Not your typical federal agency, the U.S. Postal Service is an “independent establishment” of the executive branch of the United States government. (39 U.S.C. § 201.) As a result, many federal procurement rules do not apply to the Postal Service. Here are the major differences between USPS’s purchasing policies and those of other federal agencies:
- Not only is the FAR inapplicable, but the Postal Service’s own special purchasing rules were not issued as regulations. Instead, the agency considers its Supplying Principles and Practices manual to be “advisory” and non-binding.
- While the rest of the federal government is bound by the Competition in Contracting Act and must obtain “full and open competition,” the Postal Service has no such mandate. When it competes a requirement, it need only obtain “adequate competition whenever appropriate.”
- All purchases are conducted as negotiated procurements; there are no Invitation for Bids (IFBs). All proposals are evaluated on a “best value” basis.
- The Truth in Negotiation Act (TINA) does not apply to the Postal Service. The Postal Service, however, sometimes employs a contract clause that imposes a similar requirement. TINA’s statutory exceptions therefore do not apply, so the Postal Service could seek cost information when other agencies would be prohibited from doing so.
- There are no mandatory set-aside procurements for small, disadvantaged businesses, and USPS does not participate in the SBA’s Section 8(a) program. The Postal Service does actively seek diversity in its procurements, and tracks contract and subcontract awards to small, minority-owned, and women-owned businesses.
- Prequalification of contractors is regularly used by the Postal Service to limit competition to prequalified suppliers.
- Postal Service acquisitions are made with agency funds, and thus there are no legal restrictions on multi-year procurements or limitations imposed by Congressional funding.
- The Postal Service can seek title to intellectual property, not just unlimited rights. The Postal Service may also limit contractors from selling intellectual property developed for USPS to postal competitors.
- In the proposal evaluation and award process, there are no competitive range determinations or regulations governing Best and Final Offers (BAFOs). The term “discussions” has its ordinary dictionary meaning, and discussions may be held multiple times with one offeror and less frequently with other offerors. Revised proposals need not be submitted on a common cut-off date. Once a prospective awardee is selected, the Postal Service can conduct pre-award negotiations with the selected offeror.
- The GAO has no authority to consider protests involving Postal Service purchases. Instead, the Postal Service has its own internal “disagreement” process and a Supplier Disagreement Resolution Official (SDRO). The SDRO, however, is not independent of Supply Management and does not make any documentation available to the protester. Protests can also be brought before the U.S. Court of Federal Claims.
“Long-Life Vehicles” turned out to be a fully appropriate name for the fleet of 163,000 carrier vehicles the Postal Service first bought in 1987. Now looking to replace them, the Postal Service recently issued a Request for Information and Sources Sought notice for its “Next Generation Delivery Vehicle” (NGDV). Companies have until March 5, 2015 to submit their comments and pre-qualification responses. The Postal Service will then determine which companies will be eligible to receive the RFP for competitive prototype development.
The Postal Service anticipates making a single award to a supplier for up to 180,000 vehicles. With an anticipated price range of $25,000 to $30,000 per vehicle, that works out to a contract valued between $4.5 and $5.4 billion. But don’t expect the Federal Acquisition Regulation (FAR) and other bedrock federal procurement laws to apply to this purchase. The Postal Service is exempt from a wide-range of federal procurement rules and has its own purchasing policies called the Supplying Principles and Practices manual.
While the NGDVs are expected to share some design similarities with the current Long-Life Vehicle, the draft specifications describe many enhancements. The new vehicle must accommodate more package volume, have improved ergonomics and functionality, obtain better fuel economy, and produce lower harmful emissions. And, of course, neither snow nor rain nor gloom of night should stay these vehicles from the swift completion of their appointed rounds. If all goes to plan, the first delivery of 3,000 vehicles will be making their rounds by January 2018.
Despite getting a rare Writ of Mandamus from the D.C. Circuit Court of Appeals establishing that its internal investigations were covered by the attorney-client privilege, Kellogg Brown & Root must still turn them over. As predicted in our earlier posts on Barko v. Halliburton, Judge James Gwin has ruled that KBR waived the attorney-client privilege that would otherwise have shielded KBR’s internal investigation documents from discovery. His rationale is reflected in three opinions published in November and December 2014.
In a June 2014 opinion, the D.C. Circuit held that KBR’s internal investigation documents would be privileged if obtaining or providing legal advice was “a primary purpose of the communication, meaning one of the significant purposes. . . .”
But the Court of Appeals also invited the District Court to consider additional arguments that might have been timely asserted as to “why these documents are not covered by either the attorney-client privilege or the work product doctrine.”
That is what Judge Gwin did. When the case returned to the District Court, Barko sought “interviews, reports, and documents that KBR prepared while investigating tips KBR had received that involved the same allegations found in Barko’s complaint.” Barko relied on four arguments to support his claim that KBR had waived any attorney-client privilege or work-product protection over the documents:
- KBR put the contents of the documents at issue in the litigation;
- KBR’s Rule 30(b)(6) witness reviewed the privileged documents prior to testifying at his deposition;
- The documents fell under the crime-fraud exception to the privilege; and
- KBR had failed to list these documents on a privilege log when responding to an earlier administrative subpoena from the Defense Criminal Investigative Service (“DCIS”).
In an opinion issued on November 20, 2014, Judge Gwin accepted the first two arguments.
Submitted by Husch Blackwell Associate Kayt Kopen
Federal contractors will soon need to update their Equal Employment Opportunity policies and their Affirmative Action Plans. According to an announcement by DOL’s Office of Federal Contract Compliance Programs, federal contracts and subcontracts awarded or modified after April 8, 2015, must include new contract language prohibiting discrimination on the basis of sexual orientation or gender identity. The new rule implements Executive Order 13672, signed by President Obama on July 21, 2014.
For most purposes, the new rule requires contractors to treat sexual orientation and gender identity just like race, color, religion, sex, and national origin. It prohibits discrimination and segregation, for example, and requires contractors to take affirmative action to ensure the fair treatment of job applicants. Contractors will be required to flow down the new requirements to their subcontractors, to put up new notification posters, and to refer specifically to sexual orientation and gender identity in job postings.
But not all of the requirements carry over directly from existing law. Contractors will not be required to include sexual orientation or gender identity in their affirmative action placement goals or to collect or analyze data to quantify their compliance. Contractors also will not be required to ask individuals to identify themselves on the basis of sexual orientation or gender identity.
DOL’s list of answers to frequently asked questions about the new rule is available here.
OFCCP’s five-year moratorium on enforcement actions against Tricare providers (Apr. 14, 2014)
Affirmative action for protected veterans and individuals with disabilities (Sept. 19, 2013)
TRICARE hospitals and pharmacies are not subcontractors (Jan. 9, 2012)
OFCCP’ push for a 7% disabled workforce (Dec. 27, 2011)
Contractors receive about $50 billion a year through GSA multiple award schedule contracts. With that level of spending, it is easy to see why GSA has adopted policies and procedures that allow it to secure the best possible pricing for each one of its schedule contracts.
Initially, GSA uses discounts, terms, and conditions that contractors offer to other customers to negotiate “most favored customer” pricing.
But negotiated prices stated in a schedule contract are not necessarily fixed for the entire term of the contract. The contractor remains subject to the Price Reductions Clause (GSAR 552.238-75), which imposes a duty to report certain changes in its commercial pricing terms. Under some circumstances, the PRC allows a downward adjustment in the contractor’s fixed prices.
Two triggers for adjustments under the PRC
Two types of events will trigger the Price Reduction Clause. The first is relatively straightforward: GSA and the contractor base the federal supply schedule pricing on a commercial price list, catalog, schedule, or similar document. The contractor later reduces the list price or otherwise revises the price list or offers more favorable pricing, discounts, or terms to another customer. When that occurs, the contractor must offer the same reduced price, discount, or better terms to the government.
The second situation is a bit trickier. The PRC is triggered when the contractor makes a pricing change that disturbs the relationship between the government’s pricing and the pricing offered to the customer or customers whose pricing terms are established as the “basis of award.”
Calling the Voyager fuel card program unmanageable and uneconomic, the USPS Office of Inspector General recommends that the Postal Service use another method to manage fuel under its HCR contracts. In its advisory report dated September 30, 2014, the OIG concludes that the Voyager fuel card program has cost more money that it saved and discourages fuel efficiency. The Postal Service spent $5.1 billion for 1.6 billion gallons of fuel for Highway Contract Route (HCR) contracts under the program over the last nine years.
DoD photo by U.S. Air Force Master Sgt. Adrian Cadiz
The Senate passed the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 [pdf] on Friday, December 12, 2014. President Obama is expected to sign the bill into law. The $585 billion bill authorizes the Pentagon’s activities in FY 2015. It includes $521.3 billion in base defense spending and another $64 billion in war funding. Here is a summary of the procurement reform initiatives that will be relevant to contractors in the upcoming year:
- Cyber incident reporting for operationally critical contractors. Section 1632 of the 2015 NDAA directs the Secretary of Defense to designate and notify “operationally critical contractors,” a term narrowly defined in the bill. After notification, designated contractors will be required to report to the Department of Defense each cyber incident with respect to any network or information system of such contractor. Reports must include: an assessment of the effect on the contractor’s ability to meet the Department’s contractual requirements; the technique used in the cyber incident; any sample of malicious software obtained; and a summary of information compromised by the incident. Despite the disclosure requirement, section 1632 provides for protection of contractor trade secrets and confidential commercial or financial information. It also limits the dissemination of information obtained to relevant entities and agencies.
- Enhanced authority for non-DOD Chief Information Officers. Section 831 of the NDAA increases the role of Chief Information Officers of agencies other than the Department of Defense. It provides that an agency may not enter into a contract for information technology unless the contract has first been reviewed and approved by the agency’s Chief Information Officer. The head of each covered agency must ensure that its Chief Information Officer has a significant role in all annual and multi-year planning, budgeting, and reporting related to information technology. The bill requires the Director of OMB and the Chief Information Officers of appropriate agencies to increase the efficiency and effectiveness of information technology investments and to develop opportunities to consolidate the acquisition and management of information technology services. The Chief Information Officer of each covered agency is directed to inventory agency data centers and develop a multi-year strategy for consolidation and optimization of those data centers inventoried.
- DOD CIO positions consolidated. Section 901 of the 2015 NDAA incorporates a DOD proposal to combine the positions of Chief Information Officer and Deputy Chief Management Officer into the position of Under Secretary of Defense for Business Management and Information. The new Under Secretary will oversee business operations, personnel, and IT projects and will be appointed by the President with the advice and consent of the Senate. This change will not take place until the next administration. Continue Reading
The need for strong security measures to protect sensitive government data from hackers has never been more intense. In November alone, the federal government suffered at least four breaches of government information systems, including cyber-attacks on the U.S. Postal Service, the State Department, NOAA, and the White House. What is not discussed in the news reports is the fact that the much of the burden of securing government data falls on government contractors.
The federal government has struggled to adopt a unified and mandatory approach to contractor data security. Each agency has taken a separate approach to adopting cybersecurity requirements, for example DoD recently adopted a new set of regulations governing unclassified “controlled technical information.” Many contractors find the current requirements confusing and at times conflicting between agencies.
In an effort to address this problem, the Department of Commerce National Institute of Standards and Technology has released a draft version of NIST Special Publication 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations [pdf].
The new NIST guidance is directed at contractors that already have information technology infrastructure and associated security policies and practices in place. The final version of Special Publication 800-171 will attempt to synthesize the federal government’s recommendations to ensure the confidentiality of sensitive federal information stored on contractor computers and information systems. Special Publication 800-171 is part of a three-part plan that will ultimately make these recommendations mandatory. The other parts include a rule proposed by the National Archives and Records Administration—currently under review by OMB—and the eventual adoption of a FAR clause that will apply the requirements of the NARA rule and Special Publication 800-171 to all federal contracts.
Six years from accrual. Three years from discovery. And never longer than ten years.
U.S. Air Force photo/Tech. Sgt. Ryan Labadens
Despite the statutory language imposing time limits on the government’s pursuit of False Claims Act violations, courts continue to bend over backwards to give the government more time to assert them. The decision in United States ex rel. Sansbury v. LB&B Associates, Inc., No. 07-251 (D.D.C. July 16, 2014) [pdf] allowed the government a total of 14 years from the date of the first alleged false claim.
We hope that the Supreme Court will restore some sanity to the enforcement of the FCA limitations period in its decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497. We discuss the issues in that case in an earlier post. But we still have to wait a while for that. Argument in the Carter case is scheduled for January 13, 2015.
The FCA limitations and tolling framework
Sansbury is an unusual case that is based on the intricacies of the FCA’s limitations and relation-back provisions. Before getting into the facts of the case and the holding, here’s a breakdown of those provisions.
According to the text of the False Claims Act (31 U.S.C. § 3731(b)), the limitations period applicable to civil FCA actions is the later of: (1) 6 years after the date on which the violation is committed; or (2) 3 years after the date when the material facts giving rise to the cause of action are known or reasonably should have been known by the U.S. official responsible for acting on FCA violations (i.e. DOJ official), but in no event more than 10 years after the date on which the violation is committed.
But these may not be real deadlines. Even without the tolling that that may be available under the Wartime Suspension of Limitations Act, the government may get several additional years to make a decision on whether to intervene in a whistleblower’s qui tam suit. If the whistleblower’s original action is timely under § 3731(b), the government’s intervention complaint “relates back” to the date of the initial complaint. Even if the government takes three years to file its intervention complaint, it is deemed to have been filed on the date of the original suit. The relation back provision appears in 31 U.S.C. § 3731(c).
Capital spending is making a comeback at the Postal Service from dangerously low levels. The Postal Service plans on tripling its capital spending commitments in Fiscal Year 2015. Under its recently issued Integrated Financial Plan for FY 2015, the Postal Service projects $2.2 billion in new capital commitments. This contrasts sharply with capital spending over the last five years, which was annually below $1 billion.
Capital spending commitments will be concentrated on previously deferred investment needed for aged and end-of-life equipment. Planned spending includes $800 million for mail processing equipment; $500 million for vehicles; $500 million for customer service and support equipment; and $400 million for facilities.
Total capital spending in FY 2014 was just $700 million, an anemic level for an entity that had $66 billion in total annual expenses. Postal Service capital spending has been limited to cash on hand as the agency long ago reached its statutory $15 billion debt limit. The agency also owes the U.S. Treasury $22 billion for unpaid retiree health care pre-funding mandates.
But the outlook for revenues in FY 2015 allows room from increased capital spending. Based on a projected 13 percent increase in package volume, and a moderate rise in Standard Mail volume, the Postal Service projects a $1.8 billion revenue increase from last year, with annual total revenue of $69.6 billion.
The Postal Service also expects to spend slightly more on transportation, supplies and services, and rents and utilities. Spending in these areas will increase from $13.3 billion to $14.9 billion. Transportation is projected to increase by $200 million to $6.6 billion as savings from transportation cost-reduction initiatives are offset by costs associated with network consolidations and increased volume.