Georgia Tech Procurement Assistance Center

Procurement fraud is alive and well, and being punished

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The recent guilty plea of a furniture company sales executive provides a timely reminder that contractors continue to engage in procurement shenanigans–and continue to get caught.  In such circumstances, crime definitely does not pay.

On June 10, 2019, the Department of Justice announced that Steven Anstine of Overland Park, Kansas, pled guilty in federal District Court in South Carolina to one count of illegally obtaining contractor bid and proposal information in an effort to win a State Department contract to provide furniture to a U.S. embassy abroad.

Continue reading at:  Government Contracting Matters

These are nervous times for contractors

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US DoD logoSpeaking to a room of government contractors recently, Defense Department officials insisted that there is no witch-hunt.

Contrary to industry perception, government overseers are not hammers looking for nails, said Deputy General Counsel for Contractor Responsibility at the Department of the Air Force, Rodney A. Grandon.

Grandon made a case that contractor policing is changing. The emphasis is not on trying to rack up the numbers of suspensions and debarments, he said, but on working preemptively with companies to make sure they have vigorous ethics and compliance programs.

“The focus today is no longer on numbers. The focus today is on contractor responsibility,” he told a federal procurement conference last month in McLean, Virginia, organized by the consulting firm BDO USA.

It is a fact of life that misconduct will occur, so the government is paying more attention to what companies are doing to prevent and respond in such situations, said Grandon. He commended federal contractors that have “invested in very robust advocacy and compliance programs.” The government counts on companies to self-police, he said. “Contractors must have in place procedures and willingness to engage government to take immediate steps when misconduct occurs. Our role is to buy down the risk for our acquisition community so they don’t have to worry that the contractor they’re dealing with has a lack of integrity or past performance problems.”

Keep reading this article at: http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=2172

Defense department contractors may see new hiring regulations

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A proposed Defense Department regulation, if implemented, will substantially change how contractors hire, oversee and track certain former civilian and military personnel. As proposed, it will also establish a new suspension and debarment risk for contractors that hire former personnel.

On June 6, the department issued a proposed rule — DFARS Case 2010-D020 “Representation Relating to Compensation of Former DoD Officials” — to require all offerors to submit a representation, upon submission of the offer, that all employees who are former Defense Department “covered officials”
(defined in DFARS Clause 252.203-7000), to the best of the offeror’s knowledge and belief, comply with:

  • Defense Federal Acquisition Regulation Supplement (DFARS) 203.171-3 that
    states that covered Defense Department officials must have received or requested
    an ethics opinion on post-government employment restrictions;
  • 18 U.S.C. 207 and 5 C.F.R. Part 2641, which is the statute and regulations
    affecting post-government employment of ex-government civilian personnel and
    military officers; and
  • Federal Acquisition Regulation (FAR) 3.104-2, which implements the
    Procurement Integrity Act.

This proposed rule would likely have the several effects.  For example, it will share responsibility for compliance with post-government employment laws and regulations between ex-government personnel to defense contractors. Current post-government employment laws impose criminal and civil liability on ex-government personnel violations.

It will also require defense contractors to implement new compliance measures. To ensure compliance, defense contractors must establish systems and processes to identify, track, educate, and obtain periodic certifications from all employees, consultants, and others who receive compensation and who are former “covered officials.”

The new requirement will burden both smaller contractors that must establish a new compliance program to meet this requirement, as well as larger defense contractors that must levy the requirement on subsidiaries, joint ventures and affiliates, even those entities that are non-government contractors. Any new compliance system obviously will increase contractor overhead costs, which often are passed on to the government.

It will also impose on defense contractors a new liability over which they have no control.  Because the proposed regulation does not limit the certification to the activities of the former “covered employees” on a Defense Department contract or even related to employment by the contractor, the contractor will be required to certify compliance of its employees even as to their personal, off-duty activities.

Consultants and part-time employees working for other companies or organizations may violate their restriction in pursuit of other activities wholly unconnected to the certifying contractor. For example, an ex-military officer employed by a contractor may violate her representational restrictions under 18 U.S.C. 207 by contacting the government on behalf of another company for which she is consulting, or even as a volunteer for a civic,
charitable or scouting organization.

The proposed regulation may also deter smaller companies from bidding on Defense Department contracts. Smaller commercial contractors with less sophisticated employee screening and tracking systems may view this requirement as too costly to introduce across their enterprise in order to seek new defense business.

Another result may be that contractors will be deterred from hiring ex-military and Defense Department personnel. The proposed rule imposes both a new risk of non-compliance, which could lead to suspension and debarment or liability under the False Claims Act, as well as a new requirement for a compliance system to mitigate the risk. Thus, defense contractors likely will be deterred from hiring ex-military and department personnel. Ironically, this proposed rule red flags former department personnel — including Title 10 reserves and National Guard personnel — as potential burdens for Defense contractors.

The proposed regulation applies only to “covered officials,” but the difficulty in identifying who qualifies as a “covered official,” may cause defense contractors, especially smaller contractors, to simply close the door to all former department personnel.

Another potential consequence is that it may deter civilian federal employees from working in the Defense Department. Since the restrictions apply only to former department personnel, civilian employees, especially procurement and senior program managers who qualify as “covered employees,” may choose to serve in other federal agencies instead of Defense, if they envision post-government employment in the commercial sector. This obviously would frustrate Defense Department efforts to build a world-class acquisition work force.

The bottom line is that the proposed regulation offers several dysfunctional, expensive, and possibly unintended consequences that the Defense Department hopefully will address as it considers whether it should be implemented.

— by Steve Epstein, chief counsel for ethics and compliance at The Boeing Company. The views expressed are solely those of the author. Published by National Defense magazine, October 2011 at http://www.nationaldefensemagazine.org/archive/2011/October/Pages/DefenseDepartmentContractorsMaySeeNewHiringRegulations.aspx

When competitors see bid info, the public loses

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The competition for the Air Force’s next-generation air-refueling tanker contract is one of the most lucrative procurements the service has ever conducted. Despite the high-profile and extensive precautions, a contracting officer still managed to mistakenly provide bidders The Boeing Co. and European Aeronautic Defence & Space Co. NV (EADS) with selected information about each other’s proposals during the typical technical exchanges between the Air Force and bidders.

Many people say what’s the big deal? Why not give competitors access to each other’s bidding information?

Well, here’s why: While some might think sharing this information will level the playing field, in reality it puts the government and all bidders in a worse position.

It is a basic tenet of the federal acquisition process that bidders must submit independent proposals and the government must evaluate each proposal only against the criteria in its solicitation. Another core principle of the acquisition system is maintaining the fairness of the process for all parties.

Companies invest significant time and money developing proprietary products and services and training their employees to sell them to the government. There are also significant costs and risks incurred simply by trying to enter the government market.

Thus, companies carefully protect these investments in the bidding process, often through elaborate steps such as isolated “war rooms” and restricted access to technical designs and pricing algorithms.

In government procurements, particularly for services or solutions, the system encourages bidders to bring their most innovative solutions and the best competitive pricing to the bid. But why invest in an innovative solution if your top competitors get a peek under the tent at your offering?

There are also long-standing statutory and regulatory requirements designed to prevent collusion to rig prices or markets, and bidders must certify they independently arrived at their bids. In numerous successful bid protests, the Government Accountability Office found that bids were not submitted independently, and dozens of criminal convictions have resulted from bidders sharing key information, particularly prices.

In addition, under a decades-old procurement integrity law, it is illegal for a contractor to improperly obtain government source selection information or another company’s proprietary information during the conduct of a federal procurement.

That same procurement integrity law prohibits government officials from improperly releasing government source selection information or any bidder’s proprietary information during the conduct of that procurement to prevent bidders from gaining an unfair competitive advantage or being put at a competitive disadvantage.

Furthermore, during the government’s evaluation of offers, if the contracting officer has any reason to believe the bids were not independently developed, the officer must refer those facts to the Justice Department or the agency’s inspector general.

In addition, after the agency’s initial award determination, each bidder is entitled to a debriefing to better understand the government’s evaluation and award decision and, under certain circumstances, may challenge those agency decisions.

Sharing bidders’ information would put this competition-preserving, innovation-fueling independence and fairness at risk.

Some companies might choose not to compete because they fear their trade secrets would be shared and their technological edge stolen. Others might simply not offer their best solutions for similar reasons. And the government could find itself the victim of bid rigging due to the release of otherwise protected data.

None of those outcomes benefits the government or the interested bidders. There is also damage to the sense of confidence that the federal bidding process is fair to all.

Providing untimely access to the bid information of competitors during a federal procurement is an idea whose time should never come.

— by Alan Chvotkin – Jan. 28, 2011 – Washington Business Journal

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