2. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 2 Breakout Session # 804 James Phillips, Esq. Centre Consulting, Inc. April 11, 2006 11:00 am Recent Developments in GSA Schedules & IDIQ Contracting

3. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 3 Course Topics T&M Contracting Under Assault? The Proliferation of IDIQ Vehicles GSA Schedule Developments Compliance Challenges

4. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 4 T&M Contracting Under Assault? 1.Subcontracting Under T&M Contracts T& M Contracts Contain the “Payment Under T&M Contracts” Clause- FAR 52.232-7. Clause Governs Payment of Labor Rates & Materials under Non-commercial T&M Contracts Applies to GSA Contracts Where Referenced

5. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 5 T&M Contracting Under Assault? 1.Subcontracting Under T&M Contracts FAR Case 2004-015 (9/26/05) Proposes to Tighten Up Clause to: Clarify That “Materials” Include Subs & ODCs Payment of “Materials” Limited to Cost Incurred Plus Applicable Indirect Costs Sub Labor Limited to Amount of Sub Invoice Unless Sub is Specifically Identified in Contract

6. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 6 T&M Contracting Under Assault? 1.Subcontracting Under T&M Contracts Issues Large Contractors Subject to Small Business Subcontracting Plans Requirements Under Proposal, No Profit on Subcontracts Absent Government Agreement to Recognize Subcontractor Little Incentive for the Gov’t to Recognize Subcontractor Inconsistent with Commercial Practices

7. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 7 T&M Contracting Under Assault? Note: This is a Proposed Rule That Has Not Been Approved The Comment Period for the Proposed Rule has closed Comments posted on www.regulations.govwww.regulations.gov

8. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 8 T&M Contracting Under Assault? 2.Increased Invoice Substantiation FAR Case 2004-015 Seeks to Expand Invoice “Substantiation” Req’ts to Include: Evidence of Actual Payment of Costs Employee and Subcontractor Individual Time Card Records Evidence That Employees Meet Qualifications of Specified Labor Categories

9. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 9 T&M Contracting Under Assault? 2.Increased Invoice Substantiation Warning: Payments Under FAR 52.232-7 Are Subject to Audit. Even Though Proposed Rule Is Not Yet Effective, 2004 DCAA Audit Guidance Instructs Auditors to Review Subcontractor Cost Payments under GSA Contract

10. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 10 T&M Contracting Under Assault? 3.Increased Audits More Labor Audits: Are Hours Billed Correct? Are Hours Billed at the Right Rate? Do Employee and Sub Labor Meet Quals? More Audits of Sub Costs: Unless Listed In Task Orders, Subs Must Be Billed at Cost. Indirect Rate Audits: If Indirect Costs Added to Materials and Subs, Indirect Rates Can Be Audited!

11. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 11 T&M Contracting Under Assault? 4.DOD Specific Limitations on Using GSA& Other Non-DOD Contract Vehicles. New DFARs 208.404 & 216.505: DOD Buyers to Comply with Review, Approval & Reporting Req’ts of DFAR 217.78 before ordering from GSA or other Non-DOD contracts in excess of $100,000 Reality: Other than IT Services, DOD has few broad IDIQs encompassing T&M pricing

12. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 12 T&M Contracting Under Assault? DFAR 217.78 Requires Procurements > $100K Under Non-DOD Contracts be Preceded by: A determination that the use of a non-DOD contract is in the DOD’s best interest A determination that contract items are within the scope of the contract to be used Documentation of any funding limitations Documentation that all applicable statutes and laws unique to DOD are being fulfilled

13. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 13 T&M Contracting Under Assault? Implications 1.More Fixed Price and Cost Plus Task Orders 2.Greater Audit Exposure Where T&M is Used 3.Pressure to Acquire More Contract Vehicles

14. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 14 The Proliferation of IDIQ Vehicles DOD Contracts Army ITES 2Proposals Submitted $20 Billion Navy SEAPORT E Awarded; More possible $80 Billion DISA Encore 2 RFP Issued$13 Billion NameStatusMax. Value

15. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 15 The Proliferation of IDIQ Vehicles DHS Contracts EAGLEProposals Submitted $45 Billion First SourceRFP Issued$3 Billion Secure Border RFP Not Issued$2 Billion NameStatusMax. Value

16. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 16 The Proliferation of IDIQ Vehicles Other Contract Vehicles HHS Contact Center Proposals Submitted $9 Billion IRS Treasury Enterprise Proposals Submitted $1.5 Billion VA Hardware & Software RFP Not Issued $1.3 Billion NameStatusMax. Value

17. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 17 The Proliferation of IDIQ Vehicles OMB Creates Task Force to Evaluate Inter-Agency Contracting Four Agencies currently authorized to manage inter- agency contracts: GSA, NIH, Commerce & NASA. Reviewing business cases for GWACs and potential duplicity. Focus is also on managing scope issues and ensuring contract responsiveness to agency needs.

18. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 18 GSA Schedule Developments 1.More Audits GSA May Audit Contractor Records “Involving Transactions” related to contract for : Over Billings, Billing Errors, Compliance with the Price Reduction Clause, or Compliance with the Industrial Funding Fee Clause See GSAR 552.215-71.

19. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 19 GSA Schedule Developments 1. More Audits Scope of Audit Rights Records Regarding Non-GSA Sales Transactions Reviewable to Ensure Compliance with Price Reduction Clause. Review of GSA Sales Records to Ensure GSA Pricing Terms Were Fulfilled & GSA Sales Are Reported. New Potential for Cost Audits Where Indirect Costs Added to ODCs and Subs.

20. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 20 GSA Schedule Developments 1. More Audits Scope of Audit Rights GSA Currently Reviewing the Performance of Post Award Audits to Verify Integrity of Commercial Sales Practices Disclosures. Prior to Renewal and Approving Mods, GSA May Also Audit Records of Non-GSA Sales to Verify CSP Disclosures.

21. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 21 GSA Schedule Developments 1. More Audits Audit Players Industrial Operations Analysts (IOAs): Perform Annual Reviews of GSA Contract Compliance. GSA Office of Inspector General: Conducts Pre- & Post-award Audits as Requested by PCOs or Whistleblowers. DCAA: Seeking Audits of Subcontractor Costs, ODCs & Open Market Items.

22. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 22 GSA Schedule Developments 2.New Audit Fronts Trade Agreements Act Compliance GSA Compliance Audits Extending to TAA Compliance Products on GSA Schedules Must be Made or Substantially Transformed in a Designated Country Countries Excluded Include China & Taiwan

23. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 23 GSA Schedule Developments 2.New Audit Fronts Trade Agreements Act Compliance Compliance Audit May Be Triggered by IOA Review or Competitor Complaint. Consequences: Essentially a False Claim. Government Recovers Amounts Improperly Paid, Penalties, Plus Treble Damages. Need to Monitor Schedule Offerings to Ensure Compliance.

24. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 24 GSA Schedule Developments 3.Socio-Economic Issues FAR Case 2004-012 (6/15/05) Proposes to Make Subcontract Management & Socio-Economic Compliance a Past Performance Assessment Factor.

25. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 25 GSA Schedule Developments 3.Socio-Economic Issues Proposed Rule States Primes Will Be Evaluated On: Subcontract Management Achievement of Small Business Goals (Large Businesses Only)

26. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 26 GSA Schedule Developments Socio-Economic Issues Proposed Rule Would Apply To: Contracts in Excess of $100,000 Orders Exceeding $100,000 Placed Against Schedules or Other Multi-Agency Contracts Orders Exceeding $100,000 on Single Agency Contracts when C.O. Determines Evaluation “Would Produce More Useful Past Performance Information”

27. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 27 GSA Schedule Developments Socio-Economic Issues Proposed Rule, If Finalized, Would Be Implemented in FAR 42.15 Comment Period for Rule Has Now Closed

28. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 28 Compliance Challenges 1. GSA Unique Requirements: Are CSP Disclosure Obligations Being Fulfilled When Submitting Proposals, Mods & At Renewal? Are Price Reductions Clause Obligations Being Monitored and Fulfilled? Are Sales Reporting Obligations Fulfilled? Are Open Market and Non-Schedule Items Being Accurately Described in Proposals?

29. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 29 Compliance Challenges 2. Record Keeping & Reporting Requirements Under T&M Contracts: Will Need to Flow Down T&M Clause to Subs Will Need to Be Able to Substantiate Labor Hours Billed and Qualifications of Workers Will Need to Identify Subs in Orders or Limit Invoices for Sub Labor to Amount Billed by Sub If Indirect Costs Billed, You are Subjecting Yourself to Indirect Rate Cost Audits!

30. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 30 Compliance Challenges Socio-Economic Compliance Must Exercise & Demonstrate “Good Faith” In Meeting Socio-Economic Goals Poor Performance in Meeting Socio- Economic Goals Creates Past Performance Problem as Well Same re Subcontractor Management

31. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 31 Questions?

32. April 10–12, 2006 Hyatt Regency Atlanta Atlanta, GA NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management 32 Thank You jphillips@centreconsult.com (703) 288-2800