New reader J. Legend of Brentwood, CA writes, “Our company is
doing work on a contract with a “not to exceed” amount of $200,000. We will likely only incur $100,000 of time
and labor. Can we bill for the full
$200K?” Nice try, J. but a
“not to exceed” contract means only that the government will spend “up to” that
amount during the contract.
Contractors cannot bill for more than the time or costs they actually
incur. Submitting a bill for more
is a prima facia False Claims Act violation and can cost your company more than
the business was worth. There is
substantial case law on this point.
Although it might be tempting, it is ultimately not worth the risk to
your company’s other business or reputation.
Contractors can only bill according to the terms and conditions of the
contract and only for valid prices or costs incurred. This is true, by the way, even if a
government contracting officer says you “must” bill for the entire “not to
exceed” amount. Although CO’s
should always be given respect, following advice contrary to the law can still
get you in trouble
Pentagon leaders stated recently that they will delay the enforcement of
pending restrictions on contractor use of covered telecommunications and IT equipment. Colloquially known as “Section 889 Part B”
the provision bans contractor use of Huawei, ZTE and other technology anywhere
in a contractor’s enterprise. It had
been scheduled to become effective in August.
An interim rule is thought to be held up in OMB’s Office of Information
and Regulatory Affairs (OIRA). Both
Pentagon leaders and contractors were increasingly concerned about the lack of
regulatory guidance on such a far-reaching statute with considerable
implications not only for contractors, but their supply chains as well. In addition to a delay, perhaps
of up to a year, DOD leaders are also looking at applying a risk-based
approach to implementing the rule when enforcement does begin. That essentially means that compliance
resources will focus most on critical systems and supply chains that support
essential, tech-heavy missions. To be
clear, though, compliance with Section 889 Part B means that a
contractor, and its subcontractors, cannot use telecommunications or IT
equipment from Huwai, ZTE, their affiliates and other companies that a DOD
panel may designate anywhere in their company. This extends to items such as security
cameras used as part of a warehouse security system, phones, computer monitors
or any other tech from the listed companies and their affiliates. It is also important to note that while
DOD may focus most of their own resources on critical systems, whistleblowers
will still be free to allege non-compliance. Contractors and their subs likely have some
extra time here to remove questionable equipment from company
installations. That should not be seen,
though, as an indication that covered tech can stay in place if you’re not
involved in DOD mission-critical projects
In case government business wasn’t distracted enough
already, the Customs and Border Protection (CBP) and US Citizenship and
Immigration Services (USCIS) agencies are facing possible partial furloughs
this summer in the wake of dramatically lower user fees brought on by
the COVID-19 pandemic. Unless Congress
provides supplemental funding in July, thousands of employees in these, and
possibly other fee-based organizations, could be furloughed. The potential for a furlough is enough
of a distraction. First,
agencies must, by law, conduct Continuity of Operations Planning (COOP) in case
actual furloughs do happen. Those
discussions take would-be customers away from discussions with contractors and
in virtual meeting rooms. Second, the
prospect of losing pay for a period of time can be distracting for any
employee, DHS workers being no exception.
Add on top of that transitions from home-based work to offices
re-opening and it is easy to see that the pace of business will almost
surely be impacted. There is not
much contractors can do about this situation, either, other than showing
empathy and patience. Congress may well
provide funds, but likely not until the last minute. It is also important to note that while
Congress may restore funding for employees, any acquisitions that were to
have been funded by user fees may not be covered and are very likely on hold. Contractors doing business with any
department that operates either partly or entirely from user fees should have
serious discussions now about the viability of current operations a contractor
may be supporting and fund availability for planned projects.
Forget the “juice cleanse” or
whatever diet you’re contemplating to get rid of the “Quarantine 15”, Allen
Federal is challenging all contractors to conduct a thorough review of their
contract files by the 4th of July. This could be the single-most important
project your company can take to ensure that the only fireworks you see will be
the ones you should. It should
go without saying that a complete contract file, including electronic records
of e-mails between contracting officers and your company, internal company
documents and, of course, all award documents and modifications, should be at
the fingertips of your contract manager.
If it didn’t need saying, though, we wouldn’t write about it now. Many companies think they have a complete
contract file, until they discover that records have gone missing and that
there is about as much information in the file as you get from your teenager
late on Saturday night. More than one
company has found that it’s been operating under assumptions, passed down as
oral history, that have little documentation to back them up. That’s a tough position to be in when the
auditor comes knocking. Federal
agencies shouldn’t laugh too hard, either.
Many is the time that the government has had to ask a contractor for
contract file documentation they can’t find themselves. So, now is the time. Take the Allen Federal Challenge and ensure
your contract file is complete!
Legal wrangling continues to delay the implementation
of the DISA DEOS cloud contract, an acquisition managed by GSA. DISA has yet to see one order more than 10
months after award. That’s no record,
unfortunately, as DOD’s JEDI contract has been in litigation on both a pre- and
post-award basis for over two years.
Added to the costs and delays specific to these two programs is a
belief that large Indefinite Delivery Indefinite Quantity (IDIQ) contracts
simply cost too much and take too long to put in place, especially when
technology and solutions change quickly.
What good is a contract that takes less than 30 days to buy from
when the contract, itself, takes five or more years to be useable?
Federal agencies that want agile
acquisition to match their agile solutions are already using faster buying
methods, such as Other Transaction
Authority. Small Business Innovation
Research programs are also growing in popularity, especially when obtaining
cutting edge technology. On the cloud
front, DOD continues to fulfill customer needs through existing contracts that
contain many of the features of either DEOS or JEDI. The fighting over DEOS and JEDI is a side
show as the real work of government proceeds.
Federal acquisition professionals and
their internal customers may decide that the basic large IDIQ model has had its
day. While there
simply aren’t enough acquisition professionals to conduct open market
procurements for all requirements, smaller, shorter-term vehicles may be
developed. We understand the irony of
this since recent efforts have been to trim the number of vehicles, but if
those programs can come on line faster, their popularity may rebound. Another idea is to increasingly use
non-priced contracts. This will
speed the award of larger contracts, but require more work at the customer
agency level.
Contractors with large IDIQ portfolios
cannot assume that the status quo will remain. Recommending solutions to important customers
can help you stay ahead of the game and ensure that your company isn’t caught
with a 1998 contract model when agencies shift to something that fits the
2020’s. You can be part of the change
or play catch up.