Presentation on theme: "Compliance and Growth in the MAS Marketplace"— Presentation transcript:
1 Compliance and Growth in the MAS Marketplace Overview of Compliance Risks and ResponsesRoger WaldronPresidentThe Coalition for Government Procurement
2 INTRODUCTION FEDERAL SUPPLY SCHEDULE CONTRACTS FSS contracts contain unique, non commercial itemsIndustrial Funding FeePrice Reduction ClauseTrade Agreements ActAudit RightsRecovery Act ReportingMandatory Disclosure RuleCompliance is critical: failure to comply can lead to termination, False Claims Act liability, suspension or debarment
3 COMPLIANCE AN ANALYTICAL FRAMEWORK The keys to successKnow and understand the contractual and regulatory requirementsKnow and understand thyself (e.g. business operations, market)Apply “self-knowledge” to contract/regulatory requirements to determine compliance measuresImplement measures: “Create a Culture of Compliance”Business ethics codeTrainingInternal monitoring and controls
4 INDUSTRIAL FUNDING FEE (IFF) GSA recoups its cost via a fee (.75%) tacked onto the FSS contract pricesContractors must include the fee in their FSS pricesContractors must report contract sales revenue to GSA on a quarterly basisContractors must remit the IFF (.75% of sales revenue) to GSA on a quarterly basisCompliance measures: (1) ensure FSS orders/invoices reference your GSA schedule contract and (2) Ensure your ordering and billing system tracks all sales for reporting purposes
5 CONTRACT PRICING & THE PRICE REDUCTION CLAUSE GSA negotiates prices based on each offeror’s commercial sales practice informationGSA negotiates discounts from an offeror’s commercial price listObjective is to obtain equal to “Most Favored Customer” PricingGSA should consider/compare terms and conditionsSee GSAR ClauseOfferor is essentially negotiating against itselfGSA and the offeror must also agree on a tracking (also referred to as the Basis of Award (BOA)) commercial customer for Price Reduction Clause purposes
6 GSA SCHEDULE CONTRACTS: PRICE NEGOTIATION Most Favored Customer (MFC) Price = Government’s price negotiation objectiveIf the contractor’s offered price is “equal or better than the best price offered to any customer” for the same item(s) “regardless of quantity or terms and conditions,” the offeror completes a chart with information on most favored customers.
7 GSA SCHEDULE CONTRACTS: PRICE NEGOTIATION If the contractor’s offered price is NOT equivalent to the most favored customer price, the offeror must complete a chart for all customers that get a price equal to or less than the price offered to the Governmentrequired information included; name of each customer or category of customers; discount received, with terms and conditions; quantity or volume required to be eligible for discount; delivery terms and concessions
8 THE PRICE REDUCTION CLAUSE (PRC) MECHANICS Three Prices are linked through the PRCThe tracking (BOA) priceThe commercial price listThe FSS contract PriceChanges in the BOA price or the commercial price list will result in changes in the FSS contract price- the PRD requires that the price relationship be maintainedRevised commercial price list that reduces pricesAdditional discounts to the BOA customer or customersAdditonal or new discounts to a wide-ranging set of customersDiscounts not disclosed during negotiations
9 THE PRICE REDUCTION CLAUSE COMLIANCE MEASURES Interrelated contract frameworkDisclose pricing practicesDetail differences in commercial sales practices versus the FSS market place and contract requirementsNegotiate a BOA tracking customer that worksMonitoring systemWritten pricing policies and trainingApproval process for deviations from the policiesTrack discounts for BOA tracking customerContract Administrator
10 GSA CONTRACTS: TYPICAL INTERNAL STRUCTURE Steps to reduce process riskInspect new proposal requirements for every solicitation rather than rely on prior proposalsEngage in specialized compliance trainingUtilize centralized control or monitoring of discounting and other pricing practicesConduct periodic, independent compliance reviews and sanction significant misconduct
11 GSA CONTRACTS: TYPICAL INTERNAL STRUCTURE Risk mitigation: System RequirementsSearchable sales database to identify all current accurate low prices for use in negotiations, modifications, and auditsDesignated personnel should be quick to notice and report breakdownOverrides should documented and justifiedMonitor government and tracking customer pricesTrack sales by GSA contract numberRetain data in time periods consistent with contract retention and audit access requirements
12 GSA CONTRACT AUDITS Post-Award Audits Covers over-billings, billing errors, compliance with Price Reduction and IFF clauses, proof of commerciality of items offered on GSA Schedule, contract administration, and small business subcontracting plan complianceGenerally does not cover pricing, but GSA may use to obtain pricing informationContractor has a duty to maintain record for three years after last payment.Contractor Assistance Visits: include review of:Products to ensure they fall within scopePricing and IFF Buy American Act/ Trade Agreements Act Compliance
13 GSA CONTRACT AUDITS Steps to Controlling the Audit Process Assign one person to interface with auditorsRespond reasonably to written data requestsProvide access to necessary documents in organized fashionDocument all meetings and telephone conversationsMaintain structured environmentConduct Entrance/Exit conferenceRequest copy of draft audit report from auditors; chance to correct errorsObtain copy of final audit report from COPrepare rebuttal, with factual documentationPresent defense to CO
14 Changes in Audit Process IG nowInterview employeesWhy?Repercussions?Cooperate with IGInclude CounselEmployee discretion to participate
15 THE TRADE AGREEMENTS ACT (TAA) THE FRAMEWORK FSS contracts: The TAA applies to all contract line items except those set aside for small businessFAR , Definitions- eligible end productsJapan, Canada, Germany, Korea, Taiwan (Good)China, India, Malaysia, Thailand, Vietnam (Bad)FAR 25.4 Trade AgreementsFar – Commercial item certificate19 CFR 177 Subpart B- U.S. Customs country of origin
16 THE TAA SUBSTANTIAL TRANSFORMATION ACT Subjective TestSubstantially transformed in an eligible country into a new and different article of commerce with a different name, character or useTotality of the Circumstances- Case by case analysisThe determinative issue is the extent of operations performed and whether the parts lose their identity and become a integral part of a new articleComplex/meaningful assembly operations versus simple/minimalUS Customs Determinations of Country of Origin
17 THE TAA COMPLIANCE MEASURES Address TAA during negotiations with contracting OfficerMake TAA part of Contract Compliance ProgramMonitor InventoryTrack and archive COO information for inventorySubcontractsTAA Certification and/or a compliance with laws provisionRequire notification of production point changesFlow down the applicable FAR clausesTraining – know your contract and the applicable foreign acquisitions requirements
18 MANDATORY DISCLOSURE RULE THE REQUIREMENTS FAR (b)- Applicability, Ethics and DisclosureApplies to all contracts exceeding $5 million and 120 days, including commercial item contracts, contracts performed overseas and contracts with small business concernsRequires a Written Code of Business Ethics and ConductContractor must provide a copy to each employee engaged in performance of the contractMust be in place within 30 days of contract awardRequires the contractor to exercise due diligence to prevent and detect criminal conduct; andOtherwise promote an organizational culture that encourages ethical conduct and commitment to compliance with lawFAR (b) applies to FSS contracts
19 THE MANDATORY DISCLOSURE RULE FAR (b) – Mandatory DisclosureRequires the contract to timely disclose in writing to the inspector general and the contracting officer (in that order) whenever, in connection with the award or performance, or closeout of a contract, the contractor has credible evidence that a principal, employee, agent, or subcontractor has committed a violation of federal criminal law involving fraud, conflict of interest, bribery or gratuities found in Title 18 of the US code or a violation of the civil False Claims Act
20 THE MANDATORY DISCLOSURE RULE THE MECHANICS FAR (b) – Mandatory DisclosureFor the Federal Supply Schedules, multiple award contracts and govermentwide acquisition contracts, disclosure must be made to both the IG of the ordering agency and the IG responsible for management of the contractsProvides that the Government, to the extent permitted by law, will safeguard the information obtained via contractor disclosure as confidential where the information has been marked “confidential” or proprietaryInvokes FOIA and states that to the extent permitted by law and regulation the contractor will be given prior notification before public release of such information
21 THE MANDATORY DISCLOSURE RULE FOOD FOR THOUGHT FAR (c) – Business Ethics Compliance Programs and internal control systemThis section does not apply to small businesses and commercial item contracts including FSS contracts. However, this provision provides insight into the government’s views regarding “due diligence.”Ongoing business ethics awareness and compliance programIncludes periodic communication and training on the business ethics awareness and compliance program and internal control systemProvided to principals, employees and as appropriate agents and subcontractors
22 THE MANDATORY DISCLOSURE RULE FOOD FOR THOUGHT FAR (c)(2) –Internal control systemMinimum requirements continued . . .Assignment of responsibility at a high level and adequate resources to ensure effectiveness of the ethics and compliance programReasonable efforts not to include and individual as a principal who has engaged in conduct that is in conflict with the code of business ethics (background checks)Periodic compliance reviews of company business practices and proceduresAudits, periodic evaluations, assessment of the risk and remedial actions
23 THE MANDATORY DISCLOSURE RULE FOOD FOR THOUGHT FAR (c)(2) –Internal control system (continuedMinimum requirements continued . . .Internal reporting mechanism; such as hotlineDisciplinary action for improper conduct or for failing to take steps to prevent or detect such conductTimely disclose, in writing to the IG, with a copy to the contracting officer of any applicable violation of federal criminal law or the civil False Claims ActFull cooperation with any Government audit, investigation or corrective action
24 THE MANDATORY DISCLOSURE RULE SUSPENSION AND DEBARMENT FAR andApplies to all current contracts and all contracts where final payment was received within the last three yearsApplies to all contracts and contractors regardless of size or type (includes commercial item contracts, small businesses and contracts below $5 million or shorter than 120 days)
25 REMEMBER THE FUNDAMENTALS Successful government contractors invest in contract complianceAssign an executive responsible for complianceEstablish a code of conduct and trainingEstablish a hotline for your employeesImplement systems/policies/procedures addressing IFF, PRC and TAA requirementsReview, audit, and update your compliance programCreate a culture of compliance
26 Regulatory UpdatePreventing Abuse of Interagency Contract Interim Rule – FAR 8.4 and 17.5New FSS Ordering procedures- Interim Rule FAR 8.4eBuy and BPAsFAR Part 51 Deviation Ordering GuidePublic Access to Federal Awardee Performance and Integrity Information System- Interim RuleFAR Circular 2005=50Requirements for Acquisitions Pursuant to Multiple-Award Contracts (Section 863)Sole-Source 8(a) ContractsUse of Commercial Services Item AuthorityOther?
27 Regulatory Update Continued GSAR Rewrite – MAS Pricing Policies and ProceduresGSA Requesting Comments on Improving Regulation and Regulatory ReviewProposed rule addressing Organizational Conflicts of Interests – FAR 9.5 (Coming soon)GSA Request issued on March 22, 2011 and comments are due by April 15, 2011.
28 GREENING THE GOVERNMENT EO 13514: Federal Leadership in Environmental, Energy, and Economic Performance (Oct. 2009)95% new contract actions for products/services must be green:Section 13: GSA determining the feasibility of requiring vendors to report greenhouse gas (GHG) emissions2 pilots:GreenGov Supply Chain Partnership (Companies experienced in GHG voluntary reporting)Federal Supplier GHG Emissions Inventory Pilot (Small businesses)GSA Greening Schedules (Icons)
30 DEPARTMENT OF DEFENSE: BETTER BUYING POWER INITIATIVE Increase competitionCost or Pricing data requestsSubcontract managementEfficiency Initiative to Reduce Industry Overhead Costs (Feb. 2011)Reduce Time and Materials ContractsShorten contract terms/modular bite-sized contractsNew Source Selection ProceduresImpact on MAS ProgramPotential increase in market share
31 COALITION POLICY INITIATIVES (THE 5 Cs) Contract Duplication/ConsolidationConsistency in Interpretation of RulesContract Structure (ODCs)Contract compliance and competitionNew ordering proceduresMaximum order thresholdPrice Reduction ClauseContract Greening
33 GSA Schedule Sales Data FY 2010: $38.8 BillionFY 1998: Just under $8 BillionThis chart shows the growth of the GSA schedules indicating sales by fiscal year
34 WHAT’S HAPPENING TO YOUR GOVERMENT CUSTOMER? Oversight and TransparencyLimited Fiscal ResourcesCurrent Uncertainty (Continuing Resolutions)Push for Savings (Strategic Sourcing and Competition)Future CutsInsourcing SlowsAcquisition Workforce Grows
35 CURRENT FEDERAL MARKET CLIMATE Continued Audits and Increased ReportingThe American Recovery and Reinvestment Act (ARRA) TransparencyThe President’s $40 Billion Goal in Reduced Contract SpendingSavings InitiativesStrategic SourcingCompetitionOMB & DoD Setting the Policy Framework
36 CURRENT FEDERAL BUYING INITIAIVES Strategic SourcingLeverage Government’s Collective Buying PowerReduced Costs, Better LogisticsOMB & GSA Setting FrameworkMandatory or Non-Mandatory?Government-Wide or Agency Specific?CompetitionAcquisition PlanningJustificationsElectronic SystemsConflicts with Strategic Sourcing?
37 BUSINESS EXPECTED, BUT AT A COST Transparency & OversightIG Audits & InvestigationsEthics Compliance/ Mandatory Disclosure RulePricing Reviews & Tools (GSA Taking the Lead)Subcontracting ReportingFederal Awardee Performance and Integrity Information System (FAPIIS)ARRA – Model for the future?
38 IS THERE MONEY? Continuing Resolutions Budget Stagnation/ Reduction How do you add value and save money?ARRA Has EbbedChange in Congress: Greater pressure to reduce spending
39 WHAT DOES THAT MEAN FOR MY BUSINESS PROSPECTS? How Easy Is It For Your Customer To Find You?How Can You Save the Customer Money?Why Are You The Low-Risk, Proven Solution?Increased Competition May Mean More Opportunity
40 THE SELLING TRIANGLE End-User: The Most Obvious Person Program Manager: Sometimes The End User’s Boss, Sometimes the Same PersonThe Contracting Officer
41 MARKETING & FINDING LEADS Business IntelligenceTarget Specific AgenciesCall on CO’s, End-Users, and Project ManagersExamine FPDS for Past Buying HabitsRead Industry PublicationsAttend the Right ConferencesReview E-Buy and WebsitesThe PitchWhat Makes You Special, Low-Risk and Cost Effective?Socio-Economic PartnershipsPast PerformanceDon’t Over Do ItAgency SES: GS-14s and 15s that control program funding and direction
42 The Coalition for Government Procurement Roger WaldronPresidentThe Coalition for Government Procurement