Due to rapidly rising gas prices, the IRS will increase by 8 cents the optional standard mileage rate for the remainder of 2008. The rate will increase from 50.5 cents to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This mid-year change is a departure from the normal once per year mileage rate update performed by IRS in the fall for the next calendar year.

While the IRS determines the mileage rate for tax purposes, GSA is responsible for Federal Travel rate determination.  By law, GSA may not exceed the IRS’ standard mileage reimbursement rate for a privately owned automobile (POA).  GSA matched the IRS rate in the first half of 2008, but GSA has not yet matched the IRS rate increase for the second half of 2008.  GSA is required by law to review data via a consultation process before any reimbursement mileage rate changes are made.  As soon as these processes are complete, any adjustments to the Federal Travel Regulation (FTR) POV mileage rates will be immediately published in the Federal Register for official notification.  See the GSA Rate page for complete information.  Also of note, legislation (S. 3032) is pending in the Senate that would raise the rate to 70 cents per mile for both private sector and federal employees.

The Local Preparedness Acquisition Act (H.R. 3179; Public Law No: 110-248) authorizes state and local governments to use GSA Schedule 84 to buy Law Enforcement, Security, and Emergency/Disaster Response solutions.  Approved by the Senate in early June, with a similar bill approved by the House last December, the final step was President Bush’s signature on June 26, 2008. 

State and local governments are now poised for growth opportunities in 2008; a contrast to the previously planned, reduced spending related to emergency preparedness.  The passed Local Preparedness Acquisition Act comes at the same time as an estimated $5 billion in federal funding is earmarked for state and local governments in homeland security projects.  Federal grants include $3 billion from DHS, $1 billion from HHS, and $1 billion from the National Telecommunications and Information Administration (NTIA).  See a breakdown of programs, goals, and funds by agency.

Additionally, the future of cooperative purchasing may continue to expand beyond the GSA IT and Law Schedules.  Jim Williams - currently head of the GSA’s Federal Acquisition Service Commissioner, and recently named as the new agency director - said at the recent Security Industry Association’s Government Summit, recipients of federal grants, and state and local agencies, should be able to buy from all of GSA’s contracts.

For more information on Cooperative Purchasing , Disaster Recovery Purchasing, or GSA Schedules, please contact Hope Lane at 301-231-6266 or hlane@aronsoncompany.com.

On June 30, 2008 President Bush issued an Executive Order designed to streamline the typically lengthy background checks performed before security clearances can be granted.  The Executive Order requires that the Federal Government develop consistent standards for granting clearances.  The order also requires “reciprocal recognition” so that a clearance granted by one agency would be recognized Government-wide.  Currently, standards are vary by agency and many agencies don’t recognize clearances granted by other agencies.  The Order also requires “end to end automation to the extent practical.”

The Order establishes a Performance Accountability Council to direct the reform effort.  The Council will be chaired by Clay Johnson, Deputy Director of OMB.  It is not clear how soon these reforms will be implemented.  However, per the 2004 Intelligence Reform and Terrorism Prevention Act, by 2009 90% of all security clearances must be processed with 60 days and all top secret clearances must be processed with 90 days.

Federal funding to state and local governments may be hitting an all time high this year with an estimated 4.5 - 6 billion dollars in grants pouring in from the Feds.

This is great news for most state and local governments budgets planners who were planning on tightening spending related to emergency preparedness. 

National radio interoperability, surveillance systems, geospatial software, personnel identification and credentialing, command and control systems, and intrusion detection are just a few of the items grants will be used for.

 So who is handing out all this money?  The top three biggest spenders are:

1. Department of Homeland Security (DHS) - $3 Billion

2. Health and Human Services (HHS) - $1 Billion

3. National Telecommunications and Information Administration (NTIA) - $1 Billion

There are a lot of mixed feelings about the future growth of Federal grants to state and local governments due to the changing political environment, mishaps with hurricane Katrina and border security.

On another note …. have a happy and safe 4th of July!

Achieving Top Secret security clearance continues to be a 12- 24 month process creating a shortage of cleared employees and contractors that is negatively affecting both the federal government and government contractors. Higher salaries for in demand cleared people lead to increased labor rates on government bids, but as government rates fail to increase with the market, smaller companies may lose the bid war to larger competitors with the ability to retain and absorb the cost of cleared employees during periods of downtime.

It’s not a new crisis, but despite continual federal government’s efforts to reduce the backlog after the Department of Defense (DoD) security clearance process was added to GAO’s 2005 “high-risk” list, Senator George Voinovich (R-Ohio) believes the process will remain on the high-risk list in 2009. A ranking member of the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, Voinovich mentioned the effects of delays in clearing credible workers, especially in relation to the generational concerns and the human capital crisis - Gen X & Y workers’ frustration with a months long process, the impression of an inflexible bureaucracy, and the federal government’s struggle to be competitive with the private sector.

Manual processes are highlighted as a major concern, and in the first quarter of FY 2008 the DoD submitted only 77% of its applications electronically to Office of Personnel Management (OPM). In the Feb 2008 Report of the Security Clearance Oversight Group, the performance of agencies whose clearance investigations are conducted by the OPM was measured, and an initial proposal for reform presented to President Bush on April 30, 2008. Both reports include recommendations for the security clearance community to reduce manual activity, complete the elimination of all backlogs, and digitize more of its processes.

The latest report on the Top 100 GSA IT Schedule 70 vendors shows one big surprise… the top company year-to-date is Compuware Corporation. It beat out IBM, its nearest rival, by a wide margin of well over $75 million. In fiscal 2007 the company had just over $8 million in GSA IT Schedule 70 contract sales, but this year so far it already has close to $236 million in sales, the entire amount coming from just one contract awarded on the 4th of May, 2008 from the Federal Technology Service, a bureau within the General Services Administration. The contract description is for “Quality Assurance Automation Testing Tool for Deers”.

Click the thumbnail above to view the full vendor list. Go to www.fedmine.us to see other reports, or email your request to amehan@fedmine.us

Effective May 13, 2008 DoD issued an interim rule designed to prohibit excessive pass through costs.  Though some would argue that excessive costs of any kind are already unallowable.   The definition of Excessive Pass-Through costs is vague at best.  Excessive pass-through costs “… with respect to a contractor …  that adds no or negligible value to a contract …, means a charge to the Government by the contractor .. that is for indirect costs or profit on work performed by a subcontractor.  It does not include direct costs of managing the subcontractor along with the indirect costs applicable to that effort.   “No or negligible value” means the contractor cannot demonstrate to the Contracting Officer that its effort added value to the contract in accomplishing the work. 

Two new clauses have been created.  252.215-7003 is for use in solicitations.  This clause prohibits an offeror from proposing excessive pass-through costs.  The clause further requires the offeror to disclose the total costs of the work to be performed by itself and the total costs to be performed by subcontractors.  In instances where more than 70% of the work is to be subcontracted, the offeror must further identify the total amount of indirect costs and profit allocated to the subcontractors costs and provide a description of the value added by the offeror to the subcontracted work. 

 252.215-7004 is for use in the resulting contract.  This clause states that the Contracting Officer will determine if there are excessive pass-through charges and if so, will not pay them.  It also requires the contractor to notify the Contracting Officer if the amount of subcontracting changes after award of the contract such that it exceeds 70%.  These requirements also flow-down to subcontractors who may issue second tier subcontracts.

The “Heroes Earnings Assistance and Relief Tax Act of 2008″ (the 2008 H.R. 6081, Heroes or HEART Act) is a $1.2 billion military tax relief package, fully offset with tightened expatriation rules, a new rule requiring U.S. companies working under federal government contract to treat overseas employees as subject to employment taxes, and a higher failure to file penalty. It was signed into law June 17th by President Bush.

To raise revenue and offset the cost of the new tax breaks, the Act specifically:

• Tightens the tax rules for individuals who expatriate. The provision applies to those who relinquish their U.S. citizenship or terminate their U.S. residency on or after the enactment date and to covered gifts or bequests received on or after the date of enactment from individuals who expatriate on or after the date of enactment.

• Treats certain foreign subsidiaries of U.S. companies performing services under a contract with the U.S. government as U.S. employers for purposes of Social Security and Medicare employment taxes. The new provision applies to services performed in calendar months beginning more than 30 days after the date of enactment.

• Increases the minimum penalty for a failure to file an individual tax return (effective for returns filed after December 31, 2008) to $135 or 100% of the amount of tax required to be shown on the return.

Among its incentives for individuals and employers, the Heroes Earning Assistance and Relief Tax Act:

• Provides small employers with a 20% tax credit for differential wage payments made to active duty employees; Provides an exclusion for state or local payments of bonuses to active or former military personnel or their dependents on account of such military personnel’s service in a combat zone; Permits reservists called to duty to withdraw unused amounts held in a health care spending account.

• Permanently extends a special rule that allows veterans to finance home purchases using qualified mortgage bonds regardless of whether they are first-time homebuyers; Expands the rebate program enacted in the Economic Stimulus Act of 2008 to include active military who file a joint return even if a spouse does not have a Social Security number; Permanently extends a provision treating combat pay as earned income for the purposes of the earned income tax credit; Permanently extends an expiring provision allowing active duty reservists to make penalty-free withdrawals from retirement plans.

The Joint Committee on Taxation and the Congressional Budget Office estimate that these provisions and others related to veterans and active members of the armed forces would reduce revenues by $1.2 billion over the 2008-2018 period but simultaneously that the three revenue-raising provisions would increase revenues by $1.3 billion over the same time period. For more information or questions about government contracting, corporate tax, or individual tax, contact Hope Lane at 301-231-6266 or hlane@aronsoncompany.com.

There are certain agencies within the US government from whom small business contractors have a difficult time in obtaining prime contracts, and therefore are better off vying for sub-contracting dollars from large primes. One example of such an agency is the the DEPT OF JUSTICE, FEDERAL BUREAU OF INVESTIGATION, PROPERTY PROCUREMENT AND MANAGEMENT SECTION. In FY 2007, this specific contracting office in downtown DC did a total value of contracts worth $806,496, 429 mostly with large prime contractors. To see the full listing of the Top 100 contractors click the thumbnail link below.

For further details and other new reports such as this one, go to www.fedmine.us or email amehan@fedmine.us.

A bipartisan group of members of Congress have formed a new congressional caucus dedicated to improving oversight of federal contracting and the quality and depth of policy discussions surrounding it. “The federal procurement system can be complicated and cumbersome, and making it more competitive, accessible, accountable and transparent requires a thoughtful, reasonable review,” the Congressmen said. The members cited the ability to discuss experiences and approaches from different agencies and departments, vet reasonable oversight solutions and share positive contracting experiences as prime motivators behind the new group.

The federal government spends more than $450 billion a year on federal contracting and more than a dozen different congressional committees and subcommittees share in the oversight of some or all of that process. Congressional caucuses are often formed to facilitate informal discussion and collaboration across party lines and committee jurisdictions on complicated and sometimes controversial issues. The caucus will allow members and staff to share information and engage in discussions with acquisition experts from think tanks, academia, industry, government and independent oversight organizations.

Reps. Tom Davis (R-VA), Joe Courtney, (D-CT), Christopher Shays, (R-CT), and Christopher P. Carney, (D-PA) solicited membership in an April 24 Dear Colleague letter to all House member offices. As of June 2, additional Members of the caucus include Rep. Kay Granger (R-TX), Rep. Patrick Murphy (D-PA), and Rep. Mike Castle (R-DE).  (A “tip of the hat” to PSC for this post.)