As most federal contractors know, the standard FAR clauses grant the government the right to default a contractor for delay. These same clauses, however, protect contractors where the delay is “excusable” and involve “unforeseeable causes beyond the control and without the fault or negligence of the Contractor.” Examples listed in the clauses include, among other
Will e-commerce portals replace the Federal Supply Schedules?
The General Services Administration estimates the size of the federal market for commercial products to be about $50 billion a year. Manufacturers and distributors of commercial products have seen GSA’s multiple award schedule contracts as a good way to way to access federal customers. But a GSA schedule contract does not guarantee sales and the process of obtaining and adhering to such a contract presents its own headaches.
Soon there will be a better way.
Section 846 of the National Defense Authorization Act for FY 2018 establishes a program that will allow federal agencies to purchase commercially available off-the-shelf (COTS) items through commercial e-commerce portals that are currently available only to the private sector. As long as the procurement is under the new $250,000 Simplified Acquisition Threshold, COTS products (not services) will be available for purchase Government-wide, presumably without additional competition and without a lengthy list of FAR clauses incorporated by reference.
Under the program, GSA will enter into “multiple contracts” with “multiple e-commerce portal providers.” To the maximum extent possible, the Government will adopt and adhere to standard terms and conditions established by the e-commerce portals themselves.…
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When can a contractor protest a task order at GAO?
GAO’s recent decision in HP Enterprise Services, LLC illustrates the challenges resulting from the recent changes to GAO’s task order protest jurisdiction. It also provides a useful overview of the current scope of GAO’s jurisdiction over such protests. HP Enterprise Services, LLC—Reconsideration, B-413382.3 (January 26, 2017).
Here is a bit of background on the recent jurisdictional changes that led to the decision. GAO lost its jurisdiction over protests of civilian task and delivery orders valued at over $10 million on September 30, 2016. This was the “sunset date” established in the 2008 National Defense Authorization Act. GAO’s jurisdiction over such protests for military agencies or departments, or for protests alleging increased scope, period, or maximum value of the underlying contract, remained undisturbed in 2016.
For approximately three months, contractors had no forum (and therefore, no remedy) for protests of civilian task orders valued over $10 million. That changed on December 14, 2016, when the Government Accountability Office Civilian Task and Delivery Order Protest Authority Act of 2016 became law. See Public Law No. 114-779 (Dec. 14, 2016). This law restored GAO’s civilian task order protest jurisdiction to its pre-October 1, 2016 scope.
Less than two weeks later, the scope of GAO’s jurisdiction over task order protests changed yet again. On December 23, 2016, the 2017 National Defense Authorization Act became law. See Public Law No. 114-328 (Dec. 23, 2016). Although major changes aimed at limiting federal bid protests had been under discussion, most of the limiting provisions were not adopted. The 2017 NDAA did not change the $10 million threshold for protests of civilian agency task order awards. But it increased GAO’s jurisdictional threshold for military agency task order protests from $10 million to $25 million. Protests asserting that a task order award was improper because it exceeded the scope, the performance period, or the maximum value of the underlying contract can be filed without regard to the threshold.
HP gets caught in a jurisdictional trap
Like many government contractors, HP Enterprise Services was ensnared in these changes. On July 11, 2016, HP protested the award of a task order to CACI, Inc. The task order was issued by GSA, but it required the delivery of IT support services to DoD. GSA took corrective action soon thereafter, and the protest was dismissed as academic.
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Kingdomware decision gives new meaning to the words “government contract”
The Supreme Court’s June 2016 decision in Kingdomware Techs., Inc. v. United States, No. 14-916 (June 16, 2016), may significantly impact the meaning of the term “government contract” for years to come.
The case centered on a project for the Department of Veteran Affairs. When VA continually fell behind in achieving its three percent goal for contracting with service-disabled veteran-owned small businesses, Congress enacted the Veterans Benefits, Health Care, and Information Technology Act of 2006. See 38 U.S.C. §§ 8127 & 8128. The Act includes a mandatory set-aside provision that requires competition to be restricted to veteran-owned small businesses if the government contracting officer reasonably expects that at least two such businesses will submit offers and that the “award can be made at a fair and reasonable price that offers best value to the United States.” This is an iteration of the well-known “Rule of Two.”
When it published regulations implementing this statutory requirement, VA took the position that the set-aside requirements in § 8127 “do not apply to [Federal Supply Schedule] task or delivery orders.” 74 Fed. Reg. 64619, 64624 (2009). The Kingdomware case posed a direct challenge to this interpretation.…
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Increased government attention to Federal Supply Schedule pricing may soon have contractors sharpening their pencils
Contractors supplying goods or services to the government through Federal Supply Schedules should expect increased scrutiny of their pricing in the coming months. In a July 2015 report [pdf], GAO released the results of a year-long performance audit analyzing government competition and pricing practices for FSS orders. The report highlights inconsistencies across FSS procurements, including purchasers’ frequent failure to ask FSS contractors for discounts to list prices (required by FAR 8.405-4 for orders exceeding the simplified acquisition threshold).
The main issues identified in the GAO report are nothing new. GSA is already taking steps to address the inconsistent usage of the FSS system among buyers. In March 2015, GSA proposed a rule that would impose a new transactional data reporting requirement upon FSS vendors. (For an explanation of current Price Reduction Clause requirements, take a look at our discussion here.) The proposed rule is aimed at increasing transparency in pricing across government procurements, with the end goal of an overall reduction in prices paid for FSS supplies and services. While the rule is still pending, a number of the nearly three dozen comments submitted during the comment period reveal considerable opposition to the proposed changes. Regardless of whether the proposed rule is enacted, contractors can prepare to effectively contract through supply schedules in a few simple ways.
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A primer on pre-award protests of federal procurements
You read the agency’s solicitation and realize the specifications are written around a competitor’s product and your product does not qualify. You alert the government to the issue to no avail. Where do you turn? This can be the ideal situation to lodge a pre-award protest of the specifications.
What is a pre-award protest?
A pre-award specification protest challenges the agency’s description of the requirements contained in a solicitation or the ground rules under which the agency intends to conduct the procurement. Under the Competition in Contracting Act, a contracting agency is generally required to specify its needs and solicit offers in a manner that will achieve full and open competition, so that all responsible sources are permitted to compete. An agency generally may include restrictive provisions or conditions in its solicitations only to the extent necessary to satisfy the agency’s needs. 10 U.S.C. § 2305(a)(1)(A); 41 U.S.C. § 3306(a)(2)(B). When an agency’s solicitation contains restrictions that prevent a potential bidder from competing, potential bidders can protest that the solicitation improperly restricts competition.
Prevailing on this type of protest can be difficult because it requires the protestor to demonstrate that an agency acted unreasonably in describing its requirements, which is an area over which agencies are granted broad discretion. But the equities of such a challenge can be in the favor of the protestor because the protest seeks to expand competition, which ultimately should benefit the agency. The GAO recently sustained a pre-award protest of a Department of Veterans Affairs procurement for sterile foam dressings because the agency was unable to provide a reasonable explanation for a restrictive absorbency specification in its solicitation.
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Applying the Price Reduction Clause in GSA Schedule Contracts
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 552.238-81; formerly 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.”…
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Six contracting policy changes in the FY 2015 National Defense Authorization Act
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.
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Sustainable energy and the national defense
By Hal Perloff
Energy is a national security issue. The U.S. defense industry represents one of the world’s largest markets for energy, and the cost and availability of energy directly affects military capabilities and readiness. Department of Defense leaders are revamping how DOD uses energy and determining which fuels offer the best overall investment, prices,…
VA can freely use the Federal Supply Schedule after Kingdomware
The Veterans Administration can freely acquire goods and services from GSA’s Federal Supply Schedule, and it is not required to set-aside such procurements for veteran-owned small businesses (VOSBs) or service-disabled veteran-owned small businesses (SDVOSBs). Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, the VA is required to set aside procurements for…