The government was poised to experience a partial shut-down as we went to press.  Here is the good, bad, and the ugly about conducting contracting business while some of your customers are not around. 

1. GoodAgencies that control most of the discretionary spending are open and have their money.  DOD, the VA, HHS, Education, Labor, and Energy are all open for business.  While any inter-agency operations they share with others may be impacted, they are otherwise running on a normal basis.

2. BadDHS, Treasury, Transportation and others are mostly closed.  Only “essential” operations like airport security are functional.  If you’re a company supporting those essential functions, your people should be at work.  When you get paid for that work, however, depends on when the agency officially re-opens.  This goes for all outstanding invoices your company may have with closed agencies as well.  No pay till this is resolved. 

3.  Ugly Uncertainty abounds on whether your service workers working on a client site can show up.  Generally, unless the work they do is considered essential, the answer is no.  This means that you can’t charge for their work since they’re not working on that contract. Rather than lose good people, especially when a closure is likely to be short, is not something most contractors contemplate.  Instead, they shift those workers to overhead and bite the financial bullet.  At press time there was no clear way or time frame out of this morass.  It will likely be until January before there is.  Keep the egg nog at hand and put another log on the fire.

While contractor labor has long been considered less expensive than fully-loaded federal employee labor, or at least more flexible, a new report states that many civilian positions at DOD can actually be filled more cheaply by feds.  The report says that federal employees can perform “comparable” work for less in areas such as Washington, D.C. and the Southeast.  Still, there are some valid reasons why contractor is justifiably more expensive.  The specialized skills and capabilities of specific contractor assets are often cited by DOD customers as a reason why a contractor needs to be hired in the first place.  Related to this, too, is that contractors are better able to pay market rates for people that possess unique skills, making the contractor option the only one available to DOD in many circumstances.  Still, contractors should be prepared to address the report’s claims.  The in-coming Congress may choose to reignite the debate between outsourcing and keeping certain work in-house, especially at DOD.  Contractors should definitely make sure that their customers understand the value of the services they receive from contractor labor.  Whether its specific expertise or immediate mission support that federal workers can’t provide, contractors make many federal missions possible.  The cost of not being able to meet those missions is something that the report’s authors, and Congress, should consider before making any conclusions.

New reader S. Nicks of Los Angeles, CA writes, “Our company provides a variety of services and products to federal agencies.  Everything from Mac’s to Fleetwood guitars.  We can’t tell if we’re small or not.  Can you help?  While it can certainly be a benefit to be a small business, our experience is that some companies can really break down and cry if they think they’re suddenly large.  Being “other than small” is no reason to have your illusions of federal business shattered, though.  Right now, most businesses identify as small based on their primary NAIC’s code.  This should be the one that most closely identifies with how your company conducts most of its business.  That can change, of course, and GSA is working on a system to allow multiple NAIC’s codes to be entered as a means of identification in SAM.   If you’re a Schedule contractor with a NAIC’s code that makes you small, generally you qualify as such for business done under that Schedule.  Otherwise, you’re considered small based on the NAIC’s code used in the contract or task order your agency CO issues.  If the NAIC’s code listed matches your size, you’re small.  This is one reason why some agencies and contractors engage in “NAIC’s code shopping”, a practice that we note happens, but do not endorse.  Our bottom line advice is not to go your own way, S., but to be the best contractor you can be regardless of whether you’re large, small, or somewhere in between. 

GSA leaders must ensure that they communicate early and often with stakeholders inside their agency to ensure that the Schedules consolidation project is best-positioned for success.  This was among the recommendations shared with the agency by industry panelists during GSA’s Federal Market Industry Day held December 12^th.  Agency rank and file employees don’t always get the message on big, new changes leading to frustration, misinformation, and delays in achieving intended outcomes.  This can especially be the case when industry partners may initially have more knowledge on the change than the GSA people with whom they work.  Similarly, GSA officials must ensure that contractors with multiple contracts understand how those assets might be affected and have all of the details ironed out before multi-schedule contractors become part of the consolidation progress.  GSA officials agreed on this last point.  They stated that companies with multiple contracts will be among the last to transition.  They also reinforced the message that no changes will happen now. All sides seem to agree that GSA must also dedicate considerable resources to improving its on line Schedule resources to give buyers a better experience when seeking solutions from Schedule contracts.  Industry representatives went to call for the end of the Price Reductions Clause and a possible reduction to the Industrial Funding Fee.  Time will tell how this project works out. 

A “proof of concept” commercial e-commerce platform launch by the end of the 2019 calendar year is GSA’s aim as it works to implement a Congressional mandate to improve government access to such platforms.  This, and other details, were shared with industry at a “Phase II” discussion last week.  Based on GSA’s announced timing, a draft RFP may be issued as early as April, which would make a live RFP possible in June or July.  Right now, GSA is planning to proceed with a “commercial marketplace” concept first, as opposed to other types of e-commerce platforms. 

Several concerns were raised by industry representatives during the meeting.  One is GSA’s stated desire to require some form of pricing competition for micro-purchase level buys made via commercial platforms.  There are currently no rules requiring a “look at three pricelists” type of pricing competition and industry is concerned that instituting this requirement would effectively increase rules on all types of micro-purchases as agencies followed suit.  Congress, it should be noted, has had two opportunities to say whether it believed that extra pricing competition was needed for commercial platform buys, but has not done so.  Allen Federal recommends that companies specifically site this concern in any RFI responses or other communications with GSA.

Similarly, some in industry stated concerns over the non-applicability of the Buy American or Trade Agreements Acts.  The Coalition for Government Procurement indicated that it may call for the application of the TAA to all commercial platform purchases, citing GSA’s precedent of applying that Act at the Schedule level so that all Schedule transactions are TAA covered.  While it is likely true that the purchases made through commercial platforms, in aggregate, will exceed the TAA threshold, individual purchases will, for the foreseeable future, be at or below the Micro Purchase Threshold.  Neither Buy American, nor Trade Agreements, provisions apply to such purchases.  Congress, again, has had two opportunities to say whether the acts should apply to transactions made via commercial platforms, but has not done so.  This area is definitely worthy of more attention and discussion.

Comments on GSA’s current RFI are due on December 21^st.  We recommend a close examination of the terms and conditions, including how GSA wants to access commercial catalog information, monitor price fluctuations, and implement a funding fee mechanism.  Make sure that GSA gets your input as they move toward an eventual program launch.