The BDO GovCon Week Ahead - September 2019

September 30, 2019

Welcome to the New Fiscal Year and Temporary Funding:  Fiscal Year 2020 starts on October 1, 2019, and all government agencies will be open under a Continuing Resolution (CR) that is in effect until November 21^st.  The good news is, this means we don’t have a shut down.  The bad news is that, as of tomorrow, any new projects that require appropriated money will be on hold until Congress passes full year funding.  The CR will keep agencies open and funded at FY’19 levels.  There are also the usual rumors about a possible full year CR, but it is uncertain whether that will happen.  There have been full year CR’s for civilian agencies, but never one for the Department of Defense.  The longer agencies are funded by a CR, the more things like readiness and training are degraded.  A full year CR would halt critical programs like IT modernization, or transition to new telecom solutions under GSA’s EIS contract.  Senate leaders do want a deal, and it is possible that final appropriations will pass at some point.  More certain is that the current CR will be extended, likely until sometime in December, as Congress looks for deal on a way forward.  The wildcard in all of this is what may happen to House-Senate diplomacy if the House decides to move ahead with impeachment actions against President Trump.  Such an undertaking could result in an appropriations outcome that neither contractors, nor their federal customers, would welcome.  Stay tuned.
 
GSA Schedule Consolidation Moves Forward:  Another project that starts tomorrow is the first phase of GSA’s Multiple Award Schedule consolidation project.  A new, unified, Schedule solicitation will now be used for all GSA offers.  Companies can begin filling out new offers on GSA’s e-offer system, but no new contracts will be awarded until January.  GSA intends to use that time to ensure that contracting officers and specialists are up to speed on the new changes. And the agency wants to ensure that contractors take their time to fill out the new solicitation correctly.  Existing Schedule contracts will be modified starting in January.  Contractors are urged to carefully read the new Schedule terms and understand how they may impact any special agreements currently in place. Key terms to review include your company’s Basis of Award Customer for Price Reductions Clause compliance, a new, single Economic Price Adjustment Clause, and requirements for secure supply chains and the provision of only approved electronic and telecommunications equipment.  Contractors should also be aware that GSA may require companies that have not updated their Schedule pricing recently to re-establish price reasonableness during the modification process.  GSA expects companies to sign and return the mass modification in the Spring and will require signatures in July.  Phase III, consolidation of multiple contracts into one, is also scheduled to start in July.  Check out the GSA Interact site for more information.
 
Agriculture COE Debacle Shows Risk of Not Checking Budgets:  The Department of Agriculture unexpectedly canceled all contracts and agreements with GSA only one year into to a much-anticipated Center of Excellence project to modernize its IT infrastructure.  The agency will now move all activities in-house and may have to reopen certain contract bids to achieve the originally intended outcome.  In the meantime, contractors were left with pennies on the dollar to show for their investment in the project.  The popular belief is that the agency had to cancel the GSA COE project due to a lack of funding, which offers a reminder for contractors:  Always check with an agency CFO representative as part of your capture process to ensure that there is actual money available to support the project.  While stories like AG’s are rare, more than one company has spent bid and proposal dollars to win an opportunity that was not funded.  Experienced federal sales executives know that there is a selling rectangle when seeking to do government business.  The customer, or end-user is most obvious, that person’s boss or supervisor comes next.  Many companies know to speak with someone in acquisition along the way, covering three parts of the rectangle.  Few bother to ask a customer’s financial office about what’s in the budget to support the project.  The AG case is a clear example of why such a step is essential.  Just ask the companies on the COE project.  See the article here for more.
 

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September 23, 2019

Is There Still Business to be Done this Fiscal Year?: With one week left in the 2019 federal fiscal year, companies may ask themselves if it’s too late to close business.  The answer is an emphatic no.  Hundreds of millions of dollars will be obligated in the next seven days.  Here are three tips that range from tactical to practical: 

1. Stay Open:  Believe it or not, some government contractors will either not stay open late or will close over the weekend.  Do that, and you will lose business.  You need to be reachable right up to midnight in the Pacific time zone on September 30^th.  The anecdotes about companies that lost business because they hung up the phone at 11:55 pm are legion.  You can rest in October. 
2. GSA E-Buy: Fail to monitor E-Buy this week and you will lose business.  Whether you’ve tracked an opportunity or not, you can bid on any open RFQ you see.  Your bid must be considered if it is received on time.  Contractors do win business this way. 
3. Call and e-mail your contacts:  Sometimes your company may get the project because you called at just the right time.  Don’t assume your customer knows you’re interested if you haven’t spoken in a couple of weeks.  The chances are excellent that at least one of your competitors has.  Make sure your voice is familiar, but not over-bearing.  Now is not the time to pitch new projects or strategies.  Deploy your tactical sales plan and finish 2019 strong!

 

GSA Must Listen to Industry On E-Marketplace Pilot:  A final Request for Proposals (RFP) on the much-anticipated e-marketplace pilot is expected from GSA any day.  Hopefully, the agency has taken this time to thoroughly consider industry comments from the July draft.  The draft RFP contained too many government-unique requirements and way too much technical investment for the size of the pilot.  The Congressional intent for this program was to mirror commercial e-marketplaces.  That can’t be done if GSA adds too many government-only requirements.  Similarly, the technical requirements were scaled to match a full-blown acquisition, not a pilot.  Potential contractors were asked to invest time and money well out of proportion compared to the expected ROI.  All of this will almost certainly discourage competition, especially from companies that are already doing business with individual agencies.  GSA needs to be more realistic about what to expect from companies competing for an uncertain amount of business via a pilot program with a low per-transaction dollar cap.  Agencies are also waiting to see what GSA does.  For them, its price, convenience, and the ability to buy from trusted sources.  GSA needs competitive pricing, ease of use, and recognizable contractor names.  If the agency can’t deliver on these points, their customers may decide to go their own way.  It’s ok if the RFP is delayed, if these issues are addressed so that the procurement can be successful.   

 

Does the Christian Doctrine Apply To Subcontractors?:  It is well-understood in government contracting that prime contractors are responsible for adhering to regulations inadvertently left out of their federal contracts.  This is known as the Christian Doctrine (G.L. Christian & Assocs v. United States).  A recent article in JD Supra from Husch Blackwell LLP  tackles the question of whether the doctrine can be applied to subcontractors, thus making them liable for compliance with rules not in their subcontract.  While prime contractors are notorious for trying to flow down contract clauses that have nothing to do with a specific subcontract, the depth and breadth of contract-related rules is such, that even careful planning could result in an omission.  Prime and subcontractors should pay attention to flow down requirements with subs, taking steps to ensure that they don’t have to comply with more rules than necessary.  Regarding whether the Christian Doctrine applies in cases where a clause may have been left out, a federal district court recently ruled that it does not.  The court in Energy Labs, Inc. v. Edwards Engineering, Inc. found that the Doctrine “was intended to apply to contracts between the federal government and government contractors, not to subcontracts.”  While this is not necessarily the last word, it is consistent with other court rulings.  The essence of the reasoning behind each is that the Christian Doctrine does not exist to protect the prime contractor or subcontractor, but to protect the government.  Both prime and subcontractors should take note.     

 

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September 16, 2019

BDO Federal Market Access invites you to join us on October 15^th in McLean, VA for a seminar on the Four Things Companies Need to Know Before They Renew Their Schedule Contract or Pursue A New Schedule.
 
Selling Cyber Solutions to DOD? Be Prepared to Certify Your Supply Chain:  The Department of Defense (DOD) announced a draft Cybersecurity Maturity Model Certification (CMMC) framework on September 4^th that will require any company involved in DOD work to become certified on the security of its supply chain before they can do work for the agency. The CMMC draft is out for comments, and federal contractors are strongly advised to review and comment by the September 25^th deadline. The CMMC draft model:

1. Combines various cyber security standards and “best practices”

2. Maps these practices and processes across several maturity levels

3. The associated practices and processes, when implemented, will reduce risk against a specific set of cyber threats

The intent of the framework is to stop leaks of critical cyber information from DOD.  The more a company is involved in sensitive DOD work, the higher the cyber standard they must meet.  Conversely, small businesses selling commercial items that have nothing to do with IT or cyber solutions will have a lower standard.  The draft document currently has five separate levels of certification, ranging from basic cyber hygiene requirements to practices essential to the protection of critical systems. 

DOD has stated that the new standards will go into effect in January 2020.  The time is now for any company with Pentagon business to understand the proposed standards, comment, and ensure that the company is prepared. 
 
GSA Supply Chain Memo Still Requires Secure Solutions:  A new memo issued on August 13^th by the General Services Administration (GSA) on the handling of sensitive telecommunications and video equipment may leave some contractors confused.  To clarify, all suppliers of telecommunications and video equipment must meet requirements set forth in the FY’19 Defense Authorization Act that prohibits the use of equipment from banned companies such as ZTE and Huawei.  Contractors are responsible for ensuring that the products they offer in this area have secure supply chains and come from authorized countries.  So, what’s the big deal about the GSA memo?  The agency stated that, for contracts that are not major sources of telecommunications or video solutions, a contractor must only certify that their products meet these standards at the contract level, instead of at the contract and task order levels as with other contracts.  Companies selling covered solutions through GSA’s EIS and GSA Schedule 70 contract, must still certify at both levels, according to the law.  The deviation memo issued by GSA makes the task order level certification optional, at the discretion of the procuring agency’s contracting officer.  The intent to is streamline the acquisition process when a large IT solution that may contain some of the covered items is being acquired through a broad-scope contract not traditionally used to buy telecommunications or video equipment.  GSA is intending to make the buying process easier, but contractors should not assume that they are no longer responsible for following the Congressional law. 
 
Cut and Paste as Needed: Only the CO Can Change the Scope of Work: The following is based on a true story:  A contractor was mystified that their claim for over $400,000 was not being honored by the government contracting officer.  They had sign-offs from their prime contractor and the agency staff on site was pleased with their “Phase II” work.  It took about ten minutes to review the files to figure out why the company had not been paid.  Neither the prime contractor, nor the agency’s site staff, took the formal step of having a contracting officer sign the modified statement of work to include “Phase II.”  Without a contracting officer’s approval prior to the work being done, this company, will not get paid for work done.  Only a contracting officer can bind the government to a contract, or a change to any contract.  Contract specialists, program managers, site leaders, etc. do not have this authority.   This is an expensive lesson, but one that even experienced contractors must learn over and over again.  In this example, the subcontractor was too eager to move forward and incorrectly assumed that the prime squared everything away with the government.  If the subcontractor has any beef at all it’s with the prime who failed to take the proper steps.  Your company should not have to learn this lesson the hard way.  Every training event should feature a reminder that only a contracting officer can bind the government to a contract.  In fact, we often make attendees repeat the statement in classes we teach.  Until your next training, cut this article out and paste it in your break room!
 

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September 9, 2019

While Associations Cite Burden of Supply Chain Rules, Contractors Must Still Comply:  Federal contractors must bolster the security of their supply chains right now under the terms of a recently released interim rule.  This is the latest in a series of steps the federal government is taking to ensure good cyber hygiene and risk management.  While the specific new interim rule is intended to mainly target hardware from Huawei and ZTE, industry associations are concerned that the specific wording of the rule opens the door to extra burdens.  Particularly frustrating is the fact that the Office of Management and Budget sat on the rule for nearly a year, and then released it as an interim measure, meaning it is now effective, without seeking any advanced public comment.  While interested groups were able to comment on the rule after publication, the terms of the interim measure went into effect essentially upon their publication in the Federal Register.  The bottom line is that contractors providing all types of technology products, must ensure that their suppliers and subcontractors are providing them appropriate items.  Even if a customer says, “we want a lower price, we’re willing to take the risk,” don’t do it.  Organizations are responsible for providing safe and secure solutions that meet all applicable federal rules.  If you’re unsure about the federal rules, a little research will tell you.  Both you and your customer can get in trouble for not following the rules.  Make sure that your supply chain is secure.

Natural Disasters Provide Acquisition Opportunities – And Each Situation is Different:  When disasters like hurricane Dorian and others hit, contractors and government agencies go into high gear to get critical supplies to where they’re needed.  Whether its basics like water or generators, temporary housing, or even assisting in the processing of government aid forms, contractors are working side by side with federal agencies to help those in need beyond just fulfilling immediate needs.   Recovery from major storms takes many years.  Remember how long it took New Orleans to recover from Katrina?  There should be opportunities for contractors that can provide the goods and services rebuilding community need for some time, although each situation is different.  Survivors from hurricane Harvey in 2017 needed more housing-based assistance.  Glancing blows like Dorian may require more tactical needs, such as flood prevention or recovery, utility restoration, or temporary drinking water.  There is good business to be had around disaster preparation and relief.  However, these initiatives are not just about business, though.  Disaster preparation and relief opportunities are a time for contractors to show how much they value their relationships and the communities in which they live and do business.  Market research can assist in knowing where, and whether the services and products you provide are a good fit for those recovering from disasters.  Your corporate messaging and volunteer work during crises will show a larger audience just what your company values and why customers would want to partner with you in the future.
 
Successful Construction and IT Projects Have More In Common Than You May Realize:  If you think IT projects are over budget and behind schedule, take a look at construction projects.  Only about 30 percent of construction projects are completed within budget and on time.  Whether focusing on IT, construction, or other government projects, following these three steps can help you and your customer achieve better outcomes, on time and on budget.

1. Manage Contract Scope:  Managing risk starts early in the construction or IT project lifecycle; often during the pre-planning phase.  Construction contracts often make use of an auditor, but the auditor here is closer to an independent project manager, and not what most IT companies would consider as a contracts auditor.  An experienced construction auditor or independent manager can play a vital role in risk avoidance.  To avoid unanticipated cost overruns and adversarial situations, it is important to leverage an experienced construction auditor or independent program manager to provide peace of mind. 

2. Change Order Management:  In both examples, change orders represent the single largest financial risk on any construction or IT project.  They can increase project scope or modify originally agreed upon terms.  Project managers can have a different view of change orders because of their proximity to day-to-day operations.  Remember, a government contracting officer must sign off on any scope or other change before any new work is done.  A construction auditor or third-party manager can help the project team evaluate and proactively assess change order risk, before seeking a change from the contracting officer.  This can save time and money.

3. Roles, Responsibilities and Expectations:  Construction and IT projects both have multiple players.  While the roles look separate and distinct on paper, the reality is that people on the ground can sometimes take on the appearance or responsibilities of other team members. While this can ensure that things get done in the short-term, they can ultimately lead to confusion, or project changes that were never officially approved by the right person.  It is vital to maintain separate and specific roles and responsibilities and the expectations of each team member.  A strong team lead is an important part of this process to ensure that one senior person is responsible for ensuring that each team member is following through appropriately. 

 

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September 3, 2019

Three Things to Focus on in the Last Month of the Fiscal Year: Welcome back from Labor Day break.  There are four weeks left in the Fiscal Year.  Here are three things to focus on to finish your year strong. 

1. Stay In Constant Contact: End-user customers are the obvious people with whom your sales people should be in touch right now, but don’t forget to reach out to contracting officers and industry partners.  Timing is everything, and your call may be the one that gets you last minute business.  Remember to thoroughly review GSA’s E-Buy system for business you may be able to acquire.  Ignore E-Buy and you will lose business. 
2. Don’t Get Distracted:  There is a time for conferences, committee meetings, and other networking opportunities.  That time is known as October.  Remain focused on business that you can close now, as well as any RFP’s for large contracts that will position your company well for future business. 
3. Stay Open Late:  September 30^th is on a Monday this year.  That means that your company should maintain staffing through the last weekend of the month to take orders and solve potential customer problems.  NASA SEWP has already announced that they will be open on the weekends in September.  If they sense the urgency and need, your business should as well.  September 30^th is the longest day of the federal calendar, too.  It doesn’t end at 5:00 eastern time.  Make sure your customers know that you will be open as late as they need you to be.  Follow these three tips and you will have earned your Bahamas vacation later.

 

DHS Bucks Trend – Goes with Stand-Alone Acquisition Vehicle:  The Department of Homeland Security will continue with its FirstSource IT contract according to recent agency announcements.  In a surprise move that bucks the trend toward abandoning discrete vehicles in favor of Blanket Purchase Agreements (BPA’s) against GSA Multiple Award Schedule contracts, DHS acquisition head Soraya Correa said that her agency will proceed with FirstSource III with a solicitation planned for January.  The move came as surprise to many in the IT acquisition arena as DHS had previously cancelled plans for a next generation Eagle contract in favor of Schedule BPA’s. This change placed the agency in the company of the State Department, Air Force, and others that had elected to use GSA Schedule contracts as the basis for their own agency needs.  Anyone listening to what Correa and others at DHS have been saying recently would not have been caught off-guard.  Correa has said several times this summer that DHS needed its own acquisition vehicles to meet its special needs.  In addition, Correa is high on data analytics and on managing IT spending in DHS, measurements that may be more easily provided via an internal vehicle than from an outside contract.  The FirstSource II contract has captured nearly half of the agency’s IT commodity transactions over the past year, indicating its popularity inside DHS.  Contractors can expect multiple agency engagements between now and January, according to DHS.  A place on FirstSource III could be a gateway to improved DHS business.  Be prepared to participate and listen to what the agency is saying.  See the article here for more.

 

GSA Must Ensure Security, Authenticity of E-Commerce System:  As the General Services Administration (GSA) moves toward awarding pilot contracts for its commercial e-marketplace program, ensuring that the contractors they work with offer authentic goods from authorized sources will be essential.  The success or failure of the program may hinge on the ability of customer agencies to know that they are getting what they ordered from responsible sources when buying from a GSA-awarded e-marketplace provider. The issue of authentic goods, or lack thereof, from such sources was again raised in a recent Wall Street Journal article criticizing one e-commerce site for, “limited oversight” over items on its platform.  The article went on to say that the providers site, “has increasingly evolved like a flea market”, as opposed to “a retailer with goods deemed safe enough for customers.”  An e-marketplace initiative through which government agencies purchase non-authentic products from unauthorized sources is likely to hit the Government Accountability Office’s High-Risk list overnight, with Congressional hearings soon to follow. Commercial e-commerce sites offer the ability to make quick purchases and provide exceptional data analytics. When this process is properly managed, federal agencies can likely benefit from the use of such systems. GSA should ensure that the benefits from commercial sites are equally weighed with the risks.  E-marketplace providers should be able to show the agency how they will ensure that federal agencies get what they ordered from responsible sources to be considered for the pilot contract.