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DEEP DEFENSE CUTS MAY NOT BE IN PLAY

“Arbitrary reductions would not be the right way to go,” said Senate Armed Services Committee Chair Jack Reed (D-RI) last week, when asked whether he expected deep cuts in Pentagon spending as an offset to pandemic funding.  He prefers to examine proposals made by Pentagon leaders first, to see what weapons programs and other cuts they recommend.  Reed, and other Congress watchers, also point out that any steep defense cuts would require Republican support given the 50-50 split in the Senate and the razor-thin Democratic majority in the House.  This could all be good news for contractors that sell anything from professional services to products to DOD customers.  Many companies have expected substantial cuts to programs as the new Congress looked for ways to balance defense spending with civilian agency priorities. Contractors thathave been planning for flat DOD spending and may be well-positioned to continue doing business if such forecasts prove accurate.  Where defense money ends up is still far from certain, despite Reed’s statements and those made in late 2020 by his House counterpart Adam Smith (D-WA).  At least one member wants further cuts to so-called “4th estate” DOD civilian workers.  Neither party, however, wants to be seen as weak on defense spending with the growing international presence of China and Russia.  Defense spending may not increase as it has, but most companies should continue to find good opportunities throughout the agency.

STREAM OF EXECUTIVE ORDERS MAY CAUSE MARKET CONFUSION

Recently-issued Executive Orders on everything from “Made in America”, to secure supply chains, payment of fair wages, and more may have government contractors and their customers wondering what will change, when changes will be implemented, and what they will be. Indeed, if your company hasn’t been paying attention to the string of orders that have the potential to impact procurement, you are behind the curve.  See the list here:  https://www.federalregister.gov/presidential-documents/executive-orders/joe-biden/2021.  This is a particularly important time for contractors to be aware of what’s happened so far, and what has yet to happen.  You also can’t always take your customer’s word for it, either, as they may be as confused as you are.  The bottom line is that no real changes have yet to take effect and likely won’t for several months.  The Biden Administration implemented a 60-day moratorium on new regulations that runs through March 20th.  Provisions of Executive Orders (EO’s) need to be turned into rules before becoming effective.  Those rules will fill in details on the “how” factor on such issues as whether the Buy American Act exception for COTS IT remains in place, supply chain requirements, and other policy directives more broadly covered in an order.  At least one company we know has been asked by a customer to certify that it meets a new EO standard.  No company can do this yet, however, because there is no new regulatory standard to meet.  Make sure you know the difference between what has been proposed and what has actually been implemented.  Watch this space and watch modifications to your contracts to understand how your company will be impacted.  Remember, too, whether a contract modification is sent to implement a policy change or some other matter, NEVER sign and return it without reading and understanding it first.

JUSTICE DEPARTMENT OFFICIALS INDICATE POSSIBLE USE OF FCA ON CYBER, CMMC COMPLIANCE

Some readers believe that we exaggerate the risks of contract non-compliance.  We wrote recently about the potential for the Department of Justice to use the False Claims Act to pursue contractor culpability when supplying compromised SolarWinds solutions.  We could see your eyes rolling from here.  The Department of Justice helpfully backed us up last week, though, by sending a warning to government contractors that they will be turning up the False Claims Act heat on cybersecurity fraud.  Acting Assistant Attorney General Brian Boynton told the Federal Bar Association Qui Tam Conference this week that it is not difficult to imagine a situation where False Claims Act liability may arise given what the government pays for systems or services that are supposed to comply with required cybersecurity standards.  The bottom line:  If your company provides a cybersecurity system that fails to meet stated federal requirements, or attests to a cyber standard that it does not meet, DOJ could pursue a False Claims Act case against you.  Boynton went on to say that cybersecurity was one of six key priorities for the civil division when it comes to the False Claims Act.  Contractors are on notice to ensure that they comply with any cyber standards included in an RFP or RFQ and that their company meets cyber-related standards such as CMMC.  The cost of an FCA investigation starts at seven figures and can easily reach the mid-8 level, not including potential suspension or debarmentKeep that in mind when your company contemplates whether to spend six figures on a cyber compliance system.  Conversely, if your company does meet required standards and your competitors do not, you now have a powerful tool that should give you an advantage.  If a government customer still goes ahead and makes an award to a non-compliant company a whistleblower case you file can add to your bottom line.  

FEELING (CONTRACTUALLY) INCORRECT?

It’s beyond bad manners to have a contract out of compliance, it’s something that can put your company at real risk.  Allen Federal has conducted contract compliance reviews for many companies.  You’d be surprised what we find, even from companies with good systems.  It’s a best practice to have an outside set of eyes review your contract terms, pricing, and other matters.  Reviews can be done quickly, as well.  Contact us today at info@allenfederal.com to see what we can do for you.

WORKFORCE EQUITY & DIVERSITY, CLIMATE CHANGE AMONG GSA LEADERSHIP’S PRIORITIES

Acting GSA Administrator Katy Kale and FAS Commissioner Sonny Hashmi recently outlined the agency’s top four priorities.  Contractors should take note and understand how each one may either directly or indirectly impact them.  First up is continued COVID-19 supportand, closely tied to it, bolstering economic recovery. While considerable effort has been put into meeting personal protective equipment (PPE) needs, this support could also include logistics assistance to other agencies as well as new methods to support a workforce that splits its time between office and remote locations. This could mean opportunities for contractors to provide GSA and its customers with a variety of logistics and remote workforce services.  That workforce, itself, may become more diverse and see increased advancement opportunities for women and minorities. Workforce diversity and equity are the second major goal. This may or may not change who contractors work with, but it is certainly an indication that GSA may be looking for the same types of initiatives in its contractor base.   Last, impacting climate change, possibly viagreen procurement, is making a comeback and could impact contractors in new ways.  Plans were being crafted toward the end of the Obama Administration, for example, that would have required contractors to not only report on the eco-friendliness of any goods they make, but on the green status of their office buildings, supply chains, and other business components.  Absent from the priorities was any specific mention of GSA’s need to improve acquisition outcomes or manage its still-substantial real estate holdings.  Either GSA leaders believe that these are so well handled now that they don’t require top-level attention, or these basic agency functions will be subordinate to the new priorities.