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CONTRACT NEWS/UPDATES
February 5, 2010
Bill would increase oversight of prime-subcontractor relations
The bill would pressure companies to keep a clean performance record by paying subcontractors on time
* By Matthew Weigelt < http://fcw.com/forms/emailtoauthor.aspx?AuthorItem={677B4E4C-11D9-4F02-8664-CA06358939E6}&ArticleItem={41FAE02B-17C2-4558-8E86-F6649AB1A54E}>
* Feb 05, 2010
A prime contractor’s reputation could be tarnished if it fails to pay its subcontractors on time under a newly introduced bill.
Prime contractors would have to notify an agency’s contracting officer whenever they reduce payment to subcontractors or when they are three months late in paying them even though the government has paid for the services, according to the Small Business Revitalization Act (S. 2989), which was introduced Feb. 4.
If the payment delays happen, contracting officers would be required to consider the company’s failure to pay the subcontractors on time when evaluating the company's past performances as a government contractor, the bill states.
Furthermore, contracting officers may require a company with a history of slow payments to subcontractors to enter into a funds control agreement so subcontractors would be paid, according to the bill.
An underlying reason for the bill is aiding small business in today’s economy. The bill's sponsor, Sen. Mary Landrieu (D-La.), chairwoman of the Senate Small Business and Entrepreneurship Committee, said government contracting is one of the easiest ways to increase sales for small businesses.
The legislation also makes sure small businesses are actually small. The bill would irrefutably presume that a company stole money from the United States if it lied about its size in order to be awarded a small-business set-aside contract. And a company is saying it is indeed a small business when a company bids or submits a proposal for a set-aside contract, the bill states.
The bill also would require annual certifications of a small business' size or status in the Small Business Administration’s Central Contractor Registration database or a similar database.
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26 Percent of Recovery Contracts So Far Go To Small Businesses
October 7, 2009
Government Executive.com
Agencies surpass Recovery Act small business contracting goals
By Robert Brodsky rbrodsky@govexec.com October 6, 2009
More than $1 out of every $4 spent on federal Recovery Act contracts has gone to small businesses, but several large spenders appear to be lagging behind in including small firms, administration officials told members of a Senate panel on Tuesday.
As of Oct. 2, nearly 26 percent of all federal stimulus contracting dollars -- or more than $4 billion -- was awarded to small businesses, said Joe Jordan, associate administrator for government contracting business development at the Small Business Administration, in testimony before the Small Business and Entrepreneurship Committee.
The Recovery Act does not set a specific goal for small business contracting, but in most cases, agencies have been instructed to follow the government's annual goal of awarding 23 percent of all prime contract dollars to small firms. That means about $13 billion of the roughly $60 billion in stimulus funds expected to be awarded through federal contracts should go to small businesses, Jordan said.
"Put simply, this is a win-win situation," he said. "Small businesses get increased volume, sales and hires. They get a lift to be competitive in the global marketplace and help lead the nation toward economic recovery. In addition, federal agencies get to work with the most innovative, nimble and responsive companies."
The Recovery Act spending totals for the various socioeconomic and disadvantaged categories also have been encouraging, Jordan testified. For example, small disadvantaged businesses have received 11 percent of stimulus contracts, exceeding the goal of 5 percent, he said. Meanwhile, firms owned by service-disabled veteran-owned firms and those operating in historically underutilized business zones have received 4 percent and 7 percent of Recovery contracting dollars, respectively. The goal for both categories is 3 percent.
The only subcategory in which agencies have failed to meet the overall goal is women-owned small businesses, which have received 4 percent of all Recovery contracts as opposed to the goal of 5 percent, Jordan said. To increase that figure, SBA developed its first online training module specifically geared toward women in contracting. The course is available at: www.sba.gov/womenscontracting.gov.
"This is a simple but powerful tool for women who are ready to learn the ropes in contracting," Jordan said.
While the government as a whole is exceeding its Recovery Act small business contracting goals, the report card from several large agencies is somewhat mixed.
The Defense Department, long-criticized for its small business participation, is among the government's leaders in stimulus awards to small firms, said Linda Oliver, acting director of Defense's Office of Small Business Programs. As of Sept. 25, Defense had awarded $2.2 billion in Recovery Act contracts, with $1.3 billion -- or 58 percent -- going to small businesses, Oliver said.
The high small business participation can be attributed partly to the types of projects and services the Recovery Act has funded thus far, she said. The majority of Defense's stimulus funds are for military construction or facility sustainment, restoration and modernization projects.
But, Defense's small business totals likely will decrease in the coming months as the department begins awarding roughly $1 billion in large hospital construction contracts, Oliver predicted. "These projects exceed the capabilities of small businesses so I don't think [our figures] will hold," she said.
While the Defense Department's small business contracting might soon come back to earth, the Energy Department's still is waiting to get off the ground. Energy received $36.7 billion in Recovery funds, with the overwhelming majority dispersed through grants, loans and other financial assistance. The exception, however, was Energy's Office of Environmental Management, which received $6 billion to be used for contracts and subcontracts. To date, 6.7 percent of those funds has gone to small businesses, said Committee Chairwoman Sen. Mary Landrieu, D-La.
But, Brenda Degraffenreid of Energy's Office of Small and Disadvantaged Business Utilization defended the totals, noting that the agency's business model -- 85 percent of its contract dollars are directed to laboratory management work performed by large firms -- requires greater flexibility.
Because of its unique circumstances, Energy negotiated revised small business goals with SBA. This year, the agencywide goal is 5.87 percent, while the target for the Office of Environmental Management is 4.8 percent, Degraffenreid said. The department is gathering data on its fiscal 2008 spending on subcontracts, which Degraffenreid said is a fairer reflection of its involvement with small businesses.
Energy is not the only agency lagging in issuing Recovery Act contracts to small firms. The Social Security Administration has awarded less than 2 percent of its contracts to small businesses and NASA is only at 9 percent, Landrieu said.
The chairwoman has written a letter to each agency receiving Recovery Act funds requesting a rundown of contracting figures by the 15th day of each month.
"We cannot wait until the money is spent to start evaluating whether small businesses are being included," she said. "That oversight must start now and it must be continuous. We have an opportunity to positively impact small businesses through the Recovery Act."
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"Best Value" Contracting Harder to Justify
April 9, 2009
Nextgov
Bar is raised for justifying best value contracts
By Jill R. Aitoro 03/25/09
A recent Government Accountability Office bid protest decision demonstrates that federal agencies must be more diligent in justifying decisions to award contracts to companies that are not the lowest bidders, procurement specialists said on Wednesday.
GAO on March 4 sustained Reston, Va.-based Access Systems Inc.'s challenge of a $25.6 million task order for ongoing Marine Corps Systems Command technical and management support. Access Systems -- the incumbent contractor -- had submitted a lower bid than winner Avineon Inc. of Alexandria, Va.
The Marine Corps' request for quotes stated that the task order would be issued on a best value basis, where "overall technical merit [was considered] to be of significantly greater importance than evaluated price." But GAO decided the Marine Corps failed to provide necessary justification for the higher price.
"It's not about us deciding which company's services are better, or second-guessing the decision of the agency," said Michael Golden, associate general counsel at GAO. "We're just saying there needs to be proper documentation."
Acquisition officials rated both companies' understanding of the required services as acceptable and past performance as low risk. Access Systems and Avineon held comparable technical certifications and both had qualified personnel.
"When you consider the range of activities that can make up an IT support contract, there is an enormous challenge in attempting to quantify performance with metrics," said Ray Bjorklund, senior vice president and chief knowledge officer for the consulting firm FedSources. "I think that, as thin as they are stretched, the acquisition workforce needs more practical training in how to apply best value principles."
Neither company would comment on GAO's ruling.
"The decision reiterates the fact that best value does not equate to an unfettered free hand," said Stan Soloway, president of the Professional Services Council. "Evaluation criteria do matter -- a lot."
Best value contracts often end up going to the lowest bidder, due to increasing pressure to cut costs, fear of protests, failure to understand program requirements, or inability to separate the best deal from the best overall value to the government, Soloway said. That's not ideal, because companies intentionally will low-ball bids to win work and then renegotiate the terms, driving up costs, according to Larry Allen, president of the Coalition for Government Procurement.
"We're in a more risk-averse environment," Allen said. "You don't want to see a procurement model where low cost is presumed to be the best solution in each scenario, because that ignores a lot of other factors that government should be looking at. But government is looking for sharper pencils from its offerors."
Agencies could see demand for thorough justification of best value awards increase under President Obama.
Nothing from the administration suggests a lack of support for best value contracting, but Bjorklund noted that Obama's calls for greater visibility and transparency certainly should drive agencies to be more diligent in documenting awards.
"As the new administration turns up the heat to try to reduce the costs associated with government acquisitions, there is a very real risk that the government will leave best value contracting behind in order to make things easy," said Warren Suss, president of the IT firm Suss Consulting. "But that would be a very bad decision. Best value contracting is very important -- even as it continues to be a challenge for the government."
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© 2009 BY NATIONAL JOURNAL GROUP, INC. ALL RIGHTS RESERVED
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New Stimulus Contract Requirements Include Reporting, Buy America, and Other Matters
April 9, 2009
NextGov
Acquisition community faces strict stimulus reporting rules
By Robert Brodsky 03/31/09
A series of draft rules published on Tuesday in the Federal Register detail several new reporting requirements for contractors and procurement officials disbursing stimulus funds.
All prime contractors going forward will have to submit detailed public reports to the government on the services they are providing and the jobs they are creating using Recovery Act funds, according to one of the regulations. Another rule would require acquisition officials to publish notices on contracts worth more than $25,000 in a format that's easy for the public to understand before they are awarded.
While the interim rules take effect on March 31, the final regulations will be published this summer after the end of the comment period on June 1.
The proposed requirements are aimed at holding contractors and procurement officials highly accountable for contracts related to the $787 billion stimulus package. They build off the Feb. 18 guidelines by the Office of Management and Budget provided to federal agencies.
Contractors, regardless of size or type of business ownership, will be required to report quarterly on their use of stimulus funds via an online tool being developed at www.federalreporting.gov. The rule applies to contracts at or below the simplified acquisition threshold, generally less than $100,000, and to products available commercially.
Those reports must include the dollar amount of each invoice, the supplies or services delivered, and the timeline for completing the contract. Contractors also have to describe clearly how the stimulus money affects employment, including an estimate of new jobs created and retained as a result of the award.
Less burdensome requirements are imposed on first-tier subcontractors, who only need to report basic information about their DUNS identification number, address and the performance location of the award.
The first reports are due by July 10, and must be submitted thereafter no later than the 10th day after the end of each calendar quarter. Contracting officers will not be responsible for verifying the information in the contractor's report, only that a report was submitted.
The draft rules, however, do spell out additional reporting responsibilities for the procurement workforce.
Acquisition officials must post pre-award notices for all orders exceeding $25,000 that describe the supplies and services requested "in a narrative that is clear and unambiguous to the general public." And they will have to provide a rationale to the public for any contract action -- regardless of dollar amount -- that are not fixed-price and competitive.
The rule applies to contracts awarded using small business set-asides. Awards issued through the General Services Administration's Federal Supply Schedule, however, will be considered competitive and therefore exempt.
A recent Government Executive review of initial contracts issued using Recovery Act funds showed that several agencies were making use of GSA schedules and agency blanket purchase agreements.
Other Recovery Act interim rules issued Tuesday:
-- Prohibit nonfederal employers from firing, demoting or discriminating against whistleblowers who alert the government to questionable uses of stimulus funds. Contractors who refuse to abide by this rule will not be eligible for stimulus contracts. A provision that would have protected federal whistleblowers was removed prior to the passage of the Recovery Act
-- Require that all construction, repair or maintenance projects use only iron, steel and manufactured goods produced in the United States. The rule provides a number of narrow exceptions and waivers, such as cases when goods are not available domestically, or if the local price is not reasonable
-- Provide the Government Accountability Office with the authority to audit both contracts and subcontracts related to the stimulus, and to interview contractor and subcontractor employees. The same rights, except the ability to interview subcontractor workers, are granted to inspectors general. A spokeswoman for Earl Devaney, chairman of the Recovery Accountability and Transparency Board, said the 1978 Inspector General Act "allows IGs to investigate as deep as they need on any issue, and no guidance can trump that."
The federal government estimated that it will award about $80 billion in Recovery Act awards to more than 20,000 prime contractors and 60,000 first-tier subcontractors. Roughly 20 percent of the prime contractors and about 25 percent of the subcontractors will be small businesses, the Federal Register notice said.
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© 2009 BY NATIONAL JOURNAL GROUP, INC. ALL RIGHTS RESERVED | | | |
02/09/09
Defense outlines change in acquisition strategy
February 9, 2009
Government Executive.com
Defense outlines change in acquisition strategy
By Robert Brodsky rbrodsky@govexec.com February 4, 2009
NEW YORK CITY--The Defense Department plans to dramatically realign its acquisition strategy, increasing its focus on competition, rebuilding its procurement workforce and creating more consistent requirements for contractors in the post-award process. Shay Assad, Defense's highest ranking civilian acquisition official, told a crowd of contractor executives and market analysts on Wednesday that the Pentagon's old ways of purchasing goods and services was not providing sufficient and consistent value. "We are going to push contractors real hard for significant savings," said Assad, director of defense procurement, acquisition policy and strategic sourcing, at the annual Cowen and Company Defense and Aerospace Conference in Manhattan. "We have got to get a good return for taxpayers." For too long, Assad said, Defense has assumed too much risk in its procurement procedures, both on programs that might not have been technically ready and on precarious contracting vehicles that failed to hold down costs. To better predict costs and share risk, the department plans to make a "significant shift" away from cost-plus award-fee contracts. Government watchdogs have found that the Pentagon often paid contractors with high award fees, even if their work was late or overbudget. Moving forward, Defense will utilize more incentive-based cost-plus and fixed price contracts and rely on multiple companies for long-term agreements. "We've got to write better contracts that better incentivize industry and get the best deal," said Assad, who also recently assumed the title of acting deputy undersecretary for acquisition and technology. "The world of cost-plus award-fee contracts is over." Defense is setting up a system that locks in requirements -- which can change rapidly during a new congressional session or administration -- at the time of contract awards. A Defense acquisition steering board would review post-award changes. Also, any contract worth more than $1 billion will be reviewed by a peer Defense agency, in an effort to share best practices and to reduce waste. Reiterating many of the points Defense Secretary Robert Gates outlined in late January during a pair of congressional appearances, Assad said the department must increase the size and capability of its civilian acquisition workforce dramatically. In 2001, the Defense Department spent $138 billion on contracts through approximately 19,000 Pentagon contracting officials. In 2008, procurement spending reached $396 billion -- $202 billion of it was for services -- but the workforce has remained stagnant, with only 25 new positions added in the past seven years. In 2008, Congress appropriated funding to beef up Defense's contracting workforce. And the department's new proposed budget, which will be released in the next two to three months, could include spending for more positions. While Defense works to increase its civilian acquisition rolls, the department also will be enforcing stricter ethical and revolving-door standards for its workforce. Echoing a point frequently made by the new administration, Assad said Defense acquisition employees "need to keep at arm's length from industry. This will benefit the warfighter and will benefit the taxpayer." Defense also will look to increase savings through more contract competition. In 2008, the Pentagon competed 64 percent of it's nearly $400 billion in contracts, a record for the agency. But, Assad said, "It's still not enough," because many of those contracts awards involved only one bid. "We are going to align profitability [for contractors] with performance," he said.
01/28/09
Procurement Reform Named Top DoD Priority
January 28, 2009
Gates names acquisition reform among Pentagon's top priorities
By Elizabeth Newell enewell@govexec.com January 27, 2009
Defense Secretary Robert Gates on Tuesday listed procurement reform as one of the most pressing issues the Defense Department faces under the Obama administration.
Gates told the Senate Armed Services Committee that acquisition was "chief among the institutional challenges" at the Pentagon. A risk-averse culture, an unwieldy and litigious acquisition process, excessive and morphing requirements, and budget instability are the primary issues that must be addressed, he said.
Additionally, a grossly understaffed acquisition workforce is trying to nail down purchasing priorities that are constantly in flux.
"Acquisition priorities have changed from Defense secretary to Defense secretary, administration to administration [and] Congress to Congress, making any sort of long-term procurement strategy on which we can accurately base costs next to impossible," Gates told lawmakers.
During the past eight years, the Defense Department has operated with key acquisition positions unfilled. Current vacancy rates range from 13 percent in the Army to 43 percent in the Air Force. Gates said this is due in part to a dramatic reduction in procurement staffing after the Cold War.
The Defense secretary tiptoed around a potential disagreement with his boss over restrictions on movement between industry and government jobs. Gates said strict revolving door policies might have contributed to acquisition vacancies, especially at the highest levels.
"We've created a situation where it's harder and harder for people who have served in industry -- who understand the acquisition business, who understand systems management -- to come into public service, particularly when they're not coming in as career people but perhaps at more senior levels to serve for a few years then go out," Gates said. "The last thing I would do is criticize the ethics executive order that the new president has just signed; this is a cumulative problem that has taken place over many, many years."
Transparency will be crucial for balancing the ethics order and the need to recruit the most qualified staff, Gates told the committee.
"The president recognized ... that to be able to get some of these people he'd need to exercise a waiver and he provided for that, I think wisely, in the executive order," Gates said. "But I think all of us -- the Congress, the executive branch -- together need to look at this and see if we're cutting off our nose to spite our face."
Gates noted that component agencies and services have committed to boosting acquisition staffing, with the Defense Contract Management Agency planning to hire 2,300 additional people in the next 18 months and the Army on tap to add 1,000 civilians and 400 military acquisition officials.
The Defense chief committed to building a strong foundation for major acquisition programs. By increasing competition, freezing requirements on programs upon award and writing contracts that provide incentives for "proper behavior," the department can make progress toward procurements that offer the best value for the military and the taxpayer, Gates said.
Sens. Joseph Lieberman, I-Conn., and Saxby Chambliss, R-Ga., said Defense spending could, and should, be a key part of any economic stimulus package. While Gates said the "spigot of defense funding opened by Sept. 11 is closing," Chambliss argued that Defense acquisition programs were among the most productive spending projects.
"If you take any one of these programs, and I'll just cite the F-22 program as an example, if you shut down that line you're talking about the loss of 95,000 jobs on top of the other woes we're looking at in this economy now," Chambliss said. "If we truly want to stimulate the economy there's no better way to do it than defense spending."
In response to a request from the White House, Gates submitted a list of programs that had the potential to create jobs and could get off the ground within months. Suggestions included infrastructure improvements to military hospitals, clinics, barracks and child care centers, where work could begin immediately or where projects already are under way and can be accelerated.
Committee members also asked Gates how the department will handle contractors as the military presence shifts from Iraq to Afghanistan. He conceded that the use of contractors "grew willy-nilly" in Iraq after 2003 and was not accompanied by the necessary oversight capacity. He assured lawmakers that leaders are applying contracting lessons from Iraq to the developing approach to Afghanistan. The department nonetheless must do some soul-searching on the role of contractors in combat environments, Gates said.
11/30/08
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