Federal agencies spent more on products and services in FY’19 than in any other year in the past five, according to data sited by the Federal News Network.  Multiple award contracts continued to be an important channel through which that spending was conducted.  Bloomberg Government reports that nearly one in four dollars were spent that way.  While that number is not a statistical increase over previous years, the number of dollars increased proportionally, indicating that MAC’s are an important part of nearly any government contractor’s portfolio.  This is especially true when selling to the Department of Defense.   The Pentagon spent $84 billion through MAC’s last year, up from $61 billion in 2016.  The two largest spend areas, nearly equal in size, were IT and professional services.  Firm, fixed price and cost-plus contracts were the most popular.  The Government Accountability Office, however, criticized DOD for not hitting competition goals.  Only a little over half of DOD acquisitions were competed among multiple companies, according to GAO.  That number, however, doesn’t completely match recent anecdotal evidence from contractors, suggesting that the GAO definition of “competition” may not truly reflect the amount of pre-RFP or RFQ competitive analyses nearly every contractor does when deciding whether or not to bid on a specific project.   Contractors can expect strong business again this summer, though much of it may be to continue projects already underway.  The gradual re-opening of government agencies, coupled with over COVID-19 distractions, may not result in numbers as high as last year, but it could be close.  See the story here for more:    https://federalnewsnetwork.com/reporters-notebook-jason-miller/2020/06/federal-procurement-spending-up-120b-since-2015/

The Department of Defense expects contractors to have Cybersecurity Maturity Model Certification (CMMC) in place for procurements that will happen in 2020.  The standards on how to asses a company’s status are just being rolled out now, though, and no company has yet gone through the actual process.  More than one observer has said “what’s the rush?”.  Indeed, while the idea behind CMMC, to ensure the cybersecurity of DOD contractors, is a good one, the short time frame between when assessments can actually take place and procurements requiring certification role out almost guarantees that there will be problems and logjams.  “It’s not clear there will be time to iron out the wrinkles,” said Bill Solms, the general manager and president for government solutions at QOMPLX in a recent Federal News Network article.  While DOD officials have said there will be “pathfinders” to test the new assessment protocols, guidance from the agency on how many companies will qualify has been uneven.  DOD is also intentionally limiting the number of assessment organizations until they get a better handle on how the accreditation process actually functions.  All of this can leave contractors caught between a compliance rock and a hard place.  While not all DOD procurements will contain CMMC requirements right off the bat, several larger projects will.  If FedRAMP cloud accreditation experience is any guide, what projects are covered and the security level needed to compete will be at least somewhat subjective. DOD promises that the situation will become clearer once accreditation standards are announced.  That still does not ensure that accreditation of individual companies will take place in a timely manner, especially in time to ensure competition on important acquisitions.  DOD officials should consider postponing the implementation of CMMC to avoid a mess that may make navigating the Capital Beltway look as easy as one of John Denver’s country roads.  See the article here for more:  https://federalnewsnetwork.com/reporters-notebook-jason-miller/2020/05/cmmc-accreditation-body-close-to-releasing-assessor-training-requirements/

The federal government spent over $35 billion in professional services via MAC vehicles last year according to data sited in the article above.  That number continues to rise as federal agencies, including the Department of Defense, obligate more and more money on service acquisitions than on products.  Yet, for all of this increase, much audit activity on these contracts has been on whistle-blower-initiated cases on traditional topics like Trade Agreements Act compliance.  One reason for this may be due to the complex nature of service acquisitions.  Where the money goes, though, the whistleblowers and auditors will follow.  It is essential that contractors remember that the bulk large-dollar False Claims Act cases in this market segment are driven by whistleblowers.  Similarly, it is important to remember who the whistleblowers are.  Almost all are disgruntled former employees who felt that they were never listened to, or competitors who know so much about how business in a particular area is done that they can make accurate conclusions about unethical or illegal behavior.  Service contractors should not have any sense of false security just because most False Claims Act articles focus on TAA, Schedule pricing, or allegations of healthcare fraud. Plaintiff attorneys and people whose 401k programs have tanked may well already be preparing actions.  Scrutiny of contract spending in general is increasing due to concerns over how COVID-19 monies were spent.  The best way to make sure your company is prepared is to conduct regular self-audits.  Not only do these identify potential trouble areas, they show responsibility.  Both factors can be key in eliminating or containing any problems that are discovered.

Federal agencies that rely on user fees to generate part of their income are now faced with the possibility of lay-offs, just like some private sector companies. Being closed for business may result in furloughs.  The US Citizen and Immigration Service announced such a possibility last week in a plea for emergency Congressional funding.  While there is no word from other agencies, like the National Park Service, that also generate a large portion of their income from user fees, contractors need to know that this issue can easily become a distraction to federal customers.  People concerned about furloughs may not be concerned about getting your task order issued right away.  Similarly, as the US eases its COVID-19 lockdown, federal agencies may gradually re-open, causing concern and confusion in a workforce that may still harbor fears about being in public and whether they will have the ability to continue to work at home.  While agencies will, for the most part, follow local guidelines on re-opening, it is noteworthy that the Pentagon is not.  All of this means that your federal customer may be dealing with a lot more than the transaction of federal business.  The pace of business is likely to be slowed as workers focus on basic questions like whether they should report to work and, if so, where that workplace might be.  Some of these distractions may unfortunately last through the end of the fiscal year.  Contractors may not be able to control much of what is happening, but they can remember the relationship-driven aspect of their work and act accordingly when working with customers who may have other things on their minds.  Empathy and understanding may help drive business nearly as much as the latest technology solution.

GSA Multiple Award Schedule contracts will be awarded under separate NAIC’s codes where needed, according to GSA, pursuant to a final rule being incorporated now into all MAS contracts.  Similarly, federal agencies will be required to list all applicable NAIC’s codes when issuing a Schedule task order if the task has a scope of work that crosses beyond one NAIC’s classification. This could lead to a reduction in “NAIC’s code shopping” where both industry and government representatives look for a way to set-aside a piece of work for a particular small business.  Contractors may want to adjust their NAIC’s listings so that they include all applicable goods and services the company provides. Contractors may also note that these changes have been promised for some time.  They now, however, have a specific effective date of October 1, 2022, the date by which federal IT systems are thought to be capable of operating under the new rules.  Contractors may be classified as both small and large businesses, depending on the applicable NAIC’s code.  Task orders with multiple NAIC’s codes may cause confusion if they are totally set aside for small businesses, an important factor contractors must consider when discussing potential acquisition approaches with federal prospects.  Significantly, Schedule task orders below the Simplified Acquisition Threshold (SAT) will not be set-aside for small businesses.  While the FAR Council received several recommendations on this matter, they determined that the Small Business Act allows only for the ability to set-aside specific task orders, but contains no mandate to do so.  The Council pointed out that recent case law, including the landmark Kingdomware decision, is based on other statutes.  Schedule contractors can expect continued activity on this issue, however, as small business groups push for mandatory set-asides under the SAT whenever the “rule of two” in FAR 19 is met.  Other changes coming to Schedule contracts include updates to Service Contract Act wage determination rates and fourth party logistics capabilities that are primarily of interest to companies offering commodity-type contracts.