Stimulus Funds Impose New Requirements on Contractors
The American Recovery and Reinvestment Act of 2009 will be a boon for Government contractors. The Act appropriates $789 billion, much of which will be awarded to contractors. However, there are some strings attached. The Act includes a variety of requirements designed to increase the transparency, effectiveness, and fairness of the contracting related to the stimulus funds. These requirements, summarized below, are in addition to the normal procurement regulations. Even experienced government contractors should carefully review the terms and conditions of any solicitation that is funded with Stimulus dollars because what was acceptable before may not be now.
Information Collection- Contractors who receive stimulus funds will be required to submit quarterly reports describing the (1) total amount of recovery funds received, (2) total amount of recovery funds actually spent on the contract, (3) lists of projects funded by the recovery funds and number of jobs created, (4) information on any subcontracts awarded.
Fraud, Waste & Abuse- The Act establishes a Recovery Act Accountability and Transparency Board to oversee the stimulus spending with the objective of preventing fraud, waste and abuse. The Board has not yet implemented any requirements affecting contractors, but most experts expect to see reporting requirements at a minimum. Many believe that once the risk mitigation plans required by the Act are completed, the Board will impose more substantive requirements.
Contract Types – The Act requires the use of Fixed Price contract awarded using competitive procedures to the maximum extent practical. Contracts that are not fixed price or not competitively awarded must be listed on the Recovery.gov website. Also, presolicitation notices are now required for task or delivery orders. The Act also expands the Buy America Act requirements, requires prime contractors to report first tier subcontracts, and increases the Government’s access to contractor records.
DOD Continues Suspension of SDB Price Evaluation Adjustment
Federal law allows DOD to grant Small Disadvantaged Businesses a 10% price evaluation adjustment or preference in order to help DOD meet its small business contracting goals. The law allows DOD to suspend the price evaluation adjustment if DOD met its SDB goal during the preceding year. The price evaluation adjustment was initially suspended in March 2007 because DOD had met it goal of awarding 5% of procurement dollars to SDBs. DOD announced it was extending the suspension but acknowledged that the recent Rothe decision which ruled the practice unconstitutional, may make it a moot point. The Rothe decision is currently being appealed. Further, as the DOD price evaluation preference is rarely if ever used, the SBA has stopped certifying SDBs.
For more information on the Rothe decision and the DOD SDB preference program please see our previous blog posting here. For our previous blog about the SBA and the SDB certification process please click here.
3 New Executive Orders – Creates Upheaval for Government Contractors
On January 30, 2009, President Obama issued three executive orders that make significant changes in labor policy for government contractors. Sanctions includes include contract cancellation, termination or ineligibility period of up to 3 years. Contractors should begin reviewing their policies and procedures to see if they will be in compliance with the following orders:
1) Notification of Employee Rights Under Federal Labor Laws – Contractors and subcontractors must inform employees of their right to organize under the National Labor Relations Act as opposed to the current regulation which requires informing employees of their right to refuse to join a union. Employers must post notices, physically and electronically, in their plants and offices where employees are covered by the National Labor Relations Act.
2) Economy in Government Contracting- This order would make all company expenses to persuade employees to exercise or not exercise their right to organize and bargain collectively unallowable expenses. Costs incurred in maintaining satisfactory employee relations including costs of labor-management committees and employee publications are also unallowable.
3) Nondisplacement of Qualified Workers under Service Contracts - This order applies to follow-on service contracts for the same or similar services to be performed in the same location. In such circumstances, the order requires the successor contractor to offer the employees of the predecessor contractor who would otherwise be laid off, the right of first refusal for any job openings under the follow-on contract for which they are qualified. There shall be no employment openings under the contract until right of first refusal has been provided.
Information provided in part from Crowell & Moring Attorneys at Law February 2, 2009 newsletter. If you need help understanding allowable costs or developing a compliance program, contact Tom Williams of Aronson & Company at 301-222-8289 or twilliams@aronsoncompany.com for assistance.
Protests up 17% from Last Year
Contractors filed 1,652 protests with the General Accountability Office (GAO) in fiscal year 2008, up 17% from last year. This was the most protests filed since fiscal year 1997. The reason for the substantial increase appears to be fourfold. (1) Task Orders over $10 million can now be protested. Contractors took advantage of this new rule 49 times. (2) GAO is now the forum for protests of Transportation Security Administration procurements. 8 TSA bidders filed protests with GAO. (3) Government employees now have the ability to protest the outcome of private-public competitions. 30 protests were filed pertaining to public private competitions but it was not clear how many of these were filed by Government employees.(4) The weakened economy has encouraged some contractors to more aggressively protect their Government business.
A majority of these protests were not actually decided by GAO because (1) some protests were dropped by the protester after review of the procurement files, (2) some were rejected by GAO on procedural grounds, (3) some were diverted to various alternative dispute resolution programs, and (4) others were resolved directly with the agency. Of the 291 protests decided by GAO, only 60 or 20.6% were sustained. This is actually a smaller success rate than fiscal year 2007 when GAO sustained 27.6% of the 335 decisions it rendered. However, this statistic is misleading because in many instances, the agency granted some form of relief to the protester. 42% of the protests were successful if you include relief granted directly by the agency.
Obama Administration to Focus on Holding Contractors Accountable
At least that is the conclusion reached by a panel acquisition experts hosted by the Association for Federal Information Resources Management. All of the panelists believe that contractors will receive more scrutiny than during the Bush administration which focused more on Agency accountability. The contractor misconduct database mandated by the 2009 National Defense Authorization Act is being developed. Panelists expressed concern about the possibility of contractors being included in the database for little more than “technical” violations but all agreed that it is here to stay.
The importance of contractor accountability was recently emphasized by the new FAR provision that requires contractors to adopt a code of conduct and a compliance program. It should be noted that this provision was adopted at the urging of the Bush Justice Department. Now that we have a new administration, it is even more important for contractors to have a robust compliance program. Every precaution should be taken to ensure that the contractor is complying with the terms of the contract as well as the laws and regulations governing Federal procurement. Though there is never a good time to have an ethical or compliance failure, this is an especially bad time.
Resolution #1: We will Strengthen our Employment Eligibility Verification Procedures (updated 1/28/09!)
As Government contractors enter the new year, they will encounter two significant changes to the employment eligibility verification requirements. The first change is that almost all Government contractors will be required to use E-Verify, the Government’s on-line employment verification system, for all new hires and for any existing employees assigned to work on Government contracts. The E-Verify requirement will be added to most Government contracts starting on January 15, 2009. For more information on E-Verify, please see our previous blog posting Program Launching on January 15th Will Require Government Contractors to Verify Employee Work Eligibility Status
The second change is that the I-9 form has been revised. Among other changes, expired documents will no longer serve as acceptable documentation of employment eligibility. The new I-9 form must be used starting February 2, 2009. For more information regarding the new I-9 form, please click here.
Late Breaking News (1): Continue reading »
Feds Create Self Dislcosure Websites and Forms
The new ethics and compliance regulations require contractors to disclose certain potential criminal violations to the Government. In order to facilitate such disclosures, the Inspector Generals for both GSA and DoD have developed web-sites and disclosure forms. The DoD website may be found at http://www.dodig.osd.mil/Inspections/IPO/voldis.htm. The GSA website is located at http://oig.gsa.gov/integritycover.htm. These web-sites contain instructions for submitting the required disclosures along with a sample disclosure form.
GAO Establishes Hotline for Reporting Small Business Fraud and Abuse
The General Accountability Office (GAO) has established an E-Mail hotline so citizens can report potential fraud and abuse in the Historically Underutilized Business Zone (HUB Zone), the Service Disabled Veteran-Owned Small Business, and the 8(a) programs. Anyone, including a competitor can report potential fraudulent activities in any of these programs by sending an e-mail, with as much information as possible to smallbizfraud@gao.gov. GAO is especially interested in these programs after several recent reports concluded that the programs were vulnerable to abuse. In a “sting” operation, GAO was easily able to register 4 fictitious firms into the HUB Zone program. Most recently, GAO discovered that 10 firms, that were ineligible for the HUB Zone preferences received more than $100 million in HUB Zone awards in 2006 and 2007.
FAR – Audits: AICPA National Construction Industry Conference Follow-Up
Aronson & Company had the opportunity to present at the AICPA National Construction Industry Conference on the topic of Federal Acquisition Regulation – Audits. Two questions posed during that presentation are answered here.
- Question 1: “What should be included in labor burden? How should contractors charge for bonuses?”
- Question 2:”What is paid for workers’ compensation insurance, is it actual cost (annual premium minus rebates and discounts) or simply the annual premium amount?”
Look for these topics and much more in future Aronson & Company events and future blog postings. We are leading our clients to total harmony, total solutions, and total success in the government marketplace. For more information please contact Nicole Mitchell at 301.222.8231, nmitchell@aronsoncompany.com, or post a comment.
DOD Requires More Justification for Time and Materials Contracts
DOD has amended the Defense Federal Acquisition Regulation Supplement (DFARS) to increase the review and documentation requirements pertaining to the use of Time and Materials (T&M) contracts. Henceforth, prior to the award of a T&M contract or task order the contracting officer must prepare a determination and findings (D&F) that contains sufficient facts to show that no other contract type is suitable. At a minimum, the D&F must (1) include a description of the market research conducted, (2) establish that it is not possible to estimate the extent or duration of the work or accurately estimate its costs and (3) show that steps have been taken to minimize the use of T&M contract type. Such steps might include using the T&M type for just one line item, or limiting the duration or value of the contract while gathering the data necessary to ultimately procure the requirement using another contract type. Lastly, the D&F must describe the actions planned to minimize the use of T&M contracts for future procurements of the same services.
Also, Indefinite Delivery, Indefinite Quantity (IDIQ) contracts that allow for T&M orders must also allow for orders on a fixed price or cost type basis. In order to issue an IDIQ contract for that only allows T&M task orders, a D&F must be prepared and approved by the contracting officer’s manager.
Here is a link to the new rule. http://edocket.access.gpo.gov/2008/E8-27780.htm
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- A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause
- Emerging Small Businesses: To Grow Your Business, You Must Plan For Growth
- Government Contracting: Look Before You Leap!
- GSA Schedules – Strategies for Success
- New Employee vs. Independent Contractor Considerations
- Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications
- The GSA Schedule: Your Ticket to the Federal Market (May 2010)
- The New FAR Codes of Conduct and Compliance Program Provisions
- The Seven Deadly Sins (of contract compliance)