Tensions brew between government and contractors over intellectual property

January 24, 2014 by

Tensions are brewing in the defense contracting business over government efforts to secure rights to manufacturers’ intellectual property. The clash pits military buyers who want to break up suppliers’ monopolies against companies whose livelihood depends on keeping tight control over their designs.

With the Defense Department under pressure to slash costs as budgets shrink, officials are targeting weapons programs for potential savings. They are particularly keen on reducing the cost of weapons maintenance and production by opening up the market to new competitors.

To do that in a market that is dominated by single-source manufacturers, the Defense Department needs what is known as “rights in technical data.” When the Pentagon buys a weapon system, it retains unlimited rights to the data if the item was designed with government funds. But when a product is financed by a private company, the firm keeps full control of the intellectual property and the government is simply a buyer.

Except in limited circumstances, contracting officials cannot disclose a private company’s proprietary data outside the government.

As the Pentagon in recent decades has become more dependent on the private sector for high-tech equipment, it now realizes that many of the existing arrangements restrict the government from seeking competing bids for maintenance or production of that equipment unless the manufacturers grant data rights. For most suppliers, that equates to killing the goose that lays the golden eggs.

Keep reading this article at: http://www.nationaldefensemagazine.org/archive/2014/January/Pages/DoDClashesWithSuppliersOverDataRights.aspx 

Five provisions in the new defense policy legislation for contractors to watch

January 16, 2014 by

[Note: Contractor compensation, the acquisition process, personnel security, cloud computing, and cyber security are five issues recently identified by The Washington Post as especially significant to government contractors.  The following article provides details.]

With the military policy legislation known as the National Defense Authorization Act signed by the president over the holidays, contractors are looking for the changes that matter to them. We’ve singled out five measures that will be of interest to companies that work with the federal government.

Keep reading this article at: http://www.washingtonpost.com/business/capitalbusiness/five-provisions-in-the-new-defense-policy-legislation-for-contractors-to-watch/2014/01/03/f6dd00ec-6c10-11e3-a523-fe73f0ff6b8d_story.html 

Defense budget set for 2014-15, but requires reconciliation

January 8, 2014 by

President Barack Obama signed on Dec. 26, 2013 two key pieces of legislation that detail the Defense Department’s budget for fiscal year 2014 and the federal government’s budget for fiscal years 2014 and 2015, detailed in a Reuters report.

Ros Krasny writes the signed defense authorization bill gives the Pentagon $526.8 billion in fiscal 2014, but the two-year budget compromise reached by congressional budget committee chairs Sen. Patty Murray and Rep. Paul Ryan allocates $498 million in Pentagon spending.

A final defense budget number will need to be reconciled early in the new year, Krasny reports.

Under the government-wide budget deal, spending will increase by $63 billion over sequester levels in fiscal years 2014 through 2015, Reuters reports.

Keep reading this article at: http://www.executivegov.com/2013/12/defense-2-year-budget-bills-paint-fy-2014-15-spending-picture/ 

FAR formally amended to provide accelerated payments to small subcontractors

January 3, 2014 by

For two years, it has been the policy of individual agencies of the federal government to encourage prime contractors, upon receipt of progress payments from an agency, to accelerate payments to small business subcontractors.  Now, this policy has been formalized by publication of a rule and contract clause in the Federal Acquisition Regulation (FAR), effective December 28, 2013.

Here is the background.  The Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautical and Space Administration (NASA) originally published a proposed rule in the Federal Register at 77 FR 75089 on December 19, 2012, to implement OMB Memorandum M–12–16 that would provide for the acceleration of payments to small business subcontractors.  OMB released  Memorandum M–12–16, Providing Prompt Payment to Small Business Subcontractors, on July 11, 2012. This policy memorandum outlined the steps agencies should take to ensure that prime contractors pay their small business subcontractors as promptly as possible.  OMB released Memorandum M–13–15, Extension of Policy to Provide Accelerated Payment to Small Business Subcontractors, on July 11, 2013.  This policy memorandum extended the OMB
Memorandum M–12–16’s expiration date by one year to July 11, 2014.

With the publication of a formal rule in the FAR, the accelerated payment policy is now in effect, government-wide.  Below is the clause that is to be placed in all federal contracts containing subcontracting opportunities:

FAR Part 52.232–40 

Providing Accelerated Payments to
Small Business Subcontractors (Dec. 
2013)

(a) Upon receipt of accelerated payments
from the Government, the Contractor shall
make accelerated payments to its small
business subcontractors under this contract,
to the maximum extent practicable and prior
to when such payment is otherwise required
under the applicable contract or subcontract,
after receipt of a proper invoice and all other
required documentation from the small
business subcontractor.
(b) The acceleration of payments under this
clause does not provide any new rights under
the Prompt Payment Act.
(c) Include the substance of this clause,
including this paragraph (c), in all
subcontracts with small business concerns,
including subcontracts with small business
concerns for the acquisition of commercial
items.

New military spending deal includes help for small business contractors

December 27, 2013 by

In unusually speedy fashion, Congress this week approved both a new federal budget and a military spending bill, both of which provide a sense of clarity to small business owners, particularly those who sell goods and services to the federal government.

But there’s also a little something extra for small business contractors in the latter deal, called the National Defense Authorization Act (NDAA), which authorizes military spending for the coming year and was approved by the Senate late Thursday. In fact, there are two little somethings.

The 2014 version of the legislation, which President Obama is expected to sign in the coming days, included two amendments born earlier this year in the House Small Business Committee, both of which are meant to help small firms in the procurement arena.

The first changes the way prime contractors are allowed to tally up the amount of subcontracting dollars they pass along to small businesses. Currently, the federal government can take into account every small business that works on a given project, even if they are a subcontractor to another subcontractor, when calculating the amount of federal awards that went to small companies in a given year.

Second, the bill includes a rule meant to clarify some confusion over rules concerning the amount of work small prime contractors are allowed to subcontract to large firms.

Keep reading this article at: http://www.washingtonpost.com/business/on-small-business/new-military-spending-deal-includes-help-for-small-business-contractors/2013/12/20/fe0270d2-6990-11e3-ae56-22de072140a2_story.html 

GSA may offer more cost-reimbursable contracts

December 23, 2013 by

The General Services Administration (GSA) is considering adding cost-reimbursable options to its supply schedules, according to a top agency official.

Tom Sharpe, the commissioner of GSA’s Federal Acquisition Service, said in a statement to Federal Times that the agency is conducting an assessment on “a wide array of issues, and will not be a short-term action.”

He added that GSA’s planned OASIS contract vehicle for professional services will offer a cost-reimbursable option available to agencies, and GSA plans to award the contract soon.

Contracts on the GSA federal supply schedules currently use time-and-materials and fixed-price pricing terms.

Keep reading this article at: http://www.federaltimes.com/article/20131213/DEPARTMENTS07/312130010/GSA-may-offer-more-cost-reimbursable-contracts

DoD to cut hundreds of staff and contractors for $1 billion savings

December 18, 2013 by

The Office of the Secretary of Defense will get smaller over the next five years as Chuck Hagel plans to cut 200 positions from his office, saving the Pentagon about $1 billion.

In July, Hagel ordered a 20 percent reduction in the front office budget to comply with sequestration reductions. The Joint Chiefs of Staff, service chiefs, combatant commanders and 3-star headquarters will reduce their staffs, as well.

“Some of these savings will be achieved through significant reductions civilian personnel; much of these savings will be achieved through contractor reductions. We are still finalizing the details, which will be available when the budget is submitted next year. But we will save at least $1 billion over the next five years,” Hagel said during a press briefing at the Pentagon on Wednesday.

In addition to eliminating 200 positions, several departments will reorganize to “reshape and strengthen” their staff. The Office of the Undersecretary of Defense for Policy will “re-balance” some of its workload to assistant secretaries of defense. The Office of the Assistant to the Secretary of Defense for Intelligence Oversight and the Defense Privacy and Civil Liberties Offices will be combined into a single office, as well.

Keep reading this article at: http://www.defenseone.com/management/2013/12/hagel-cut-hundreds-staff-contractors-and-reorganize-1-billion-savings/74912 

GAO says agencies need to comply with Congressional requirements for bundled contracts

December 17, 2013 by

Federal agencies sometimes can achieve savings by consolidating requirements from separate, smaller contracts into fewer, larger contracts.  However, consolidation may negatively impact small businesses.  Generally, when consolidation makes a contract unsuitable for small businesses, the contract is considered bundled, which is a subset of consolidation. Agencies must justify their actions for both consolidated and bundled requirements.

In a new report issued by the U.S. General Accountability Office (GAO), it’s noted that the Department of Defense (DoD) and the General Services Administration (GSA) — which accounted for more than 80 percent of the consolidated contracts reported by all federal agencies in fiscal years 2011 and 2012 — do not know the full extent to which they are awarding consolidated contracts.  This is the result of contracts being misreported in the federal procurement data system (FPDS).

GAO reviewed 157 contracts — more than half of all DOD and GSA contracts that were reported as consolidated — and found that 34 percent of the DoD contracts and all of the GSA contracts in fact were not consolidated. GAO also identified four DoD contracts with consolidated requirements that were not reported as such.

GAO’s study found that DoD generally justified contracts with consolidated requirements in accordance with existing regulations, but DOD and GSA have not yet implemented 2010 changes in the law.   Eighty-two percent of the 100 DoD contracts confirmed as consolidated followed existing regulations pertaining to conducting market research, identifying alternatives, and justifying decisions. Most of the contracts that did not comply were justified, but the determinations were not made by an official at a level senior enough to meet defense regulation requirements.

The study also found that the Small Business Administration (SBA) does not collect complete information on bundled contracts and has not reported to Congressional committees as required by federal law.

To read the full GAO report, please visit: http://www.gao.gov/products/GAO-14-36

DoD enacts rule on excluding contractors based on supply chain risk

December 3, 2013 by

The Defense Department may now officially exclude contractors or subcontractors from receiving information technology contracts based on the risk their supply chain poses to national security systems.

The authority comes from earlier national defense authorization bills and it expires in September 2018. In an interim rule published Nov. 18 in the Federal Register, DoD says the authority applies to the acquisition of any IT product or service, including commercial items, so long as the contractor in question operates a supply chain that poses a significant risk to a particular national security system.

Although the clause permitting the DoD to exclude contractors will now be a part of all defense IT contractors, the interim rule notes that it can apply only to national security systems, and then only to items “the loss of integrity of which could result in a supply chain risk to the entire system.”

Keep reading this article at: http://www.fiercegovernmentit.com/story/dod-enacts-rule-excluding-contractors-based-supply-chain-risk/2013-11-21

DoD finalizes unclassified information protection rule for contractors

November 25, 2013 by

A proposed rule more than two years in the making regarding contractor protections of unclassified defense information and intrusion reporting became final last Monday (Nov. 18, 2014) following publication of a final rule in the Federal Register.

The rule is smaller in scope than the proposed rule the Defense Department put forth in June 2011; it proposed controls for any data tagged with a “for official use only” or similar marker.  The final rule only pertains to “unclassified controlled technical information,” which means technical data or computer software (as defined in the Defense Acquisition Regulation Supplement, section 252.227-7013).

It requires contractors and subcontractors storing or transiting that data to implement 51 security controls from the National Institute of Standards and Technology catalog, Special Publication 800-53 (.pdf), or provide a justification for the use of alternative controls or a case for the control’s inapplicability.

Keep reading this article at: http://www.fiercegovernmentit.com/story/dod-finalizes-unclassified-information-protection-rule-contractors/2013-11-18