The BDO GovCon Week Ahead - April 2020
April 27, 2020
Federal Workers Say Pandemic Has Extreme Impact on Operations: Nearly six in 10 federal workers say that COVID-19 has had either an extreme or major impact on their agency operations, according to a recent survey conducted by the Government Business Council. Contractors need to understand how these views impact their business relationships and adapt accordingly. Only about three in 10 federal workers are still reporting to their normal worksites. This can pose challenges to making decisions on critical matters. Although technology can help pull together teams of people, not everyone has the same level of technology available to them and not everyone feels comfortable discussing sensitive matters virtually. Some agency managers are still requiring employees to come to work on some days, but not others. And about one-third of survey respondents stated that their job does not require them to work in an office. Respondents were also concerned about safety when their offices re-open. Each of these elements can slow down the pace of government business. Contractors need a mix of patience and determination as they tackle their internal pandemic-related issues. Technology can get in the way sometimes. Feds may not want to commit to a virtual meeting due to time constraints, concerns over favoritism, or because it may pressure them to make decisions on issues for which they haven’t prepared. That’s one reason why many marketing professionals are recommending leveraging the telephone. Contractors may find that this may be the time to reach out and (virtually) connect with someone.See the story.
Deal Reached on $450 Billion Stimulus Bill: Congress passed, and the President signed, a new round of COVID-19 relief funding on April 23rd. The bill includes $310 billion for the paycheck protection fund, a third of that money will be directed to small and minority companies without big bank relationships. Significant money is also being allocated to hospital support and COVID-19 testing. The new legislation does not include increased funding for states or more stimulus money for individuals. Contractors who couldn’t take advantage of the first round of paycheck protection funding should consider applying now. There is already a substantial queue of applications. The program is largely designed to work with banks, so contacting your bank may be a good place to start. The legislation does not provide unrestricted new appropriations to agencies. Only companies directly supporting healthcare missions may see new business as a result of the legislation. At least one more round of legislation to provide money to state and local governments, businesses, and others impacted by the COVID-19 pandemic is likely. That bill could have more in it directly for contractors, especially those that sell to state and local governments. Any such measure may be one to two weeks in developing and could be the subject of partisan disagreement, whereas relief bills so far have had wide bi-partisan support. Aside from the paycheck money, most non-healthcare contractors likely will not experience a bounce in business from the new stimulus bill and should therefore continue to focus on the business at hand. Check out the story.
Caution Ahead on GSA’s Verified Product Portal Project: The COVID-19 pandemic has seen an increase in unscrupulous companies trying to sell products that they don’t make or aren’t authorized to sell to federal agencies. At the same time, the government wants to do business with new companies that can help meet medical and healthcare needs as part of responding to COVID-19. These are just some reasons behind the launch of the General Services Administration’s (GSA) new Verified Product Portal (VPP). GSA wants to ensure that federal agencies that buy both during the crisis and after are protected from bad actors. The agencies’ intentions are good, but manufacturers and wholesalers that don’t sell directly to the government should proceed carefully when considering participation in the VPP. While well-intended, there is considerable risk for companies that are unfamiliar with supplying data to the federal government.
The VPP is intended to be a manufacturer- and wholesaler-facing portal through which such companies provide standardized part numbers, manufacturer names, specifications, and other information. GSA wants to standardize product descriptions and eliminate confusion on whether one part is the same as another that is sold by a different company.
Companies must understand that there is risk involved any time information is provided to the government. Perhaps the best example of this is Country of Origin (COO) information about where a part or product is made. If that production point shifts to a non-designated end country (as a non-contractor your firm may not know what that means), but GSA’s VPP isn’t updated, there is a real potential for a False Claims Act case. It’s not just the federal enforcement community that could catch the problem, either. There are professional whistleblowers who regularly review COO information to catch an unwary company of supplying false information. They can cash in on any subsequent government recovery.
Participating in the VPP does not constitute a contract between the supplier and the government. There are no protections on how the information will be used or what happens if the data provided is inaccurate or becomes outdated. Although GSA is trying to do something positive and the urgency of properly meeting COVID-19 demands is an important consideration in the launch of the VPP, manufacturers and wholesalers should carefully consider participation, ask plenty of questions, and get the answers in writing before deciding whether or not to participate.
Important Reminders: Although the following government agency programs were well underway before the COVID-19 outbreak, it’s prudent for government contractors (GCs) to prioritize implementation now. These programs can serve as part of a larger effort to recover from the impact of the pandemic and get back on the path to growth.
Gain New Business Opportunities Through the SBA’s Mentor-Protégé Program: The Small Business Administration’s (SBA) Mentor-Protégé Program (MPP) allows companies of any size to form a three-year joint venture with a small business. The joint venture retains the favorable set-asides of the “protégé” while benefiting from the enhanced capabilities of the “mentor” company. For middle market GCs, the MPP can be a powerful business development tool, expanding your value proposition and giving you an advantage in competing for contracts. The MPP can also be an important element in your succession strategy, making your company potentially more attractive to potential acquirers. For more information on the MPP or to schedule a Mentor or Protégé assessment, contact Elvis Oxley, Managing Director, Industry Specialty Services at BDO, at [email protected].
Securing Your IT Network From Cybersecurity Risks is More Important Than Ever: Telecommuting has become a critical component of GCs’ business continuity plans during the COVID-19 pandemic, but as more employees work remotely, cybersecurity risks increase dramatically. And it’s clear that the stakes are even higher for GCs, who routinely work with sensitive government information. While unrelated to the COVID-19 pandemic, the Department of Defense (DoD) released its Cybersecurity Maturity Model Certification (CMMC) framework earlier this year, which requires any company doing business with the DoD to meet cybersecurity requirements.
The CMMC comprises five levels, from level one, which mirrors the requirements all federal contractors are already required to meet, to level five’s suite of 171 information security requirements, which are intended for GCs working on especially sensitive projects. On March 26th, 2020, the DoD announced that the pandemic will not delay the implementation of the CMMC on contracts beginning July 1st, 2020. So, now is the time to prioritize movement through the levels to meet the agency’s increasingly stringent cybersecurity requirements. Not only will you help to safeguard sensitive DoD information and become a preferred contractor for future projects, it will benefit the entire organization by lowering the risk of cyberattacks more broadly.
April 13, 2020
Substantial Impact Expected on Federal Acquisition Policies in Response To COVID-19: Government contractors can expect to see calls for increased US-based manufacturing, tightened export controls, and a federal workforce that works more remotely as a result of experiences learned by novel coronavirus (COVID-19). These are among the changes predicted by Rich Beutel, a former senior Congressional staffer with many years in federal acquisition policy. Beutel predicts, “There will be a profound reassessment of basic supply chain structures to reinforce the defense industrial base.” The net result of this assessment will be the likely return of critical manufacturing to the United States, including everything from pharmaceuticals to weapons components. Commercial service and product companies will also see an impact. Beutel states that Congress may reassess “buy American” requirements and try to strengthen those requirements to decrease reliance on overseas suppliers. Beutel states that some previous attempts to establish “Trusted Foundries” have failed because of the enormous support costs required to sustain them. While some of these measures may seem like common sense reactions, the substantial momentum for change will likely result in some new rules and regulations that could ultimately prove to be counter-productive. Contractors will have to watch Congressional action closely and be prepared to educate leaders on changes that can be both positive or negative. See the story here.
DOD Issues Memo on Managing Defense Contracts in Time Of COVID-19: There are several contract clauses used in the Department of Defense (DOD) contracts that provide default protection for contractors in cases where a failure to perform the contract is due to issues beyond the control, and without the fault or negligence, of the contractor. This is a major point from a recent memo by Kim Harrington, Acting Principal Director of Defense Pricing, and sent to all DOD acquisition functions. The undated memo, “Managing Defense Contracts Impacts of the Novel Coronavirus,” also states that the Office of Management and Budget and other acquisition functions have issued similar guidance. “They share the common theme that contracting officers are trusted and empowered to make the difficult decisions on appropriate adjustment to each contract,” Harrington writes. This is good news for contractors that may be struggling to overcome logistical hurdles in fulfilling their contract obligations. Like most memos, however, it is essential that contractors help to ensure that their individual customers are aware of it. Individual buying organizations sometimes literally “miss the memo,”which can lead to improper adverse actions against your company. Contractors may want to proactively send a copy of the memo to all their DOD, and perhaps even non-DOD, customers.The memo references several specific Defense Federal Acquisition Regulation clauses with which contractors should also be familiar. Remember, your government customer may be struggling. They’re under internal pressure to perform, and if your contract execution becomes an issue, they could initiate action against your company. Make sure you know the protections in your contract and remind your customer of DOD’s guidance.
Uncertainty Persists On “Phase IV” COVID-19 Stimulus Bill: The initiation of CARES Act stimulus funding has been challenging, considering that the normal timeline from approved legislation to agency implementation can be between one to two years. Additionally, the Small Business Association (SBA) was mandated to implement the Paycheck Protection Program (PPP) with fifteen days, posing its own challenges.
SBA lenders are now at the forefront of the bottleneck between applications and reviews. What many anticipated to be an application review by SBA personnel and purely processing by banks, has turned into financial institutions yielding more power over the review process due to their vast personnel capacity. As of today, very few PPP loans have been approved, and small businesses eagerly wait to see if they can pay their bills. We are hopeful that this is the week loans start being approved in high quantities.
Many government contractors are anticipating another round of Congressional action to spur federal spending after the implementation of the CARES Act. The new legislation may address guidance and clarity on several outstanding PPP issues, such as PE/VC investment, small business definitions, total payroll cost, and other substantial issues. However, the content of any new bill is still very uncertain. Preliminary information indicates that the bill would be primarily for initiatives not tied directly to federal government contracting. Eviction relief, student loan forgiveness, and consumer protection have all been discussed. Thus, contractors should not wait for a new “Phase IV” bill to pursue federal business that is available now. Additionally, planning for a traditionally busy federal fiscal year fourth quarter is also a good idea.
Another piece of legislation being discussed would initiate a new infrastructure program for highways, roads, bridges and other projects. Whether this bill will be drafted is uncertain. It is likely that a new round of legislation will include additional funds for small businesses, especially minority-owned firms. Congress is currently out of session and is likely to stay that way until after Easter. Final action on any new measure could be a month away. Don’t trade speculation on what if scenarios for business opportunities that are available now. Some may be COVID-19 related, but others may be federal business almost-as-usual. While no one can predict for certain when the pandemic will pass, current estimates show that it may run its course by July, which could lead to a busy “busy season.” Be prepared.
COVID-19 Legislation and Impacts to Your Accounting System: COVID-19 has impacted us all from a personal and business perspective. As the world comes together to face the pandemic, we want to keep you informed of recent Federal Government actions and ways BDO can assist. BDO ERP system professionals are available to discuss the impacts to your accounting system configuration and make updates to support compliance with new laws. The BDO team has hands-on configuration experience with Deltek Costpoint, Unanet, Microsoft Dynamics, QuickBooks, and several other accounting systems.
Per the Families First Coronavirus Response Act (FFCRA), effective April 1-December 31, 2020, certain employers will be responsible for providing paid sick leave and/or expanded family and medical leave for qualified reasons related to COVID-19. The FFCRA is administered by the Department of Labor’s Wage and Hour Division (WHD).
Covered Employers
Paid sick leave and the expanded family and medical leave provisions of the FFCRA apply to certain public employers and private employers with fewer than 500 employees. Additional guidance exists for federal employees and small businesses with fewer than 50 employees.
Qualifying Reasons for Leave
Per the FFCRA, an employee qualifies for paid sick time if the employee is unable to work or telework due to one of the following reasons, where the employee:
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Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
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Has been advised by a health care provider to self-quarantine related to COVID-19;
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Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
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Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
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Is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
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Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury
Under the FFCRA, an employee qualifies for expanded family leave if the employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.
Duration of Leave
Reasons I through IV, and VI: Full-time employees are eligible for 80 leave hours. Part-time employees are eligible for their average hours over a two-week period.
Reason V: Full-time employees are eligible for up to 12 weeks of leave (two weeks of paid sick leave followed by up to 10 weeks of paid expanded family and medical leave) at 40 hours per week. Part-time employees are eligible for the hours the employee would normally work over that period.
Calculation of Pay
Reasons I through III: Pay is calculated at either the employee’s regular rate or the applicable minimum wage, whichever is higher, up to $511 per day and $5, 110 in the aggregate (over a 2-weekperiod).
Reasons IV & VI: Pay is calculated at 2/3 of the employee’s regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period).
Reason V: Pay is calculated at 2/3 of the employee’s regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period).
How BDO Can Help
BDO can help align your business needs to the newly enacted FFCRA.By addressing your ERP configuration and business needs, BDO can aid inaccurately capturing employees’ time and associated costs that meet the above criteria.
April 6, 2020
Legislation Provides Direct Loan Assistance to Help Small Businesses: One important feature of the recently-passed Novel Coronavirus (COVID-19) Aid, Relief, and Economic Security (CARES) Act is a new $349 billion Paycheck Protection Program. The program is intended to provide relief to millions of small businesses so they can sustain their operations and keep their workers employed. The Paycheck Protection Program provides eight weeks of payroll support, as well as certain overhead assistance, to keep workers employed. The Department of Treasury and the Small Business Administration expect to have the program up and running by April 3rd. Small firms seeking the assistance can go to a participating SBA 7(a) lender, bank, or credit union as of that date, apply for a loan, and be approved on the same day. Significantly, the loans will be forgiven so long as the funds are used to keep employees on the payroll and for certain other expenses. This program can benefit small business government contractors that may be struggling to get to connect with federal buyers who are currently being pulled in many directions at once. Small firms rely on cash flow and often find that their best assets are their people. This can be especially true for government contractors who often employ people with highly specialized skills. The Paycheck Protection Program can help ensure the retention of those critical employees and the competitiveness of small businesses in the federal market.
How to Stand Out When Everyone Wants to Help: It’s time to give your federal customers one click access to your business. With personnel working at home, constant Continuity of Operations Planning (COOP) discussions, and priorities that can change in hours, it’s not good enough to say, “we’re here to help.” Proving this claim by giving your customer an easy way to reach you is essential. If you are selling services, make sure your customers have the e-mail addresses of each account manager so that all they have to do is click, write, and send. If you are having acquisition issues, be sure that customers and prospects have instant access to the contracting people who can answer the critical “how do I get to you?” question. Don’t assume that your current or prospective customers know who to go to in your company, or how to buy from you. Make sure you tell them and emphasize that you’re only a click or call away. Being proactive helps, as well. A short webinar or video white paper, especially one that shows thought leadership on a newly issued directive or recommended action, highlights your experience in this area and may tell your customer something they missed while in an internal meeting. This approach strengthens your image as a trusted, informed partner, and can lead to new business. Even though in-person meetings aren’t possible right now, make sure you stay in active, creative contact with your customers and prospects. The government is open for business and companies that adapt to changing methods of interaction will benefit.
Pandemic Response Delays Key Contract Actions: Expected additions to the General Services Administration (GSA) One Acquisition Solution for Integrated Services (OASIS) contract, long-delayed action on the Alliant II Small Business contract, and GSA’s anticipated commercial e-commerce platform award are a few significant acquisition programs to experience delays as response to the COVID-19 pandemic demands the time and attention of the acquisition workforce. While the National Institutes of Health (NIH) acquisition officials issued a draft RFP for their much-anticipated CIOSP-IV contract on March 27th, many of their acquisition resources are supporting a variety of healthcare-related needs, including research. The GSA is also responsible for a host of emergency response duties. Resources are being diverted to ensure that key products like masks and hand sanitizer are readily available, and that teleworking federal employees have the tools necessary to be productive. All of this is frustrating for contractors, especially those that do not currently hold an existing Indefinite Delivery/Indefinite Quantity contract. Such companies see participation in OASIS, CIOSP-IV, or other new vehicles as a vital part of growing their government business. The delay of new contracts or new additions to existing contracts does not mean that business isn’t getting done. As noted in the previous story, the federal government is open. Existing IDIQ contracts are a popular approach in GSA, NIH, and elsewhere as they provide an expedited way for agencies to get the critical products and services they need to meet public health or telework missions. The GSA is expected to announce the status of their delayed acquisition actions in the near future. The GSA and NIH have a track record of communicating with industry, and likely would appreciate some patience on the part of their industry partners right now.
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