What's the Best Approach to MAS Competition? Strategery.

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

Late last summer, we blogged on an interim rule designed to increase competition for multiple-award schedule (“MAS”) contracts issued by civilian government agencies. The interim rule took effect even as the implementing agencies sought comments on its provisions. One year and just seven comments later, the final rule, tweaked only slightly from its predecessor, is set for launch. While its potential impact is difficult to predict, snarky blog titles aside, the best approach is one that includes both caution and optimism.

The two most significant changes in the final rule: (1) correct, to $103 million, the threshold amount above which single-award blanket purchase agreements (“BPAs”) are precluded (except under very limited circumstances); and (2) remove the requirement that an ordering activity’s competition advocate approve the exercise of an option under a single-award BPA. A third change requires an ordering activity to evaluate the reasonableness of the total price for the staffing proposed, when a BPA includes the provision of services on an hourly basis. The final rule takes effect April 2.

As reported in our earlier blog, the rule change will likely permit thrifty contracting officers (“COs”) to more easily shop the market, especially when placing orders under BPAs. In fact, the final rule requires a CO to seek a price reduction whenever an order or BPA exceeds the simplified acquisition threshold. One commenter to the interim rule argued that this requirement may cause future offerors to significantly inflate their starting prices in anticipation of multiple rounds of price reduction (either as a result of competition or direct request). The irony of that prospect is that if a competition is not so competitive, the government may not wind up getting the lowest possible price.

As we have before, we recommend a calm and rational approach to future MAS contracting. An overly clever strategy will probably be just that – overly clever, and not necessarily winning. The wise contractor will also be careful, however, not to misunderestimate its competitors.
 

Government Contractor Successfully Defends Its Senior Executive Compensation Costs

This post was written by Stephanie E. Giese.

The issue of senior executive compensation limits continues to be a contentious one for the federal government and its contractors. This may explain why the limit has not been raised since 2010 from the current amount of $693,951. In fact, the Obama administration has proposed lowering senior executive compensation limits to $200,000, the level it caps salaries for its own executives. Given the administration’s focus, this is an area where we are likely to see more litigation. The Appeals of J.F. Taylor, Inc., ASBCA Nos. 56105, 56322 (January 18, 2012) (“JFT”) is an example of such litigation that was recently decided in favor of the contractor.

The JFT decision is relevant to contractors subject to Federal Acquisition Regulation (“FAR”) 31.205-6(p), the federal limitation on the allowability of compensation for senior executives. This benchmark limitation is the maximum amount a contractor may seek reimbursement for under its government contracts, but does not limit the compensation an executive may earn. Further, the limit that applies to small-to-midsize government contractors may actually be lower than the benchmark limitation. Regardless of the size of the contractor, a contractor subject to FAR 31.205-6(p) must show that the executive compensation costs it charged the government are reasonable in order for the government to reimburse those costs. To evaluate reasonableness, Defense Contract Audit Agency (“DCAA”) conducts a statistical analysis considering factors such as industry, company revenue relative to other companies in the same industry, geographic location, and the executive position being evaluated.

The JFT decision offers arguments that may allow a contractor to resolve disputes with DCAA in annual Executive Compensation Reviews (“ECRs”) and to avoid potential litigation. In its JFT decision, the Armed Services Board of Contract Appeals held that DCAA’s methodology was “fatally flawed statistically”:

(a) as a matter of basic statistical analysis,

(b) because the method market priced JFT’s executive compensation at the median without adequate consideration of the company’s superior performance,

(c) because DCAA failed to evaluate the compensation of the JFT vice presidents based on the revenues of the whole company even though each vice president had companywide responsibilities for the success of the company, and

(d) because the method used does not yield auditable and reliable results.
 

Thus, JFT was not required to repay the government approximately $600,000 in disallowed executive compensation costs. A contractor should consider the fatal flaws cited by the Board as potential arguments to defend its own executive compensation costs.

For Government Contractors, Will 2012 Be the Rise of the "Past Performance Primary POC"?

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.

Proposed Rule Seeks To Prevent Future Contractor Leaks of Personally Identifiable Information - The WikiLeaks Response

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.

No Contractor Left Behind: The Proposed Standardization of Contractor Past-Performance Evaluations

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.
 

FAPIIS Flap-is: Transparency Advocates Hate It Now, Contractors Likely to Hate It Later

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.
 

Hey, Government Contractor: Don't Fret About the Next Federal Budget Stumbling Block; Prepare For It

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.

Coming in April: Transparency, by FAPIIS

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.