end, $38.5 billion was cut from the discretionary side of the budget, i.e. spending for programs whose spending levels are not mandated by federal law such as Social Security and Medicare. While more detail will be made available in the next days and weeks about where the budget knife will fall, we know that programs at the Departments of Labor, Education and Health and Human services will be cut by $13 billion. $18 billion will come from cuts in programs considered to be "unnecessary" by the Department of Defense. The remainder will be spread across agencies ranging from State to Housing and Urban Development. In addition, some, but not all of the policy riders sought by Republicans were included, such as restrictions on the District of Columbia spending its own funds to provide abortions and requirements and the reauthorization of a program to continue a school voucher program in the District.

The compromise agreement took a lot of effort, however the work on this agreement will seem slight in comparison to the decisions needed to be made 1) on the next federal budget, for Fiscal Year 2012; and 2) on the upcoming increase needed on the federal debt ceiling. A more grueling battle in both areas is expected, with cuts in both discretionary and mandatory spending to be under consideration. We will see more detail on the President's plan when the Obama Administration makes its own budget request of Congress this week, in response to a plan already put out by House Republicans that will cut $5 trillion over ten years.

Companies would be advised to at least monitor the budget activities, and to lobby for needed clarifications and amendment. Significant budget policies, possibly including the structuring of the tax code and other key program directions, are certain to be debated and revised.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Monahan.

What happens when a bid proposal is sent via e-mail prior to the submission deadline but not by the proper party until after the submission deadline has passed? Turns out, the answer depends on whether the Government Accountability Office (“GAO”) or the Court of Federal Claims (“COFC”) is reviewing the matter.

A government contractor dealing with a late bid may still have its bid considered by the contracting officer, even if not received on the submission deadline, if it meets one of the three exceptions listed under FAR 52.215-4(c)(3)(ii)(A). The “Electronic Commerce” exception applies if the proposal was submitted electronically and “received at the initial point of entry to the Government infrastructure” by 5:00 pm the day prior to the submission deadline. The “Government Control” exception applies when there is “acceptable evidence” to establish that the offeror’s e-mail proposal “was received at the Government installation designated for receipt of offers and was under the Government's control prior to the time set for receipt of offers.” The “Only Proposal” exception applies if the late bid is the only proposal received.

When determining bid protest for late submissions, GAO has consistently held that the “Government Control” exception does not apply to e-mail proposals. In Matter of: Sea Box, Inc. (PDF), a government contractor submitted its proposal by e-mail 11 minutes before the deadline. However, it took several minutes for the proposal to be transmitted from the original point of entry to the final electronic destination. When the email finally reached the intended recipient, it was past the deadline. GAO states since electronic delivery methods already had the “Electronic Commerce” exception, it would not make the “Government Control” exception broad enough to include electronic transmittals and provide two alternative means to determine whether late electronic transmitted proposals may be accepted.

However, the Court of Federal Claim recently reached an explicitly different result than GAO. In Watterson Construction Company V. United States (PDF), a bidder’s proposal arrived four minutes late to the Contracting Officer’s email inbox due to an unexplained "mail storm" at the Army Corps of Engineers e-mail server. When notified that its bid was deemed “ineligible for award” due because it was late, the bidder filed a protest. Unlike the GAO, the COFC held that the “Government Control” exception applies to electronic deliveries. So, if a contractor previously thought it was out-of-luck under GAO precedent, it may still be able to save its proposal at the COFC.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Perhaps I'm not that creative, but I keep thinking that illegally exporting jet engines has to be more difficult than people think. I guess the arrests would lend credence to my belief.
• $ 16.2 Billion … sneak attacks … the cover of darkness. The only thing Robert Creamer's summary of lobbying effort against the Wall Street Reform Law is missing is a reference to Chuck Norris. That's better.
• Following a lot of chest thumping about its new enforcement weapon, the Bribery Act, the UK appears poised to let some air out of its own balloon.
• How many government employees does it take … to conclude that fixed price contracts have built in financial cushions? Apparently just one.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos and Joelle E.K. Laszlo.

When prevention of an event is impossible, preparation is the best defense. This is certainly the case for federal contractors facing an impending Government shutdown. By the time this ‘blog entry is posted, the likelihood of such a shutdown should be clearer, as the House of Representatives votes today on the latest federal funding continuing resolution (“CR”). If the new CR is passed, federal operations will continue for another three weeks under its temporary spending provisions, while Democrats and Republicans continue to hammer each other, as they hammer out the 2011 federal budget.

If a new CR isn’t passed, and no budget miraculously materializes, the CR currently funding federal operations will expire this Friday, March 18th. At that point, federal agencies will be required to cease all but the most crucial operations. Such a federal shutdown will mean different things to different contractors, but even those who don’t stand to be severely or even marginally impacted in the short term would be well advised to take the time to consider the shutdown’s potentially broader implications. Reed Smith offers six recommendations to federal contractors preparing to weather the potential federal shutdown and emerge on solid ground – to read them, click here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• During law school, I sort of liked having to carry a copy of Blacks Law Dictionary, it made me feel extra-smart. The distinct benefit of carrying a dictionary is that is serves as a (heavy) reminder of the importance of defining your terms. Because the FCPA doesn't, we get to read posts like this.
• In breaking news … some government contracts are wasteful.
• I always have a moment of anxiety when my bag has to go through the scanners at the airport. Did I get out my shaving cream? Is there a water bottle left in there? Did I accidentally pack my cigar cutter? I have never once had to worry if the scanners would find the dissembled remains of 60 firearms I was illegally exporting out of the US.
• Free advertising and fishing expeditions are two justifications for why GAO bid protests have reached a 15 year high. This article by Robert Brodsky draws back the curtain in a discussion of the flaws, as well as those taking advantage, of the current system of government contracting.
• I'm a lawyer; so unlike that baby in the cars.com commercial, I have very little experience fighting fires. However, given my stated lack of experience, I feel rather confident that fighting fires with gasoline probably isn't going to settle things down. Please allow Robert Reich to explain.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Steven D. Tibbets and Lawrence S. Sher.

A recent U.S. Court of Federal Claims bid protest decision illustrates how one agency’s apparent attempt to award a sole-source contract without making the findings to justify the award was unlawful, though, ultimately, the protest challenging award was not successful. The Court’s decision in Mobile Medical International Corp. v. United States, demonstrates a situation in which a sole-source award was mis-handled by the agency and subsequently set aside following a protest. In our experience, there are times when contractors suspect that their competitors have been “pre-selected” or just seem to have the inside track for certain contract awards even when those awards are not, technically, sole source. This case may serve as helpful authority in challenging such awards.

In Mobile Medical, the Government engaged in sole source pre-award negotiations with a contractor for a particular type of mobile medical trailer. At the time of the negotiations, neither the contractor, nor any other vendor offered the specific type of trailer the Government needed via an FSS contract. The Government then issued an FSS request seeking quotes for those trailers. After the closing date for the receipt of quotes, the Government permitted the contractor to add the trailers of the type the Government needed to the contractor's FSS contract. At that point, the Government awarded the order to the contractor. The Court determined that this procedure was improper and amounted to "targeted pre-selection of contractors outside the FSS system, which is inconsistent with the FSS system, as well as the general goals of fair and open competition espoused in" Government procurement laws. The Court ultimately denied the protest, however, because the protester had failed to establish that it would have been in line for award if the Government had handled the procurement properly.

This case illustrates why it is generally better for Government procurement personnel to conduct competitive procurements even where the agency has a particular vendor it believes will be the best or only vendor to respond to a solicitation. In this case, even though the Government issued an RFQ on which anyone, ostensibly, could compete, the Court criticized this procedure as a de facto sole-source award in light of the surrounding circumstances. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Joelle E.K. Laszlo.

Though April 15 will not be tax day this year, it may still be scary for some. According to an interim rule published last week in the Federal Register, April 15 is the day that information in the Federal Awardee Performance and Integrity Information System (“FAPIIS”) will be made available to the public, pursuant to the 2010 Supplemental Appropriations Act. While the interim rule assures that contractor past performance reviews will not be among the information available on FAPIIS, and that certain documents may require redaction before they are posted for public access, contractors wanting a say in what the public ultimately gets to see on FAPIIS are advised to speak now (or at least by the end of March).

Aside from announcing the date that FAPIIS will go live, the interim rule establishes a new Federal Acquisition Regulation (“FAR”) contract clause to provide notice of the public availability of certain data in FAPIIS. The new FAR clause is to have been included in all solicitations and contracts issued on or after January 24, 2011. The interim rule also instructs contracting officers to bilaterally modify any existing contracts to include the new FAR clause. Finally, the interim rule notes that the public must use the procedures under the Freedom of Information Act (“FOIA”) to request access to information posted to FAPIIS before April 15, 2011 (though under the new FAR clause some that information must be re-posted, and will thus become publicly available).

As we previously reported, FAPIIS brings together the information from a number of Federal databases and records on contractor performance. Specific details that will be publicly available through FAPIIS include: contract terminations for default; contractor suspension, debarment, and other penalties; contract-related criminal, civil, and administrative proceedings and their outcomes; and contractor non-responsibility determinations. A provision in the 2011 Defense Authorization Act requires contracting officers to report contractor violations of bribery laws in FAPIIS, which may also be among the publicly available details. (Contrary to some reports, however, the 2011 Act does not appear to require FAPIIS reporting of any reduction in contractor profits due to reckless or negligent behavior.)

To the chagrin of transparency advocates, the interim rule advises contracting officers to ensure that no information is posted to FAPIIS “that would create a harm protected by a disclosure exemption under FOIA,” and invites comments on regulatory or other guidance required as the data on FAPIIS becomes publicly available. In order to be considered in the formulation of the final FAPIIS rule, all comments are due on or before March 25th.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos and Steven D. Tibbets.

On December 3, 2010, the U.S. Department of Defense (“DoD”), issued a proposed rule that, if finalized, will increase the DoD Federal Acquisition Regulation Supplement’s (“DFARS”) requirements for contractors’ business systems. The proposed rule defines what constitutes a deficient business system and provides for withholding of payments when deficiencies are identified. Generally, the proposed rule would apply to contractors performing DoD contracts that either: (a) are worth $50 million or more; or (b) are awarded on the basis of cost and pricing data and meet certain dollar value thresholds.

We first reported on this effort approximately a year ago, when the DoD published its initial draft of the proposed rule. We noted that the rule’s definitions regarding what constituted a deficient business system seemed vague and that the DoD’s application of those definitions could be unpredictable. In its revised proposed rule, DoD removed “phrases such as ‘including but not limited to’ and ‘as applicable’” from a list of compliance criteria, but otherwise did not find that the definitions in the proposed rule presented a risk of subjective and inconsistent application of criteria in determining whether business systems are deficient.

Otherwise, the proposed rule provides for a system under which Government auditors will review contractor business systems for DoD contracts over certain dollar thresholds – different thresholds apply to different business systems. Where the Government makes a preliminary finding that deficiency exists, the proposed rule allows the contractor 30 days to respond, after which the Government will review the responses and make a final determination regarding whether a business system is deficient. The consequence for a deficiency under the proposed rule is that a contracting officer is to withhold 5% of payment under a contract until the Government receives a corrective action plan. Upon receipt of a plan, the contracting officer may, but is not required to, reduce the withholding to 2%. The contracting officer may not terminate the withholding until the contractor has implemented its corrective action plan. Thus, the proposed rule’s penalty provisions can harm a contractor’s cash flow position until any deficiencies are corrected.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• Just once I'd like a "pilot" program to be about Top Gun. This SBA program isn't, but it will help small businesses compete for large contracts.
• Ezra Klein takes a look at what it means to be pro-labor during these economic times.
• Here at the Round-Up we love all things in summary form -- so head over to the exportlawblog's update of the Iran sanctions.
• The FCPA Professor temporally moved his classroom to the Hill. Find out what the Professor taught Senator Specter.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• *Attention* government contracts attorneys: If your friends and loved ones stare blankly at you when you explain what it is you do, it turns out they are not the only ones who are confused. Check out this amusing breakdown of confused experts.
• New Year, new Congress, new rumblings about government fraud . An attorney involved in civil suits against the company formerly known as Blackwater is calling for the federal government to pursue cases involving allegedly corrupt defense contractors.
• Can't find time in your busy schedule to visit your grandparents? No problem, they may be coming to a work place near you.
• The Round-Up would like to wish a belated happy 33rd to the FCPA. One of our favorite FCPA commentators, the FCPA Professor has penned a worth-reading birthday announcement.
• Washington Technology peers through its crystal ball and forecasts how companies in the federal markets can continue to grow in 2011.
• If you saw the New York Times articles about OFAC, you may be wondering how Treasury decided to respond. By blog, of course.
• If you have not been paying attention to Sudan, now is the time to start. As the referendum concerning the unification of the country gets underway, the Guardian lets you catch up in a hurry.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• It seems that the business sector finds the requirements of regulatory compliance to be burdensome. Who knew?
• Ezra Klein gets two-thirds of the way to a Clint Eastwood analysis of the financial commission's final report. Make sure to check out his summary before Friday's vote.
• I've stressed the importance of the Davis Bacon Act on these pages before. In case you thought I was kidding, I'm not: check our Mike Purdy's blog for a reminder of the importance.
• Ineffective assistance of counsel. Need I say more? Read it.
• I know there's a clever line in here about students becoming the teacher or vice versa, but it isn't coming to me. Check out Dick Cassin's piece at thebriberyact.com on what the UK can learn from the FCPA.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by James P. Gallatin, Jr. and Lorraine M. Campos.

With more than 50 years of combined experience in Federal Supply Schedule (“FSS”) contracting, we have negotiated, administered, reviewed, investigated, litigated, and testified as experts about FSS contracts. Today’s FSS contracts can last up to 20 years. It’s difficult enough to look back over the prior 10 years of a contract life and try to determine what the parties meant and understood when it all began. But a 20-year lookback is a challenge of biblical proportions given the “virtually unintelligible” requirements of the Commercial Sales Practices (“CSP”) and Price Reductions Clause (“PRC”) provisions.

Having seen the same issues over and over, we realized that to practice in this area, one needs a set of moral imperatives, perhaps even a set of commandments, to guide them. And while we haven’t seen Moses, we have spent much more than 40 days and nights with GSA and VA Contracting Officers, Administrators, Auditors, and IGs. With that experience and a handy set of stone tools, we offer these commandments as a “moral foundation” for others venturing into the desert to contract by.

Thus, we present our Ten Commandments of FSS Contracting.
 

Disclose it all. Disclose it in narrative form. Disclose all of the company’s commercial pricing, including discounts, concessions and rebates. Disclose Black Friday, blue-light, end-of-year, buy-one-get-one, and just-because-it’s-Tuesday specials. We don’t care what the deal is called – just disclose it.

Explain how the company’s current commercial sales and pricing models work. This is especially true if the current models do not fit the solicitation requirements. Do not try to make the company’s pricing “fit” the CSP chart. Rather, draft your own CSP to paint an accurate portrayal of the company’s pricing practices. Remember, the CSP solicitation asks for a discount off of a price list. If your company’s pricing uses a gross margin build-up off of a factor of cost, then explain that and base your proposed pricing on that model.

Every exchange of data, in any form, including supporting data, should be contemporaneously and fully documented.

Keep copies of everything in Commandment III – Everything. Forever. Period.

An FSS contract requires contractors to negotiate a Customer of Comparability (“CoC”), also known as Tracking Customer or Basis of Award Customer. Generally speaking, “all commercial customers” is not a sound CoC. Keep in mind that while you are required to disclose all your commercial pricing, you are not required to provide the government with the best pricing you offer to any customer – just the best pricing offered to any comparable customer.

We have seen award letters that contain incomplete sentences, random extra punctuation, differences from page to page in the description, and contradictions in attached charts – in short, incomprehensible award letters. Read the award letter and all documents incorporated by reference out loud and ask someone unfamiliar with the negotiations to read the letter. If the letter doesn’t make sense to you, and especially to the other reader, clarify the ambiguities.

Things change – pricing, commercial sales practices, place of manufacturer, administrators, company headquarters can easily fluctuate. Nothing is worse than receiving a subpoena for not responding to three audit notices because they were sent to and sitting on the empty desk of the contract administrator who left the company seven years ago.

Assigning administration of the FSS contract to a salesperson as a penalty for not closing a deal (yes, we’ve seen that), to a finance person temporarily in between audits (been there), or to another distracted and temporary resource (uh huh), is certainly a tried-and-true formula for disaster.

The Trade Agreements Act (“TAA”) is applicable to all FSS contracts. In accordance with the TAA, only U.S.-made or designated country end-products shall be offered and sold under FSS contracts. Manufacturers change manufacturing locations regularly. So does the list of designated countries change, parts are added and removed from the FSS contract. For those reasons, someone in the company needs to understand not only these requirements, but also the sourcing of your company’s products under the FSS Contract to ensure TAA compliance.

There are special requirements for invoicing the government. Is there a negotiated discount if invoices are promptly paid by the government? Are open-market associated items offered as part of the FSS order? If so, you better notify the purchaser via your invoice.

And thus we impart our Ten Commandments of FSS contracting. Since we also want to impart our exhaustive knowledge of each of them, in the coming 10 weeks we will tackle each revelation in depth and provide guidance to live by (or at least to contract by). After all, at Reed Smith, we don’t just give you fish – we teach you how to fish.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I bet you think pretty highly of yourself. I know I do … come on, I’m a lawyer! (Please insert stereotypical lawyer joke here – put a good one in the comments if you dare). From time to time, I’m “gently” reminded that not all of my accomplishments are oh-so noteworthy. As my brother used to say after I would regale him with some of my more humdrum endeavors: “what do you want, a cookie?” It looks like I’m not the one in search of a cookie.

As the great state of Wisconsin bids farewell to Russ Feingold, the rest of us begin to say goodbye to the legislation he is most known for.

When I think of auditors, the first thing I think of (after the Grim Reaper) is efficiency. So why then is the Defense Contract Audit Agency amending its procedures in a way that “could expose the government to massive overcharges by prime contractors?”

Interested in potentially saving millions of dollars? Yep, I thought so. Now lets play: Follow the Blogosphere Link Machine. This post is my reference to the FCPA Blog’s reference to an article written by Andrew Weissmann and Alixandra Smith discussing the potential for substantive FCPA revision.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Joelle E.K. Laszlo.

“Efficiency” and “transparency” are on the lips of many government regulatory types these days. Along these lines, the FAR Council has proposed a process for determining whether the President may waive in a particular circumstance the standing prohibition in FAR section 25.702 on doing business with entities that conduct certain types of business in Sudan. That section prohibits Federal contracting with entities that engage in “restricted business operations” as defined in the Sudan Accountability and Divestment Act of 2007, including activities related to power production, mineral extraction, oil, and the production of military equipment. While the section permits the President to waive the prohibition on a case-by-case basis, the FAR contains no criteria to govern the section 25.702 waiver process. The FAR Council’s recently-proposed amendments aim to change this situation, by establishing greater consistency in the process.

To bring about this consistency, the amendments would make two specific changes: first, they would establish the particular information an agency must provide when requesting a section 25.702 waiver; second, they would institute a formal process for reviewing agency waiver requests. In addition to requiring pieces of data one would expect (i.e., the agency’s and contracting entity’s names, complete addresses, and points of contact), the proposed amendments would require an agency seeking a waiver to provide market research-supported justification for contracting with the proposed entity, assurances that is it “in the national interest” to grant the waiver, and details on “humanitarian efforts engaged in by the [entity], the human rights impact of doing business with the [entity] for which the waiver is requested, and the extent of the [entity’s] business operations in Sudan,” including its relationship to other entitles that conduct prohibited business operations in the country. Under the proposed amendments, after being reviewed and cleared by the head of the requesting agency, these details would be forwarded to the Administrator of the Office of Federal Procurement Policy, which would consult with the President’s National Security Council, Office of African Affairs, and the Department of State Sudan Office and Sanctions Office, in reviewing the waiver request.

The Sudan Accountability and Divestment Act of 2007 is one of a composite of regulations and statutes addressing the activities of U.S. persons and business in Sudan and/or with Sudanese nationals. Importantly, the “restricted business operations” designated in the Act, and the actions prohibited under the Sudanese Sanctions Regulations, at 31 C.F.R. Part 538, will remain just as restricted and prohibited as they currently are, even if the proposed FAR amendments are adopted as drafted. Parties interested in commenting on the proposed FAR amendments may do so until December 6.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Joelle E. K. Laszlo.

Inflation is good for some things, including increasing the acquisition-related thresholds in the Federal Acquisition Regulation (“FAR”). Inflation-pegged adjustments to the FAR thresholds were initiated by the Ronald W. Reagan National Defense Authorization Act of 2005, and are required every five years thereafter. The most recent adjustments, which took effect on October 1st, increase a number of thresholds, including the following “heavily used” figures:

• The simplified acquisition threshold, which sets the bar below which the simplified acquisition procedures in FAR Part 13 may be used, is now $150,000.
• The ceiling for the commercial items test program (described in FAR Subpart 13.5), under which simplified acquisition procedures may be used if a contracting officer reasonably expects offers to include only commercial items, is now $6.5 million.
• The cost or pricing data threshold is now $700,000, meaning that a contracting officer must obtain cost or pricing data before awarding any negotiated contract or subcontract, or modifying a contract, unless one of the exceptions in FAR § 15.403-1(b) applies.
• The prime contractor subcontracting plan floor described in FAR § 19.702 is now $650,000, meaning that the bidder in a sealed-bid acquisition selected for award of a contract (or contract modification) expected to exceed this amount must submit a subcontracting plan to the contracting officer within a specified time, or risk being found ineligible for the award.
• The threshold in FAR § 19.702 applicable to construction contracts is now $1.5 million.

The micro-purchase threshold, which sets the bar at and below which commercial purchase cards and other less restrictive procedures described in FAR Subpart 13.3 may be used, remains unchanged at $3,000. Also unchanged is the requirement under FAR Part 5 that notice of contract actions above $25,000 must be posted on FedBizOpps.gov.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

After the roaring success of the first Round-up (remember when I gave it the cool nickname) we are back for round two. Here is a quick jog around the regulated legal world.

• Have you ever known a professor who didn't love golf? I didn't think so. Have you ever been able to get a lawyer to stop talking about the law? Don't lie to me, its rude. It was going to happen sooner or later, but I'm hoping this one sticks around -- ladies and gentlemen, for your tee time banter: The FCPA Mulligan Rule.
• I hope you got all of your "Congress never does anything" jokes out of your system. These Lame Ducks could cost you a fortune.
• 10 years ago the thought of having two employers would have meant that I had: 1) two small paychecks, 2) a couple of lousy jobs, and 3) at least one terrible middle manager to report to. I'd much rather be a federal contractor in this day and age, where having joint employers means there are more people to sue.
• If you sit real still, watch closely, and are willing to have less fun than bird watching, you can witness the birth of the proxy advisor industry.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Peterson.

The government contracts community has long debated what steps, if any, the federal government should take to help women-owned small businesses break through the glass ceiling (or get off the sticky floor). Taking one of the last steps in a process that began in 2000, on October 7, 2010, the Small Business Administration (“SBA”) filed a final rule creating the Women’s Contracting Rule. The final rule establishes a procurement program for women-owned small businesses (“WOSBs”) in 83 industries where they are underrepresented. Under the WOSB Federal Contract Program (“WOSDFCP”), qualified WOSBs will be eligible for set-asides with respect to federal contracts of less than $5 million for manufacturing and less than $3 million for other goods and services.

Launching the overdue womens’ procurement program was a top priority for the Obama Administration.  In March of this year, taking into consideration various market analyses, draft rules, and public comments, SBA “started from scratch” and crafted a completely new rule. The end result is a program designed to achieve the statutory goal of awarding 5 percent of federal contracts to WOSBs.

To qualify for an award under the WOSBFCP, a small business must be 51 percent owned, controlled, and primarily managed by one or more women who are U.S. citizens. Further, WOSBs must self-certify their status or be certified by a qualified third-party.

Although the final rule is not scheduled to take effect until February 4, 2011, SBA and the Federal Acquisition Regulation Council have prepared for its success by implementing the rule in the Federal Acquisition Regulation and other federal procurement rules. Those interested in learning more about the WOSBFCP should visit the SBA’s website, www.sba.gov, for more details on the final rule and guidance on compliance with its provisions.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Michael A. Grant.

Hello good-looking regulatory attorneys. Welcome to the first installment of the Regulatory Round-up (catchy, I know). If you are reading this post, odds are someone in an office larger than yours is wondering why you aren't working -- but I'm glad you stopped by. The goal of this weekly installment will be to connect you to stories from around the blogosphere that impact those of us practicing in regulated industries. While the primary focus of the Round-up (look, I already gave it a trendy nickname) will be the 7 topics to the left, I'll be sure to mix in other stories that catch the eye. Here's hoping you see something new, have a laugh, or at least get some legitimate "professional reading" time.

• State and local agencies, you remember Davis-Bacon right? You met at that government contracting convention in Hawaii? You remember … the tiki torches, the pig roast, the Pacific breeze, and non sequiturs about the FAR … but I digress. Looks like you might want to spend some time getting reacquainted; after all, federally funded construction projects must comply with the prevailing wage requirements.
• Tax the bad or fund the good? Ezra Klein discusses differing approaches to combating climate change.
• Who’s left to review the competitive effects of this merger? (or) Why its better to regulate than be regulated. The Competition Law Blog breaks down the proposed merger of the Office of Fair Trading and the Competition Commission.
• You know that feeling you get when you think your banker is stealing from you? You may be on to something.
• I always liked the expression “a license to print money.” Securency International is in the businesses of printing other peoples money, so why are their businesses and homes being raided?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• TRICARE Final Rule for the inclusion of the TRICARE Retail Pharmacy Program in the Federal Procurement of Pharmaceuticals
• Integrating TRRx utilization in the FCP calculation
   

DATE: Thursday, October 21st, 2010
TIME: 2:00 - 3:15 PM EDT
REGISTRATION: https://www1.gotomeeting.com/register/292046224

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Andrew C. Bernasconi and Nathan R. Fennessy.

After Congress and the courts have spent the past few years making it easier for private citizens acting in the name of the government (also known as "qui tam relators") and the government to maintain False Claims Act ("FCA") cases, and eliminating many of the defenses for FCA defendants to dismiss frivolous claims, a recent appellate decision provides a level of comfort to parties defending against allegations of FCA violations that are initiated by qui tam relators. The decision from a three-judge panel of the United States Court of Appeals for the Sixth Circuit, in the matter of United States ex rel. Summers v. LHC Group, No. 09-5883 (October 4, 2010), provides additional support for defendants seeking dismissal of FCA allegations where qui tam relators fail to comply with the FCA's statutory requirements (which include filing the initial qui tam complaint in camera and under seal, see 31 U.S.C. § 3730(b)(2)).

The Sixth Circuit panel held that violations of the FCA’s unique procedural requirements can preclude relators from maintaining actions on behalf of the government. Specifically, the Sixth Circuit panel affirmed dismissal of a relator’s FCA allegations because the relator failed to file the complaint in camera and under seal, as required by the FCA. While several courts across the country (including the U.S. Court of Appeals for the Ninth Circuit) previously have limited the opportunities for defendants to obtain dismissal in such circumstances, the Sixth Circuit expressly declined to follow the clumsy balancing tests employed by these courts. Instead, the Sixth Circuit concluded that the statutory procedures governing qui tam complaints are clear, and that Congress did not intend to allow exceptions to the procedures except as expressly set forth in the statute.

This decision provides strong support for FCA defendants to seek dismissal of qui tam complaints where the relator failed to follow the statutory requirements of filing the initial complaint under seal, or otherwise disclosed the complaint’s allegations while the matter remained under seal and subject to the government's investigation. Although the government can still pursue FCA allegations against a defendant in its own right, the Summers decision serves as a strong basis for defendants to support dismissal where the relator has ignored the statute's plain requirements, and where the government declines to pursue the case.  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos and Joelle E.K. Laszlo.

Federal grant awardees are about to join contractors in the transparent government revolution. Beginning in November, awardees of prime grants valued at $25,000 or more may be required to report certain executive compensation information about themselves and their subgrantees. The new reporting requirements, established under the Federal Funding Accountability and Transparency Act (“FFATA”), were greeted with open hostility at a recent Office of Management and Budget (“OMB”) Town Hall meeting. Not enough hostility to prevent them from taking effect, however, so prospective grant recipients should take note.

The new grantee reporting requirements are similar to those placed on contractors by the FFATA, about which we reported in August. Unlike the contractor reporting requirements, however, the grantee requirements will not be “phased in” over time. Rather, any new grant of $25,000 or more awarded as of October 1, 2010 will require reporting two types of information. First, the name and total compensation of each of the prime grantee’s five top executives must be reported if the prime grantee (A) receives more than 80 percent of its annual gross revenues from the federal government, which revenues exceed $25 million annually, and (B) does not already report its executive compensation through the Securities and Exchange Commission. Second, without exception, a prime grantee must report specific data about all first-tier subgrants it awards that are valued at $25,000 or more. That data includes the name of the subgrantee and the amount and purpose of the award, the subgrantee’s location and the place of grant performance (including the congressional district), and the award’s Catalog of Federal Domestic Assistance program number and program source. Additionally, if a first-tier subgrantee meets the conditions for reporting executive compensation of grantees (items (A) and (B) above), the grantee must report the name and total compensation of each of the subgrantee’s five top executives.
Possibly in an effort to take some of the sting out of the reporting requirement, OMB officials presenting at the Town Hall stressed that grant reporting under the FFATA only needs to happen once – there is no continuing reporting requirement. A prime grantee will have until the end of the month following the month of obligation of a grant or first-tier subgrant subject to the reporting requirements, to report related executive compensation and/or subgrant information. Thus, for example, reporting related to a grant awarded October 1, 2010 and subject to the FFATA requirements must be completed by November 30, 2010.

As with contractor reporting under the FFATA, grantee reporting will take place though the FFATA Subaward Reporting System (“FSRS”), at www.fsrs.gov. While FSRS is currently open for contractor reporting, the site’s grant reporting functionality will not be available until October 29. FSRS has been programmed to receive data through the Central Contractor Registration database, www.ccr.gov, in which all prime contractors and grantees (but not subcontractors or subawardees) are required to register.

On October 7, OMB held the first of two planned webinars for grantees on how to use FSRS. Those wishing to receive updates on training and other developments related to FFATA reporting are encouraged to register at USASpending.gov. Those wishing the reporting requirements will go away are advised to keep wishing (and learn how to use FSRS in the meantime).  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Leslie A. Peterson.

The Small Business Jobs Act of 2010 (“the Act”), signed by President Obama on September 27, 2010, quashed the argument that Historically Underutilized Business Zone (“HUBZone”) small businesses are entitled to absolute contracting priority. Section 1347 of the Act establishes parity among the Small Business Administration’s (“SBA”) various small business contracting programs. Passage of the Act eliminates the requirement that contracting officers must first check for eligible HUBZone companies to perform work before looking to other types of small businesses.

Contracting officer discretion to treat the SBA’s programs equally when awarding set-asides had been heavily debated after recent decisions from the Government Accountability Office and the U.S. Court of Federal Claims established a preference for HUBZone small businesses. In Mission Critical Solutions v. U.S., the Court of Federal Claims held that the Small Business Act requires contract opportunities to be set aside for HUBZone firms whenever two HUBZone firms are available to perform the contract. The court based its decision on the use of the word “shall” to describe contracting officer requirements with regard to awarding HUBZone set-asides. Under the court’s interpretation of the language, HUBZone small businesses were to get first preference over other categories of small business programs, such as minority-owned businesses and veteran-owned businesses.

The new Act eliminates preferential treatment for the HUBZone program by changing the language of the Small Business Act from "shall" to "may," to mirror the language used to describe contracting officer requirements with regard to other SBA programs. As a result, contracting officers are no longer required to give preference to HUBZone firms and are able choose which small business contracting program to utilize when making set-asides.

The attorneys at Reed Smith will continue to monitor any developments associated with the Small Business Jobs Act of 2010.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher L. Rissetto, Lorraine M. Campos and Robert Helland.

The Public Policy and Infrastructure Practice continues to monitor the changes in the campaign finance world since the Supreme Court's landmark decision in Citizens United v. Federal Election Commission. Citizens United reverses decades of statutory and case law that prohibit corporations from using their general treasuries to fund independent political advertising supporting or opposing candidates for local, state or federal office, or what it is termed "express advocacy". 558 U.S. 50 (2010). It also removes restrictions on independent advertising released within close proximity to either a primary or general election and which refer to a clearly identified candidate for federal office (known as “electioneering”). This decision has been the equivalent of an earthquake in the campaign finance world, however, it does not provide corporations and labor unions with unlimited leeway when it comes to funding political advertisements. The attached alert from the Public Policy and Infrastructure Practice discusses one limitation that remains in place, post-Citizens United, which affects "coordinated communications" i.e. those coordinated with a federal candidate, campaign, or political party. Contributions that are coordinated with a federal candidate, campaign or political party are considered a direct, in-kind contribution and remain illegal in the case of corporations or labor unions, even with the Court's decision in Citizens United. 2 U.S.C. § 441b (a).

The Federal Election Commission has issued revised regulations as to what constitutes a "coordinated communication". These rules will take effect on December 1, 2010. The alert discusses these rules and what steps can be taken to ensure that a communication is truly independent.
 

To view the entire alert click here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post is written by James P. Gallatin, Jr. and Lorraine M. Campos

Being a Contracting Officer may be the most thankless job in government. Let’s just say it, it IS the most thankless job, period.

Unfortunately, the government acquisition personnel are often overworked and understaffed. Earlier this year, Peter Orzag, the former OMB Director, stated that while there is more than $500 billion in federal contracts, and while those contracts have doubled in size over the past eight to nine years, the acquisition workforce has generally remained constant. So there is an ever-increasing workload; responsibility for billions of dollars in purchases from sophisticated and highly aggressive commercial vendors across a staggering variety of industries; compensation far below private sector peers; constant scrutiny by their agency personnel, auditors, and Inspectors General; regular second-guessing or simple overruling by senior management; mocking by congressional representatives and senators as incompetent – what’s not to like?

But wait . . . there’s more. The thanklessness of being a Contracting Officer is further highlighted by the erosion of independence definitively described in "The Incredible Shrinking Contracting Officer" by John S. Pachter in the Public Contract Law Journal, Vo. 39, No. 4 Summer 2010. Every government acquisition professional should read this piece – and be prepared to be depressed. (It’s not pretty reading for the contractor community either.) And we haven’t even talked about the emerging and disturbing trend toward OIG investigations of Contracting Officers when an auditor cannot locate the acquisition file, even though the contract file may be a decade old and may have been transferred to other procurement personnel.

We are not addressing the “nonprofessionals” we have encountered who have never read the $400 million contract they administered for 10 years; nor are we talking to those who have made no attempt to understand what they are signing, leaving the rest of us to clean up the resulting messes years in the future. They are a lost cause. We are talking about the “professionals” – people intent on doing a professional job, with all the authority, few of the proper tools, and a whole lot of negative reinforcement. No wonder so many talented professionals forthrightly head to private industry at the first opportunity.

But the simple fact is that those of us in the private sector who work with Contracting Officers share the challenges they face. It does us no good to abuse the pressure or lack of resources to strike a tough deal or ram through a poorly crafted contract. Both sides will address the consequences at some point in the future, and the government has unlimited money, time, and lawyers. This challenge has only one professional and productive response, a response that furthers private industry and the taxpayers’ interests: Support Contracting Offices and their fellow acquisition professionals in their work.

It isn’t rocket science, people. It’s the basics. Make sure your Contracting Officer understands what you are selling and how you sell it. Don’t hide the ball. When in doubt disclose – disclose in writing. Document everything and keep the documents for at least the term of the audit-rights under the contract. Make sure the contract is clearly written, reflects the business deal, makes sense in your industry, and includes all the relevant documents. Read what you sign before you sign it. Read it again. Explain it to someone else. Then sign it. And save a copy of the awarded contract and all pertinent correspondence.

Where and when ethically permitted, get to know your key acquisition professionals. Understand their workloads and priorities. Understand the outside pressures they have to deal with, whether meddling management, hyper-aggressive auditors, or the wonderful benefits of congressional oversight. Make sure they understand not only your workload and priorities, but also your industry and issues. Go to their industry days and make sure they have other ethically appropriate but effective means to how your business sector works.

Contracting Officers’ roles will likely remain a frustrating mix of critical importance, limited support, and lots of intervention by third parties. Private industry has no choice but to do a better job on its end of supporting Contracting Officers in creating reasonable, defensible contracts. So yes, we end with this plea – Support your Contracting Officer.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Articles In This Issue:

• Protest, Claim, or Both? Taking Advantage of Dual Jurisdiction in the U.S. Court of Federal Claims
• Cloud Computing – The Risks and Rewards for Federal Government Contractors
• New Government Contractor Reporting Requirements on Subcontracts and Compensation
• U.S.–Canada Trade Agreement Suggests Increased Cross-Border Opportunities with Regard to Public Projects

Click here to download the full issue.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Camposand Keith D. Coleman.

On September 15, 2010, the House unanimously passed H.R. 5366, referred to as the “Overseas Contractor Reform Act (the “Act”)”. The Act would amend federal law to require that any individual, partnership, or corporation found to be in violation of the Foreign Corrupt Practices Act of 1977 (“FCPA”) be proposed for debarment from any federal contract or grant within 30 days after final judgment of such violation. The FCPA is a law that prohibits bribery of foreign officials by U.S. or related companies. The Act declares that it is the policy of the U.S. Government that no contract or grant should be awarded to individuals or companies that violate the FCPA. Promulgation of the Act is said to be in reaction to media reports last year that a private security contractor allegedly authorized illegal payments to Iraqi officials to prevent Iraq from revoking the company’s license to operate in the country.

In analyzing the Act, one must first consider whether the provisions of the Act are necessary. The current regulations provide that conviction of a criminal offense, like the FCPA, is cause for debarment. See FAR 9.406-2(a)(1). Moreover, a separate cause for debarment exists for firms and individuals who are convicted of committing bribery. See FAR 9.406-2(a)(3). Therefore, the Act does not grant the Government with any additional authority. However, because FCPA actions are oftentimes resolved by execution of a non-prosecution agreement (“NPA”) or deferred prosecution agreement (“DPA”), contractors must be aware of the consequences of the Act when negotiating such agreements. Specifically, contractors must ensure that the negotiated NPA or DPA does not expressly required the company to admit to violating the FCPA or committing bribery.

The Act is currently being considered by the Senate. Reed Smith will continue to keep you posted on the progress of this legislation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Joelle Laszlo.

In a twist lauded by proponents of government transparency, the 2010 Supplemental Appropriations Act (“Act”) signed by President Obama July 29, 2010, requires that nearly all of the information contained in the Federal Awardee Performance and Integrity Information System (“FAPIIS”) be made available on the Internet. Specifically, the Act amends the Clean Contracting Act of 2008 to provide that the General Services Administration (“GSA”) will post to the Web all FAPIIS data except contractor past performance reviews. The Act provides no deadline for GSA action in this regard, but the Office of Management and Budget, which oversees GSA’s administration of FAPIIS, is reportedly hard at work on the logistics of posting FAPIIS information on the Internet.

In May, Reed Smith provided details on the FAPIIS reporting requirements promulgated in the spring by the Federal Acquisition Regulation Council. Essentially, FAPIIS is to contain a comprehensive set of information regarding contractor performance, including contract terminations for default; contractor suspension, debarment, and other penalties; and contract-related criminal, civil, and administrative proceedings and their outcomes. Though contractors have the opportunity to comment on any of the information about them in FAPIIS, the public disclosure of nearly all FAPIIS data may leave some ill at ease. It is yet another reason contractors would be well advised to ensure their houses (and reports) are in order, before competitors, watchdogs, and the media come knocking.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Stephanie Giese.

The passage of the Weapon Systems Acquisition Reform Act of 2009 (“WSARA”) signed into Public Law 111-23 on May 22, 2009, and most notably the Organizational Conflict of Interest (“OCI”) provisions of the WSARA, arguably marks the start of the Congress' tear to reform Department of Defense (“DoD”) contracting.  The reforms required by the WSARA OCI provisions alone have kicked off a restructuring of the defense industry, beginning with major weapon system developers like Northrop Grumman and Lockheed Martin selling their Systems Engineering and Technical Assistance business units – even before DoD promulgates the new OCI regulations implementing the WSARA, which are expected in the fourth quarter of 2010.

Congress’ reform theme is now being carried over to other aspects of DoD contracting in the 2011 National Defense Authorization Act (“2011 NDAA”).  Given the potential dramatic effect of past reforms mandated by the WSARA, defense contractors should understand the impacts of both the House (H.R. 5136) and Senate (S. 3454) versions of the 2011 NDAA, as well as plan to participate in the DoD rulemaking process that will ultimately implement many of the 2011 NDAA reforms.
Here are some of Congress’ latest proposed reforms for defense contractors to watch in the House and Senate versions of the 2011 NDAA:

• Contractor’s beware—the government may obtain “unlimited rights” to certain contractor technical data developed a private expense.  Among other changes related to technical data, the Senate proposes granting the government unlimited rights in technical data developed “without significant contribution by a contractor or subcontractor”.  “Without significant contribution” is not defined in the bill, but this proposed change would certainly expand the government’s unlimited rights to certain data funded, in part, at the contractor’s expense.
• Reform regarding government review of contractor business systems may increase compliance costs and delay payments to contractors.  For contractors subject to the Cost Accounting Standards, the Senate proposes that a “significant defect” in a contractor’s business system, which is one that undermines the reliability of the data produced by that system, is grounds for the DoD to withhold up to 10% of payments due to a contractor.  Business systems that may be reviewed by DoD include accounting systems, estimating systems, purchasing systems, earned value management systems, material management and accounting systems, and property management systems.
• DoD evaluation of contractor proposals may be limited to “best cost” to the government rather than “best value” to the government in the future.  The House proposes modifying current law to require DoD to weight cost or price at least equal to or greater than all other evaluation criteria in a government competitive source selection.  This would severely limit the DoD’s ability to conduct a best value evaluation of contractor proposals, including for procurements where contractor innovation is required such as in research and development contracts, and would essentially require the DoD to award to the lowest priced offeror for all its procurements.
• Due process lacking for defense contractors and subcontractors that supply cybersecurity products and services, information technology, and national security systems to the DoD.  Such DoD contractors should be aware that, in the name of reducing supply chain risk, the Senate intends to grant the head of a procuring agency, on the basis of a joint recommendation by the Director of the Defense Intelligence Agency and the Assistant Secretary of Defense for Networks and Information Integration, the authority to exclude a particular source from competing for a DoD contract on grounds that the supplier presents an unacceptable supply chain risk.  The bill does not require the DoD to allow the supplier to mitigate the risk before excluding the supplier.  For additional discussion of current cybersecurity issues facing DoD, please see the Reed Smith article, “Cloud Computing—The Key Risks and Rewards for Federal Government Contractors.”
• The U.S. space industrial base may get a boost from additional federal government investment.  The Senate proposes requiring the Secretary of Defense, in consultation with the National Aeronautics and Space Administration (“NASA”), to take steps to preserve the industrial base for liquid rocket propulsion systems and solid rocket motors. I n addition, the House proposes directing the Secretary of Defense and the Director of National Intelligence to jointly establish a national security space architecture to guide and coordinate each agency’s long-term investment in the space industrial base.
• Reminder that defense contractors, with the exception of weapon system developers, may soon be required to go “green” to compete for DoD contracts.  As currently drafted, the Senate bill requires DoD to report its progress to Congress in complying with Executive Order 13514 of October 5, 2009 which requires the head of a procuring agency to “advance sustainable acquisition to ensure that 95 percent of new contract actions including task and delivery orders, for products and services with the exception of acquisition of weapon systems, are energy-efficient (Energy Star or Federal Energy Management Program (FEMP) designated), water-efficient, biobased, environmentally preferable (e.g., Electronic Product Environmental Assessment Tool (EPEAT) certified), non-ozone depleting, contain recycled content, or are non-toxic or less toxic alternatives, where such products and services meet agency performance requirements.”

Industry’s Acquisition Reform Working Group provided its recommendations and concerns regarding the 2011 NDAA to the House and Senate Armed Services Committees on July 28, 2010.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This alert was written by Edward Miller, Eugene Tillman, Cynthia O’Donoghue, and Leon Stephenson.

The arrival of the new UK Coalition Government has brought with it proposals to reform the health care system in the UK over the next four years, detailed in its much publicized White Paper “Equity and excellence: Liberating the NHS”.

The stated objectives are ambitious and if instituted will have a far reaching effect on both the way the British public access the health system and the role of the private sector in UK health care. Although the White Paper does not go so far as to indicate that privatization of the NHS as such is being considered, the Government’s tone is bold in as much as it advocates public choice and recognizes that resultant competition must include third party private providers.

The key themes of the White Paper are based on choice for the patient, flexibility for the commissioning consortia, encouraging competition and social enterprise. This, within an ambitious four year timetable, indicates that there will be room for unprecedented private, for profit and non-profit and third sector involvement in the reform of the UK health care system.

To view the entire alert, please click here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine Campos and Steve Tibbets.

“Major systems” are the lifeblood of large defense contractors.  The long-term development and implementation of big and expensive programs – think fighter jets – are the foundation of many contractors’ business plans.  Generally, contractors that design systems, buildings, or vehicles for the Government are not supposed to compete for follow-on contracts to build those items because they could skew specifications to favor themselves.  Current regulations permit OCI “mitigation” plans where the building or implementing parts of the company are isolated from the design parts.

On July 20, 2010, the American Bar Association (“ABA”) Section of Public Contract Law (“Section”) submitted its comments on a major proposed rule on Organizational Conflicts of Interest (“OCIs”) published by the U.S. Department of Defense (“DOD”) in April 2010.  The proposed rule would significantly curtail the ability of large defense contractors to handle procurements of major defense systems in a “cradle to grave” manner.  The proposed rule would, if finalized, place stricter limits on contractors’ ability to work on both the design or development phases of a large procurements and the implementation or manufacturing phases of the same procurement.

The proposed rule would reduce the extent to which contractors can rely on mitigation plans.  The Section argues that this will reduce competition because contractors will avoid certain portions of procurements so they are not “conflicted out of” other parts of those procurements.  As a practical matter, contractors for the DOD will have to plan their business strategies with greater care and make difficult decisions regarding which contracts to chase, considering when to trade off the prospect of current work for future contracts on which they may be dependent and cannot risk a conflict.

Ultimately, the reason OCIs strike policy-makers as worthy of further regulation is the conventional wisdom in the defense contracting space that any successful contractor will be bought by the “big boys” with deleterious effects on competition.  The Section seems to indicate that certain larger defense contractors are averse to “tough choices” regarding which parts of major procurements to pursue and prefer the existing rules, which permit them to pursue entire procurements as long as OCI mitigation is in place.  Whether this aversion will lead to any large-scale balkanization of the design and implementation parts of major contractors remains to be seen.  What is clear from the comments is that the community has “sat up and taken notice” that the proposed rule is a departure from business as usual on OCIs.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine Campos and Steve Tibbets.

Federal contractors can add yet another item to their lists of databases in which they register and disclose information. As of July 8, 2010, contracting officers are to modify certain federal contracts to include a Federal Acquisition Regulation (“FAR”) clause that requires certain contractors to register in two locations and potentially provide two new types of information: (1) information regarding subcontracts must be disclosed via the Federal Funding Accountability and Transparency Act Subaward Reporting System at www.fsrs.gov; and (2) information regarding executive compensation must be reported via the Central Contractor Registration database at www.ccr.gov. 75 F.R. 39414 (July 8, 2010).

The subcontract reporting requirement applies to all prime contracts worth $25,000 or more. The prime contractor must report a number of items for any first-tier subcontract worth $25,000 or more, including the name and address of the subcontractor, the amount of the subcontract, and the nature of the items or services being acquired. The requirement is being “phased in” so that, until September 30, 2010, the reporting requirement only applies to prime contracts worth at least $20 million and, until March 1, 2011, the reporting requirement only applies to prime contracts worth at least $550,000. After March 1, 2011, the subcontract reporting requirement applies to all contracts over $25,000 in value.

The compensation reporting requirement requires contractors to identify the five most highly-compensated executives and report the amount of their compensation. This requirement only applies to contractors that have both annual revenue of at least $25 million from federal contracts, grants, and/or loans and derive at least 80% of their annual revenue from federal contracts, grants, and/or loans.

These reporting requirements have had the force of law since their promulgation on July 8, 2010. The regulatory body that issued the requirements, the FAR Council, is accepting comments on this interim rule until September 7, 2010. Therefore, companies that wish to persuade the FAR Council to abandon or modify the rule have a little over a month to do so.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine Campos, Stephanie Giese, and Joelle Laszlo.

Whether or not you believe cloud computing represents a revolutionary change in the provision of software and data processing services, the cloud and its lexicon have become firm fixtures in corporate enterprise management and, more recently, in doing business with the federal government. As discussed further in the following link, contractors should recognize the legal risks and rewards of both assisting federal agencies in implementing clouds, and in employing cloud service providers to perform federal government contracts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Articles In This Issue:

• Suspension and Debarment Is Not a Tool To Punish…Except When It Is
• Don’t Forget About D&O Insurance When That Government Subpoena Arrives
• New Service Contracting Regulations: Will Make Employees Smile and Impose Additional Requirements on Employers
• Advancement and Indemnification of Directors and Officers of Delaware Corporations: What Government Contractors Need to Know
• Deceptively Simple: The New FAPIIS Responsibility Reporting Rule
• Health Reform Legislation Includes Significant Amendments to the False Claims Act
• Gearing Up for the ‘High Road’
• Supreme Court’s Interpretation of FCA’s ‘Public Disclosure’ Bar Is Blunted by Health Care Reform Provisions

Click here to download the full issue.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Hugh Scogin, Mao Rong, and Zack Dong.

In November 2009, the Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Finance jointly issued Notice No. 618, requiring enterprises registered in China to apply for accreditation of indigenous innovation products. The program would have provided the Ministry of Science and Technology with authorization to prioritize accredited products for government procurement. Of particular interest to foreign enterprises were requirements that an applicant's use, disposal and improvements to a relevant product's intellectual property (IP) must not be subject to foreign restrictions, while any trademark used would first require registration in China and would also need to be free of restrictions from any related foreign brands. Under this program, foreign-invested companies whose products are not locally developed would not be able to participate equally with their Chinese competitors in government procurement unless they agreed to take the risk of removing licensing restrictions from their IP. In response to the notice, foreign associations and business leaders expressed concern that the system promoted domestic favoritism and would potentially result in discriminatory requirements for companies looking to take part in the government procurement market, while also restricting the capacity for innovation and development in China.

To view the entire alert, please click here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Articles In This Issue:

• A Whistleblower in Your Organization
• New Rules Regarding Manufactured Product ‘Components’ in Defense Procurement
• Corporate Political Spending After Citizens United v. Federal Election Commission…or, as P.T. Barnum put it, “You Ain’t Seen Nothing Yet!”
• New DoD Rules on Business Controls May Foreshadow More Thorough and Severe Audits
• New Law Restricts Employment Arbitration for Defense Contractors and Subcontractors

Click here to download the full newsletter.

• Email This
• Print
• Comments
• Trackbacks
• Share Link