Quarterly Regulatory Update

March 2018

FINAL DECISIONS
 
Unauthorized Release Of Incumbent’s Proposals For Current Requirement Gives Rise To Ocis, Procurement Integrity Act Violation; Gao B-414461, Dell Services Federal Government Inc.
Key Details: Protest alleging the agency failed to reasonably investigate a possible Procurement Integrity Act violation is sustained, where the agency concluded that the release of the incumbent contractor’s proposals for the current requirement would have no effect on the follow-on competition, but did not consider whether a competitor’s access to the incumbent’s proposed pricing, labor rates, and staffing strategies would provide a competitive advantage; and protest arguing the prospective offeror has organizational conflicts of interest arising from its receipt of the protester’s proposals is sustained, where the agency failed to consider that the firm had access to nonpublic, competitively useful information, or that the individual supplying that information may have participated in developing the agency’s requirements for the current acquisition.

Effective: 7/20/2017

Government Improperly Disallowed Costs That Were Never Accrued Or Charged; Asbca No. 60190, Appeal Of Northrop Grumman Corporation
Key Details: Appeal of the government’s final decision disallowing costs related to the contractor’s post-retirement benefits plan is sustained, where the contractor used a methodology that was not compliant with the FAR, but did not accrue, incur, or charge the government for these costs, and therefore the contractor will never claim and the government will never pay the disallowed costs. In an earlier decision, the Armed Services Board of Contract Appeals denied Northrop Grumman Corporation’s appeal of the agency’s disallowance of $253,361,512 of post-retirement benefit costs associated with Northrop’s transition from its existing accrual methodology to the methodology prescribed in FAR 31.205-6(o). During the entitlement phase, ASBCA determined that, for government contract accounting purposes, Northrop failed to measure, accrue, assign and fund its PRB costs in accordance with FAS 106 and FAR 31.205-6(o) allowability criteria during FYs 1995 to 2006, prior to Northrop’s 2006 transition to the FAR-compliant methodology.

Effective: 8/7/2017

Unavailability Of Key Personnel: A Growing Protest Risk
Key Details: In the decision of YWCA of Greater Los Angeles, the GAO determined that offerers must notify the procuring agency of any changes to proposed Key Personnel, even after a proposal has been submitted. GAO further explained that if the procuring agency receives notice of a Key Person’s unavailability, it may reject the proposal. An offeror may have the opportunity to provide a substitute Key Personnel “only if the procuring agency elects to formally engage in discussions with all offerers.” Regardless of whether the unavailability of a Key Person is foreseeable or the fault of the offeror, the proposal may be rejected. This has implications on the competitive range of an offerer if the proposal is deemed technically unacceptable due to the sudden unavailability of Key Personnel when an acceptable substitution is readily available.

Effective: 10/9/2017

Agency Unreasonably Eliminated Proposal Based On Compliance With Proposal Preparation Instructions, Instead Of Evaluation Of Substance: Gao B-414787, Mccann-Erickson Usa Inc.
Key Details: McCann-Erickson USA, Inc. (ME) protested the elimination of its proposal from consideration under request for proposals (RFP) No. W9124D-16-R-0046, issued by the Department of the Army for advertising services. ME argued that the agency unreasonably eliminated its proposal without meaningfully evaluating it. The RFP anticipates the award of a hybrid (fixed-price plus cost reimbursable) indefinite-delivery, indefinite-quantity contract to provide the Army with advertising and marketing services for a five-year base period and two successive option periods of three years and two years, respectively. The ceiling value of the acquisition is $4 billion. Firms were told the agency would make an award on a best-value basis, and considered the following evaluation criteria: technical, cost/price and small business participation. ME received record showing the agency eliminated the proposal based on a compliance review as opposed to the above criteria. In response, the Government Accountability Office (GAO) confirmed the accusations protested and recommends the agency reevaluate the RFP in consistency with the terms of the solicitation.

Effective: 10/17/2017

Contractor Award Additional Costs Resulting From Governments Negligent Estimate; Cofc Nos. 13-55c, 13-97c, Agility Defense & Government Services Inc.
KEY DETAILS: Agility Defense & Government Services Inc. incurred additional costs under a contract with the Defense Reutilization Management Services. Even though a decision had previously been made by the Federal Circuit, “Agility further maintained that the evidence furnished to the court substantiates its claim for an equitable adjustment.” The Defense Reutilization and Management services argued that Agility’s evidence could not prove it incurred damages because of the government’s negligence. The court made its decision and awarded Agility an equitable adjustment for the total amount.

Effective: 10/25/2017

Protester Entitled To Protest Costs Where Agency Took Corrective Action After Supplemental Comments (Gao B-414573.3)
Key Details: Protections Strategies Inc. filed a protest challenging the Securities and Exchange Commission’s award of a contract, challenging the agency’s tradeoff decision. After the agency filed a supplemental agency report and PSI filed supplemental comments, and after GAO informed the parties of its view of the litigation risks for each side, the agency took corrective action to terminate the award and cancel the solicitation. PSI sought to recover its costs for pursuing the protest, arguing that the agency unduly delayed taking corrective action in response to PSI’s clearly meritorious protest. PSI challenged the agency’s best value tradeoff decision, arguing that the record lacked any consideration of the strengths and weaknesses of PSI’s proposal, particularly considering that PSI’s price was lower than the awardee’s. Although the agency argued that the selection official relied on a technical evaluation report to make the award decision, GAO found that the award decision did not include any documentation of a comparative assessment of PSI’s proposal. As a result, GAO found PSI’s protest on that basis to be clearly meritorious.

Effective: 11/28/2017
 
Gsa Loses Protest For Bundling Requirements Under Jwod Procurement (Gao B-415137)
Key Details: Goodwill Industries of the Valleys and Source America protested a full-service lease awarded by the General Services Administration (GSA) based on a violation of the Javitz-Wagner-O’Day Act, which provides employment and training opportunities for people with disabilities. The GSA claimed it was not subject to the JWOD Act; however, GAO sustained the protest, declaring the GSA bundled services into their lease without procuring the services in accordance with the JWOD Act. GAO rejected the GSA’s claim that Goodwill was not an interested party and explained that as Goodwill was the mandatory source for custodial services, GSA was required to procure services from Goodwill.

Effective: 12/20/2017
 
FINAL RULES
 
Final Rule – Removal Of Fair Pay And Safe Workplaces Rule
Key Details: DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to implement a public law that disapproved the final rule, Fair Pay and Safe Workplaces (FAR Case 2014-025), and an Executive Order (E.O.) dated March 27, 2017, that rescinded the prior Executive orders authorizing that rule. The Fair Pay and Safe Workplaces rule seeks to increase efficiency and cost savings in the work performed by parties who contract with the Federal Government by ensuring that they understand and comply with labor laws.

Effective: 11/6/2017
 
PROPOSED RULES
 
Sba Proposes Rules For Oha To Consider Cve Appeals And Protests
Key Details: SBA proposed an amendment to SBA Office of Hearings and Appeals rules of practice to grant OHA jurisdiction over protests and appeals of VA’s determination with respect to the eligibility for registration in the VA Center for Verification and Evaluation database. This amendment is proposed because the FY 2017 NDAA prohibits VA from issuing rules related to the status of SDVOSBs, instead directing the agency to follow SBA regulations.

Under this proposal, procedures for CVE protests will mirror SBA’s existing rules for protests of SDVOSB status. Protests of eligibility must be filed within five days of awardee announcement, and appeals must be filed within 10 days. Contracting officers are also given the ability to file a protest challenging the eligibility of an awardee for inclusion in the CVE database.

Effective: 11/9/2017

Pentagon Reverses Course And Rolls Back On The Ir&D Technical Interchange Rule
Key Details: On Sept. 14, 2017, the Department of Defense issued a new class deviation that eliminates the requirement on major contractors to engage with the Government in technical interchange meetings prior to the generation of independent research and development (IR&D) costs. This class deviation represents a continuing reversal in position for the Pentagon, which had been moving forward with placing more guiderails for IR&D spending.

Effective: 9/27/2017
 
KEY REPORTS, MEMORANDUMS, GUIDANCE ETC.
 
Special Plan And Operations Report: Section 1206/2282 Funding
Key Details: The Office of Inspector General (OIG) of the Department of Defense issued a Special Plans and Operations Report, evaluating DoD efforts to build counterterrorism and stability operations capacity of foreign military forces. The objective was to determine whether the DoD Global Train and Equipment Program (2006 NDAA, Section 1206) effectively managed and enhance partner-nation security-force capabilities.
The DoD OIG found that Section 1206 had not been established as a distinct and fully developed program and that project proposal guidance, selection criteria, analysis procedures and metrics for determining results achieved from 1206 implementation were insufficient, under-enforced, misaligned and incomprehensive, respectively.

The evaluation report (click link for details) includes recommendations to designate a lead manager and develop a comprehensive implementation plan resulting in well-crafted proposals, a robust selection process and established performance measures. It also provides Management Comments and the OIG response.

Effective: 7/21/2017

Department Of Labor Increases Health And Welfare Fringe Benefit Rates For Contracts Covered By The Services Contract Act
Key Details: DOL’s Wage and Hour Division issued a memorandum increasing the health and welfare fringe benefits rate for contracts covered by the SCA. SCA’s requirement for contractors and subcontractors performing work on federally funded prime contracts is to pay service employees wage rates and fringe benefits at least what is required by the locality in which the contract is being performed or the rates and benefits included in a contractor’s collective bargaining agreement are adjusted by the DOL each year. This year, the wage determinations adjusted by the DOL included on adjustment for SCA covered contracts and another for contracts covered by SCA and Executive Order 13706, which established paid sick leave for federal contractors. For those contracts covered by Executive Order 13706, the health and welfare rates will be slightly lower. Following President Obama’s signing of Executive Order 13706, the DOL issued a Final Rule in accordance with Executive Order on Sept. 30, 2016.

Effective: 7/25/2017

Nasa Program Makes Buying Legitimate It Easier
Key Details: NASA has launched a new program to help buyers using its government-wide IT contract verify that the products they’re buying are from legitimate sources, enforcement practice or policy.
NASA unveiled the Established Authorized Reseller Program for its billion-dollar Solutions for Enterprise-Wide Procurement vehicle, better known as SEWP. The program limits certain contracts to companies specifically authorized to re-sell technology products to the federal government. Non-authorized sellers, then, will be restricted from sending quotes for certain products if the original manufacturer already has an authorized reseller, according to NASA.

Effective: 7/31/2017

Ndaa For Fy 2018 Includes Acquisition Reforms That Present Potential Risks And Benefits For Federal Contractors
Key Details: On Dec. 12, 2017, President Trump signed into law the National Defense Authorization Act (NDAA) for 2018. The provisions include reforms for defense contract auditing, negotiated procurement process changes, expansion of commercial item and service contracting, increasing non-tradition procurement under OTA and modernizing federal IT. The NDAA directs DoD to begin using private auditors to perform incurred cost audits in order to reduce backlog and focus on DCAA resources on forward pricing audits for a higher rate of return. FY 2018 NDAA also includes revisions to the DFARS that will enhance post-award debriefings including the right to receive a redacted copy of the Agency’s written source selection award determination and ask follow-up questions. Revisions to the DFARS also include two additional circumstances in which the DoD may use LPTA source selection criteria: when DoD would realize little or no additional innovation or future technological advantage, and in the procurement of goods, goods are expendable in nature or have a short life expectancy. The DoD is now required to contract with online marketplaces for the procurement of certain commercial-off-the-shelf (COTS) products. The effects of marketplace acquisitions on mandatory sourcing obligations such as the Javits-Wagner-O’Day Act, the Berry Amendment, or the Buy American Act remain unclear. The DoD is also allowed to enter into longer service contracts. For certain services, service contracts may be up to 10 years and extended for five additional one-year terms.

Effective: 12/12/2017
 
EXECUTIVE ORDERS
 
The Implementation Of White House’s Buy American Policy Is Underway:  What Federal Contractors Should Know
Key Details: The administration’s Buy American and Hire American Executive Order and OMB’s implementing guidance are intended to maximize the sourcing of domestically manufactured products and minimize the use of waivers, but still leave agencies the discretion to authorize exceptions in specific situations. OMB’s guidance allows agencies to waive the order when it is in the public interest to do so, and leaves in place other exceptions to the Buy American Act for purchases at or below the micro-purchase threshold, or procurements for use outside of the United States. Trade Agreements Act waivers also remain in effect.

Effective: 6/30/2017

Presidential Executive Order On Assessing And Strengthening The Manufacturing And Defense Industrial Base And Supply Chain Resiliency Of The United States
Key Details: President Trump signed an executive order to launch a cross-government study of the country’s manufacturers and whether they can fully supply the military’s needs essential to national security. The Secretary of Defense will coordinate with other government agencies to provide an unclassified report detailing results of the assessment. It is unclear whether the report will examine the Defense Department’s acquisition process, but according to presidential advisor Peter Navarro, it is a possibility. The report is due to the president in nine months.

Effective: 7/21/2017

Read next article "Significant Accounting and Reporting Updates"

Return to BDO Knows Government Contracting Newsletter - Spring 2018