It can be tempting sometimes to talk with competitors about bidding
strategies and whether or not they will bid on an upcoming procurement. This is can be especially true in an IDIQ
environment or BPA situation where there are fewer companies and the chances of
people knowing each other well are good.
The “I’ll sit this one out, if you sit the next one out” strategy,
though, is illegal. Two
companies recently found this out the hard way and had to collectively pay $29
million in fines for collusion and discouraging other companies from
bidding on a Department of Energy auction. In this specific
case the government alleged that the defendants exerted pressure on the
two other competing bidders to suppress their bids, depriving the Department of
Energy of a fair bidding process and reducing the amount ultimately recovered
in the auction. The defendants were able to acquire the non-performing loan
secured for far less than its fair market value. We can already hear people saying, “what if
it’s not an auction?” It can’t be
emphasized enough that the type of acquisition does not matter here. What matters is whether companies engaged in
anti-competitive behavior. The fine, too, is just one cost. Legal fees, lost productivity, and now a bad
reputation, will all cost the companies much more. Not every company can compete on every task
order, but make sure your decision to bid or not is a business decision,
not one driven by the “wink-wink, nudge-nudge” culture of “we’ll the get the
next one.”
Contractors can expect larger than normal
fiscal year-end business due to the disruption of business earlier this year stemming
from the government’s response to COVID-19.
Bloomberg Government reported last week that they expect $194
billion to be spent between now and the end of the fiscal year and that $101
billion of that will be spent in September. That’s 52% of remaining funds. Such a figure would exceed even the September
2018 spend of $99 billion. BGov further
believes that $28 billion will be spent on IT during the last quarter,
while $32 billion will go towards professional services. This is good news for contractors who may
have seen critical projects delayed as their customers dedicated resources to
emergency needs related to the pandemic.
Serious needs still have to be met, including security, delivery of
services to Veterans, and front-line DOD mission support. Contractors must be prepared more than ever,
too, to help their customers buy from them easily. Access to IDIQ contracts like the GSA
Schedule, NASA SEWP, OASIS and others will be an essential part of a company’s
business strategy. Don’t take our word for it. NASA officials told a BGov audience
that agency customers’ fourth quarter spending accounted for 54% of all of its
revenue under the SEWP GWAC in 2019, 33% of which came in September alone. Similarly, NIH’s NITAAC organization stated
that the fourth quarter accounts for 57% of their annual business. Being able to provide your customer with
acquisition time savings may be just as important as the solution itself. With Europe closed and two-week
quarantines imposed in Maine and Hawaii, contractors should be extra-focused on
finishing the year strong.
October vacations in Trenton will be there when you’re ready.
Pentagon leaders have told Congress that they would like $10 billion in
additional stimulus money to ensure that the industrial base stays strong while
dealing with the impact of COVID-19.
Congress, however, may not be in a giving mood after already
approving $10.5 billion in additional aid this year, increasing DOD budgets
over the past three years, and being poised to deliver approximately $741
billion in spending for 2021. “We don’t
need to give them any more money,” said HASC Chair Adam Smith (D-WA) during a
recent teleconference and quoted in an article by Federal News Network. Smith went on to note that DOD had yet to
distribute half of the COVID-related money it had previously received. A lack of additional supplemental funding
may limit DOD’s ability to compensate contractors for workforce disruptions
related to COVID-19. While the
agency has the ability to do so, the real key is the availability of
money. Pentagon leaders have previously
said that they could need billions more in aid to meet such needs. Contractors should plan accordingly. A strong fiscal year-end may offset some of
the negative impact, but some may still face challenges depending on the level
of initial business disruption. Still,
contractors may be fairing better than their commercial counterparts. Deputy Defense Undersecretary for
Acquisition and Sustainment Alan Shaffer said on Government Matters
recently, “We are somewhere under 40 companies in the defense industrial base
that have had layoffs. I compare that to the rest of the nation and I think the
actions the department took to accelerate payment to our supplier sub tier
actually allowed them to stay in business.”
A sales executive under pressure to make a
quarterly number “discovers” the military base down the road from your branch
office. An
appointment is made and a sale is closed.
Later, the executive sends his new client a pair of Boston Red Sox
tickets as a thank you. Your
federal team never even knew about it, but now you have a compliance problem. The scenario above is not imagined, similar
ones play themselves out all the time (not withstanding that there aren’t any
Red Sox games currently). That’s
why the answer to the question above is “False”. While your federal team may not be perfect,
substantial evidence suggests that a company’s largest liability for
non-compliance can come from people outside your federal business operation. That’s why training for all of your
sales and marketing professionals is a best practice. It need not be the same full-on training the
federal team receives, but everyone should be aware of the special rules
surrounding the conduct of federal business.
Some companies even go so far as to strictly regulate who can and cannot
call on federal customers. This takes
coordination and communication at the senior level of the company. That’s the point. Federal contract compliance is
everyone’s business. Make sure your company
knows about your federal business and what it means to the company overall.
An interim rule is expected to be
published in today’s Federal Register implementing Section 889 Part B of the
2018 Defense Authorization Act. This provision prohibits the government, “from
entering into a contract, or extending or renewing a contract, with an entity
that uses any equipment, system, or service that uses covered
telecommunications equipment or services as a substantial or essential
component of any system, or as critical technology as part of any system,” (new
language in FAR 52.204-25) unless an exception applies or a waiver is granted. Exceptions will be granted on a case-by-case
basis and will only serve to delay the requirement to comply, not do away with
it. Contractors should closely examine
the rule, the draft of which was 86 pages, and ensure compliance. The interim rule is effective August
13, 2020. Key features
include:
- The rule applies only to prime
contracts, not sub-contracts due to the way the statute was worded.
- The government shall insert the new
clause into any new contract or existing contract upon modification, extension,
or renewal.
- Contractors must make a “reasonable
inquiry” inside their company to discover whether or not covered IT and
telecommunications equipment is used.
- “Covered equipment” includes products
from Huawei, ZTE, Hytera, Hangzho Hikvision Digital, Dahua and their
affiliates.
- The prohibition on using prohibited
equipment extends company-wide and is NOT limited to those parts of the company
that contract with the federal government.
- Contractors that discover
non-compliant equipment are expected to remove it and have one business day to
notify the government that such equipment has been discovered.
The FAR Council acknowledges that the cost to comply
with the standard will run into the billions of dollars. Contractors are encouraged to submit
comments on the interim rule during the 60-day comment period,
indicating that this is considered a major rule making. This interim rule has been anticipated for
nearly a full year. Companies should
already have been taking steps to comply.
See the interim rule here for more and make sure you understand
how it applies to your business. https://acquisition.gov/sites/default/files/page_file_uploads/FAR%20Case%202019-009-Interim_Rule_prepublication_07_10_20.pdf