Compliance

Once again a contractor covered by the Davis-Bacon Act has been penalized for not maintaining adequate payroll records. In Pythagoras General Contracting Corp. v. Dep’t of Labor, ARB Nos. 08-107 & 09-007, ALJ No. 2005-DBA-14 (Feb. 10, 2011) [pdf], the DOL’s Administrative Review Board upheld a determination to debar the contractor from getting any future federal contracts for up to three years and increasing the monetary penalty significantly.

The Office of Federal Contract Compliance Programs has been busy the past few months and anticipates heightened activity in the months to come. New OFCCP initiatives include: (1) asserting jurisdiction over healthcare providers, (2) revamping efforts to identify workers misclassified as contractors; (3) proposing new affirmative action regulations for construction contractors; and (4) increasing enforcement…

In National Aeronautics and Space Administration v. Nelson, No. 09-530 (U.S. Jan. 19, 2011) [pdf], the Supreme Court concluded that employees of government contractors can be subjected to the same background checks conducted on federal civil servants, without violating the privacy protections in the Constitution. The decision specifically rejects a challenge to questions about the past use of illegal drugs, including whether prospective contractor employees had previously received treatment or counseling for drug use.

One response to the shortage of experienced federal contracting personnel and qualified DCAA auditors is to turn the job over to the public at large.  That seems to be the plan when it comes to the new federal contractor transparency initiatives, the most recent of which is the rule that will make the Federal Awardee Performance and Integrity Information System (FAPIIS) available to the public after April 15, 2011.  Like the business model adopted by Wikileaks, the concept appears be that posting selected contractor performance data on the internet will be like hiring 300 million inspectors general.  As with many government initiatives, the results are likely to cost more and achieve less than anticipated.

Organizational Conflicts of Interest arise when a contractor’s work on one government contract gives it an unfair advantage in competing for a second contract or when it impairs the contractor’s ability to give impartial advice to the government.  Although FAR 9.5 offers general guidance on OCIs, GAO guidance on the issue is not currently reflected there.  In April 2010, the Defense Department proposed sweeping revisions to the DOD FAR Supplement to incorporate GAO caselaw addressing OCIs and to make it clear that the new OCI rules would apply to all DOD procurements. 75 Fed. Reg. 20954 (Apr. 22, 2010).  Final regulations were published December 29.  75 Fed. Reg. 81908 (Dec. 29, 2010).

Congress recently passed legislation (Section 893 0f the National Defense Authorization Act of 2011) requiring the Secretary of Defense to develop a program ensuring that “contractor business systems” provide timely, reliable information for the management of Department of Defense programs.  “Contractor business systems” include accounting systems, estimating systems, earned value management systems, material management and accounting systems, and property management systems. 

The program required by this legislation will set requirements for contractor business systems, establish a process for reviewing contractor business systems, and provide for disapproval of any contractor business system that has a significant deficiency.  If a contractor business system is disapproved, DoD will work with the contractor to develop a corrective action plan.  Until the system is approved, DoD may withhold up to 10 percent of progress and other payments on cost type contracts with contractors that are covered by the Cost Accounting Standards.