Administration moves ahead with federal contractor labor law guidance

The Obama administration proposed guidance that requires prospective contractors to disclose labor law violations from the past three years before they can get a contract. But a contractor advocacy group isn’t happy about it.

Dept. of LaborOn May 28, the Labor Department issued proposed guidance and the Federal Acquisition Regulation Council issued a proposed rule to help agencies implement an executive order signed by President Obama in July 2014.

The order is meant to ensure those contractors who “repeatedly violate the rights of their workers and put them in danger, don’t get contracts and thus can’t delay important projects and waste taxpayer money,” a fact sheet that was released with the order says.

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GSA to push back RFP for Networx replacement

The General Services Administration won’t make its hoped for July release of the solicitation for the $50 billion Enterprise Infrastructure Solutions contract.

GSA NetworxThe contract will replace GSA’s Networx vehicles and is the backbone of the government’s Network Services 2020 strategy for telecommunications services.

A a top agency official managing the effort said more time is likely to be needed as his team gathers input from industry and other interested parties.

Amando Gavino Jr., director of GSA’s Office of Network Services Programs, told FCW in an interview before a Professional Services Council industry forum in Arlington, Va., on May 21 that his team is digesting 1,600 comments from vendors and government agencies interested EIS contract.

The complex RFP, Gavino told FCW, “has to be released by this fiscal year, no later than September.” Last month, Gavino left the door open to pushing back the EIS RFP’s July release date.

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Good faith and fair dealing upheld in federal construction contracts

In United States v. Metcalf, the Federal Circuit Court of Appeals agreed to review a decision of the lower court. If upheld, it would make contractor claims against the government for the breach of the duty of good faith and fair dealing very difficult by requiring the contractor to show intentional bad faith by the government, as opposed to prior precedent that the contractor need only prove that the government objectively acted unreasonably.

US Court of AppealsThe policy arguments for reversal of the lower court decision in Metcalf were straightforward and compelling. Contractors, when bidding work, must consider the risk of government-caused delays, impacts and changes. If the very high burden of proof for the breach of the implied duty of good faith and fair dealing applied, then contractors would either be forced to increase their price or forgo bidding government work. In either case, the market, the procurement process and the public would suffer.

In a far-reaching decision, the Court of Appeals reversed the lower court and set forth the standards for a claim of the breach of the duty of good faith and fair dealing.

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Reverse auctions: Last-second bid was “late”

In a reverse auction, a bid filed literally at the last second was excluded as late, perhaps because the reverse auction system did not process the bid until a few seconds after the deadline.

GAO-GovernmentAccountabilityOffice-SealAs a recent GAO protest demonstrates, reverse auctions – by their very nature – encourage last-second bids, but it is the prospective contractor that may pay the price if the reverse auction system does not immediately process a bid.

The GAO’s decision in C2G Ltd. Co., B-411131 (May 12, 2015) involved a Defense Logistics Agency solicitation for maintenance services on government-owned equipment.  The procurement was conducted using a a third-party reverse auction system, operated by Procurex, Inc.

The reverse auction began at 9:00 a.m. Eastern Standard Time on February 6, 2015.  The reverse auction was scheduled to end at 9:30 a.m. EST.

At 9:04:34 a.m., C2G Ltd. Co. placed a bid of $1,335,687 and became the “lead” bidder.  C2G’s “lead” bid was visible to other offerors.  C2G remained in the “lead” position until 9:28:55 a.m., when a competitor placed a bid of $1,294,725 and became the “lead” bidder.

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Fake SDVOSB to pay $1 million, close down business

A Santa Maria, California company paid a $1 million settlement and agreed to close down on May 11, 2015 after its owner was accused of falsely claiming the company was a Service-Disabled Veteran-Owned Small Business (SDVOSB) in order to obtain landscaping and cemetery restoration contracts with the U.S. Department of Veterans Affairs. The contracts had been set aside for disabled veterans.

The $1 million payment represents virtually all of Veterans of the Land’s assets.

CVE logoFrom 2008 to 2013, Veterans of the Land obtained contracts with the Veterans Administration under the SDVOSB program to provide landscaping and cemetery restoration services at various U.S. National Cemeteries, including Riverside National Cemetery. There are no allegation that the services provided by the company were improperly performed.

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SBA to include overseas contracts in rating agencies

The Small Business Administration will begin to include overseas contracts as part of the baseline used to rate agency performance against small business contracting goals.

SBA logoCurrently about $100 billion a year in federal contracts — including contracts that support overseas projects — aren’t considered when the agency calculates small businesses’ share of procurement dollars annually. It’s been a bone of contention among the small business community, which argues that all awarded contracts should factor into individual ratings, as well as the overall goal of federal government to allocate 23 percent of contracts to small businesses.

“Overseas contracts, we couldn’t find a justification to continue to exclude that,” said John Shoraka, associate administrator of government contracting and business development at the SBA, during a keynote session at a procurement conference hosted by the Montgomery County Chamber of Commerce. “So coming into 2016, we’re working with the Office of Federal Procurement Policy, Defense, USAID and State on including those contracts in the base.”

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Finding a cure for what ails Defense acquisition

US CongressAround the nation’s capital, defense acquisition reform is surely in vogue. Last month, Rep. Mac Thornberry, R-Texas, capped off his multiyear expedition in this space with the unveiling of a House bill to modernize the Pentagon contracting. On the other side of Capitol Hill, Sen. John McCain. R-Ariz., and the Senate Armed Services Committee have taken up the issue as well.

pentagon-sealEnter Frank Kendall. Just a few short weeks after Thornberry put his stake in the ground, the Pentagon’s undersecretary for acquisition, logistics, and technology released Better Buying Power 3.0. The initiative complements Thornberry’s broad legislative push with a set of tactical recommendations that aim to coax the many stakeholders in the defense sector toward more efficient collaboration and more effective outcomes. Though BBP 3.0’s provisions get way down into the weeds of the Defense Department’s acquisition machine, its fundamental (and lofty) goal is to protect American “technological superiority.” In this light, the initiative builds on earlier versions appropriately in certain respects and falls short in others.

While the message is “stay the course” in some areas, this latest cut ventures into new terrain in several ways to preserve the military’s technological edge. BBP 3.0 reinvigorates “prototyping and experimentation” to get greater capabilities out to soldiers at a faster clip. The initiative also promotes stronger long-range research and development efforts, positioning the Pentagon to harness new technologies for tomorrow as well as for 2030. It’s a prudent, yet ambitious campaign.

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Defense bill asks if contractors are gaming bid protests

Lawmakers want to know if Defense Department contractors are gaming the bid protest process, according to language included in the National Defense Authorization Act.

The NDAA, which passed out of House Armed Services Committee on a 60 to 2 vote April 30, instructs DoD to commission a study regarding how Defense Department contractors use – and possibly manipulate – the bid protest process.

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FY 13 Bid Protest Stats - GAO

Cloud contractor to pay U.S. $9M to settle false claims charges

Global Computer Enterprises, a now-defunct federal contractor, and its owner Ray Muslimani, agreed to pay $9 million to the federal government to settle charges that GCE hid its use of prohibited employees on federal contracts with the Department of Labor and the U.S. Equal Employment Opportunity Commission.

GCE supplied a cloud-based financial management service. GCE allegedly concealed is use of engineers and other employees who could not work on federal contracts due to their citizenship or U.S. immigration status.

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Former head of engineering firm fined $4.5 million for 20 years of contract fraud

The former president, chief executive officer, and chairman of the board of a New Jersey-based international USAIDengineering consulting company was sentenced today to 12 months of home confinement and fined $4.5 million for conspiring to defraud the U.S. Agency for International Development (USAID) with respect to billions of dollars in contracts over a nearly 20-year period, U.S. Attorney Paul J. Fishman announced.

Derish Wolff, 79, of Bernardsville, New Jersey, previously pleaded guilty before U.S. District Judge Anne E. Thompson to a superseding information charging conspiracy to defraud the government with respect to claims. Judge Thompson imposed the sentence on May 8, 2015 in Trenton federal court.

According to documents filed in this case and statements made in court:

  • Wolff, the former president and CEO of Morristown, New Jersey-based Louis Berger Group Inc. (LBG), and the former chairman of LBG’s parent company, Berger Group Holdings Inc. (BGH), led a conspiracy to defraud USAID by billing the agency on so-called “cost-reimbursable” contracts – including hundreds of millions of dollars of contracts for reconstructive work in Iraq and Afghanistan – for LBG’s overhead and other indirect costs at falsely inflated rates.
  • USAID, an independent federal government agency that advances U.S. foreign policy by supporting economic growth, agriculture, trade, global health, democracy, and humanitarian assistance in developing countries, including countries destabilized by violent conflict, awarded LBG hundreds of millions of dollars in reconstruction contracts in Iraq and Afghanistan as well as in other nations. LBG calculated certain overhead rates and charged USAID and other federal agencies these rates on cost-reimbursable contracts, which enabled LBG to pass on their overhead costs to the agency in general proportion to how much labor LBG devoted to the government contracts.
  • From at least 1990 through July 2009, LBG, through Wolff and other former executives, intentionally overbilled USAID in connection with these cost-reimbursable contracts. The scheme to defraud the government was carried out by numerous LBG employees at the direction of Wolff.
  • Wolff targeted a particular overhead rate, irrespective of what the actual rate was, and ordered his subordinates to achieve that target rate through a variety of fraudulent means. From at least as early as 1990 through 2000, Wolff ordered LBG’s assistant controller to instruct the accounting department to pad its time sheets with hours ostensibly devoted to federal government projects when it had not actually worked on such projects.
  • At an LBG annual meeting in September 2001, Salvatore Pepe, who was then the controller and eventually became chief financial officer (CFO), presented a USAID overhead rate that was significantly below Wolff’s target. In response, Wolff denounced Pepe, called him an “assassin” of the overhead rate and ordered him to target a rate above 140 percent, meaning that for every dollar of labor devoted to a USAID contract, LBG would receive an additional $1.40 in overhead expenses supposedly incurred by LBG.
  • In response, Pepe and former controller Precy Pellettieri, with Wolff’s supervision, hatched a fraudulent scheme from 2003 through 2007 to systematically reclassify the work hours of LBG’s corporate employees, including high-ranking executives and employees in the general accounting division, to make it appear as if those employees worked on federal projects when they did not. At his plea hearing on Dec. 12, 2014, Wolff admitted that Pepe and Pellettieri, at Wolff’s direction, reclassified these hours without the employees’ knowledge and without investigating whether the employees had correctly accounted for their time, and at times did so over an employee’s objection.
  • In addition to padding employees’ work hours with fake hours supposedly devoted to USAID work, Wolff instructed his subordinates to charge all commonly shared overhead expenses, such as rent, at LBG’s Washington, D.C., office to an account created to capture USAID-related expenses, even though the D.C. office supported many projects unrelated to USAID or other federal government agencies.

On Nov. 5, 2010, Pepe and Pellettieri both pleaded guilty before then-U.S. Magistrate Judge Patty Shwartz to separate informations charging them with conspiring to defraud the government with respect to claims. Also on that date, LBG resolved criminal and civil fraud charges related to Wolff’s and others’ conduct. The components of the settlement included:

  • A Deferred Prosecution Agreement (DPA), pursuant to which the U.S. Attorney’s Office in New Jersey suspended prosecution of a criminal complaint charging LBG with a violation of the Major Fraud Statute; in exchange, LBG agreed, among other things, to pay $18.7 million in related criminal penalties; make full restitution to USAID; adopt effective standards of conduct, internal controls systems, and ethics training programs for employees; and employ an independent monitor who would evaluate and oversee the company’s compliance with the DPA for a two‑year period;
  • A civil settlement that required the company to pay the government $50.6 million to resolve allegations that LBG violated the False Claims Act by charging inflated overhead rates that were used for invoicing on government contracts; and
  • An administrative agreement between LBG and USAID, which was the primary victim of the fraudulent scheme.

In the settlement, the government took into consideration LBG’s cooperation with the investigation and the fact that those responsible for the wrongdoing were no longer associated with the company.

U.S. Attorney Fishman credited special agents of USAID-Office of Inspector General, under the direction of Special Agent in Charge Daniel Altman; the FBI, under the direction of Special Agent in Richard M. Frankel; the U.S. Department of Defense, Defense Criminal Investigative Service, under the direction of Special Agent in Charge Craig W. Rupert; and the former Office of the Special Inspector General for Iraq Reconstruction, under the direction of former Special Inspector General Stuart W. Bowen Jr., for the investigation leading to today’s sentencing. He also thanked the U.S. Attorney’s Office, District of Maryland, and the U.S. Department of Justice Civil Division for their roles in the case.