Fast, Furious Change Afoot in Federal Contracting

It’s June, almost at the end of the third government quarter and the time of year when things begin to sizzle as the government buying season heats up. There is lots of news and a pressing need to be well informed in order to guide your company as it navigates through the uncertain seas currently impacting the government security marketplace.

On the scene are new faces in procurement leadership. There is an ongoing climate of conservative policy and increased oversight. It is the time of audits! There are new regulations for identification technologies, new applications of technology, merging technology and evolving regulations that may significantly change or greatly impact doing business with the government.

Despite Harsh Criticism, Schedule 84 Sales for Security Remains Solid
GSA has been under a dark cloud the past two years as numerous procurement abuses and the resulting investigations were made public. In response, GSA established The Get It Right campaign in June 2004.

The steps to ensure understanding and compliance in the utilization of GSA’s Multiple Award Schedule (MAS) program have gone a long way toward improving and clarifying the acquisition regulations for an already highly successful procurement process. However, the term “get it right” produced the opposite reaction from agencies that confused the problems of the Federal Technology Service (FTS) program with the otherwise successful Federal Supply Service (FSS) MAS program.

Getting it right seems to have backfired into stories of how agencies “got it wrong.” Despite the media focus on the shortcomings of GSA, rather than the many success stories through the years, and the public pushback from the Department of Defense (DoD) for using the MAS program, GSA Schedule 84 sales for security equipment and services have remained strong and the schedule’s use continues to grow.

Audits Are an Unavoidable Aspect of Working With Federal Agencies
Ten years ago, the Office of the Inspector General was more active. Those days are returning.

Many contractors have had a Customer Assisted Visit (CAV) with the Industrial Operations Analyst (IOA), the GSA’s representative from the regional Administrative Contracting Officer’s (ACO) office. The purpose of the visit is to review the contractor’s process for tracking orders, reporting GSA sales, payment of the Industrial Funding Fee (IFF), compliance to the Trade Agreement Act (TAA) and to determine whether the contractor understands its responsibilities under the program and accepts “in scope” orders.

The result of this visit is to grade a company on its performance and report back to the GSA ACO and the Procuring Contract Officer (PCO). With GSA’s mission of acquisition excellence comes the oversight to make sure it happens at the next level, including pricing compliance. Many companies in the security industry as well as other schedule programs received a letter during the past two years that arrived several months before the ending of their MAS contract/prior to renewal. The determination for a Pre-Award Audit depends on the level of sales reported during their five-year contract term.

A letter from the GSA contracting officer informs the contractor of the pending visit from the Inspectors General (IG) and requests the gathering of commercial and government customer data for their review. The resulting feedback and report assists the GSA PCO in determining the performance of the contractor and whether to renew the contract. Of course, if any serious violations are found, there could be other actions pending beyond the issue awarding of a renewal, most of them not so favorable.

GSA Specialists Help Promote Compliance Via Policies, Practices
In a presentation at the recent annual Security Institute meeting, Larry Ginder and Brenda McCall, GSA contract specialists for the Greater Southwest Acquisition Center (GSAC) in Fort Worth, Texas, disclosed to participants an increase of Schedule 84 program sales from 2003 to 2004 at 64 percent, to 26 percent in 2005 and projected a 24-percent increase for 2006.

Although the highest sales for 2005 were in guard services, body armor and bomb or metal detectors, sales for security equipment and services continue to show growth. The information provided by Ginder and McCall reflects GSA’s focus on “acquisition excellence.” Relative to the MAS Get It Right program, Ginder and McCall further explained GSA’s objectives to educate and train the federal acquisition workforce to ensure compliance through clear policies, regulations and procedures.

The GSA MAS program has continued to be a success, and the Greater Southwest Acquisition Center’s workforce can certainly take credit for their excellent record. They have balanced contract management and efficiency while focusing on the needs of their agency customers. In addition, their presence at industry events has helped promote the Schedule 84 security program to government end-user customers.

Pricing Structure Changes to Be Clarified for Agencies
Echoing this theme, GSAC recently advised its Schedule 84 contractors of plans to readdress the services pricing policy. While the announcement of this change caught many by surprise, given the changes to the GSA program’s Federal Acquisition Regulations (FAR) clauses and the current conservative interpretation, it is not totally unexpected. GSAC has always taken a leadership role in implementing change. Under the guidance of center Director Kathy Colomo, GSAC’s management team is proactively addressing areas of their program that seem to conflict with change to FAR or current policy trends.

In response to concerns voiced by manufacturers and security dealers related to proposed changes to services in the Schedule 84 and 56 programs, which are as yet to be fully defined or implemented, GSAC held an Industry Day. The purpose was to hear contractors’ viewpoints and to understand the impact and challenges that lay ahead.

The excellent turnout of contractors at the meeting was a demonstration of the value this program brings to Schedule 84 contractors and the importance of schedule holders to accomplish the joint mission of providing the “by-the-book” best to their mutual customers. Results and comments recorded at the meeting are to be sent to those who attended. A bulletin board is to be established for further comment.

Security Branch Chief Mark Sims and Division Director Kellie Stoker encouraged vendors to assist GSA in recommending alternatives to the current pricing policy. Sheila Brannan, contracting officer, encouraged contractors to assist GSA in finding solutions. Stoker, marker in hand, led a lively and, at times, heated discussion. She listed the challenges and potential roadblocks on a flipchart as the visiting contractors cooperatively voiced their concerns.

The meeting was adjourned with no solution, but, hopefully, it represented a productive start with both sides listening. Under the current policy, Schedule 84 contractors offer service under the Ancillary Services category (installation, maintenance, training, etc.) in support of products, as a single line item with one fixed price to be justified as fair and reasonable by the contracting officer at the task order level.

This program has been especially effective in allowing manufacturers with participating dealers to offer a total solution as their nationwide force of dealers were able to provide and justify their pricing per each job requirement. Many of these dealers are small businesses and do not hold a GSA contract, but have an opportunity to sell to the government through the manufacturers.

This is indeed one of the challenges, as the manufacturer, as a contract holder, has no methodology or practice for setting labor rates. Another hurdle is to be able to come up with standard rates t
hat cover the unique design, varying conditions, different required labor skills and regional labor rates that change under the complex factors.

Other security services under the Schedule 84 program include pricing predetermined or negotiated by GSA for services requiring construction, professional services, leasing and guard services.

Security Schedule Makes Headway at State and Local Levels

An issue of great interest is whether Congress will consider approving the use of the Schedule 84 program for state and local government purchasing. Some contractors are asking whether state agencies with Department of Homeland Security (DHS) grants can use the Schedule program. The answer has been no.

Currently, only the Schedule 70 program has approval. In the past, one of the major objections to this proposal was concern of the impact on small businesses. Only certain items from the Schedule 84 program were allowed to be included in the 1122 Drug Intervention program, as purchased through a state-authorized point of contact. Only CCTV products are approved under this program from the security industry.

The reality is many small security businesses are able to use the GSA program to sell to the government as an authorized GSA dealer, and there is a growing number of small business vendors listed on the program. So why not state and local?

The answer can be found in the Defense Authorization Bill, which the House Armed Services Committee just passed for fiscal year 2007 by a vote of 60- 1. It states that use of FSSs by state and local governments (H.R. 5122) would provide GSA’s administrator the authority to allow state and local governments to use the GSA’s FSSs for goods and services to facilitate recovery from natural disasters, terrorism or nuclear, biological, chemical or radiological attack.

This is progress, but as yet it appears to only be authorized in an emergency situation.

Access Control Program Threatened by Rule Proposal

At a recent meeting held during the 12th annual GSA Expo in San Antonio, Schedule 84 contractors were surprised to learn of a proposed FAR rule supporting the president’s directive under HSPD12 that will exclude their schedule contract program and restrict agencies to purchase equipment and services related to personal identity verification under Schedule 70 only. SIN 132-62 will be for HSPD12 products and services. The directive requires everything to be in place by October.

This is a major concern for the security industry and Schedule 84 contractors, as well as their government customers. The leading manufacturers and integrators of this technology sell their products and services under a different schedule. They have been appropriately listed under Schedule 84 for Access Control for many years. Government agencies utilizing these systems in their buildings may have some serious challenges following the president’s directive when they are no longer able to support their existing systems.

Practically speaking, it would take at least a year under the current workload for Schedule 70 to even hope to achieve a separate contract program. The time delay of waiting for a new award rather than using the existing one will not only impact contractors but also limit what’s available to government agency customers trying to meet the president’s requirements.

As with many of the other schedule programs, there is some overlap. The overlap does not affect the ability of the agency to buy, but does provide flexibility.

One of the reasons for this exclusive proposal may be related to cooperative purchasing and state agencies. Schedule 70 is the only program that allows state and local agencies to buy from the GSA contract. Considering homeland security is of the utmost importance to our nation, it might make more sense to allow security equipment and emergency preparedness to be included.

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