The BDO GovCon Week Ahead - December 2019
December 23, 2019
No Shut Down, But No E-Commerce Portal – The Status of The Federal Market as The Calendar Year Draws to A Close: This time last year, contractors and their government customers were living with a partial government shut-down that would go on to be the longest in history. Some agencies and projects never caught up. The good news is that it appears that a shut down this year will be highly unlikely and, federal agencies will have their appropriations allocations at either the end of January or the start of February. This makes for a more stable year and enables at least some measure of planning. On the other side, GSA will not meet its goal of starting its much-anticipated e-commerce portal by year-end. The agency seems to be struggling with an amendment to the original RFP, despite it being promised by the middle of December. Offers will now be evaluated in the new year, and protests will likely have to be dealt with. It could be spring before a pilot program is up and running. Another inconsistent area in government acquisition is the stated desire of DOD officials to attract non-traditional contractors, often via non-traditional acquisition methods, to obtain innovative technology and solutions. At the same time, DOD’s Congressional overseers are putting new layers of requirements on new market entries and traditional contractors that drive up their cost of doing business and seem designed to keep the compliance community employed full time. Government business is good business for those who are knowledgeable and stay committed. It is not for the faint of heart. It will be interesting to see what we write about this time next year about 2020. Stay tuned.
Technology Modernization Fund Gets Boost To $150m: The appropriations package poised for Congressional passage at press time includes an extra $25 million for the Technology Modernization Fund (TMF), bringing the total amount of money available for innovative modernization projects to $150M. Agencies can access this no-year money through a business case process managed by the Office of Management and Budget and the General Services Administration. Money is allocated to approved projects to help start modernization efforts, but must be paid back by the agencies when the project is completed. This initiative allows funds to be used over and over by agencies needing seed money, or a catalyst to assist in upgrading their IT infrastructure. "The TMF remains a vital tool that federal agencies should continue to consider when identifying technological improvements for their day-to-day operations and replacing their costly and vulnerable legacy IT systems," said Congressman Jerry Moran (R-KS), a key supporter of the program. Agencies must go through an application process discussing the specifics of their intended use of the funds, timelines and, what metrics will be used to measure success. Contractors can assist their customers in putting together a package, but should be wary of providing so much help that they would be precluded from bidding on any resulting work. The fact that Congress keeps expanding the fund is a good barometer of its success.
Paid Parental Leave Could Be in Your Future: One feature of the Defense Authorization Act recently passed by Congress is the creation of 12 weeks of paid parental or family leave for federal civilian workers. This provision puts civilian feds on the same level as their military counterparts. This issue should be of high interest to government contractors, aside from the likelihood that key contacts may now spend more time out of the office. Expect there to be building pressure to extend this mandate to government contractors in future defense bills until it eventually passes. While this may not be an issue for some firms, others may find it financially unfeasible. Extending 12 weeks of paid leave to non-working employees can cause a strain on any business, especially given the critical role of key personnel. While many contractors already offer some combination of paid and unpaid leave, formulas vary widely and often reflect the relative size of the business as well as the specific type of work in which they are engaged. The Congressional Budget Office estimates that the financial burden on feds will be $8.1 billion over 10 years. Make no mistake, the move toward paid leave is inexorable. The unpaid federal leave movement achieved success in the late 1980’s and work has been underway ever since to convert it to paid leave. Now that this has been achieved, government contractors are almost certainly the next in line, before a larger movement to make it a requirement for all employers over a certain size. Make sure you keep an eye on developments here and coordinate your leave policies accordingly.
See You In 2020: This is the last week ahead until January 13, 2020. BDO wishes you a Happy Holiday Season and some time away from government procurement!
December 16, 2019
Merry Christmas! Congress May Pass All Appropriations Bills Before Leaving Town: Congress may provide a welcome Christmas gift to federal agencies and contractors in the form of final appropriations for the remainder of Fiscal Year 2020 (FY’20). While no deal has been struck, appropriators at press time were said to be as little as a few days away from reaching agreements on spending levels for all federal agencies. Border wall funding and treatment of ICE detainees remain sticking points, but appropriators report progress on those issues as well. Defense and civilian agency funding would generally increase under the agreement. If passed by December 20th, individual offices would receive their final FY’20 spending number at the end of January or beginning of February. Agencies would then be able to initiate new programs and plan for the remaining nine months of the fiscal year. Achieving a deal would be good news for contractors and their federal customers. It seemed as recently as two weeks ago that final appropriations would lag until the calendar year, slowing business and pushing any new projects into a year-end frenzy of activity. Contractors should adjust their business plans accordingly and be prepared to bid on new projects right around Groundhog Day.
Defense Authorization Bill Cleared for Passage: The House and Senate Armed Services Committees have also reached an agreement on the FY’20 Defense Authorization bill. This major piece of legislation outlines how the Department of Defense will spend the money appropriators provide. The Department will be authorized to spend more than $730 billion for Fiscal Year 2020, including money to create a new Space Force. An additional $5.3 billion was added for disaster relief for areas hit hard by recent hurricanes and tornadoes. Authorizers side-stepped the issue of border wall funding to reach an agreement, making it the responsibility of appropriators. Key acquisition-related provisions include the creation of a separate pathway for software acquisition, with the intention of compressing the timeframe for initial software development to a year or less. This approach would use a continuous delivery model, something that has been long-embraced by the private sector. The authorization bill also orders the DOD CIO and Chief Data Officer to create policies to migrate the military’s applications to the cloud. Another provision would allow companies to compete for Small Business Innovative Research (SBIR) contracts even when their ownership stakes are mostly made up of venture capital investments. SBIR projects have increased in popularity over the past several years as a key way to attract non-traditional contractors offering innovative solutions. The bill also formally blocks any merger between the Office of Personnel Management and GSA, a move that had come under increasing criticism. See more details on the FY’20 defense bill here
New Rule Makes It Easier to Qualify as A Small Business: Companies will be able to use a five-year average of receipts, instead of the current three, to determine whether they qualify as a small business under any SBA receipts-based size standards starting January 6th. That’s good news for companies that have experienced a certain amount of growth but could otherwise claim small business status. Firms will still have the option of using the three-year standard if that is more advantageous during a two-year phase in period for the new regulation. The transition period is in effect until January 6, 2022. The change does not impact companies that have their size standard determined by the number of employees. The SBA is also relaxing some HUBZone business requirements to make it easier for companies to qualify as a HUBZone business and clarify HUBZone rules. “The SBA is doing what they can, or what they think is appropriate to help make compliance with the program easier while still making sure the goals of the program are met”, said Matt Schoonover of Koprince Law. While the SBA is making these positive changes, small firms still need to be aware of new regulations on cybersecurity, the use of prohibited IT and telecom equipment, and the need for secure supply chains. These rules apply to businesses of all sizes, as well as to prime and subcontractors. See the story here for more:
December 9, 2019
What Does “Continue Existing Operations” Mean When Your Customer Is Under a CR? What does it mean that your federal customer can maintain existing under a Continuing Resolution, but not spend appropriated dollars for anything new? That’s an important question at a time when all federal agencies are operating under a Continuing Resolution (CR) until at least December 20th. The common explanation that your federal customer cannot start a new project is frequently heard, but not always understood. Agencies can maintain, and even improve, existing telephone service. The project is providing telecommunications services. Some new features unrelated to an existing solution could be considered new, and unallowable unless other types of money were used. The fact that agencies can maintain telecommunications services is one reason why contractors in that segment are anticipating new business. An agency can continue to procure services that they currently use and even tweak the performance somewhat, so long as the service being provided stays within the scope of the original project. There may be exceptions if a GSA Schedule contract is used (see article below). Critical products and services, such as pharmaceuticals, or disaster relief supplies, can be acquired as well. Any new planned project, such as implementing a new cloud solution, or removing an existing network to replace it with something entirely new, must have a different source of funding or wait until Congress passes an official appropriation. When will that happen? Not even Congress knows the answer.
Another Reason to Use Schedule Contracts - Greater Sole Source Ability: A federal agency was justified in issuing a sole source task order to an incumbent Schedule contractor to complete an on-going task without seeking competition, according to a recent ruling by the Court of Federal Claims. In Harmonia Holdings Group, LLC v. United States, the Court ruled that the International Trade Commission acted within its discretion under the rules provided in FAR 8.405. It is a little-known fact that orders placed under GSA Schedule contracts are not subject to the sole source rules of FAR Part 6. The sole source authority in 8.405-6 is more flexible. If the work is a logical add-on to an original project, sole source task orders are permissible, as long as the original task order was issued properly. This is a somewhat broader standard than the best interest of the government exception used under other circumstances. If the acquisition is made in the interest of efficiency and economy, and otherwise complies with Schedule ordering rules, it may be deemed to be appropriate. The benefits to the government can be substantial. A critical project can continue and be completed without the delay associated with conducting a new procurement. Institutional knowledge can be maintained. A well-performing contractor can continue work. While contractors and their customers should strive to complete projects on time, acquiring the work via a Schedule contract provides you and your customer with additional leeway if unforeseen delays occur. That’s an important issue to remember when you’re recommending an acquisition approach to your federal customer.
Commerce Issues Proposed Rule on Communications and IT Supply Chain Security: The Department of Commerce issued a proposed rule at the end of November that would govern the process and procedures that the government will use to identify, assess, and address information and communications technology and services transactions that pose an undue risk to critical infrastructure or the digital economy in the United States. The proposed rule also includes transactions that pose an unacceptable risk to U.S. national security. The background information published in support of the proposed rule states, “The information and communications technology and services (ICTS) supply chain is critical to nearly every aspect of U.S. national security. It underpins our economy; supports critical infrastructure and emergency services; and facilitates the nation's ability to store, process, and transmit vast amounts of data, including sensitive information, that is used for personal, commercial, government, and national security purposes.” Although the proposed rule covers government contractors and their supply chains, companies may miss the publication of the proposed rule as the Department of Commerce is not a primary issuer of rules that impact government contracting. Companies need to review the rule, discuss compliance, and plan to comment if there are concerns. This is especially true since the rule transcends your government business and applies to any covered area of a businesses’ operation. Comments are due December 27th.
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