The BDO GovCon Week Ahead - May 2020
May 26, 2020
SBA Revises Loan Forgiveness Guidelines Again: On May 15, 2020, the US Small Business Administration (SBA) shared additional guidance for Paycheck Protection Program (PPP) awardees who will seek loan forgiveness. The new procedures mandate awardees file SBA Form 3508, the Paycheck Protection Program Loan Forgiveness Application with their SBA-approved lender. Four components of the application include:
- the PPP loan calculation form
- PPP Schedule A (akin to an IRS 1040 Form)
- PPP Schedule A worksheet (names and salaries of each employee)
- an optional section called Borrower Demographic Information Form (were PPP funds spread across small business owners equitably?)
Though the SBA offered no additional guidance on affiliation rules, some borrowers are still under the onus of coordinating their responses with subsidiaries, strategic investments, and other material interests. A total of $2 million or more in PPP loans between affiliated businesses triggers a higher level of scrutiny, and likely an audit, by the SBA. Awardees are advised to seek professional council to determine any outstanding questions within the PPP Loan Forgiveness Application.
Pentagon to Leverage More Robotic Process Automation to Curb Monotonous Tasks: The Defense Innovation Unit (DIU), an arm of the Department of Defense (DoD), recently issued a solicitation to industry to determine if there are any commercial Robotic Process Automation (RPA) technologies that could expedite several otherwise burden some administrative or process-oriented tasks. To quote the request for proposal (RFP), “DIU seeks readily available, commercially viable automated machine learning (ML) solutions to enhance DoD's existing RPA tools, enabling them to automatically identify, predict, and recommend corrections to complex business processes. Anticipated discrepancy types include resolving unmatched transactions; identifying patterns of fraud, waste, and abuse; and other inaccuracies or redundancies in financial, logistics, travel, and payroll accounting systems.” More information on this bid and other DIU opportunities can be found here.
A vortex of factors led to this request to industry, likely including the following:
- Decades of IT modernization legislation have been passed by Congress and signed into law, but lack funding. These “unfunded mandates” have been fervently ignored by federal agency CTOs and CIOs.
- Due to a documented lack of interest in public sector employment by Generation Z and a correlation to increased baby boomer retirements from federal agency roles, someone or something must process hundreds of thousands of Social Security updates, grant applications, and contract closeouts.
- An aging IT infrastructure and agency procedures have been exposed by COVID-19 to be inadequate in a new age of telework.
- Car manufacturers embraced assembly line manufacturing robots four decades ago. Why would the assembly line-like task of identifying improper payment anomalies, for example, need a lot of humans to accomplish this when machine learning can accomplish it more accurately and expeditiously.
Help the General Services Administration Test its New Contract Management Tool: Be part of the beta phase of a significant information access upgrade at the General Services Administration (GSA). Curious to know what federal agencies are spending on Personal Protective Equipment (PPE) or logistics services during COVID-19? Now, in addition to this site and subscription-based resources, the GSA is rolling out Public Category Management Dashboards and Analytics in support of contract management stakeholders. Kristen Wilson, GSA’s Branch Chief of Government Wide Category Management, has attached her photo and email to the page because she genuinely wants industry feedback and collaboration. Test it out and share your suggestions and comments with Ms. Wilson directly.
Logistics Civil Augmentation Program Still in Protest Limbo: On April 15, 2019, the DoD announced its selection of four vendors for the fifth Logistics Civil Augmentation Program (LOGCAP V). The awards were protested at the Government Accountability Office (GAO) shortly thereafter. This $83 billion, 10-year contract is meant to provide key logistical, facilities, and personnel support to U.S. active duty troops in harms way in Iraq and Afghanistan. In the interim, extensions have been issued to LOGCAP IV contract holders, who are finding it difficult to plan and recruit/maintain talent in six-month increments. Contracts for organizations that have been selected, like Vectrus Inc., Fluor Intercontinental Inc., PAE-Parsons Global Logistics Services partnership, and Kellogg, Brown and Root (KBR) Services – as well as the active duty service members they serve – have lingered in GAO’s hands for final opinion for over a year. This is an example of the difficulties associated with awarding and sustaining “Best Value” versus Lowest Price Technically Acceptable (LPTA) contracts. BDO will keep you informed when GAO renders its protest decision(s).
May 18, 2020
COVID-19 Induced Contracting Reform: Noted GovCon consultant and Federal News Network contributor, Rich Beutel, recently aggregated a list of federal contracting reforms that will likely become the new normal thanks to COVID-19. The Coronavirus Aid, Relief, and Economic Security (CARES) Act funding designated to improving VPN and telework infrastructures will further improve and expedite the contracting process by including electronic signatures, digital forms, and web user experience (UI/UX) improvement. Unfortunately, it took a global pandemic to institute countless 21st century government reforms where congressional legislation, executive orders, and a full Modernization of Government Technology Act fund were all unable to gain traction. As the US Marine Corps has always touted with their slogan, “Improvise, Adapt and Overcome,” some federal agencies have realized the benefits of rapidly implementing more commercial-like systems. Other agencies that refused to innovate, have had a significantly more difficult time adapting to the new COVID-19 world.
WOSB Certification Reform at SBA: On May 11, 2020, the Federal Register advised contractors of a significant change in the world of Woman Owned Small Businesses (WOSB) and Economically Disadvantaged Woman Owned Small Businesses (EDWOSB). Self-certified WOSB’s will no longer carry any material value to contracting officers seeking to award sole source or set-aside contracts. This change will also apply to prime contractors seeking WOSB subcontractors, teaming partners, or proteges under the All Small Mentor Protégé Program. The SBA has also declared a mandate that any WOSB paying for certification via third parties (US Women’s Chamber of Commerce, WBENC, and others) is unfair, thus, SBA will roll out its own free online certification system on or around July 15, 2020. As any small business that applied for a Paycheck Protection Program (PPP) loan under the CARES Act can attest, users should anticipate unpredictable and spotty technology rollouts. Lastly, after conducting an industry and agency stud, and receiving 146 comments on their federal register posting, SBA has determined that $750,000 net worth is the new economic disadvantage threshold for small business owners.
GovCon Reforms Around China: COVID-19 exposed severe weaknesses in US policy and commercial manufacturing. Decades of extreme reliance on China for low-cost manufacturing uncovered major self-made supply chain defects in vaccine manufacturing, personal protective equipment (PPE), and key Defense Department armaments that contain rare earth metals. Well prior to COVID-19, the US Government imposed sanctions on Chinese manufacturing, particularly imports. Chinese security system manufacturers Huawei and ZTE were mandated by the US Government to be ripped and replaced in all federal facilities due to security concerns. Import tariffs started to trim the supply of goods, yet US manufacturers demonstrated little compulsion to fill the gap. Now, a pandemic that started in China is exposing a global over-reliance on Chinese-made products and a severe lack of supply chain resiliency. To make up for this discrepancy, President Trump invoked the World War II era Defense Production Act to compel US manufacturers to supply US-made goods by rapidly reorganizing their facilities in order to help supply meet demand. So, the question now is this: Will the “Buy American Act” and “Buy America Act” be woven more tightly and more firmly into future requests for proposals? Will the government dedicate enough resources to ensure US-made products are given preference, per these laws, to imported goods–especially those from China, per other laws? This remains a developing situation which we will continue to monitor.
COVID Sparks Remote Voting: When citizens want to express their opinions about political leadership, they vote. But what happens when voting may put their health at risk, such as with COVID-19? Two interesting developments will occur this week in this arena. On May 14, the House of Representatives Rules Committee will meet to discuss remote voting in the House and the allowance of official remote committee proceedings. The bill has yet to earn an official number but considering that the House allowed for proxy voting until the 1990s and the necessity to keep elected officials safe during the pandemic, this bill is likely to move on from Committee to a full Chamber vote posthaste. The Senate is likely to pass the measure on voice vote despite their tendency to adhere to stricter institutional boundaries.
Frank LaRose, Secretary of State in Ohio, instituted a unique primary voting reform in his state. He asked local newspapers and grocery stores to print Ohio’s primary ballots in their papers and on their bags, respectively, in order to reach as many Ohioans sheltering in place as possible. This non-traditional approach creates its own challenges; however,its innovation may be an effective bridge from traditional ballot box voting to an eventual embrace of internet voting. Time will ultimately tell, but one thing is for certain: recalibrating aged systemsin order to meet citizens’ needs is the right way to ensure governing institutions remain intact in troubled times.
May 11, 2020
Every national emergency presents opportunities for fraud, waste, and abuse, and we continue to see stories of such behavior. In this week’s edition of the Week Ahead, we’ll focus on this topic in the age of COVID-19.
Personal Protective Equipment Supply and Demand: Enterprising individuals and companies that recently sought to take advantage of low supply and high demand of Personal Protective Equipment (PPE) have been exposed for their endeavors. A former Air Force officer-turned-entrepreneur with no experience selling medical equipment had his $34.5 million contract revoked by the Department of Veterans Affairs Hospital Administration (VHA) for his inability to deliver. The state Attorney General is now reviewing the former lobbyists’ case. How these and related incidents play out will ultimately be up to the Investigator General or Attorney General offices. Will the defendants be viewed as genuinely having tried to do the right thing despite limited experience and gray, shifting contracting laws? Or will they face punishment for attempted profiteering and subjecting government agencies to unnecessary risk and delays that put human lives in the balance? Going forward, contractors who don’t make PPE and don’t know where to find reliable sources of PPE shouldn’t try to sell PPE to government agencies. And to government procurement teams – if it looks like the Fyre Festival and smells like the Fyre Festival, caveat emptor.
Paycheck Protection Program (PPP) Audits Forthcoming: On April 28, Treasury Secretary Steve Mnuchin and Small Business Administration head, Jovita Carranza, cast stern warnings to companies that followed the letter of the CARES Act law, but perhaps not the spirit. PPP loan recipients of $2 million or more will be audited for their use of these loan funds. Should improper application of these funds be determined via audit, offending companies will owe the full principal plus interest to the US government. Guidelines on what does and does not constitute adherence to the letter and spirit of the law will be determined in concert by Treasury, SBA, and the Office of Management & Budget (OMB) in the next few weeks.
Improper Payments – How Are We Going to Pay for All of This? Once the COVID-19 stimulus packages have been absorbed by businesses, agencies will need to audit the proper use of funds by contractors as well as individual recipients. Be on the lookout for a resurgence of a Trump version of the Recovery Accountability Transparency Board (RATB), originally formed to address President Obama’s Recovery Act stimulus spending. Perhaps this new RATB will be blessed with all the full legal authorities granted by five progressively granular Improper Payment Elimination laws that continue to have little effect on stemming $145 billion in annual improper payments from agencies annually. The odds are high that this figure will skyrocket due to the massive stimulus, another round of household stimulus checks, and the largest FY federal budget ever. Planning now for necessary recovery audits will be key to ensuring maximum value for taxpayers.
May 4, 2020
When Will Federal Offices Reopen? The Offices of Management and Budget and Personnel Management issued a joint memorandum on April 20 outlining the circumstances under which federal offices may start to reopen from COVID-19 closures. Generally, federal reopenings will be based on circumstances specific to each location. As stated in the memo issued by acting OMB Director Russell Vought and acting OPM Director Michael Rigas: “... in partnership with state, local, tribal, and territorial governments, and the private sector the federal government is actively planning to ramp back up government operations to the maximum extent possible, as local conditions warrant, consistent with the National guidelines for Opening Up America." Federal officials will make determinations in concert with state and local government leaders to reopen their states and cities. While some government officials may follow federal guidelines calling for a consistent reduction in infection rates, others are likely to reopen sooner. Keeping track of where your customers are and whether their offices are open could be a challenge for government contractors. Federal offices or military bases in rural areas may re-open well before offices in Washington, D.C. or New York. Even then, access to buildings may be restricted. On-site contractor personnel may be allowed to return to federal office spaces, while meetings with other contractor personnel or outside organizations may continue to be done virtually. Many federal workers may continue to telework as well, either due to personal issues, limited office capacity, or because telework is deemed to be more productive and in the best interest of the government rather than working on site. Contractors seeking in-person meetings will likely have to ask specific contacts if such gatherings are allowed for many months to come. In the meantime, keep those virtual meeting skills sharp.
Helping Your Customers During COVID-19-Tips to Remain Compliant: Federal government business is often relationship driven. Contractors with established relationships with their federal customers naturally want to be helpful in stressful times such as COVID-19. It’s important that well-intended help doesn’t get you or your customers in trouble. Here are some tips on how to assist and remain compliant:
- Anything of value must be offered widely: Thinking of buying lunch for a federal customer or agency workers that visitan office? Follow the example of some Washington, D.C. restaurants and ensure that the free lunch is widely available. This can mean handing out bagged meals on the street or sending a notice to all workers in a specific geographic area that lunch will be available on a first-come, first-served basis. This guideline follows the logic of “Widely Attended Gatherings” in which federal workers can participate and are not targeted specifically to federal workers.
- Keep the value within gift limits: Federal gift rules vary widely, and generally allow for gifts of up to $20 per occasion, but no more than $50 per year from a covered source. This rule means that a one-time offer of lunch or coffee and donuts could be allowed, depending on whether any special limits apply. Providing lunch or coffee every week would quickly put you over the limit.
- No free rides: Offering to share cabs or giving federal workers a ride, even if you’re going to the same place, can get you and your customer in trouble. A ride is considered something of value, which could lead to an implication of favoritism. More than one federal official has gotten in trouble for accepting a ride from a contractor.
- Special rules apply to acquisition officials: Don’t risk a current or prospective award by trying to give a contracting official any sort of gift or favor. Any appearance of favoritism or attempt at influencing a Contracting Officer’s decision can get your company disqualified and land subject the CO to an internal review.
Make sure you review your company’s federal gift and ethics rules to ensure that any help you provide has the desired impact.
Expect COVID-19 Contracting Oversight to Outlive the Virus: The House of Representatives has set up a special oversight subcommittee to examine several COVID-19-related issues, including whether acquisitions were conducted in accordance with federal rules. Existing committees will review spending and crisis management, and the President has established the Pandemic Response Accountability Committee (PRAC).The PRAC is a multi-agency organization that will review the spending of the $3 billion in economic relief via the bills passed by Congress, as well as money re-programmed by the administration. Contractors can expect increased scrutiny from both branches of government regarding the spending of relief-related money and whether other acquisitions taking place during the same time were conducted properly. Government buyers are under tremendous pressure to allocate money toward health supplies, IT support, and other critically needed services and products. Companies should follow proper acquisition rules, not cut corners, and keep clear written records of all contracting actions. It is important to remember that Congressional committees legislate as well as conduct oversight. New contract-related rules and changes to whistleblower and fraud prevention statutes encouraging those with information on potential misconduct to come forward are also likely. Spending intended to assist companies, including government contractors, will be scrutinized. Be prepared for more types of federal representatives to request to review your books and government contracts and remember that the oversight pendulum never stops in the middle. See the first story here and the second story here.
Important Reminder: Effective later this year, the DoD will prohibit contractors from using equipment manufactured by entities deemed to be under the control of the Chinese government, including Huawei and ZTE. The prohibition not only covers telecommunications equipment, such as phones, but also certain screens, security cameras,and other devices. Use of prohibited items, even in locations not related to a company’s government work, will still be considered a violation of the rule. The rule goes into effect in August, so it’s important to identify and replace any offending equipment now. If you wait another month or two to swap out office devices, systems,and equipment, you could potentially disrupt staff, IT, and procurement teams just as they’re settling back in after weeks of working remotely.
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