Did the U.S. Postal Service’s lack of procurement regulations inadvertently help USPS officials carry out a $13 million bribery scheme over several years?  Five Postal Service employees were indicted in May 2011 by a Detroit, MI grand jury for taking bribes and steering as much as $13 million in vehicle maintenance work to a private contractor. Could this scheme have been prevented, or caught earlier, if USPS had not abolished its procurement regulations in 2006?

Contributed by Husch Blackwell Partner Bert Wolf, Esq.

Government contractors are relieved that they won’t immediately face having 3% of their invoices withheld as an advance against future tax liability. The IRS’s final rule implementing the 3% withholding tax won’t go into effect until 2013.  Absent a material modification, contracts executed by December 31, 2012 will be exempt from the withholding tax entirely, at least until January 1, 2014. But that isn’t the end of the story. Here is a bit of the background on the source of the 3% withholding tax, why it has been delayed, and some thoughts on why it’s not a great solution to the problem at hand.

Developments in the OFCCP’s investigation of compensation disparities at United Space Alliance, LLC are worthy of consideration. During a 2009 desk audit, OFCCP conducted a standard threshold test of United Space Alliance’s compensation data.  Although this audit uncovered no indicators of pay discrimination, OFCCP conducted additional tests of the data, commonly known as the “pattern analysis” and the “30 and 5 Refinement” tests. These tests revealed potential pay bias, and OFCCP requested more extensive compensation data to examine the question more closely. The case begins when United Space Alliance refused to comply with OFCCP’s request.

During last week’s “Meet the Construction Chiefs” program put on by Professional Women in Construction, the new Director of Project Delivery for the National Capital Region gave a candid presentation on his plan for overhauling GSA’s procurement of construction services. Andrew Blumenfeld’s plan includes identifying the contractor’s proposed completion schedule as an evaluation factors and encouraging fixed-price line items for acceleration.

More legislation to address the recent high-profile abuses of the SBA contracting system is in the works. A bipartisan group led by Senator Olympia Snowe (R-ME) has introduced legislation called the Small Business Contracting Fraud Prevention Act of 2011 [pdf]. Among other things, the bill would amend the provisions of the Small Business Act relating to misrepresentations as to the status of companies as small business concerns, including HUBZone, 8(a), woman-owned, and service-disabled veteran-owned small businesses.

What’s more likely to sustain the default termination of your government contract—poor performance on your current contract or omitting a fact about your prior employment? According to a recent decision by the Postal Service Board of Contract Appeals, the latter is enough. A contractor’s omission of key prior employment history was, by itself, a sufficient basis to terminate the contract for default.

On April 26, 2011, the Office of Federal Contract Compliance Programs formally proposed regulations to update contractor affirmative action obligations concerning veterans. The proposed rules impose additional obligations on covered federal contractors and subcontractors. For the first time, OFCCP is seeking to impose quantitative measurements to assess the hiring of protected veterans, self-identification invitations…

Do you think that small business contracts and subcontracts have been going to contractors that do not qualify as small businesses? If so, you may be interested in the new legislative changes intended to discourage and penalize fraud in small business contracting. The changes are in the Small Business Jobs Act of 2010, signed by the President on September 27, 2010.