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Apogee Consulting Inc

The Eisenhower Matrix

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Eisenhower_Matrix
Reflecting on our recent articles about DCAA’s problems in working down its audit backlog and DOD’s problems in working down its backlog of physically completed but unclosed contracts, we got to thinking about how workload is generally prioritized. As you know (because we told you), we had some specific recommendations for DCAA and DCMA to consider as they contemplate how to whittle down their respective backlogs. But those recommendations were specific, and we were thinking about workload prioritization in general

We received an email from “Easy Ed” in response to those articles. “Easy Ed” claimed to be a retired DCAA Regional Audit Manager (RAM). (Remember, we cannot often verify peoples’ identities. However, in this instance, we believe there were sufficient details to provide confirmation that “Easy Ed” is who he claimed to be.) “Easy Ed” wrote—

I still have the utmost respect for many DCAA personnel who try their very best each day. However, it appears that the GAO, DCMA and DCAA have not addressed the implications of the Statute of Limitations and the return on investment aspects of drawing down the backlog.

“Easy Ed” recommended one additional tactic to DCAA management, in order to help them reduce their backlog of some 25,000 “incurred cost” audits (aka “10100 assignments,” for those who speak DCAA)—at least a few of which are dated as far back as 1996. He advocated the following—

It would seem appropriate that the DoD consider writing off any incurred cost proposal/submission subject to a time bar available by the SOL. and just close out the contracts. Concurrently, the DCAA would have to also evaluate how many submissions which could not possibly be audited within the window of the ticking SOL due to the length of time to complete their engagements. Working on those assignments appear to be a waste of time if any contractor anticipates exercising the SOL time bar.

Our response: Absolutely.

The problem with that idea, as common-sense as it well may be, is that we don’t believe DOD is convinced that the Contract Disputes Act’s Statute of Limitations is as firmly established by the Courts as “Easy Ed” (and many others, including Apogee Consulting, Inc.) would like it to be. We’ve explored the CDA’s SOL in depth on this site. For example, here’s one article entitled, “DCAA Audits and the Contract Disputes Act Statute of Limitations.” In that article, we quoted Professor Richard Loeb, who wrote, “It is very likely that for many of the contracts, the statute of limitations for recouping overpayments will run out before DCAA gets around to completing the audits, resulting in a significant loss of savings to the taxpayer.” Which is absolutely true and correct, assuming the Courts establish that completion of a DCAA audit is not a prerequisite for establishing the date of the accrual of a CDA claim. If the Courts conclude that the CDA SOL is tolled pending outcome of the DCAA audit, then DCAA can simply take its time and finish up anytime within the next millennium.

In point of fact, the CDA Courts seem to be split on the issue. Over at the Court of Federal Claims, several Judges have firmly established that the CDA SOL clock runs without regard to Federal administrative proceedings. For example, in July 2012, Judge Lettow wrote (in the matter of Sikorsky v. U.S.)—

… while the government may have its own internal review procedures that it must follow prior to submitting a claim, nothing in the CDA mandates such procedures, nor can such procedures delay accrual of a claim. … [A]n agency’s self-imposed, internal regulations are invisible for claim accrual purposes because they are not part of the contract.

[Emphasis added.]

While that seems clear and on-point with respect to aging DCAA audits, over at the ASBCA the issue is far murkier, as we told you in our CDA SOL article (link above).

In March 2012, the ASBCA tackled a dispute between Lockheed Martin and the United States (ASBCA No. 57525), ruling on a motion by LockMart to dismiss the Final Decision of its Divisional Administrative Contracting Officer (DACO) that demanded $29.9 million related to alleged noncompliances with Cost Accounting Standards 418 and 420. The dispute started in 2002, when DCAA issued a letter to the contractor, with a copy sent to the DACO, in which the auditors asserted that costs associated with certain Independent Research and Development (IR&D) projects were unallowable and should have been charged directly to a particular contract.

Much jockeying ensued. DCAA issued a “draft/preliminary” audit report on the matter in September 2005; DCAA issued a final audit report in February 2007; the DACO issued a Final Decision in September 2008, finding that LockMart was in noncompliance and demanding that LockMart calculate damages. LockMart issued its “cost impact” analysis and submitted it in March 2009. In December 2010, the DACO issued another Final Decision and demand for monies owed the Government (at an amount roughly twice was LockMart’s calculations indicated that damages had been).

Judge Delman, writing for the Board, ruled against Lockheed Martin’s motion, stating—

The record also does not show that the government knew or should have known at this time that the contract price itself was increased as a result of the alleged misallocation of these costs. … Appellant has not persuaded us on this record that the government knew, or should have known of any injury to the government at or around the time of the 31 December 2002 DCAA letter arising out of the Sniper contract. … It is true that DCAA's letters to appellant of 31 December 2002 and 30 March 2004 recommended adjustment of certain accounts of appellant … but there were no statements in either letter regarding overbillings to, or overpayments made by the government on government contracts …. As far as this record shows, it was the DCAA draft/preliminary report of September 2005, copied to the DACO, that indicated that appellant's CAS noncompliance resulted in overbillings to the government …. The CO's 8 December 2010 final decision asserting the government's monetary claim was issued within six years of this report.

We didn’t have many nice things to say about that decision, which was not appealed. (We are reliably informed the decision was not appealed because Lockheed Martin received a very favorable settlement offer from the Government attorneys, who were delighted at the ruling and the precedent it established.) Accordingly, if you have a CDA SOL issue you want to litigate, we expect your attorneys are directing you to the Court of Federal Claims, and not to the ASBCA, because they don’t want to have to deal with this particular decision.

And more to the point of “Easy Ed’s” recommendation to DOD and DCAA, we suspect that they are not going to walk away from hundreds—perhaps thousands—of aged audits, so long as the legal principle regarding when the CDA SOL clock starts to run remains murky. We think it’s going to take a ruling at the Federal Circuit to get the Government folks to take another, harder, look at DCAA’s audit backlog—and then swallow hard before sweeping the ancient uncompleted assignments off the table.

But perhaps we digress. We were talking about workload prioritization and we wound up talking about why DCAA and DCMA might not feel burning pressure to prioritize the workload, as they would if they knew the CDA SOL was a hard, locked-in-stone, deadline.

“Easy Ed” had his recommendation. Our Technologist, Mark Sewall, had another one. He thought DOD leadership needed a new approach to management. He recommended that they consider using the Eisenhower Matrix.

President Dwight D. Eisenhower is said to have asserted that, “What is important is seldom urgent, and what is urgent is seldom important.” In that spirit, he is credited with creating the Eisenhower Matrix—a 2 x 2 (four quadrant) box that helps prioritize tasks and manage time.

Essentially, Eisenhower created his four quadrants along the axes of Urgency and Importance. (See the illustration.)

Urgency refers to the near-term (immediate future) task deadline. These are time-sensitive items and need to be worked right now. Importance refers to the value added by the task, recognizing that some tasks are more relevant than others to attainment of long-term goals.

The brilliant part of his approach is the recognition that important tasks should never be urgent. If the task at hand is important, you should have been working it all along, and should never have let it become urgent.

Looking at the Matrix, Quadrant A lists tasks that are both urgent and important. This indicates where the crisis is. Having a number of tasks that are both urgent and important is an indication of poor planning, or of poor management.

Quadrant D (for “dustbin”) lists tasks that are neither urgent nor important. These are time-wasters and should never be worked, so long as there are any other tasks listed in the matrix.

Quadrant C lists tasks that are urgent but not important. These are reactive tasks that don’t move you toward attainment of your long-term goals, but need to be worked right now anyway. These tasks are what you have to do, not what you should be doing. If you are in management, these are tasks that would be good candidates for delegation to staff.

Quadrant B lists tasks that are important but not urgent. This is where the value lies, where tasks that move you toward attainment of your long-term goals are to be found. This is where your future can be found.

This is a simple, yet effective, approach to time management. Your goal should be to keep Quadrant A empty and to minimize tasks in Quadrant C. Your goal should be to spend as much time as you can in Quadrant B.

Applying these principles to DCAA audits, we suggest that the backlog of unperformed “incurred cost” audits belongs in Quadrant A. We suggest that the backlog of the other unperformed audits should be there as well (though perhaps the urgency is not the same). The urgent but not important stuff includes working for non-DOD agencies.

What do we think belongs in DCAA’s Quadrant B?

How about employee development? How about training and quality control? How about developing innovative ideas for working paper documentation and ensuring audit timeliness? How about hiring and employee retention, and performance reviews?

What might go into DCAA’s Quadrant B? Send us an email with your thoughts. We’ll aggregate responses and publish the results (protecting identities, of course).

Until then, we hope somebody in DOD Leadership is contemplating how to get all the work done with the resources available.

 

 

Hey, It’s the 2013 National Defense Authorization Act, and You Had Better Read It

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We were amused during the last election cycle by those who refused to vote for Obama because of some provision in the 2012 NDAA they didn’t like. As if the President had much effect on the provisions Congress—and lobbyists—added to what is an annual piece of legislation. People really need to get a clue.

And speaking of clues, you need to get one about the many provisions of the 2013 NDAA. Thankfully (for all of us), Bob Antonio over at WIFCON takes the time each year to analyze the legislation and show what the House and Senate had to say about each provision. Here’s a link to his analysis, which should be taken as the definitive analysis of the 2013 NDAA, otherwise known as H.R. 4310 and soon to be known as Public Law 112-xx.

You had better read it, because the various sections of the law are going to become future FAR and DFARS rules. There are some 83 individual sections, ranging from 801 through 3121. Obviously, we are not going to repeat all 83 provisions. But we do want to draw several of them to your attention, as we think they may have significant effects on compliance and contract management. (Remember, this bill affects only the Defense Department unless other Agencies are specifically identified.)

802 – Requires the Secretary of Defense, the Secretary of State, and the Administrator of the United States Agency for International Development to issue such guidance and regulations to ensure that in any case in which an offeror for a contract or a task or delivery order informs the agency (pursuant to FAR provision 52.215-22) that it intends to award subcontracts for more than 70 percent of the total cost of work to be performed under the contract, task order, or delivery order, the contracting officer for the contract is required to (1) consider the availability of alternative contract vehicles and the feasibility of contracting directly with a subcontractor or subcontractors that will perform the bulk of the work; (2) make a written determination that the contracting approach selected is in the best interest of the Government; and (3) document the basis for such determination.

804 – Requires the Secretary of Defense to review the profit guidelines in the Department of Defense Supplement to the Federal Acquisition Regulation in order to identify any modifications to such guidelines that are necessary to ensure an appropriate link between contractor profit and contractor performance.

827 – Extends whistleblower protections to “an employee who initiates or provides evidence of contractor or subcontractor misconduct in any judicial or administrative proceeding relating to waste, fraud, or abuse on a Department of Defense or National Aeronautics and Space Administration contract or grant.” Extends the disallowance of legal fees defending against a suit initiated by a contractor employee, where the disposition is imposition of a monetary penalty or an order to take corrective action.

828 – Establishes a pilot program to enhance contractor employee whistleblower protections, such that “An employee of a contractor, subcontractor, or grantee may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing to a person or body … information that the employee reasonably believes is evidence of gross mismanagement of a Federal contract or grant, a gross waste of Federal funds, an abuse of authority relating to a Federal contract or grant, a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a Federal contract (including the competition for or negotiation of a contract) or grant.”

831 – Requires the USD (AT&L) to issue guidance and standards (and training) for evaluations of price reasonableness, including “standards for determining whether information on the prices at which the same or similar items have previously been sold is adequate for evaluating the reasonableness of price; … standards for determining the extent of uncertified cost information that should be required in cases in which price information is not adequate for evaluating the reasonableness of price; [to] ensure that in cases in which such uncertified cost information is required, the information shall be provided in the form in which it is regularly maintained by the offeror in its business operations; and … [to] provide that no additional cost information may be required by the Department of Defense in any case in which there are sufficient non-Government sales to establish reasonableness of price.”

832 – Requires the Director of DCAA to revise audit guidance regarding access to contractor internal audit reports to ensure that requests for access are “properly documented.” The document must include a “written determination that access to such reports is necessary to complete required evaluations of contractor business systems; a copy of any request from the Defense Contract Audit Agency to a contractor for access to such reports; [and] a record of response received from the contractor, including the contractor's rationale or justification if access to requested reports was not granted.” In addition, “he revised guidance shall include appropriate safeguards and protections to ensure that contractor internal audit reports cannot be used by the Defense Contract Audit Agency for any purpose other than evaluating and testing the efficacy of contractor internal controls and the reliability of associated contractor business systems.” Moreover, the law directs that “A determination by the Defense Contract Audit Agency that a contractor has a sound system of internal controls shall provide the basis for increased reliance on contractor business systems or a reduced level of testing with regard to specific audits, as appropriate. Internal audit reports provided by a contractor pursuant to this section may be considered in determining whether or not a contractor has a sound system of internal controls, but shall not be the sole basis for such a determination.”

833 – Establishes that “the cost of counterfeit electronic parts and suspect counterfeit electronic parts and the cost of rework or corrective action that may be required to remedy the use or inclusion of such parts are not allowable costs under Department contracts” unless “the covered contractor has an operational system to detect and avoid counterfeit parts and suspect counterfeit electronic parts that has been reviewed and approved by the Department of Defense … the counterfeit electronic parts or suspect counterfeit electronic parts were provided to the contractor as Government property in accordance with part 45 of the Federal Acquisition Regulation; and … the covered contractor provides timely notice to the Government….” [Note: The use of the conjunction “and” may be of some concern in this context.]

864 – Instead of the drastic drop in the ceiling to establish allowable contractor compensation (which we have previously discussed), requires the GAO to issue a report to Congress on the effect of “reducing the allowable costs of contractor compensation to employees to the amount payable to the President … or to the Vice President.”

1701 – 1708 – Enhances requires relate to prevention of trafficking in persons. Among other things, requires contractors to annually certify that they have a compliance plan and have “implemented procedures to prevent [human trafficking] and to monitor, detect, and terminate any subcontractor, subgrantee, or employee of the recipient engaging in [such activities].” Covered contractors will “provide a copy of the plan to the contracting or grant officer upon request, and as appropriate, shall post the useful and relevant contents of the plan or related materials on its website and at the workplace.”

As we stated, there are many provisions in the 2013 NDAA that may be of interest to government contractors. The foregoing are but a few of them—but we think you’ll agree that they are especially interesting and worth knowing about in advance of rulemaking action by the FAR and DAR Councils.

Remember, when the proposed and/or interim rules are issued in response to the requirements imposed by Congress, there’s not much to argue about. The Councils need to comply with the statutory requirements imposed on them.

But watch and see if the Councils’ rulemaking is consistent with the statutory language in the NDAA, and with the various Conference Reports that discuss Congressional intent. It’s not unheard of for the Councils to take—shall we say?—liberties with the language.

 

 

Updates from the Department of Justice

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As we’ve mentioned from time to time, we get press releases from the U.S. Department of Justice (DOJ) pretty much every single day, seven days a week. We look at each one we get to see if there’s anything of interest to the government contracting community. Then you get to hear about it.

Today’s stories are follow-ups to previously published articles. Individually, they weren’t worth the time of writing about; but together we think they pass the bar.

The first story concerns soldiers of the U.S. Army who, while in uniform, sought and accepted “gratuities” (i.e., bribes) from local contractors in exchange for awarding to them small dollar value construction supply contracts at Forward Operating Base (FOB) Hammer, located in Iraq. We wrote about the situation here.

In that article, we discussed U.S. Army Master Sergeant (now former U.S. Army Master Sergeant) Julio Soto, Jr., who pleaded guilty to “one count of conspiracy to accept illegal gratuities.” We didn’t think very highly of that plea bargain deal, since we felt it trivialized the actual crime, which was to accept bribes while wearing the uniform of the U.S. Army, and then use the money illegally received to purchase U.S. Postal Service money orders and mail the illegal proceeds back to the United States.

Whatever. It’s not like we have the qualifications to actually, you know, understand the nuances of the applicable law. And perhaps Soto received a favorable deal in return for testifying against his co-conspirators. Or maybe he had a great lawyer negotiating on his behalf. So we moved on.

Now, on January 3, 2013, the DOJ issued a press release announcing that a U.S. Army Major pleaded guilty to the same crime for which Soto copped a plea, at the same location (FOB Hammer). It turns out that U.S. Army Major Ulysses S. Hicks, age 40, while a Captain, engaged in the conspiracy with Sgt. Major Soto to “unlawfully” seek, receive, and accept “illegal gratuities” for helping Iraqi contractors obtain construction supply contracts. Like Soto, Hicks pleaded guilty to “one count of conspiracy to accept illegal gratuities.” While wearing the uniform of a U.S. Army officer.

Clearly, Hicks was no gentleman.

Maybe we shouldn’t be overly harsh in our criticism of these two plea bargains. The DOJ press release stated that—

At sentencing, Hicks faces a maximum penalty of five years in prison, a fine of $250,000 and up to three years of supervised release. As part of his plea agreement, Hicks agreed to pay $65,409 plus interest in restitution to the United States.

But still, as a deterrent to future wrongdoing by other uniformed soldiers stationed in a war zone, we think it’s lacking.

The other story we want to discuss concerns U.S. Army personnel who generated false entries into the Army’s recruiting database, indicating that they had referred new recruits (which qualified them for a bonus payment), when in fact they had not done so. We wrote about that story right here. In that article, we discussed the legal problems faced by the eight soldiers, six of whom had pleaded guilty. Two of the six had been sentenced for one count of conspiracy to commit wire fraud.

On January 4, 2013, the DOJ announced via press release that U.S. Army Specialist Richard Garcia, age 29, of Kirby, Texas, had been sentenced to serve 18 months in prison for his role in the conspiracy. Like the other two, Kirby pleaded guilty to one count of conspiracy to commit wire fraud. The press release provided the new information that, “To date, 10 individuals have been charged, all of whom have pleaded guilty.” 

We don’t have too much to say about this crime, which seems (to us) to be of a whole different order than that committed by the FOOs at FOB Hammer. The soldiers in Texas seemed to be getting an unjust enrichment, whereas the soldiers in Iraq seemed to be actively engaging in a corrupt scheme to solicit, receive, and accept bribes—which they then sent home via USPS (i.e., that could be potential mail fraud). We’d like to think that the punishments meted out are commensurate with the levels of corruption.

We’d like to think so, but our experience informs us otherwise.

In our experience, the plea bargain deals and punishments correlate with the quality of the defense attorneys involved in the negotiations, and not with the severity of the crimes.

 

 

Small Business Opportunities and Obstacles

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It’s tough to be a small business, competing against larger contractors in today’s shrinking budget environment. Sure, there are set-asides and 8(a) programs and the AbilityOne Program and Mentor-Protégé programs. They do provide opportunities to qualifying small business that the larger businesses simply can’t access. But the fact is that the qualifying small businesses simply don’t have the capital or the resources to compete against the bigger firms in a “full and open” environment.

Small businesses typically don’t have the working capital to invest hundreds of thousands of dollars in a proposal, only to wait six months (or more) to see if they won the contract. If they don’t win—and they believe they were wronged—they usually lack the funds to hire competent attorneys to pursue bid protests. They may not even understand that such an avenue of redress is available to them.

Even when the competition is on the up-and-up, small businesses generally lack the skilled subject matter experts to put together proposals that comply with the Truth-in-Negotiations Act (TINA) or, for that matter, to support DCAA audits (performed in compliance with Generally Accepted Government Auditing Standards, or GAGAS) that start with a 34 point adequacy assessment and then get deep into the details of how the estimate of future direct and indirect costs was generated.

Speaking of direct and indirect costs, too many small businesses lack “adequate” accounting systems (as that term is defined by either the Standard Form 1408, or by DCAA 17740 audit programs, or by the Defense Federal Acquisition Supplement (DFARS) contract clause 252.242-7006 (“Accounting System Administration”). Consequently, they are officially ineligible to receive cost-type contracts. In addition, it’s quite difficult to receive Time & Material or Labor Hour contract types as well, because those contract types are lumped together into the “flexibly priced” contract category.

(Our opinion that FAR Part 16 does not list “flexibly priced” as a recognized contract type does not seem to help our clients get over this hurdle. They seem to be stuck with the choice of either having an “adequate” accounting system or not receiving a T&M contract award. But we digress ….)

And we haven’t even mentioned unallowable costs, or management of Government property, or a host of other contract compliance requirements whose compliance regimes take significant investments of time and money (and expertise) to create.

So yeah, small businesses have it tough when they want to go up against the big dogs on an open playing field. But when they stay within their niche markets, they can do pretty well for themselves.

Recently, the Small Business Administration (SBA) issued a final rule that expands the number of companies that qualify for participation in the Small Business Innovation Research (SBIR) Program. As the respected government contract attorneys at the firm of McKenna, Long & Aldridge summarized

The final rule allows concerns that are majority-owned by multiple venture capital operating companies, hedge funds or private equity firms (‘investment companies’) to participate in the SBIR program, as long as no single investment company owns more than 50 percent of the concern. In order to be eligible, the investment company must have a place of business in the U.S. and be incorporated in the U.S. Furthermore, concerns that are majority-owned by multiple investment companies must register with SBA on or before the date they submit a response to an SBIR solicitation and these concerns must indicate in their SBIR proposals that they have completed this registration. Unlike the proposed rule, however, the final rule does not allow concerns that are majority-owned by multiple investment companies to participate in the STTR program. …

Currently, investment companies would not be eligible to participate in the SBIR program, because the concern would be considered to be affiliated with not only the investment companies, but also the other companies owned by these investment companies. SBA’s final rule provides that a concern is an affiliate of an individual, concern, or entity that owns or has the power to control more than 50 percent of the concern’s voting stock. However, SBA may find a concern an affiliate of an individual, concern, or entity that owns or has the power to control 40 percent or more of the voting equity, based upon the totality of the circumstances. If no individual, concern, or entity is found in control, SBA will deem the Board of Directors to be in control of the concern.

The SBIR Program has helped many small businesses get a toehold into government contracting. And now the market niche has been widened to accept participants that have venture capital funding, which is going to make it more difficult for the other small businesses to compete. Those venture capital-backed small businesses may well have access to the funds and expertise to address some of the obstacles to growth that we recited at the beginning of this article. Accordingly, those venture capital-backed small businesses will likely have an advantage over the non-affiliated small businesses in the competition for scarce SBIR dollars. Certainly, they will be better positioned to transition from SBIR Phase 1 to SBIR Phase 2 contracts.

(As we have opined before, the SBIR Phase 1 FFP contracts are an order of magnitude easier to win and execute than the SBIR Phase 2 cost-type contracts, but again we digress ….)

So small businesses take note. You have been warned.

With respect to large businesses who cannot participate in these Programs, period. You should also take note of the recent settlement entered into by Caddell Construction Co., who agreed to pay $2 million in order to “resolve criminal fraud allegations arising from Caddell’s intentional overstating of developmental assistance provided to a disadvantaged small business” as part of the DOD Mentor-Protégé Program.

The DOJ reported that (according to the settlement and Non-Prosecution Agreement executed by Caddell)—

… from February 2004 to March 2005, Caddell submitted more than 20 requests for payment to the DoD in connection with the Mentor-Protégé Program that significantly overstated the amount of developmental assistance Caddell had provided Mountain Chief.  [Note: Mountain Chief was “certified as a Native American, woman-owned and economically-disadvantaged small business”.] In addition, Caddell filed documents falsely stating Mountain Chief’s size and income, as well as the status of Mountain Chief’s technical capabilities and business infrastructure.  From April 2003 to October 2004, Caddell also submitted at least eight requests to the DoD for the Indian Incentive Program, for rebates based on services purportedly performed on subcontracts Caddell gave to Mountain Chief.  Mountain Chief performed few, if any of these services, and the invoices were created solely to support Caddell’s applications for payment.

Oops!

But that’s not all. The settlement and NPA resolved the issues for the corporation, but not for the individuals accused of committing the alleged crimes. The DOJ press release also stated—

In January 2012, Daniel W. Chattin, 50, of Granite Bay, Calif., the son of Mountain Chief’s owner and a project manager and consultant for Mountain Chief, and Mark L. Hill, 57, of Montgomery, Ala., the Mentor-Protégé Program Coordinator and a director of business development at Caddell, were indicted in the Middle District of Alabama on three counts of major fraud against the United States stemming from the same scheme.  In addition, Hill was charged with one count of making a false statement to the DoD.  Chattin and Hill await trial, which is scheduled to begin on April 22, 2013.

At the DOJ reminded the public, “The charges and allegations against Chattin and Hill are merely accusations and they are considered innocent unless and until proven guilty.”

Small businesses have a tough challenge when they go up against larger companies in a “full and open” competition for government contracts. But when they stay in their niches designed to encourage and foster small businesses, they tend to do just fine. Those program niches are so attractive that, sometimes, larger companyes cut corners in an attempt to obtain some of the program benefits. When the companies (and their executives) get caught cutting corners, they have significant challenges of their own to overcome—challenges of the legal variety.

Recent changes to the SBIR eligibility rules have expanded the number of firms that can participate. Those newly eligible firms are likely to be better capitalized and have better access to subject matter experts, than traditional non-affiliated small businesses. We think that’s going to make it more important than ever for the traditional small businesses to get their house in order, so that they can successfully compete for scarce SBIR dollars.

Not to make this article into too much of an advertisement, but Apogee Consulting, Inc., has helped small businesses with cost accounting, estimating, and administrative issues associated with the SBIR Program, as well as with other matters. If you think you might need some assistance, why not consider giving us a call?

 

 

Court of Federal Claims Dismisses Contract Award to AbilityOne Entity

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We have worked with the AbilityOne Program for many years. For the past two years, we have taught courses on behalf of the NISH Leadership Academy, preparing AbilityOne contractors to successfully pass DCAA audits. One of our largest clients is an AbiltyOne entity, working at military bases throughout the country. We passionately support the AbilityOne Program and its mission of giving meaningful jobs to people with disabilities, including severely wounded warriors returning from military service.

This is not to say that we don’t have some choice words of criticism for the Program.

In fact, the fairly recent emphasis by the Defense Department on AbilityOne contracting, making AbilityOne sources “preferred” over other potential sources, has contributed to the enormous growth of the Program. In turn, that rapid growth has led to some management issues. We have observed the leadership of the AbilityOne Program struggle to adapt and evolve in response to challenges created by its growth and by its new Defense customers. The AbilityOne Leaders have not always made the wisest of decisions in response to those challenges, sometimes holding on to “the way it’s always been done” despite the needs of its newly expanded operating environment.

Recently, the Court of Federal Claims felt the need to point out some of the problems with the AblityOne Program’s eagerness to expand its contracting opportunities (which in turn would create more opportunities for those with disabilities). The decision was the result of a bid protest filed by Systems Application & Technologies, Inc. (SA-TECH), who was the incumbent O&M contractor at the Yakima Training Center in the State of Washington before the Army intended to award its contract to Skookum Educational Systems, an AbilityOne entity. Skookum, who had “zero experience” with the scope of work, proposed to perform the O&M work with at least 60 percent “severely disabled” workers.

As Judge Bruggink wrote—

While to an outsider it would appear that what the Army proposes is sheer folly, the government has aggressively defended its actions as permissible under the Javits-Wagner-O’Day Act (‘JWOD’), 41 U.S.C. §§ 8501-506. That act authorized creation of the Committee for Purchase from People Who Are Blind or Severely Disabled (the ‘Committee’ or ‘AbilityOne’). … The Committee is responsible for developing a ‘Procurement List’ of products and services which are suitable for the Federal Government to procure from qualified nonprofit agencies (‘NPA’) which employ a workforce of blind or severely disabled individuals. …

Here, the Committee, with the Army’s concurrence, has designated the contract suitable for addition to the Procurement List and for award on a sole source basis to Skookum, an AbilityOne NPA.

Not everybody was excited at the idea of having severely disabled people performing range management functions. One memo introduced into the record stated, “The stringent requirements under the contract to conform to all OSHA regulations, all explosive ordnance directives and to operate safely in a highly dangerous work environment could be compromised by a severely disabled workforce.”

One key issue concerned the definition of “severely disabled” and whether there were a sufficient number of such people in the remote desert area of western Washington, and whether such people (if they could be found) could safely perform the required work. One Army Memorandum questioned whether “having a labor force that has severe mental and physical disabilities, monitored by non-medical supervisors / work leads, and working in what can be a harsh and stressful environment, will produce a positive outcome.” The Committee held many discussions with stakeholders, including counsel for SA-TECH, and expressed disagreement with the notion that disabled people could not safely perform range O&M services. The Judge related the following exchange—

… [C]ommittee member Kathy Martinez told plaintiff’s counsel, ‘I am very concerned about your concept of what a significant disability means and what people with significant disabilities can do? I happen to be a blind person. I don’t work on a shooting range, but I am you know, a significant, I am a person with a significant disability who is employed. And, I am unaware that the term significant disability means that you can’t hold down a job.’ … After plaintiff’s counsel read the statutory definition of ‘severely disabled,’ Ms. Martinez replied, ‘I think that’s a very antiquated definition frankly.’

As the Judge wrote—

Nine [Committee] members voted in favor, one was undecided, and three disapproved. … The three dissenting members of the Committee expressed doubts as to the propriety of awarding this contract through AbilityOne. They were concerned because the principal behind the incumbent contractor was a disabled person who employed service disabled and other veterans, the work did not seem safe for severely disabled individuals, Skookum was allowed a long phase in period and a low goal for the percentage of severely disabled individuals employed, and Skookum had not presented a plan for transporting severely disabled individuals 33 miles to and from YTC.

SA-TECH filed a bid protest against the Army and its decision to give the work to Skookum under the auspices of the AbilityOne Program. The primary basis of the protest was that the Committee failed to enforce the statutory requirement that at least 75 percent of the contract direct labor hours be performed by the severely disabled. The Committee took the position that the ratio severely disabled labor hours should be applied to the AbilityOne NPA as a whole, and not to any particular contract. But the Judge decided the protest on other grounds and did not resolve that difference of opinion.

Judge Bruggink found that the Committee’s decision to add the Yakim range O&M services to the Procurement List was “arbitrary and capricious.” He wrote—

It is uncontroverted that the YTC contract is not the same as the work Skookum does at Fort Bliss and White Sands. Describing the YTC contract as merely ‘facilities maintenance’ makes it sound more like other AbilityOne work, but that description is inaccurate. Conditions on the range are stress-inducing … and involve the explosion of munitions during live fire. An unavoidable question should have been, is it appropriate to put someone who has severe post-traumatic stress disorder with depressive and anxiety disorder on or even near a live fire range. Or, can someone who has degenerative joint disease or polio meet the physical requirements of the job …

Instead of asking such questions, the Committee staff shifted the burden to SA-TECH and relied on high-minded policy … It was not SA-TECH’s burden to show that severely disabled are ‘inherently incapable’ of performing any of the tasks on the YTC contract. It was Skookum’s burden, given the numerous reasons for concern, to show that there were a sufficient number of specific jobs that could be done by severely disabled workers. Instead of thinking critically about whether severely disabled individuals are capable of performing the contract, the Committee criticized SA-TECH for assuming ‘that Skookum will perform the work in the same way that SA-TECH has in the past,’ and uncritically accepted Skookum’s unsupported claim that doing the work in some unspecified different way somehow solves the technical problems posed by the YTC contract. …

On the basis of the existing record, it was arbitrary and capricious for the AbilityOne Committee to designate the YTC for placement on the Procurement List. Because Skookum was the only contractor being considered, that means that its designation as the contractor for the work was also arbitrary and capricious.

Consequently, the Army was prevented from awarding the contract to Skookum.

This decision has clear implications for the AbilityOne Program. First, it indicates that Courts will take seriously the statutory definition of “severely disabled” and so it behooves the Committee and AbilityOne contractors to use that statutory definition with respect to workers who might be called on to perform the contract SOW. It means that challenging work—work not traditionally performed under the AbilityOne program—should be critically evaluated to ensure that it can be safely performed by individuals who meet the statutory definition. Scoffing at “antiquated definitions” will not work when legal challenges are presented.

Second, the decision should be interpreted as a signal that the AbilityOne Program has limits on its ability to grow, and that those limits are inherent in the Program’s mission. AbilityOne NPAs cannot do everything under the sun; they can only do the work that they can do safely, consistent with the disabilities of those it employs. While it may be tempting to add contract after contract to the Procurement List, that temptation must be tempered by the realization that some work is simply inappropriate to add.

Third, DOD contracting officers looking to respond to the official preference for AbilityOne contract awards—a pressure that will only grow along with the numbers of wounded warriors exiting service—need to evaluate the work requirements in light of the fact that a number of the individuals performing the work will be severely disabled (as that term is defined by statute). There is a lot of work that can be performed by the severely disabled; but not all work can be performed by them. This decision can be used to educate government personnel about the types of work that can, and cannot, be performed—and how the requirements should be evaluated for suitability.

Finally, it’s time for the AbilityOne Program leadership team to use this decision to identify processes and procedures it needs to change, in order to provide assurance that the Program is not over-reaching and is safely operating within its statutory intent. It ought to serve as a wake-up call that the way things have been done will not work in the current environment, and that new management approaches are required.

The AbilityOne Program is too important to founder on the shoals of historic management approaches and practices. It needs to adapt to the current environment, so that it can maximize the number of severely disabled individuals it can employ.

It needs to adapt and change in order to remain successful.

There are many who can assist with that change.

Let them help.

 


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Newsflash

Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.