1 Michelle M Currier CPCM CFCM Professor of

1 Michelle M. Currier, CPCM, CFCM Professor of Contract

Acquisition Provisions in Defense Authorization Bills

Sources of FAR Changes (http: //www. acq. osd. mil/dpap/dars/case_statu s. html Legislation IG & GAO Recommendations Court Decisions OFPP Policy Letters Executive Orders Agency Recommendations Individual Recommendations Industry Recommendations Policy Changes FAR DFARS PGI CD

Defense Procurement & Acquisition Policy (DPAP) Operations Mr. Robert Jarrett Director Ms. Claire M. Grady Contract Policy/ International Contracting (CPIC) Mr. John Tenaglia Defense Acquisition Regulations System (DARS) Ms. Linda Neilson Acquisition Policy (AP) Mr. Skip Hawthorne Contingency Contracting (CC) Ms. Barbara Truillo Program Acquisition (PA) Ms. Jill Stiglich Mr. Shay D. Assad assumed the role of Director of Defense Pricing in June of 2011. Services Acquisition (SA)/ Strategic Sourcing (SS) Mr. Kenneth Brennan Program Development & Implementation (PDI) Ms. Le. Antha Sumpter

Better Buying Power 3. 0 9 Apr 15 Achieving Dominant Capabilities through Technical Excellence and Innovation Achieve Affordable Programs • Continue to set and enforce affordability caps Achieve Dominant Capabilities While Controlling Lifecycle Costs • Strengthen and expand “should cost” based cost management • Anticipate and plan for responsive and emerging threats by building stronger partnerships of acquisition, requirements, and intelligence communities • Institutionalize stronger Do. D level Long Range R&D Program Plans • Strengthen cybersecurity throughout the product lifecycle Incentivize Productivity in Industry and Government • Align profitability more tightly with Department goals • Employ appropriate contract types, but increase the use of incentive type contracts • Expand the superior supplier incentive program • Ensure effective use of Performance-Based Logistics • Remove barriers to commercial technology utilization • Improve the return on investment in Do. D laboratories • Increase the productivity of corporate IRAD Incentivize Innovation in Industry and Government • Increase the use of prototyping and experimentation • Emphasize technology insertion and refresh in program planning • Use Modular Open Systems Architecture to stimulate innovation • Increase the return on and access to small business research and development • Provide draft technical requirements to industry early and involve industry in funded concept definition • Provide clear and objective “best value” definitions to industry Eliminate Unproductive Processes and Bureaucracy • Emphasize acquisition chain of command responsibility, authority, and accountability • Reduce cycle times while ensuring sound investments • Streamline documentation requirements and staff reviews • Remove unproductive requirements imposed on industry Promote Effective Competition • Create and maintain competitive environments • Improve Do. D outreach for technology and products from global markets • Increase small business participation, including through more effective use of market research Improve Tradecraft in Acquisition of Services • Strengthen contract management outside the normal acquisition chain – installations, etc. • Improve requirements definition for services • Improve the effectiveness and productivity of contracted engineering and technical services Improve the Professionalism of the Total Acquisition Workforce • Establish higher standards for key leadership positions • Establish stronger professional qualification requirements for all acquisition specialties • Strengthen organic engineering capabilities • Ensure development program leadership for is technically qualified to manage R&D activities • Improve our leaders’ ability to understand mitigate technical risk • Increase Do. D support for (STEM) education Continue Strengthening Our Culture of: Cost Consciousness, Professionalism, and Technical Excellence Ideas retained from BBP 2. 0 and/or BBP 1. 0 New in BBP 3. 0

Reminders • Have you issued your whistleblower protection letters to each of your employees? As of September 30, 2013 all federal contractors were required to notify each employee in writing of their whistleblower rights- what they can disclose, and to whom they can disclose the information, and not be retaliated against by their employer. If the employee does not speak English, the letter must be translated for them into their predominant language. • Rule prohibits contractor or subcontractor from discharging, demoting or otherwise discriminating against employees who wish to report fraud, waste or abuse. Scope of information protected expanded to include disclosures about “abuse of authority” in the management of a Do. D Contract. Old standard was just mismanagement, waste, violation of law or danger to public health or safety.

Reminders • Have you conducted your annual training for each of your employees on how to prevent and detect human trafficking? Have you verified your subcontractors prevention and detection plans? • Is your workforce comprised of 8% veterans and 7% disabled, or do you have a written plan to achieve those goals by 2015? • Have you added sexual orientation and gender identity to your employee handbook as protected classes that cannot be discriminated against?

Reminders • Cost Realism Analysis – GAO sustained protest where the record shows that agency’s evaluation was based on the mechanical application of a government estimate. – Did not take into consideration each offeror’s unique technical approach. – Not consistent with the terms of the solicitation and applicable statues and regulations.

Historical Title Act

Historical Title Act 10

Historical Title Act 11

Historical Title Act 12

Thresholds • Effective October 1, 2015, one final rule amends the FAR to implement inflation adjustments to acquisition-related thresholds. Changes include: • The micropurchase threshold of $3, 000 is increased to $3, 500. • The commercial items test program ceiling is increased from $6. 5 million to $7 million. • The cost or pricing data threshold is increased from $700, 000 to $750, 000. • The prime contractor subcontracting plan floor is increased from $650, 000 to $700, 000, while the construction threshold remains at $1. 5 million.

Thresholds • The threshold for reporting first-tier subcontract information, including executive compensation, is increased from $25, 000 to $30, 000. • The cost or pricing data threshold and Cost Accounting Standard threshold are raised from $700, 000 to $750, 000. • The simplified acquisition threshold of $150, 000 is unchanged, as are Fed. Biz. Opps preaward and postaward notices, which remain at $25, 000. A proposed rule published November 25, 2014, is adopted without change. However, some final thresholds are lower due to a lower rate of inflation than projected at the time the proposed rule was published.

New Stuff Coming! • Contracting officers are prohibited from awarding contracts using FY 15 funds to any contractor that has an adjudicated federal tax liability or has been convicted of a felony criminal violation of any federal law within the preceding 24 months. • Women-owned small businesses (WOSBs) now are authorized to receive sole source contracts up to $4 million (services) and $6. 5 million (equipment). WOSBs MUST BE CERTIFIED BY THE SBA- THEY CAN NO LONGER SELF CERTIFY. • Small businesses are exempt from fraud penalties for False Small Business certifications if they relied on written advisory opinions from a SBDC or PTAC. • The FAR was amended to make it harder for firms to propose uncompensated overtime as a method for gaining a cost advantage. • Saving Federal Dollars Through Better Use of Government Purchase and Travel Cards Act (S 1616) to examine charge card purchases across government.

New Stuff Coming! • FAR rule has been published regarding pass through contracts. If the prime intends to award subcontracts for more than 70% of the work effort, the contracting officer must justify continuing with that contract in writing, or seek to contract directly with the subcontractor. – Far 15. 404 -1(h)(2) COMPETITION REQUIREMENTS STILL APPLY IF THE CONTRACTING OFFICER SELECTS ALTERNATIVE APPROACHES – Far 15. 404 -1(h)(3) DOES NOT APPLY TO SMALL BUSINESS SET-ASIDE CONTRACTS 16

Labor Issues • Fair Pay and Safe Workplaces Proposed Regulations • New $10. 10 Minimum Wage • Service Contract Act and GSA Schedules Interplay • Nondisplacement of Qualified Workers • General SCA Compliance Issues 17

• New Regulations affecting Service Contracting: Labor Laws E. O. 13658, Establishing a Minimum Wage for Contractors – Establish a minimum wage for contractors of $10. 10 to be adjusted annually (FAR 22. 12, 15 Dec 2014, Interim rule) • E. O. 13665, Non-Retaliation for Disclosure of Compensation Information – Applicants or employees of Federal contractors may discuss compensation without fear of adverse action (Rulemaking is still at the DOL) • E. O. 13673, Fair Pay and Safe Workplaces – Information to be provided to workers regarding how their pay is calculated and if they are being treated independent contractors. – That certain claims brought by workers be adjudicated using arbitration only if voluntarily agreed to. – Agencies to appoint a senior labor compliance advisor who will advise contracting officers on specific procurement actions. – Disclosure of contractor and subcontractor labor law violations so contracting officers and contractors, respectively, can consider this information when making responsibility determinations and during contract/subcontract performance. • E. O. 13672, Further Amendments to Equal Opportunity in the 18 Federal Government

Labor Issues • The Labor Landscape: contracting professionals have a dizzying array of labor compliance challenges ü New FLSA regulations proposed higher minimum salary ü FLSA Compliance including overtime and employee categorization • Exempt employees must be paid as required (salary, fee, or hourly) Hours worked • Class actions rising ü Service Contract Act for non-exempt services and Davis. Bacon Act for construction ü Employee Classification – Employees or Contractors (1099 s)? 19

Labor Issues • Fair Pay and Safe Workplaces: – Expected to take effect in 2016 – Proposed regulations issued in May – Impacts contracts for services and products – Requires contractors to disclose (in proposal) if they have labor violations from preceding three years and update disclosures every 6 mos. after contract award. – Contracting agency will make responsibility determination depending on labor compliance history 20

Labor Issues • Fair Pay and Safe Workplaces: – What is a “violation? ” Prospective contractors bidding on contracts valued over $500, 000 would be required to report whether they have had any “administrative merits determination, ” “arbitral award or decision, ” or “civil judgment” rendered against them for violation of any one of fourteen federal labor laws/regulations (or their state equivalents) within three years of the date the bid or proposal is submitted. See Proposed FAR 22. 2002 (note, DOL will be issuing guidance regarding the equivalent state laws at some point in the future). 21

Labor Issues • Fair Pay and Safe Workplaces: – Reportable violations include restraining orders issued by a court (including consent injunctions), summary judgment decisions in a case, or investigative findings by DOL (such as the issuance of DOL form WH-56). A DOL investigator issues a WH-56 form anytime he or she is requiring the payment of back wages regardless of whether the contractor is at fault for the “violation. ” For instance, with respect to the Mc. Namara-O’Hara Service Contract Act of 1965 (the “SCA”), sometimes the payment of back wages is triggered by the contracting agency’s failure to include the SCA statute and appropriate wage determination into the contract – a circumstance where a contractor has no fault. See Proposed FAR 22. 2002. 22

Labor Issues • Fair Pay and Safe Workplaces: – What happens next? If a contractor’s proposal is considered for award, the prospective contractor would be required to enter the following information regarding the violation into the System for Award Management (“SAM”): the labor law violated, the case number or other unique identifying number, the date rendered, and the agency, panel, or court that issued the decision. See Proposed FAR 22. 2004 -2(b)(1)(i). 23

Labor Issues • Fair Pay and Safe Workplaces: – Contracting agencies, in consultation with their internal agency labor compliance advisors (“ALCA” – a new position created by the Proposed FAR Regulations), would be required to make an affirmative determination prior to awarding a contract in excess of $500, 000 as to whether the prospective contractor is a responsible source. This analysis is in addition to the existing present responsibility analysis under Federal Acquisition Regulation (“FAR”) Part 9. See Proposed FAR 22. 2004 -2. 24

Labor Issues • Fair Pay and Safe Workplaces: – How are subcontractors impacted? Prime contractors would also be required to make responsibility determinations regarding their proposed subcontractors if the subcontract is estimated to exceed $500, 000 and is not for the supply of Commercial Off The Shelf (“COTS”) items (this requirement is supposed to be passed down to each lower tier subcontractor). See Proposed FAR 22. 2004 -1(b). Prime contractors are encouraged to consult with DOL to help in making responsibility determinations. In addition, in some circumstances (particularly when a subcontractor with previous violations has not entered into a Labor Compliance Agreement), prime contractors will be required to report an affirmative responsibility determination to the contracting agency. 25

Labor Issues • Fair Pay and Safe Workplaces: – Consequences (Unintended and Intended): – Increase in bid protests challenging responsibility determinations – More publicly available information regarding labor violations – Double trouble: a second punishment for contractors who have labor violations – Increase in court settlements to avoid reporting – More expensive contracts with a smaller pool of contractors 26 – Three year look-back starts now!

Labor Issues • Fair Pay and Safe Workplaces: – There also provisions regarding paycheck transparency and employee arbitration – Comments are due August 11 27

Labor Issues • $10. 10 Minimum Wage: • $10. 10 Minimum Wage EO is now a final regulation and applicable to all new procurements (after Jan. 1, 2015). • Impacts SCA, DBA and certain other contracts • Pop Quiz: is it applicable to options that occur after January 1, 2015? • Requires minimum wage payments to workers on contract and certain other support workers • Violations could result in debarment and payment of back wages 28

Labor Issues • $10. 10 Minimum Wage: – WDs not being updated – disclaimer on the front: – Note: Executive Order (EO) 13658 establishes an hourly minimum wage of $10. 10 for 2015 that applies to all contracts subject to the Service Contract Act for which the solicitation is issued on or after January 1, 2015. If this contract is covered by the EO, the contractor must pay all workers in any classification listed on this wage determination at least $10. 10 (or the applicable wage rate listed on this wage determination, if it is higher) for all hours spent performing on the contract. The EO minimum wage rate will be adjusted annually. Additional information on contractor requirements and worker protections under the EO is available at www. dol. gov/whd/govcontracts. 29

Labor Issues • SCA/GSA Interplay: – SCA clause and all WDs in all GSA Schedules – Burden on contractor to determine applicability of SCA – Burden on contractor to choose the correct WD – Ordering agency not expected to include specific WD – Guidance coming from DOL? 30

Labor Issues • The Non-Displacement of Qualified Workers: requires incoming contractors (with exceptions) to hire the non-exempt SCAcovered workforce. ü Outgoing contractors required to provide employee list with anniversary dates to contracting officer 30 days prior to the end of the contract. ü The contracting officer must forward list to incoming contractor. 31

Labor Issues ü Incoming contractors must provide bona fide offers to incumbent workforce except: • Changes with written bona fide staffing plan. • Outgoing contractor takes their staff. • Incoming contractor has its own staff. • Poor performance by worker. • Note: burden on contractor to prove exemption. ü Some practical issues include: • No new requirements by incoming contractors. • Pricing is difficult. • Even if employee not on list, must be given offer. • Complaints must be made within 120 days of start of contract. 32

Labor Issues • SCA Compliance Issues: – More investigators and investigations – Basic requirements: (1) pay according to WD/CBA, (2) benefits (H&W, vacation, and holiday), and (3) notification of SCA applicability – Pitfalls include benefits for PT and temporary workers, “volunteer” work, properly counting hours worked, agency failure to include SCA/WD in contract – Get help during an investigation 33

Labor Issues • Affordable Care Act - How is H&W Impacted? Depends whether ACA benefits are required because SCA benefits cannot otherwise be required by law. • The Supreme Court addressed the issue as to whether the ACA required an employer to provide health insurance in National Federation of Independent Businesses v. Sebelius, 132 S. Ct. 2566 (2012). • Because, under the ACA, no one has to actually provide health insurance, it is not a requirement that would prevent one from counting it for SCA purposes. 34

Cyber • The Scary Cyber Landscape • Keith Alexander: the “loss of industrial information and intellectual property through cyber espionage” the “greatest transfer of wealth in history. ” • Tony Scott (federal gov’t CIO): protections instituted by contractors were “inconsistent” and federal agencies failed to have proper “contractual language, policy direction, or awareness” as to how they should respond to breaches. 35

Cyber • The Scary Cyber Landscape • 67 K cyber incidents on systems supporting federal government in 2014 • Of 24 agencies reviewed by GAO, 23 were not cyber ready • VA failed its cybersecurity audit for the 16 th straight year (1. 2 m malware attempts in April) • GAO: Healthcare. gov lacks proper cyber protections • HBGary provides a cautionary tale (you will be hacked) 36

Cyber Federal Agencies Racing… • NIST Leads the Way • DOJ, GSA, Do. D, and others release guidance • Guidance may be used against contractors (legally or for responsibility determinations) if there is a breach 37

The OPM Breach 38

OPM Breach • Who is impacted? 22. 1 million people including government employees and contractor employees and their families. Included was James Comey – FBI Director. • What was stolen? Highly sensitive information including social security numbers, health records, criminal records and 1. 1 million fingerprints. • What are the consequences? Individuals’ information can be sold and there is a fear that the information can be used to “out” spies. • Army blocked OPM e-mail… 39

New DFARS 252. 204 -7012 Highlights: –Applies to Unclassified Controlled Technical Information (any information that has military or space application); –Must be inserted into every Do. D contract: no exemption for small businesses and commercial buys; –Must be flowed down to subcontractors; –Establishes minimum security controls for safeguarding Unclassified Controlled Technical Information; and –Requires disclosure to Do. D within 72 hours of breach – no safe harbor. 40

New DFARS 252. 204 -7012 • Some of the 50+ Requirements: –AT-2: Contractor must provide security awareness training. –CM-7: Configuration of the system provides only essential capabilities. –IA-5(1): Requirement regarding passwords – encryption, type, etc. –IR-2: The organization provides incident response training. –PE-2: Maintains list of individuals with physical access to facility where information systems resides. –PE-3: Maintains physical access logs, escorts visitors and monitors visitor activity. –RA-5: Scans for vulnerabilities. –SC-4: Prevents unauthorized transfer of information using shared system resources. –SC-28 (and others): Requires encryption of information. –SI-4: Monitor system to detect attacks and potential attacks. 41

New DFARS 252. 204 -7012 Some Practical Issues: • Applies to subcontractors and vendors supplying your IT • Penalties can include contract administration actions (termination) • Contracts should be getting certifications from subcontractors where possible • Agencies should be monitoring contractor compliance 42

Data Vulnerability • Safeguarding Unclassified Controlled Technical Information, DFARS 204. 73, 18 Nov 2013, PGI 204. 73, 16 Dec 2014 – Requires the contractor to safeguard Do. D unclassified controlled technical information within the contractor’s unclassified information systems and report the compromise of unclassified controlled technical information, such as technical data, computer software, and other technical information – Procedures for requiring activity and contracting officer when a solicitation is expected to result in a contract with CTI. • Requirements Relating to Supply Chain Risk, DFARS 230. 7306, 18 Nov 2013 (Interim Rule) – Provision and clause for inclusion in all solicitations and contracts, including contracts for commercial items or COTS items involving the development or delivery of any information technology, but only applies to National Security Systems • Basic Safeguarding of Contractor Information Systems (Proposed FAR Case 2011 -020) – Will add subpart at 4. 17, Basic Safeguarding of Contractor Information Systems – Contractor must protect Federal Gov’t information transiting through the contractors information systems and report information breaches to the Gov’t will have access to computers to analyze breach. • Class Deviation, Contracting for Cloud Services, 9 Feb 2015 – Rules and contract clauses when procuring cloud services

Controlled Unclassified Information (CUI) DFARS 252. 204 -7012 Safeguarding of Unclassified Controlled Technical Information • Examples: credit card and healthcare information, background and law enforcement records, IRS tax records, patent submissions, technical data to develop satellites, communication systems, infrastructure and weapons. • Most information stolen in security breaches is CUI.

Controlled Unclassified Information (CUI) • Contractors’ information system must at a minimum comply with NIST Special Pub 800 -53 relating to 14 factors including access control, awareness and training, audit and accountability, CM, contingency, planning, identification and authentication and incident response • Mandatory 72 -hour Cyber Incident Reporting with No Safe Harbor on Compliance • All Do. D contractors and subcontractors including commercial and small business contracts if contractor has access to or stores “controlled technical information”

Controlled Unclassified Information (CUI) • Be ready! • Evaluate if you have or use CUI, consider the type of CUI and the nature of the safeguards as expected by NARA and by 800 -171 • Determine if you conform to the objectives of 800 -171, gaps and find cost-effective means to close them • Burden not as great as expected – Use commercial cyber security best practices instead of government-specific ones

FITARA – The Federal IT Acquisition Reform Act • Federal Information Technology Acquisition Reform Act (FITARA) – Implementing guidance coming from OFPP – Improve how the federal government acquires, implements and manages its IT investments – CIOs more authority over the budget, governance and personnel processes – Tech. FAR Handbook- guidance to use existing authorities for software development procurements – Digital Services Playbook- propose services on an incremental and iterative basis – Reduce government’s commitment to failing contract solutions – Allow contractors to propose solutions that meet government needs without having to incorporate predefined solutions 47

FITARA – The Federal IT Acquisition Reform Act • Requires CIOs to be involved in IT acquisition, budgeting, and hiring • Final regulations issued June 10 • Self assessment and implementation plan due August 15 • Baseline requirements must be met by December 31 48

CIO Role in IT Management 49

FITARA • How is cybersecurity impacted? Federal CIO Tony Scott said: “While there's nothing specific in FITARA about cybersecurity, this is going to be one of the great benefits of FITARA: a greatly improved cybersecurity posture…[t]he very first thing in cybersecurity is understanding what's of value and being very clear about that … Once you understand what's of value and you figure out a management strategy of how to protect it, that's the beginning step in having an effective cyber strategy. ” Source: Federal Times 50

Crystal Ball-What’s Next? ? • Contractors will have to pay close attention to cybersecurity compliance (see USIS) • Agencies will come under closer scrutiny • Legislation is rushing to the forefront and more regulations are coming 51

The Small Business Programs Do. D Directive 4205. 01, March 10, 2009 • It is Do. D policy that a fair proportion of Do. D total purchases, contracts, subcontracts, and other agreements for property and services and for sales of property, be placed with Small Business Programs: – – – – Small Business (SB), Veteran-Owned Small Business (VOSB), Service-Disabled Veteran-Owned Small Business (SDVOSB), Historically Underutilized Business Zone Small Business (HUBZone), Small Disadvantaged Business (SDB), Women-Owned Small Business (WOSB), Historically Black Colleges and Universities and Minority Institutions (HBCU/MI), – Do. D Pilot Mentor-Protégé Program, – Indian Incentive Program, – Small Business Innovation Research (SBIR), and Small Business Technology Transfer (STTR) and that such small businesses have the maximum practicable opportunity to participate as subcontractors in Do. D contracts, consistent with efficient contract performance.

SETASIDE PROGRA M ` SMALL BUSINES S 8(A) COMPETITIVE ACTIONS >$3000 AND ACTIONS >SAT < SAT SOLE SOURCE Automatically reserved for set-aside for small business if two or more offers anticipated FAR 19. 502 -2(a) KO may set-aside prior to a small business set-aside No authority HUBZO NE KO may set-aside prior to a small business set-aside SDVOS B KO may set-aside prior to a small business set-aside 53 May be set-aside if not suitable for other SB programs, i. e, 8(a), HUBZone, WOSB, or SDVOSB FAR 19. 502 -2(b) Shall consider set-aside if greater than $6. 5 M for manufacturing and greater than $4 M for all other acquisitions – may offer to SBA for competitive contract Shall consider set-aside if two or more offers anticipated. If the requirement is currently in the 8(a) program, must remain in 8(a) program unless released by SBA If < $6. 5 M for manufacturing and $4 M for all other acquisitions – may offer to SBA for sole source contract. J&A required if action is > $20 M If <$6. 5 M for Mfg and < $4 M for all other acquisitions, and no reasonable expectation of more than one HUBZone offer and award can be made at fair and reasonable price. No sole source authority under SAT Shall consider set-aside if two or If <$6 M for Mfg and < $3. 5 M for more offers anticipated. all other acquisitions, and no If the requirement is currently in the reasonable expectation of more 8(a) program, must remain in 8(a) than one SDVOSB offer and

Small Business 2013 NDAA Implemented • Two substantive changes to the law governing limitations on subcontracting – Section 1651 of Public Law: • New limitations for service contracts are now based on the total amount paid to the small business, not the cost of the contract incurred for personnel • Does not count against performance requirements when subcontracting to other “similarly situated” small businesses 54

Small Business • Under the old law, a small business had to incur at 50% of the labor costs of the contract for its own employees (services contracts). The same rule applied for supply contracts, minus the cost of material. Profit and/or fee was not included in the calculation. • Under the new law no calculations are needed. The prime cannot subcontract more than 50% of the contract value for service contracts, or 50% of the contract value for supply contracts, less material costs. • Prime contractors may meet the performance requirements by subcontracting to other “similarly situated” small businessesi. e. those either small under the same standard or participating in the same SB program. – If a subcontractor is a “similarly situated” SB its work does not count against the limitation on subcontractors. The new rule treats the “similarly situated” subcontract as if the prime performed the work.

Small Business New Fines and Penalties • The penalty for violations is the greater of either $500, 000 or the dollar amount spent in excess of the permitted levels for subcontracting • Material misrepresentations • Prime Contractor is responsible and must certify compliance in its offer 56

Small Business Joint Ventures • SBA is proposing to allow small businesses to compete on any size contract as long as each business is small • Simplifies eligibility requirements for joint venture members. Currently JVs are qualified only when all members are small and: • (1) the procurement is bundled; or • (2) the procurement value exceeds half the size standard of the applicable NAICS code (or $10 million dollars for employee-based NAICS codes) • Purpose: to encourage more small business joint venturing, 57 and to extend the “similarly situated” benefits to joint ventures

Changes to Small Business • Rothe Case (FAR 19. 11 and 19. 12): Deletion of Price Evaluation Adj, 95% progress payment rate, use of evaluation factor for SDB’s, 10/14/14 – Keeps other SDB incentives such as 5% goal and evaluation of prime contractors subcontracting plan for SDBs. • Extension of Test Program for Negotiation of Comprehensive SB Subcontracting Plans to Dec 2017, Deviation 2015 -O 0006, 12/24/14 • Socio-economic Parity, FAR rule, 3/2/12 – SVOSB, 8(a), WOSB, HUBZone are equal – If contractor eligibility is protested or appealed, the KO cannot make award until SBA determination is made (15 days), FAR 07/25/14 • Accelerated Payments to Small Business Primes and Subcontractors, 08/01/14

Small Business and Multiple Award Contracts (MAC’s) • FAR part 8 and 19 – KO’s can make set-asides against MAC’s – Set asides can be SB, HUB, WOSB, SDVOSB – Also applies to Orders and BPA’s • July 12, 2012 DPAP Policy Letter “For all prospective new MAC’s w/SB contract holders where order set asides many be appropriate, commit to using order set asides unless a determination is made … that there is not a reasonable expectation of obtaining offers from two or more responsible SB concerns that are competitive in terms of market prices, quality and delivery” • Jan 13, FPDS was modified to allow agencies to record the action of set-aside at the order level

Woman Owned Small Business • Authorizes set-asides for eligible: – Women-Owned Small Businesses (WOSBs) or – Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) • No sole source authority (Yet!) • Set-aside for two or more within appropriate NAICs codes • KO’s have to check for eligibility at WOSB Program Repository https: //eweb. sba. gov/gls/dsp_login. cfm

Small Business: BBP 2. 0 • New Small Business Career Field, effective 1 Oct 2014 – 500 personnel in the new career field, 1101’s – They don’t have to come from contracting – New certification program and courses begin Oct 16 • Director SB will review all MDAP strategy documents • SB will develop annual procurement forecasts • New MAXPRAC tool to assist in market research to achieve small business goals • http: //www. acq. osd. mil/osbp/ or

Are you thinking about these? • Upcoming Deadlines • Quick Update and What to Expect – Sequestration – Shutdown – Debt Ceiling – VA Shutdown possible in next few weeks 62

NDAA 2015 • 2015 NDAA Section 804: requires Congress to report on the commercialization of IT acquisition • 2015 NDAA Section 813: extends cap on Do. D services • 2015 NDAA Section 823: allows Do. D PTAPs to provide education about the Arms Export Control Act • 2015 NDAA Section 824: prohibits reverse auctions if there is only one bidder and are not always compliant with procurement regulations and prohibits such auctions for Do. D design-build contracts • 2015 NDAA Section 857: costs related to Congressional investigations are unallowable 63

NDAA 2015 • 2015 NDAA Section 912: repeals requirement for GAO to report on Do. D service contract inventory • 2015 NDAA Section 1230: construction projects that cannot be physically inspected by the Government over $1 million are prohibited • 2015 NDAA Section 1632: requires Do. D to develop a plan regarding reporting of cyber intrusions of contractor “operationally critical” responsibilities • 2015 NDAA Section 2711: affirms Congressional intent to reject further base closures. 64

Protests • Contractors generally have three options when protesting an award: • Court of Federal Claims • Government Accountability Office • Agency • Each has advantages/disadvantages • Despite the chatter, bid protests are not on the rise 65

Protests 66

Protests • Proposed 2016 NDAA requires Do. D to determine whether contractors are gaming the bid protest process. • More specifically, Do. D is supposed to analyze whether: • Incumbent contractors filed protests to draw business away from the new contract and • Contractors filed protests knowing they lacked merit 67

Protests Be mindful of perceived unfair competitive advantages Lesson learned: Agencies must consider whether former government official had non-public competitive information that gave offeror an unfair competitive advantage. Case Name: International Resources Group 68

Protests Bait and switch difficult to establish Lesson learned: Bait and switch is an attractive protest ground, but must show a misrepresentation that was relied on by the agency and had a material impact on the procurement. Even though awardee (EY) was recruiting incumbent’s personnel after contract award does not mean bait and switch occurred. Case Name: IBM U. S. Federal 69

Protests Federal Supply Schedules Rule of Two Lesson learned: Rule of Two is inapplicable to Federal Supply Schedules. The Government does not have to consider whether two small businesses can perform. FSS is excluded from FAR Part 19. Case Name: Walker Development and Trading Corp. 70

Protests Agencies Must Evaluate Consistent With Criteria Lessons learned: 1. When conducting a best value tradeoff analysis, cost must be considered. 2. When evaluating past performance, agency must consider past performance information that is close at hand. Case Name: DKW Communications, Inc. 71

Protests Contractors Must Re-Submit Proposals Lesson learned: if the agency modifies a solicitation following the submission of a proposal and calls for revised proposals, the contractor cannot rely on the initial proposal. A new proposal is required. Case Name: Northstar Location Services 72

Protests COFC: Attorneys’ Fees Available Lesson learned: if the agency takes corrective action that is not reasonably justified, attorneys’ fees are available under the Equal Access to Justice Act (small businesses only). Case Name: WHR Group 73

Protests Federal District Court: DBA Does Not Apply to City. Center Lesson learned: Davis-Bacon Act does not apply to construction projects that serve the public interest if the government’s only interest was providing a ground lease and design requirements for the project. Case Name: District of Columbia v. Department of Labor Case to be argued on appeal on September 10. 74

SB Subcontracting Improvements Proposed FAR rule in Development • Prime contractor must notify the KO in writing if it does not use the SB subcontractors set forth in it offer • KO monitor and evaluate prime’s adherence to its subcontracting plan • Clarifies which subcontracts must be included in the prime’s subcontracting data reporting • Funding agencies allowed to receive subcontracting credit for FSS and

Proposed Rules • FAR Case 2014 -018, Contractors Performing Private Security Functions, published on May 27, 2015. This proposed rule proposes to amend the FAR to remove the distinction between Department of Defense (Do. D) and non-Do. D agency areas of operation applicable for the use of FAR clause “Contractors Performing Private Security Functions Outside the United States” and provide a definition of “full cooperation” within the clause. The public comment period closes July 27, 2015. • FAR Case 2014 -025, Fair Pay and Safe Workplaces, published on May 28, 2015. This proposed rule proposes to amend the FAR to implement the Executive Order “Fair Pay and Safe Workplaces, ” which is designed to improve contractor compliance with labor laws and increase efficiency and cost savings in Federal contracting. The public comment period closes July 27, 2015.

Proposed Rules • FAR Case 2015 -019, Definition of Multiple-Award Contract, published on June 2, 2015. This proposed rule proposes to amend the FAR to define multiple-award contract. The public comment period closes August 3, 2015. • FAR Case 2014 -015, Consolidation and Bundling of Contract Requirements, published on June 3, 2015. This proposed rule proposes to amend the FAR to implement sections of the Small Business Jobs Act of 2010 and regulatory changes made by the Small Business Administration, which provide for a Government-wide policy on the consolidation and bundling of contract requirements. The public comment period closes August 3, 2015. • FAR Case 2014 -003, Small Business Subcontracting Improvements, published on June 10, 2015. This proposed rule proposes to amend the FAR to implement regulatory changes made by the Small Business Administration, which provide for a Government-wide policy on small business subcontracting.

Final rules • FAR Case 2014 -022, Inflation Adjustment of Acquisition-Related Thresholds This final rule amends the FAR to implement the inflation adjustment of acquisition-related dollar thresholds. 41 U. S. C. 1908 requires an adjustment every 5 years of acquisition -related thresholds for inflation using the Consumer Price Index for all urban consumers, except for the Construction Wage Rate Requirements statute (formerly Davis-Bacon Act), Service Contract Labor Standards statute, and trade agreements thresholds. This rule will become effective on October 1, 2015. • FAR Case 2015 -006, Prohibition on Contracting with Inverted Domestic Corporations – Representation and Notification. This final rule amends the FAR to require additional actions by contractors to assist contracting officers in ensuring compliance with the Government-wide statutory prohibition on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation or to any subsidiary of such an entity. This rule will become effective on November 1,

Final Rules • FAR Case 2015 -008, Update to Product and Service Codes. This final rule amends the FAR to update the descriptions of Federal product and service codes related to exemptions from services contract labor standards, to conform to the current Federal Procurement Data System Product and Service Codes Manual. This rule will become effective on August 3, 2015. • FAR Case 2014 -020, Clarification on Justification for Urgent Noncompetitive Awards Exceeding One Year. This final rule amends the FAR to clarify that a determination of exceptional circumstances is needed when a noncompetitive contract awarded on the basis of unusual and compelling urgency exceeds 1 year, either at time of award or due to post-award modifications. This rule will become effective on August 3, 2015.

Final Rule • FAR Case 2014 -017, Prohibition on Contracting with Inverted Domestic Corporations. This rule adopts as final, without change, a previously issued interim rule that amends the FAR to address the continuing Government-wide statutory prohibition on the use of appropriated (or otherwise made available) funds for contracts with any foreign incorporated entity that is an inverted domestic corporation (under 6 U. S. C. 395) or to any subsidiary of such entity. The interim rule was effective on December 15, 2014, and the final rule is effective on July 2, 2015. • FAR Case 2015 -010, Permanent Authority for Use of Simplified Acquisition Procedures for Certain Commercial Items. This final rule amends the FAR to make permanent the authority to issue solicitations under subpart 13. 5. This rule will become effective on August 3, 2015.

What’s Happening on the Hill • A bill was introduced in the senate to allow a surviving nonveteran spouse of a service disabled veteran who owned an SDVOSB company to retain that designation and the benefits that go with it for up to three years after the veteran’s death, if the death was unrelated to the service disability. This is likely to become law next year. • Both the house and senate are looking at expanding the definition of “hubzone” tracts to include areas around a base being closed pursuant to a BRAC statute. • 2016 NDAA, Simplified Acquisition Threshold $150, 000 to $500, 000. Passed the House not the Senate. • The SBA issued proposed rules greatly expanding the mentorprotégé program and making multiple substantive changes to the program, including limiting the number of protégés a mentor can have to three (3) total.

Promote Real Competition BBP 1. 0/2. 0 • Continue to emphasize continuous competition – Competitive prototypes, dual sourcing, subcontractor competition… • Use open systems architecture (OSA)and manage technical data rights – Allows for greater competition through the lifecycle • Effectively use prototypes to reduce risk early in the Technology Development phase. – Increase use of competition in early development • Only One Offer to do effective

Competition • BBP 3. 0 Continues Emphasis on Competition – Create and maintain competitive environments with direct or subcontracting competition, or competitive pressure – Reach out to global allies with co-research, codevelopment – Improve MR in order to find Small Businesses • “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Dept of Defense”, December 2014 – Overcome: status quo, time constraints, scope creep, restrictive or poor requirements, etc.

Actions to Improve Do. D Competition • USD(AT&L) memorandum dated August 21, 2014, “Actions to Improve Department of Defense Competition” and caused changes to the PGI – Issues “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense, Dec 2014” – PGI 215. 371 -2 Requires Contracting Officers to solicit feedback from companies that expressed interest during the market research phase of an acquisition that resulted in only one offer on why they did not submit an offer. (kept in contract file with source selection documents) – PGI 206. 302 -1 Require Contracting Officers to use RFI’s or Sources Sought notices before soliciting non-competitive acquisitions and to include results of this inquiry in the applicable justification document. 84 – PGI 206. 303 -2, 206. 304 , 208. 405 -6, and 216. 505 Justifications for noncompetitive follow-on acquisitions of the same supply or service, shall include the prior J&A as part of the new J&A package to determine whether

Source Selection Estimated Frequencies of Source Selection Approaches Used in Fiscal Year 2009 for New, Competitively Awarded DOD Contracts Obligating over $25 million Sealed bid Non-cost factors more important than price Lowest price technically acceptable Recent GAO findings state LPTA has increased up to 39% Non-cost factors less important than price GAO Report 11 -8, Figure 2 Non-cost factors equal to price

Source Selection • Appropriate Use of LPTA and Associated Contract Type, Mr. Kendall Memo, 4 March 2015 – Clear, but limited place in “Best Value” continuum – Only applies if we can clearly define the requirements and can do a technical evaluation based on “acceptable/unacceptable” – If these standards are subjective, then LPTA is not appropriate – Can be appropriate for commercial and non-complex supplies and services – Think about using CPFF LOE in Knowledge-based Services because it is well-suited to these requirements

Source Selection • BBP 2. 0 and 3. 0 Sustained Superior Supplier Program – Recognize higher performing industry partners based on past performance evaluations – Service specific implementation – Higher weight for more recent performance • BBP 2. 0 and 3. 0 Clear Best Value Definitions – How much $ are we willing to pay for higher levels of performance than minimal or threshold levels? – Anxiously awaiting the May 2015 Modification to the DOD Source Selection Guide 87

Improving Acquisition of Services • Service Acquisition Governance – New Do. DI 5000. ac, “Defense Acquisition of Services” will complement the recently issued – Do. DI 5000. 02, “Operation of the Defense Acquisition System” by focusing solely on services – Provides management and oversight of contracted services by encouraging DAU Service Acquisition Process for standardization. – Implement and strengthen the

Improving Acquisition of Services • Services acquisitions are predominately decentralized – Each service acquisition recreates information it needs each time and – Do. D loses the buying power of acting as a single buyer • USD(AT&L) appointed senior Do. D officials as Functional Domain Experts (FDE) for specific portfolios

Contracting Officer Representative • Do. DI 5000. 72, “Do. D Standard for Contracting Officer’s Representative Certification, March 2015 – Supplements FAR/DFARS 201. 602 -2 – Applies to all requiring activities, CORs and supervisors of CORs, and Contracting Officers delegating COR responsibility – Do you know if you meet or exceed this standard?

Past Performance • Standardization of Evaluation Factor and Performance Ratings (FAR subpart 42. 15) – Mandatory entry of all PP information in CPARS – Minimum of Annual Evaluations; Standard Factors (including SB subcontracting); Five Scale Adjectival Rating System – Appeals Process Remains Intact – New Thresholds for Do. D Contracts (CD) – Offerors must take responsibility to ensure availability of necessary PP information – Solicitations can be unduly restrictive if they prohibit consideration of PP of offeror’s affiliates

Insufficient Discussions • Agency not required to discuss every weakness appearing in a pricing proposal • Only significant weaknesses, not all weaknesses, must be discussed • Agency not required to advise offer that its price was higher than those of its competitors

Commercial Items • 24 Dec 2014 Deviation, FAR 13. 5, Permanent Authority for use of the Simplified Acquisition Procedures for Certain Commercial Items ― Test program for commercial items $150 K<X<$6. 5 M ― Congress made permanent in 2015 NDAA • 25 June 2013, DFAR 212. 301(f), Simplification of solicitation provisions and contract clauses – Makes it clear which provisions and clauses apply to commercial item and which flow down to commercial subcontracts. – 24 Sept 2013 Deviation allows SPS to automatically select the clauses

Commercial Items • Commercial Items and Determination of Reasonableness of Price, Feb 15 DPAP memo – Timeliness: KO’s need to make a determination of “commercial of a type” within 10 days of assembling support data – Pay Fair and Reasonable Price: Must evaluate for price reasonableness; If market pricing isn’t available or sufficient, KO’s may use cost data – Changes to DFAR, PGI and Commercial Item Handbook is coming – Due to heightened audit and oversight attention, DON’T ASSUME PRODUCTS AND SERVICES PREVIOUSLY ACCEPTED AS COMMERICAL ITEMS WILL BE IN THE FUTURE!

Contractor Business Systems • Contractor business systems and internal controls are the first line of defense against waste, fraud, and abuse • Weak control systems increase the risk of unallowable and unreasonable costs on Government contracts • Contractor business systems: − Accounting Systems − Estimating Systems − Purchasing Systems − Earned Value Management Systems (EVMS) − Material Management And Accounting Systems (MMAS) − Property Management Systems

Contractor Business Systems • Feb 24, 2012, Do. D Final Rule • KO’s must include DFARS clause 252. 242 -7005 in all CAS covered contracts/TO/DO after August 16, 2011 (not small business) • Business Systems Clause allows the KO (generally ACOs) to withhold a percentage of payments when a contractor's business system contains significant deficiencies • Payments could be withheld using: • Interim payments under: – – Cost reimbursement contracts Incentive type contracts Time-and-materials contracts Labor-hour contracts • Progress payments • Performance-based payments

FSS/GWAC/MAC • Reasonable Fees for Assisted Acquisitions, 11 June 14 Policy Ltr – Know and document the fees when using non-Do. D vehicle if the assisting agencies approach is to use another agencies contract vehicle • Priorities, FAR 7. 102 and 8. 002/4, Effective 30 Jan 14 – No Mandatory Schedules. Consider existing contracts, including interagency and intra-agency contracts before awarding new contracts, especially GWAC, FSS, MACs. • Interagency, DFAR 217. 7802 and FAR 17. 7, July 2013 – A Do. D acquisition official may acquire supplies or services for Do. D in excess of the simplified acquisition threshold through a non-Do. D agency only if the head of the non-Do. D agency has certified that the non-Do. D agency will comply with defense procurement requirements including

Business Case for GWACS and MACS • OFPP memo, dated 29 Sept 11, FAR change on 3 Jan 12: For acquisitions that enter the solicitation phase after Dec. 31, 2011, agencies must develop a business case using procedures outlined in the memorandum to support the establishment or renewal of: – GWACs – Multi-Agency Contracts – Multi-Agency BPAs created in the FSS where another agency is expected to use the BPA significantly • Ensure expected return of a new contracting vehicle is worth the cost of planning, awarding and managing it • Applies to new MAC with a total value of more than $250 million • Limit duplication of large contract types

Class Deviation 2014 -O 0011, March 13, 2014 • Class Deviation: Determination of Fair and Reasonable Prices When Using Federal Supply Schedule Contracts – Effective immediately – In lieu of FAR 8. 404(d) must use FAR 15. 404 -1 – GSA determination of fair and reasonable prices does not relieve the ordering activity contracting officer from making determination of Fair & Reasonable Price for individual orders, BPA’s or orders under BPAs. – Must use proposal analysis techniques at 15. 404 -1

Contract Business Analysis Repository (CBAR) • DCMA shares real time business data with government employees w/a need to know. • Where do I find CBAR? Under e-tools at the DCMA website or http: //www. dcma. mil/itcso/cbt/CBAR_1_2/index. c fm • 24/7 data on individual contractors – Effective 24 June 13, for all negotiated contracts >$25 M, PCO will share Business Clearance and PNM’s (PGI 215. 406 -3) – FPRA/FPRR – Status of Contractor Business Systems – Status of compliance with cost accounting standard

Government Property • Do. D needs to strengthen the accountability and management of personal property owned by Do. D when the property is provided to contractors for contract performance • FAR and DFARS clauses are not being included in solicitations and contracts as required • Accountability and auditability of Government-Furnished Property (GFP) cannot be achieved if contracts do not

Government Property MANDATORY • FAR 52. 245 -1 Government Property, in all cost type and T&M solicitations and contracts, and in labor hour and fixed-price solicitations and contracts when the Government will provide property. • FAR 52. 245 -9 Use and Charges, in solicitations and contracts when the clause at 52. 245 -1 is included. • DFARS 252. 245– 7001 Tagging, Labeling, and Marking of Government-Furnished Property, in solicitations and contracts that contain the clause at FAR 52. 245 -1, Government Property. • DFARS 252. 245– 7002 Reporting Loss of Government Property, in solicitations and contracts that contain the clause at FAR 52. 245– 1, Government Property. • DFARS 252. 245 -7003 Contractor Property Management System Administration, in solicitations and contracts containing the clause at FAR 52. 245 -1, Government Property. • DFARS 252. 245– 7004 Reporting, Reutilization, and Disposal, in solicitations and contracts that contain the clause at FAR 52. 245 -1, Government Property. • DFARS 252. 211 -7007 Reporting of Government-Furnished Property, in solicitations and contracts that contain the clause at FAR 52. 245 -1, Government Property. OPTIONAL • DFARS 252. 245 -7000 Government-Furnished Mapping, Charting, and Geodesy Property, in solicitations and contracts when mapping, charting, and geodesy

Government Property

BRAIN HURT? Having a hard time keeping up with all the changes? 104

Acquisition Central

Defense Procurement and Acquisition Policy (DPAP)

Federal Contracts Report

Defense Acquisition Portal 108

Contracting Site in the DAP

National Contract Management Association

Where In Federal Contracting http: //www. wifcon. com/

Keep in Touch Michelle Currier Michelle. Currier@DAU. Mil 757 -635 -8261