Strategic Messages From Congress to the Federal Acquisition Community

2. Strategic Messages From Congress to the Federal Acquisition Community • Presented by: • Alan Chvotkin • Professional Services Council703.875.8059 | chvotkin@pscouncil.org Session # 702 April 14, 2008

3. Overview • Recent Legislation • "Acquisition Improvement and Accountability Act of 2007" (2008 National Defense Authorization Act, Title VIII) • FY08 DoD Appropriations Act • Other Proposed Reforms • Major Themes • Competition/Protests • Commercial Items • Transparency/Openness • Oversight/Accountability • Iraqi Contracts

4. 2008 NDAA, ''Acquisition Improvement & Accountability Act of 2007" • Title VIII of 2008 National Defense Authorization Act (NDAA), known as the "Acquisition Improvement and Accountability Act of 2007" • Incorporates a number of procurement measures initiated by committees and found in other bill (e.g., Waxman, Collins) • Oversight and Accountability • Task Order Competition, Protests • Commercial Item/Services Definitions • Second version enacted January 28, 2008 • Original bill (H.R. 1585) passed by House on May 17, 2007 and by Senate (with amendments) on October 1, 2007 • Differences resolved in conference which passed both houses and was presented to the President for signature on December 19, 2007 • Vetoed by President based on provisions dealing with seizure of Iraqi assets • Amended version (H.R. 4986) passed Congress and signed by the President • Other provisions in Titles III and IX

5. 2008 Defense Appropriations Act (P.L. 110-116; 11/13/07) • Section 8117 limits use of funds to pay contractor award fees contrary to the provisions of Section 814 of the 2007 NDAA • Requires "linking of award and incentive fees to acquisition outcomes" • Prohibits payment of award fees for contractor performance that is "below satisfactory performance" or "does not meet the basic requirements of the contract" • Conferees directs DoD to provide more robust staffing for DCAA, DCMA and the DoD IG • Conferees directs DoD, within 90 days after enactment, to develop minimum personnel standards for private security contractor personnel

6. Other Legislative Proposals • Two of the more prominent procurement reform bills introduced in the current Congress include • "Accountability in Government Contracting Act" (S. 680) (Collins, Lieberman) • Includes various measures addressed by 2008 NDAA, including task order competition/protests, disclosure of J&As, definitizing letter contracts, LSIs, etc. • Other measures not addressed in NDAA include limits on sole source contracts and "excessive tiering" of subcontracts • Passed Senate November 7, 2007 • "Accountability in Contracting Act" (H.R. 1362) (Waxman) • Among other things, would impose limits on cost-plus, sole source contracts • Also includes "transparency" provisions (disclosure of audits and J&As) addressed in 2008 NDAA • Passed House March 15, 2007

7. Other Legislative Proposals (cont'd) • Other pending procurement-related bills include • "Defense Acquisition Reform Act" (S. 32) (McCain) • Would require mandatory compliance programs; provide for suspension/debarment for failing to report "improper conduct"; limit rollover of award fees; prohibit cost increases on DoD contracts unless caused by the Govt • "Honest Leadership and Accountability in Contracting Act" (S. 606) (Dorgan) • Would provide for suspension/debarment of contractors with a pattern of "overcharging the Government" or "failing to comply with the law, including tax, labor and employment, environmental, antitrust and consumer protection laws" • "Executive Branch Reform Act" (H.R. 984) (Waxman and Davis) • Includes measures to close "revolving door," including 2-year "cooling off period" for certain former Govt officials

8. Competition/Protests

9. Competition/Protests • NDAA Sec. 843, "Enhanced Competition Requirements For Task And Delivery Order Contracts" • Task/Delivery Order Contracts Over $100M (Sec. 843(a)(1), (b)(1)) • Prohibits award of a task/delivery order contract in an amount estimated to exceed $100M (including all options) to a single source unless the head of the agency determines in writing that— • Orders "are so integrally related" that only a single source can reasonably perform; • Contract provides only for FFP orders for • products for which unit prices are established in the contract, or • services for which prices are established in the contract "for the specific tasks to be performed" • Only one source is qualified, capable of performing at a reasonable price; or • It is "in the public interest to award to a single source" due to "exceptional circumstances" (and notice provided to Congress within 30 days) • Applies to contracts awarded 120 days after enactment of the NDAA • Applies to both DoD and civilian agency contracts

10. Competition/Protests • NDAA Sec. 843, "Enhanced Competition Requirements For Task And Delivery Order Contracts" • Task/Delivery Orders Over $5M (Sec. 843(a)(2), (b)(2)) • Provides that, in case of an individual task/delivery order in excess of $5M, requirement to provide all contractors a "fair opportunity" to be considered for award is not met unless all contractors are provided— • Notice of task/delivery order, including a clear statement of requirements; • A reasonable period of time to provide a proposal; • Disclosure of significant evaluation factors and subfactors (including cost or price), and relative importance; • A written statement documenting basis for award and relative importance of quality and price/cost factors; and • An opportunity for a post-award debriefing • Applies to orders awarded 120 days after enactment of NDAA • Applies to both DoD and civilian agency contracts

11. Competition/Protests • NDAA Sec. 843, "Enhanced Competition Requirements For Task And Delivery Order Contracts" • Task/Delivery Order Protests (Sec. 843(a)(2), (b)(2)) • Current law prohibits protest of a task/delivery order except for protests based on the ground "that the order increases the scope, period, or maximum value of the contract under which the order is issued" • 2008 NDAA expands this existing exception by allowing GAO to exercise exclusive jurisdiction over any protest of an order valued in excess of $10M • Takes effect 120 days after enactment of the NDAA, and continues for a period of three years • Applies to both DoD and civilian agencies

12. Commercial Items

13. Commercial Items • NDAA Sec. 805, "Procurement Of Commercial Services" • Services "Of A Type" Sold In Commercial Marketplace • Allows DoD to treat services "of a type" offered and sold competitively in substantial quantities in the commercial marketplace as commercial items • Requires CO to determine "that the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for such services“ • Information required to determine price reasonableness of such service may include: • "[P]rices paid for the same or similar commercial items under comparable terms and conditions by both government and commercial customers" or • "[O]ther relevant information regarding the basis for price or cost, including information on labor costs, material costs, and overhead rates"

14. Commercial Items • NDAA Sec. 805, "Procurement Of Commercial Services" • Time and Materials Services • SASC concerned that recent FAR rule on T&M services "exceeded [OFPP's] authority" under SARA by identifying "any service . . . as being available for acquisition on a [T&M] basis" • NDAA limits DoD's use of commercial item T&M/LH contracts to • Emergency repair; • Services in support of a commercial item ("ancillary services"); or • Other services if CO determines (with approval from agency head) that • The services are "commercial items" • The offeror has provided sufficient information to determine price reasonableness, if they are "of a type" sold commercially • The services are "commonly sold to the general public" through T&M/LH contract • Use of T&M/LH contract "is in the best interest of the Government"

15. Commercial Items • NDAA Sec. 814, "Clarification Of Submission Of Cost Or Pricing Data On Noncommercial Modifications Of Commercial Items" • Currently, statutes and regulations require submission of cost and pricing data when the value of a non-commercial modification of a commercial item exceeds 5% or $500,000 • In an effort to harmonize this provision with the TINA threshhold (currently $650,000), the NDAA eliminates the fixed $500,000 threshold • Links the threshold for requiring cost or pricing data for modifications of commercial items to the indexed TINA threshold

16. Commercial Items • NDAA Sec. 815, "Clarification Of Rules Regarding The Procurement Of Commercial Items“ • Prohibits DoD from treating subsystems, components or spares on major weapons systems as commercial items, unless • the subsystem, component or spare is a "commercially available off-the-shelf item" • the system (or subsystem, in case of components or spares) is a commercial item, or • the CO determines in writing that the subsystem, component or spare is a commercial item and the offeror has submitted "sufficient information to evaluate, through price analysis, the reasonableness of the price for such subsystem" (e.g., prices paid for the same or similar items, or other information "regarding the basis for price or cost") • Restriction on components and spares applies only to components and spares acquired by DoD through a prime contract, or through "a subcontract under a prime contract . . . on which the prime contractor adds no, or negligible, value" • Directs that DFARS be modified to clarify that the terms "general public'' and "nongovernmental entities," for purposes of determining commercial item status, do not include sales to state, local, or foreign governments

17. Commercial Items • NDAA Sec. 821, "Plan For Restricting Government-unique Contract Clauses On Commercial Contracts" • Requires DoD to implement a plan to minimize number of "government-unique contract clauses" used in commercial contracts except those • authorized by law or regulation, or • "relevant and necessary to a specific contract" • NDAA Sec. 881, "Clearinghouse For Rapid Identification And Dissemination Of Commercial Information Technologies" • Requires creation of a "clearinghouse" of information about readily available IT that could support DoD's warfighting mission

18. Commercial Items • NDAA Sec. 887, "Defense Science Board Review Of DoD Policies And Procedures For The Acquisition Of IT" • Requires DSB to conduct a study of DoD's policies and procedures regarding acquisition of IT, to address among other things • Policies and procedures for maximizing the usage of commercial information technology while "ensuring the security of the microelectronics, software, and networks of the Department" • NDAA Sec. 1109, "Pilot Program For Temporary Assignment Of IT Personnel To Private Sector Organizations" • Authorizes a pilot program for DoD to temporarily assign up to 10 "exceptional" IT personnel (GS-11 or below) to a private sector employer

19. Transparency/Openness

20. Transparency/Openness • NDAA Sec. 844, "Public Disclosure Of Justification And Approval Documents For Noncompetitive Contracts" • Requires disclosure of justification and approval (J&A) prepared to justify award based on other than full and open competition (i.e., sole source) • Disclosure required within 30 days for sole source awards based on "unusual and compelling urgency," 14 days for other sole source awards • Must be published on the agency website and a government-wide website designated by OFPP • Applies to both DoD and civilian agency contracts

21. Transparency/Openness • NDAA Sec. 845, "Disclosure Of Government Contractor Audit Findings" • Requires each agency IG (as well as DCAA) to provide, as part of its semi-annual report to Congress, a summary of all "final, completed contract audits" containing "significant audit findings" • Defines "significant" as any finding of unsupported, questioned, or disallowed costs over $10M, or other findings the IG deems significant • Report to include a brief description of the nature of the finding, as well as amount of cost identified as "unsupported, questioned, or disallowed" • Also requires agency to provide Congressional committees, on request, a full, unredacted copy of any audit described in the report • Agency to identify any information exempt from disclosure under FOIA • Does not require disclosure of classified information or information otherwise exempt from disclosure under FOIA • Applies to both DoD and civilian agency contracts

22. Oversight/Accountability

23. Oversight/Accountability • NDAA Sec. 846, "Protection For Contractor Employees From Reprisal For Disclosure Of Certain Information" • Expands protections for contractor employees who provide a Member of Congress (or Congressional committee, IG, GAO or DoD employee) information the employee "reasonably believes" is evidence of: • gross mismanagement of a DoD contract or grant, • a gross waste of DoD funds, • a substantial and specific danger to public health or safety, or • a violation of law related to a DoD contract or grant • Applies only to employees of DoD contractors

24. Oversight/Accountability • NDAA Sec. 847, "Requirements For Senior DoD Officials Seeking Employment With Defense Contractors" • Requires that certain DoD officials or former officials request written ethics opinion before receiving compensation from a DoD Contractor within two years of leaving DoD • Request must be made in writing to DoD ethics official "having responsibility for the organization in which the official or former official serves or served" • Request must set forth "all information relevant to the request," including information relating to government positions held and major duties, "actions taken concerning future employment, positions sought, and future job descriptions, if applicable" • Within 30 days, DoD ethics official is to issue written opinion regarding "applicability or inapplicability of post-employment restrictions to activities that the official or former official may undertake on behalf of a contractor" • Contractors prohibited from knowingly paying compensation to any former DoD official within two years after the official leaves DoD, without first determining that the official "has sought and received (or has not received after 30 days of seeking) a written ethics opinion"

25. Oversight/Accountability • NDAA Sec. 847, "Requirements For Senior DoD Officials Seeking Employment With Defense Contractors" (cont'd) • Section 847 covers former DoD officials who participated "personally and substantially" in an acquisition with a value in excess of $10M, and was: • In an Executive Schedule position; • In a position in the Senior Executive Service; • In a general or flag officer position (grade O–7 or above); or • A program manager, deputy program manager, procuring contracting officer, administrative contracting officer, source selection authority, member of the source selection evaluation board, or chief of a financial or technical evaluation team for a contract in an amount in excess of $10M • Violating the restrictions in Section 847 can result in "administrative actions" under the Procurement Integrity Act (41 U.S.C. § 423(e), which include: • Cancellation of the procurement, if a contract has not been awarded; • Rescission of a contract; • Initiation of suspension or debarment proceedings; or • Initiation of adverse personnel action

26. Oversight/Accountability • NDAA Sec. 848, "Report On Contractor Ethics Programs Of Major Defense Contractors" • Would require "major defense contractors" (i.e., those awarded more than $500M in DoD contracts in 2006) to report to GAO on current ethics programs and controls • GAO is to compile the information and report to Congress on the extent to which contractors have, and whether such systems include • Mechanisms for internal reporting (e.g., company hotlines) as well as external reporting (e.g., IG hotlines) of conduct that may violate applicable law; • Ethics training, as well as disciplinary action for employees; • Internal audits and reviews, as well as management oversight; and • Self-reporting (i.e., "voluntary disclosure") requirements • GAO also to make recommendations on "advantages and disadvantages of legislation requiring that defense contractors develop internal ethics programs and requiring that specific elements be included in such ethics programs"

27. Oversight/Accountability • Sec. 801, "Internal Controls For Procurements On Behalf Of DoD By Non-Defense Agencies" (Interagency Contracts) • Require DoD IG to work with IGs from designated agencies (GSA, Treasury, DOI, NASA, VA, NIH) to determine whether agencies' policies, procedures, and internal controls are "compliant with defense procurement requirements" • “Compliant with defense procurement requirements" means that the agencies' policies, procedures, and internal controls, and the manner in which they are administered, are “adequate to ensure the compliance of the non-defense agency with the requirements of laws and regulations (including applicable Department of Defense financial management regulations) that apply to procurements of property and services made directly by DoD” • Prohibits DoD from making purchases over the simplified acquisition threshold through any non-defense agency unless the agency head has certified that the agency "will comply with defense procurement requirements” • Prohibits DoD from making purchases over the simplified acquisition threshold through one of the designated agencies (GSA, Treasury, DOI, NASA, VA and NIH) if DoD IG and Agency IG have determined that the agency procurement policies are "not compliant with defense procurement requirements"

28. Oversight/Accountability • NDAA Sec. 802, "Lead Systems Integrators" (LSIs) • Effective October 1, 2010, prohibits DoD from awarding new LSI contracts to contractors that are not currently performing LSI functions • Also prohibits award of contracts for LSIs on major systems that are past LRIP, unless it is "not practicable" to proceed without LSI • For purposes of these restrictions, LSI defined as prime contractor that-- • Will not perform "a substantial portion of the work"; or • Will perform "acquisition functions closely associated with inherently governmental functions“ • Allows DoD to contract for "acquisition support functions" in connection with the development or production of major systems, so long as • Contractor does not perform "inherently governmental functions" • Federal employees are responsible for determining "courses of action to be taken in the best interest of the government" and "best technical performance for the warfighter" and • Contractor does not advise or recommend the award of a contract or subcontract for the development or production of the major system

29. Oversight/Accountability • NDAA Sec. 809, "Undefinitized Contractual Actions" • Requires Sec Def to issue guidance and instructions to DoD to ensure "implementation and enforcement of requirements applicable to undefinitized contractual actions," to include • Circumstances in which it is, and is not, appropriate to use UCAs; • Approval requirements and thresholds for using UCAs; and • Procedures for ensuring timelines for definitizing UCAs • Narrower than other pending bills, such as Sen. Collins' "Accountability in Government Contracting Act of 2007" (S. 680), which would authorize the agency to unilaterally determine (subject to the Disputes process) all missing terms in an undefinitized letter contract that have not been agreed upon within 180 days

30. Oversight/Accountability • NDAA Sec. 811, "Requirements Applicable To Multiyear Contracts For The Procurement Of Major Systems" • Requires use of fixed-price type contract for multi-year contracts in excess of $500M, and requires Secretary of Defense to certify in writing that certain conditions have been met (e.g., "substantial savings" from use of multi-year contracts, stable design, etc.) • According to legislative history, Congress believes that "contracts for major systems providing savings estimated at less than 10 percent should only be considered [for award of a multiyear contract] if the Department presents an exceptionally strong case" that the proposal meets the other requirements for multiyear contracting

31. Iraqi Contracts

32. Iraqi Contracts • NDAA Sec. 841, "Commission On Wartime Contracting In Iraq And Afghanistan" • Establishes an eight member "Commission on Wartime Contracting" to study waste, fraud, and abuse and make recommendations on use of contractors to perform security, logistical support and other functions in Iraq and Afghanistan • NDAA Sec. 842, "Investigation Of Waste, Fraud, And Abuse In Wartime Contracts And Contracting Processes In Iraq And Afghanistan" • Directs DoD IG, Special IG for Iraq and new Special IG for Afghanistan (to be appointed under NDAA Sec. 1229), to conduct "thorough audits" of contracts/subcontracts/task/delivery orders for logistical support, security and reconstruction in Iraq and Afghanistan • NDAA Sec. 863, "Comptroller General Reviews And Reports On Contracting In Iraq And Afghanistan" • Requires GAO to issue annual report on contracts in Iraq and Afghanistan

33. Iraqi Contracts • NDAA Sec. 862, "Contractors Performing Private Security Functions In Areas Of Combat Operations" • Within 120 days, DoD (in consultation with State) to develop regulations, regarding "selection, training, equipping, and conduct of personnel performing private security functions under a covered contract in an area of combat operations" • Regulations to address, among other things, procedures for • Accounting for personnel, weapons and military vehicles operated by contractors performing private security functions; • Reporting of certain incidents (e.g., weapons discharged, persons killed or injured, or property destroyed); • Independent review and investigation of reported incidents and alleged misconduct; and • Requirements for qualification, training, screening and security for personnel performing private security functions

34. Iraqi Contracts • NDAA Sec. 862, "Contractors Performing Private Security Functions In Areas Of Combat Operations" (cont'd) • Section 862 also requires FAR Council to develop contract clause within 180 days to address "selection, training, equipping, and conduct" of private security contractor personnel • Clause must require that contractors brief personnel, and "cooperate with any investigation conducted by [DoD] by providing access to employees of the contractor and relevant information in the possession of the contractor regarding the incident concerned" • Penalties for non-compliance may include removal of contractor personnel (at the contractor's own expense), or termination for default in the case of "gross" or "repeated" violations • IG also to study the "feasibility and advisability" of a pilot program to impose fines on contractors for personnel who violate or fail to comply with applicable requirements of the clause • Applies to covered contracts in designated areas of operation (to include Iraq and Afghanistan) awarded 180 days after enactment of the NDAA

35. Questions? Alan Chvotkin Executive Vice President and CounselProfessional Services Council703.875.8059chvotkin@pscouncil.org