The BDO GovCon Week Ahead - February 2020

February 24, 2020

DOD’s New Adaptive Acquisition Framework Means No More One Size Fits All Approach: The Department of Defense (DOD) is implementing its new Adaptive Acquisition Framework this year. Over the next several months the department will issue eight new overarching policies that will guide acquisitions on everything from service to software to defense business systems and more. New interim guidance, in fact, is already out on software acquisition. The goal of these new directives is to empower acquisition and program officials in DOD to use the best acquisition approach for what they are buying. At least one DOD official pointed out that every program manager in the agency is trained on how to buy a submarine, but that almost no one buys submarines. For services, new directives will be largely targeted on how to buy varying “as a service” offerings. All service acquisition guidance is being re-written. DOD is bringing in two new people to assist specifically in this area. In addition to flexibility, the intent of the Adaptive Acquisition Framework is to protect the defense industrial base. Interestingly, no mention is being made of whether, or to what extent, these changes were influenced by the Section 809 panel acquisition reform effort. The new changes are expected out prior to the end of the calendar year. Contractors should be familiar with the new frameworks and how to work with their customers to take advantage of the intended flexibilities.
Changes to Section 889 Subsection B May Not Come This Year: Congress-watchers are skeptical that the body will take action this year to lessen the impact on Section 889 of the FY’18 Defense Authorization Act. That provision bars contractors from using prohibited IT and telecommunications equipment anywhere in their enterprise, regardless of whether it’s used in relation to the fulfilment of a government contract. A proposed rule is expected out in March on Subsection B and industry is bracing itself for the potential impact.  While some in Congress have indicated that the intent of the legislation isn’t as far-reaching as a strict reading of the statute may suggest, that’s no real defense for any contractor that finds itself the target of an investigation or whistle-blower suit. Security cameras, smart phones, desk phones, and routers used in employee home-offices could all be covered. While the original provision was included in the defense bill and DOD acquisitions will be the first to be covered, the issue  isn’t just a defense matter, some say. Any legislative fix would likely cross multiple Congressional committee jurisdictions. And the politically-charged nature of the topic, means that industry and government will have to speak with one voice to get changes made and, there may have to be one or more significant events to get the Hill to move. Contractors must begin developing a risk assessment matrix to ensure that their exposure is understood, managed, and reduced.
Does Your Business Strategy Match Your Compliance Strategy? Successful companies build strategies and execute business plans designed to expand their federal footprint. It would be bad, though, if a government agency came in and took some of that money away, though, right? That’s just what happens to companies that focus only on growth and not on ensuring contract compliance. Smart contractors have strategic plans for both business growth and contract compliance. When was the last time your company had mandatory training on the do’s and don’ts of federal business? What is the process for handling an internal complaint or question? Your company is at risk if you answered “I don’t know” to either of these questions. Some companies play the odds and believe they won’t get audited. Most compliance cases are filed by whistleblowers; either disgruntled employees or competitors. There are also professional whistleblowers and, while their claims might be less substantial, your company will still have to invest in legal and other outside help to defend itself. That’s costly and a huge distraction. Compliance programs are like an extra -strength flu shot. They can keep you from getting sick and make any incident less harmful. Like flu shots, compliance programs are comparatively less expensive than getting the flu and don’t tie up nearly as much time as an audit or investigation can when you’re not prepared. Investing in business growth and compliance saves your company time and ensures that you will keep more of the money you make.   

February 17, 2020

The President’s Budget Request Cuts Some Areas and Increases Critical R&D: The Fiscal Year (FY) 2021 budget request from the White House was released last week showing an increase in the Trump Administration’s emphasis on non-defense research and development projects, including artificial intelligence and quantum information science. The administration has requested significant increases in this spending for FY21 and proposed a doubling of the amount of spending in those areas by FY22. This proposed budget increase aligns with two executive orders President Trump signed in February 2019, making AI and quantum R&D a top priority for research agencies citing national defense. This new budget request also includes more than $850 million of funding to the National Science Foundation and interdisciplinary research institutes, close to a 70 percent increase from the FY20 budget request, a $125 million investment from the Energy Department in AI research, a $54 million increase from the FY20 budget request. A $50 million investment from the National Institutes of Health (NIH) for the use of AI, and other new technologies in researching chronic diseases is also included. Certain domestic programs, such as funding for the EPA, would be cut to pay for some of the additional research. The final verdict on the President’s budget request ultimately is in the hands of Congress. They are quite likely to make changes in several areas. It is unclear whether they will alter the specific requests for research funding. This is potentially good news for contractors and possible AI-related work. See the story here.
Budget Also Seeks Slight Decline in Total Defense Spending: The Department of Defense has requested $705.4 billion in funding for Fiscal Year (FY) 2021, an amount slightly less than last year’s $718 billion request and the $712 billion that was enacted for FY20. The slight decrease had been predicted by both Pentagon and other administration officials and is meant primarily to reflect a decrease in overseas operations. This request focused on DOD's priority for funding and modernizing current systems, advancing emerging technologies development, building and developing space and cyber programs, and improving the military’s readiness abilities, all while cutting outdated systems and duplicative processes. Aside from tactical and technological advances, the budget request also builds in a three percent pay raise for service members, adding on to the 3.1 percent raise included in the FY20 budget. Like the request for increased spending on AI and quantum information science, this budget request must ultimately be approved by Congress.  Notably, even Congressional Republicans have largely expressed a luke-warm reception to the proposed budget, urging for an increase in spending and citing the need to outpace adversaries in technology development and deployment. Conversely, Congressional Democrats have largely remained silent on the budget, but have traditionally opposed increases in defense spending without similar increases for civilian agency spending. Final appropriations will be heavily influenced by the November elections, so expect a little something for everyone before voters go to the polls. See the article here for more.
What Do You Mean I’m A Government Contractor?!: Some companies don’t think of themselves as government contractors, even when they sell to the government.  It is not uncommon for one part of a large company to hold a government contract without other parts knowing it. If your firm does business with a company that sells your solutions or products to a federal agency, you could be considered a contractor. Similarly, your company is a contractor if it holds a contract, even if the fulfillment of that deal is primarily done by a business partner (the advisability of that situation is a subject for a different article). While these may seem obvious, it’s apparently an issue in need of clarification. If you’re not sure whether your company is listed as a prime or subcontractor, it’s time to do a little research and ask questions. The Federal Procurement Data System (FPDS) can be used to search on whether your company is listed as a prime contractor and, if so, what the contract number is, and the agencies to which you sell through it. Asking business partners that sell to the government directly how they describe your business relationship to the government can also be enlightening. Some may say that you are a supplier, a status that, if the government agrees, generally exposes your firm to lower risk. If your partner says, “You’re absolutely a sub-contractor since I need your small business size to help me make my goals”, you’re in another arena. It’s time to get up to speed on the rules and regulations your firm must follow as a sub-contractor. These rules vary depending on the type of contract your partner holds. It is ultimately how the government views your company that can determine whether you’re a supplier, sub or prime contractor. The time to understand this is now, before any problems develop. 

February 10, 2020

With Q3 Around the Corner, Three Things Contractors Should Focus on Now: Federal business is conducted throughout the year, and the pace is about to shift gears. Prospective buyers are increasingly focusing on how they will buy what they need, not what. Here are three things contractors should focus on to maximize federal business opportunities: 

  • Get Those Informational Meetings in Now: The third quarter of the federal fiscal year starts in April. The pace of acquisitions will pick up from that point forward. While many federal agencies want to hear about new solutions, potential customers will have progressively less time to meet with new companies. Aim to have your first meet and greets finished by the end of May. 
  • Be Prepared to Answer the “How” Question: We’ve written about this before, but not everyone has gotten the word. Contractors must be prepared to tell a customer how they can buy from them, not just what solutions they are selling. Never assume your federal customer knows how to get your solution easily. A recent client meeting proved this point. The customer was interested in the solution and was amazed to hear how easy it was to get started with the company. The company knew more about available acquisition methods than the customer. Be prepared to recommend one or two potential acquisition methods as part of all business development activities.
  • Check Your Compliance Status: This sounds about as much fun as going to the dentist. Just like routine dental care, having good contract compliance is a must, especially this year. Is your company preparing to meet new DOD cyber standards (see article below)? Can it meet restrictions on the sale, or even use, of prohibited IT and telecommunications equipment? Is your company complying with its GSA Price Reductions Clause? You need to be able to focus on closing business over the last two quarters of the fiscal year. No one wants to trip on the last 10 meters of the 100-meter dash. Checking your compliance now helps ensure that you can finish the race strong this fall.  

What the New Cybersecurity Maturity Model Certification Standard Means for Your Business: The Department of Defense (DOD) released the first version of its Cybersecurity Maturity Model Certification (CMMC) standard on January 31st. While the DOD stated that the new standard won’t be a mandatory requirement on all contracts until 2026, the agency simultaneously said that approximately 10 contracts will include the standard this year, with 10 more having the standard included as part of Requests for Information the department will issue. Contractors can expect to see individual DOD buyers increasingly require offerors to show certification ahead of the 2026 deadline. The National Institutes of Health Information Technology Acquisition and Assessment Center (NITAAC) also said that CMMC will be a part of its CIO-SP IV contract (see article below). DOD Undersecretary for Acquisition and Sustainment Ellen Lord stated that the standard faces a “complicated rollout,” an indication that there will be confusion among DOD and industry over when the standard will be required to be a part of specific acquisitions and which of the five certification levels contractors and subcontractors will have to meet for each acquisition. The CMMC is a combination of processes, practices, and capabilities that all companies doing business with DOD, regardless of prime or subcontract status, will have to meet, depending on the level of compliance contained in each RFP or RFQ. Contractors will have to have their compliance validated by a DOD-authorized third party. DOD contractors need to act now to start the certification process. Even those that do business solely with civilian agencies should take notice as similar standards for those agencies are already on the drawing board.
NIH CIOSP IV Takes Shape, Faces Challenges: The highly-anticipated CIO-SP IV contract from the National Institutes of Health’s Information Technology Acquisition and Assessment Center (NITAAC) is starting to take shape. The contract, which may have an individual award ceiling of $30 billion or more, will cover health IT, cyber-security solutions, agile IT, and emerging technology in its scope. A draft RFP is expected out in early March.  Industry is already expressing concern with current NITAAC plans to have a single contract vehicle, instead of a main contract and a small business companion contract. Although NIH has stated that small business set-asides will still be allowed, smaller firms are concerned that they may not be able to compete successfully with larger firms on a single, universal contract vehicle. Similarly, small firms are concerned over whether offers from joint ventures (JV’s) will be accepted. NITAAC officials expect offerors of any size to be able to show satisfactory past performance, possibly raising challenges to firms that may come together solely for the purpose of bidding on this contract. The issue of JV’s, overall in fact, is likely to receive a lot of attention before any final RFP is issued. NITAAC officials have expressed a strong interest in communicating with industry throughout the acquisition planning process, with multiple industry days and presentations planned. Prospective contractors should plan to participate accordingly.

February 3, 2020

OMB Request for Acquisition Streamlining Methods Is Perplexing: The Office of Management and Budget (OMB) put out a call last week seeking input on ways to streamline the acquisition system. It seems the agency hasn’t been looking at reform initiatives sent by industry and other groups to current administration leaders for the past three years, not counting the many ideas submitted before that time.  It’s great for the government to seek input on how to make things better.  It’s also frustrating to have the government consistently ask for input, and then have little positive output to show for it. The call for streamlining ideas was sent out just as companies are spending more money on new requirements like Cyber Maturity Model Certification and supply chain security. Industry has not been silent on ways to improve the government’s largest commercial item acquisition program, the GSA Multiple Award Schedules. Industry consistently has called for the outdated Price Reductions Clause to be removed from all Schedule contracts. Yet, the industry group community insists on holding onto a clause that is based on the way companies sold services more than two decades ago. OMB Deputy Director Margaret Weichert stated, “The purpose of the challenge is idea creation to catalyze new thinking in government procurement around best practices, more strategic orientation and applying what we learn from world class, private sector and public sector opportunities to the U.S. federal government acquisition and supply chain management capabilities.” For those who have been around federal acquisition for a while, the statement sounds eerily reminiscent of words spoken by Clinton Administration Office of Federal Procurement Policy Director Steve Kelman. It’s worth noting that Kelman and his colleagues, of both parties, did do something to reform acquisition, but many of those reforms subsequently fell by the wayside when political firestorms erupted.  Companies interested in commenting now should see the link here, and there is skepticism  as to whether anything substantive will come of this most recent initiative. 
Contractors Can Benefit from Common Acquisition Lead Time Standards: The term “PALT” has been used by government acquisition officials for the past several years. It stands for Procurement Acquisition Lead Times and is a general attempt by the federal acquisition community to measure the time it takes to hit milestones on major acquisitions and get an RFP or RFQ out the door for bidding. Contractors can also benefit from the use of standard measures to assist them in making their own business pursuit plans. Until now, each agency has had its own definitions for how it implements PALT, including the specific inputs that get measured.  A proposed rule out for comment until February 5th seeks to standardize the types of inputs being measured and bring consistency to PALT measurements overall. The proposed rule was made necessary by Section 878 of the FY’19 Defense Authorization Act. While Congress and others agree that measuring acquisition lead times to better understand planning, and obtain desired outcomes are important, there needs to be a common baseline from which measurements can begin. Contractors benefit because they also have better, consistent information to make their own business plans. PALT data can help forecasting and the better allocation of internal resources. Read the proposed rule here for more.
Best Value vs. LPTA Protests – When the Agency Changes its Own Criteria: Federal agencies may have wide discretion when awarding a contract based on best value, but not to the point where the award is made on Low Priced Technically Acceptable (LPTA) grounds. A recent Court of Federal Claims (CoFC) ruling in System Studies & Simulation, Inc. (Case No. 19-1518C) made clear that agencies cannot overuse technical leveling criteria to create a false impression of equality to justify an award to the lowest price, and lowest technically-rated, offer. Regardless of whether all offerors were capable, consideration of whether an offer is adequate is a hallmark of LPTA procurements – not Best Value Tradeoff decisions. Price still does matter to some extent. In this specific case, the price between the highest and lowest-rated offers was only 6 percent. A wider gap may have potentially been easier for the agency to justify. Overall, both the COFC and GAO seem more open now to hearing protests on best value procurements. Agencies have discretion, but it is not unfettered. Contractors who feel that they lost out on procurements due to improper technical leveling, or an award made to a lower technically-rated competitor should note this willingness and consider a protest if they believe an award was not made based on the criteria in the RFP or RFQ. See the story, with a link to the protest decision here