Most GSA Schedule Contract holders are now required to adhere to additional compliance requirements due to new FAR clause 52.203-13 “Contractor Code of Business Ethics and Conduct”. This FAR clause has been added to most GSA Schedule Contracts and requires affected contractors to a adopt a Code of Conduct for all employees, implement a compliance program and self-report certain ethical violations of the Code to the Government. Large businesses are also required to implement a robust set of internal controls.
The “Contractor Code of Business Ethics and Conduct” FAR clause is not required to be added to pre-existing contracts nor is it required for contracts of less than $5 million. So the addition to GSA Schedule contracts has generated some controversy. For more information on the nature of this clause and the issues involved in applying it to GSA Schedule contracts please read Tom Marcinko’s latest article: A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause. Continue reading »
If your company has ever received an order from a Federal Contractor requiring your GSA rates, you may have wondered…can they really do that – and – if they can, am I violating my Basis of Award? In accordance with FAR Part 51.1, Contractor Use of Government Supply Sources, contractors can be given the authority to make purchases against Federal Supply Schedule (FSS) contracts on behalf of the Government.
This permission was previously restricted to cost-reimbursable contracts and limited scenarios “determined to be in the best interest of the Government.” Recently, however, a deviation was issued to FAR Part 51 expanding the circumstances in which contractors can purchase off other companies’ GSA Schedule contracts, which is quickly being incorporated into the GSA Schedule Solicitations. So, when can another contractor purchase off your GSA Schedule and what are the pricing and reporting implications? Continue reading »
It is axiomatic that “inherently governmental work” cannot be outsourced to contractors. However, applying this principal in practice has proven to be very difficult. The Office of Federal Procurement Policy (OFPP) has issued a draft policy letter designed to provide guidance on what work is considered inherently governmental and thus cannot be performed by contractors.
OFPP proposes to use the inherently governmental work definition originally used in the 1998 Federal Activities Inventory Reform Act. Under this law, inherently governmental work is defined as ” work that is so intimately related to the public interest as to mandate performance by Federal employees.”
This definition is vague and subject to various interpretations. To provide more specificity, OFPP is proposing to retain current list of inherently governmental work set forth in FAR 7.5. For work not listed in the FAR, OFPP is proposing several “tests” as a means to help agency officials decide if the work can be outsourced. These tests include the “nature of the function” test which involves the exercise of sovereign power and the “discretion” test which asked whether the contractor will be in a position to commit the government to a course of action.
OFPP also proposes to strengthen the oversight of contractors performing activities that are closely related to inherently government work. In addition, a new category “critical function” would be established to help agencies build a core internal structure to management their core missions.
Comments on the draft Policy Letter are due by June 1, 2010.
Beware, you may be overbilling for airfare costs if you haven’t been closely watching the travel regulations lately. A regulation revision, FAR 31.205-46(b), related to the recoverability of airfare costs aimed to resolve certain ambiguities and may result in lower recoverable amounts. The new rule provides that airfare costs in general, only are allowable to the extent the costs do not exceed “the lowest priced airfare available to the contractor.” Thus, under the new rule when contractors have obtained discounted airfare prices not available to the general public, only the discounted airfare only is allowable. The revision goes on to state that increased costs for refundable, versus non-refundable, airfare generally are unallowable.
Contractors therefore should update travel policies and procedures to reflect both the new limit of the lowest priced airfare available to the contractor and that increased costs for refundable tickets are unallowable. Contractors also should ensure that travel policies and procedures are followed when scheduling travel.
A likely result of this revision is increased focus by the DCAA and other government auditors on both allowability of airfare and contractor policies and procedures for scheduling travel. A&C can provide assistance in initiating or updating your travel policies. Contact Hope Lane at email@example.com or call at 301-231-6266.
Per Section 8116 of the 2010 Defense Appropriations Act, as a condition of receiving Appropriation Act funded contracts in excess of $1 million, contractors can not require employees or independent contractors to submit civil rights claims or claims of sexual assault or harassment to binding arbitration. The prohibition even applies retroactively to existing employees and independent contractors who may have already signed employment contracts requiring mandatory arbitration. The law also requires prime contractors to certify by June 17, 2010 that all of their covered subcontractors are in compliance with the requirement.
This provision is known as the “Franken amendment” after Senator Al Franken (D-MN) who sponsored the legislation and became effective on February 17, 2010. In a memorandumof the same date, Shay Assad, Undersecretary of Defense for Procurement and Acquisition Policy instructed all Contracting Officers to modify existing contracts that are expected to receive 2010 appropriations by adding a new DFARS clause 252.222-7999. The clause will be required in both contracts and task orders including GSA schedule task orders, though contracts for commercial items are exempt.
Service providers accustomed to 3 – 4% annual rate escalations on multi-year contracts may be surprised by the rate escalation at their next negotiation. Nationwide, economic conditions have led to dramatic decreases in the Employment Cost Index (ECI), a survey conducted by the Bureau of Labor Statistics that tracks changes in private sector compensation which is used by Federal agencies when negotiating out-year escalations. This, accompanied by President Obama’s executive order holding federal civilian 2010 pay raises at 2.0%, and the 1.4% pay raise proposed in the 2011 budget, will impact Contracting Officers’ negotiation stance.
Federal contractors, especially those in the Washington, D.C. metro area less affected by the recession, who continue to give 3 – 5% pay raises to attract and retain employees do this at risk of taking a hit to their bottom line. Additionally, the 2010 package extends the A-76 moratorium on new public-private competitions for federal work and requires non-DoD federal agencies to annually review whether work now being done by private contractors should be insourced to federal employees. Need assistance with government contract negotiation? Contact Aronson & Company’s Government Contracts Solutions Group.
The final rule, issued in the February 8, 2010 Federal Register governs eligibility to participate in the Veterans Affairs Department (VA) set-aside program for veteran-owned small businesses (VOSB) and service-disabled veteran-owned small businesses, (SD/VOSB). The set-aside program was established in December, 2009. This preference program requires the VA to set-aside procurements valued between $100,000 and $5 million dollars for SD/VOSB or VOSB when two or more such firms are likely to bid. The program also allows contracts to be awarded to such firms on a sole source basis. More details on the VA set-aside program can be found in a previous blog.
The rule states that owners may only have one company in the set-aside program at a time and that the owner must work full time in the business. To participate in the set-aside program, a company must register with the VetBiz.gov Vendor Information Pages database and verify that they meet all of the eligibility requirements. Continue reading »
According to the statistics recently released by the General Accounting Office (GAO), 1,989 protests were filed in calendar year 2009, a 20% increase over 2008. Some have conjectured that the economy has motivated more losing bidders to file protests. However a significant part of the increase is due to changes in the regulations which allow different types of procurements to be protested to GAO. Protests involving task order awards, A-76 outsourcing decisions, and Transportation Security Administration procurements accounted for a large percentage of the increase.
Though the number of protests are up, the percentage of protests sustained by GAO actually decreased. GAO decided 18% of the protests in favor of the protested, compared to 21% in 2008. This is a sign the increase in protests is not attributable to an increase in poorly conducted procurements. Of course, a protest can be beneficial to contractors even if they don’t technically win. Often incumbent contractors protest and are able to continue work on their contract while the protest is being decided. That can result in months of additional revenue and profit even if they ultimately lose the protest.
President Obama continues to target tax delinquent Government contractors. In December 2008 the FAR was modified to require offerors to certify whether or not they owed any delinquent taxes. See FAR 52.209-5. On January 20, 2010, the President ordered the IRS to review the contractor tax payment certifications for accuracy. The IRS and OMB as well as other Federal agencies were further tasked to develop a mechanism to prevent tax delinquent contractors from receiving federal contracts. Contractors can already be debarred or suspended for failure to pay taxes. See FAR 9.406-2 (b) (5) (v). To improve both compliance and enforcement, the President wants the IRS to be able to share tax information with other Federal agencies, perhaps in a shared database.
The bottom line is that if you dance to the music, you should pay the piper. It seems axiomatic to say that if you make your living off of tax payer dollars, you should pay your own taxes. And definitely don’t certify that you have paid your taxes if in fact you have not.
If you have delinquent taxes or tax return filings, it is important to get them current before it costs you your contract. For help in these matters, please contact Aronson & Company’s Tax Group directly: Mark Gossart, Officer: (301) 231-6278.
A proposed rule released by the Department of Defense (DoD) on January 15, 2010 will provide contracting officers the authority to withhold payments on cost reimbursable type and time and materials type contracts as a response to address business system deficiencies. The draft rule adds a clause to contracts requiring contractors to certify that they have no major defects in their contractor business systems defined as: accounting systems, estimating systems, purchasing systems (CPS), earned value management systems (EVMS), material management and accounting systems (MMAS), and property management systems. This DoD’s proposal to amend the Defense Federal Acquisition Regulation Supplement (DFARS), continues the crack-down on contractors increasing regulations and potential penalties for contractors with deficient business systems.
The draft rule identifies contractor business systems and internal controls as the first line of defense against waste, fraud, and abuse of tax dollars. The objective of the rule is to improve the effectiveness of Defense Contract Management Agency (DCMA) and Defense Contract Audit Agency (DCAA) oversight of contractor business systems. The requirements of the rule will apply to entities contractually required to maintain one or more of the defined contractor business systems listed above. If deficiencies are identified in the systems and the contractor does not implement corrective action within 45 days, the proposed rule allows contracting officers to withhold up to 10% of each of the Contractor’s payments on cost reimbursement, time and materials, and labor hour type contracts for each system up to a maximum of 50%. Continue reading »
What We Are Writing
- 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)