On Wednesday, September 9th at 12 PM Eastern, join our government contracts attorneys for a webinar entitled: “Mitigating Trade Agreements Act Risks for GSA Schedule Holders.” During this 60-minute webinar, we will provide an overview of the GSA Schedule contract requirements related to the Trade Agreements Act (“TAA”), review recent enforcement actions by the government and whistleblowers against Schedule contractors for alleged violations of the TAA, and discuss how contractors can mitigate TAA non-compliance risks related to manufacturing processes and purchasing from suppliers.

Please note that Federal Publications Seminars charges a fee for this webinar. Registration information can be found here.

 

On Wednesday, July 23rd from 11:30 am -1:30 pm, Cathy Kunz will join Rubino & Company to discuss critical issues in cost law. As contractors face more scrutiny and review of their cost and accounting practices, we will address recent cost-related court decisions and legal changes including the new caps on executive compensation, application of statute of limitations in government audits and cost claims, recent DCAA audit policies and practices, and important court interpretations of the Cost Accounting Standards and cost principles. The webinar is free, but registration is required – click here.

On March 13, 2014, the Department of Defense issued a memorandum titled “Class Deviation – Determination of Fair and Reasonable Prices When Using Federal Supply Schedule Contracts.”  This memorandum directs DoD contracting officers to make their own determination of fair and reasonable pricing when using Federal Supply Schedules (also known as GSA or VA Schedule contracts), rather than rely on the fair and reasonable price determination made by GSA when GSA awards Schedule contracts.    Specifically, the memorandum establishes a class deviation to FAR 8.404(d) that will be applicable to DoD entities buying off Schedule contracts.  This deviation provides that “GSA has determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, to be fair and reasonable for the purpose of establishing the schedule contract.”  But then it states: Continue Reading GSA Schedule Contracting: Has Selling to DoD Just Gotten Harder?

On April 2nd, Cathy Kunz joins Paul Calabrese of Rubino & Company for an important roundtable for government contractors. During this ½ day presentation sponsored by Bank of America and Merrill Lynch, participants will get both the legal and accounting perspective. From the legal side, Cathy will review recent cost-related court decisions and legal changes, including the new caps on executive compensation, application of statute of limitations in government audits and cost claims, as well as recent DCAA audit policies and practices. From the accounting side, Paul will discuss how to prepare a cost or price proposal. He will cover the proposal submission requirements, what contractors should expect from a DCAA proposal audit, including examples of data DCAA might request, and sample proposals.

Registration is free – click here for more information.

Just last week, the Department of Justice announced another large False Claims Act settlement with a GSA Schedule contractor – for $60.9 million. A review of the underlying qui tam complaint, filed by a former vice president of the contractor, reveals multiple alleged failures by Tremco Inc. and RPM International to comply with the basic – yet often very challenging – requirements of the contract: disclosure of commercial pricing and compliance with the Price Reduction Clause. Among a number of allegations, the complaint alleges that the roofing supplies and services contractor failed to disclose to GSA that it offered better pricing to its commercial customers than identified on its published price list. As a result, the complaint states that the government was disadvantaged by negotiating higher pricing than it would have, had it known about the contractor’s actual commercial pricing practices. The complaint also alleges that, during the course of performing the GSA Schedule contract, the contractor failed to provide price reductions to government customers when it provided discounted pricing to its commercial customers. Continue Reading GSA Schedule Contracting: Does Your Company Have Sufficient Internal Controls to Minimize Noncompliance Risks?

On June 26, 2013, the government published an interim rule that implements Section 803 of the National Defense Authorization Act for Fiscal Year 2012 by extending the application of the executive compensation benchmark from senior executives to all contractor employees working on Department of Defense, NASA, and Coast Guard contracts. The interim rule is effective as of its issuance date (June 26, 2013).

The executive compensation benchmark was established in 1998 by the Office of Federal Procurement Policy (“OFPP”) Act and is intended to reflect “the median amount of the compensation provided for all senior executives of all benchmark corporations for the most recent year for which data is available.” The Administrator, Office of Federal Procurement Policy, determines the executive compensation benchmark amount, which is published on the Office of Management and Budget website. The benchmark amount does not limit the amount of compensation that an executive may receive, but caps the amount that will be allowable under the FAR compensation cost principle (48 C.F.R. § 31.205-6(p)). The current benchmark amount is $763,029. Continue Reading New Executive Compensation Limits

On February 21, 2013, the Office of Personnel Management ("OPM") issued a notice in the Federal Register of its intent to adopt the policies and procedures set forth in the Federal Acquisition Regulation ("FAR") at Subpart 9.4 concerning debarment, suspension, and ineligibility of government contractors. Because OPM’s procurement rules are not contained in the Code of Federal Regulations, OPM proposes a new internal policy, to be titled "Contracting Policy 9.4: OPM Suspension and Debarment Program."  OPM states that it has long-maintained procedures consistent with FAR Subpart 9.4, but it is adopting this proposed policy to make clear that FAR Subpart 9.4 applies to its contracting decisions. 

Consistent with FAR Subpart 9.4, the proposed policy will provide as follows: 

  • OPM will not solicit offers from, award contracts to, or consent to subcontracts with contractors who are listed on the Excluded Parties List Systems on the System for Award Management ("SAM/EPLS"), except as otherwise provided for in FAR Subpart 9.4. 
  • If OPM debars, proposed for debarment, or suspends a contractor, OPM will list that contractor in the SAM/EPLS.  Such action will have government-wide reciprocity.
  • OPM may continue an existing contract with a contractor despite the fact that the contractor has subsequently been debarred, proposed for debarment, or suspended if it is determined in the best interest of the Government to do so.

Continue Reading OPM Issues Notice of Written Suspension and Debarment Policy

The start of a new year is a perfect opportunity for government contractors to refocus and rejuvenate their compliance efforts. Regardless of whether a company is contractually required to have a compliance program, contractors should take time to determine the contractual obligations and risks they face now and in the year ahead. Is your company subject to the Trade Agreements Act? Does your company comply with the FAR cost principles and Cost Accounting Standards? Is your company making good faith efforts toward its small business subcontracting plan? Does it understand the risks associated with the False Claims Act?

An investment of time, attention, and resources for purposes of ensuring your company’s compliance efforts are sufficiently robust can have significant pay-off in the long run, including avoiding contract performance disputes, monetary penalties, fraud allegations, litigation and defense costs – all of which distract from the company’s core purpose, cause preventable PR problems, and drain resources. So how best to review and bolster a contractor’s compliance efforts?

The following are some of the basic steps any contractor should take in reviewing its compliance efforts:

1. Make sure the company understands the risks associated with its government contracts. Read and understand the contractual requirements, including the long litany of FAR and other agency clauses often incorporated into contracts by reference only. Often hidden within these long lists are fairly substantive legal requirements and, therefore, compliance risks if the contractor does not comply with the requirements.

2. Evaluate and improve internal controls, policies, and procedures. Review the existing compliance infrastructure to identify any weaknesses and necessary changes. Compare the written policies and procedures with actual practices and determine why there might be variances between the two. Do the written documents need to be updated to reflect changes in law or changes in company structure or operating procedures? Or do actual practices need to be revised to bring them in line with the company’s intention expressed in its written policies and procedures? Test the robustness of internal controls. Are there loopholes that need to be addressed? Is there management support of the internal controls?

3. Refresh employee training and education. A contractor’s commitment to compliance can be derailed by a workforce that lacks an understanding of the rules and the reasons for the internal controls, policies and procedures. Review and update training materials to keep the information current and accurate and ensure the presentation is engaging. Revisit the categories of personnel who receive training to evaluate whether additional groups should be trained. Consider adding more training or supplementing with alternative educational opportunities, ranging from more rigorous certification programs for certain key employees to regularly highlighting compliance success stories on the company internet.

4. Consider a third-party review or audit of the compliance program. Many contractors bring in an outside party, such as a law firm or consultant, to review or audit the company’s compliance efforts. This type of review or audit can be invaluable to the contractor. A qualified outside party brings its expertise and breadth of experience to bear in conducting its evaluation, and can provide useful guidance for improving compliance efforts, getting buy-in from management, and implementing best practices. Engaging in a third-party review can also demonstrate to key stakeholders, such as employees and the government, the contractor’s commitment to compliance.
 

At 1:00 p.m. (Eastern) on October 18, 2012, Crowell & Moring attorneys Cathy Kunz, Richard Arnholt and Tiffany Wynn will conduct  a webinar on behalf of L2 Federal Resources entitled “Business Ethics  in Government Contracting: Legal Requirements & Best Practices for Compliance.” This 90-minute webinar will provide an overview of the requirements in FAR 52.203-13 for a code of business ethics, business ethics awareness and compliance program and internal control system. Other topics we will cover are the key requirements of the mandatory disclosure rule and the consequences of failing to comply with all aspects of compliance and disclosure, as well as provide an in-depth review of best practices.

Further details and registration information are available at http://l2federalresources.com/2012/code-of-business-ethics/.

L2 Federal Resources requires a registration fee for its webinars.

GSA has now topped the $128 million settlement it reached in 2009 with NetApp – then the largest settlement reached in an FCA action against a GSA Schedule contractor – by settling with Oracle Corporation and Oracle America Inc. this past week in the amount of $199.5 million plus interest. The settlement resolves an FCA action brought by former Oracle employee, Paul Frascella, under the qui tam provisions of the statute, in which the Department of Justice intervened.

The Government’s and relator’s complaints had alleged that Oracle provided false, incomplete, and inaccurate information to the government during its negotiation of the Schedule contract; failed to disclose deep discounts given to the most favored commercial customers; and submitted false certifications. The Government’s complaint also alleged that Oracle actively took steps to ensure that its commercial sales to its basis of award customers did not trigger the Price Reduction Clause by means such as increasing the order size to exceed the contract’s maximum order threshold, arranging for the sale through a reseller rather than directly from Oracle, or changing the terms of the software license sold to the commercial customer so that it differed from the terms of the licenses on the GSA Schedule contract.

While it would have been interesting to watch the outcome of the case had it been litigated, given the unusual allegations of fraudulent schemes to circumvent the Price Reduction Clause, the settlement amount indicates there were sufficient facts supporting at least some of the allegations, such that the company chose to settle rather than fight the case.

How to avoid being GSA’s (or a whistleblower’s) next target for a fraud action:

  • Ensure your commercial pricing disclosures are current, accurate, and complete
  • Negotiate a Basis of Award customer that your company can competently and consistently monitor with respect to discounts and changes in commercial pricing
  • Implement a rigorous tracking system to ensure that price reductions given to the Basis of Award customer(s) are also given to Government customers
  • Ensure that any certifications signed and submitted to the Government are 100% accurate
  • Implement internal controls and policies that require company personnel – from the sales force to the managers of the Schedule contract – to comply with the contractual requirements
  • Require mandatory training of company personnel to educate individuals on the contractual requirements and the importance of compliance
  • Implement a reporting system that allows employees to report concerns about the company’s compliance with the contract requirements and that ensures such concerns are properly addressed and resolved.