Congressional Resolution to Rescind Fair Pay and Safe Workplaces Rules Passes Both Houses

Last Monday (March 6), the Senate passed a joint resolution disapproving the final rule implementing the Fair Pay and Safe Workplaces Executive Order. The House initiated the joint resolution and passed it in February. From what we've been able to discern from reading online sources, the President is expected to sign it into law.

The resolution reads:

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration relating to the Federal Acquisition Regulations (published at 81 Fed. Reg. 58562 (August 25, 2016)), and such rule shall have no force or effect.

The Fair Pay and Safe Workplaces Executive Order and its related regulations have been controversial from the start. It requires the Government to "consider" a contractor's (or prospective contractor's) history of actual and alleged labor violations when awarding contracts. It has become known as the blackballing regulation.

Just before it was to go into effect, a Texas judge enjoined the Government from implementing the portion of the new rules relating to the reporting and disclosure requirement s regarding labor law violations, but not other aspects of the regulations.

Presumably, this resolution applies to the entirety of EO and regulations including the provisions relating to the paycheck transparency (see FAR 52.222-60), based on the same EO and part of the same regulation addressed in the Congressional resolution.

Senate Doesn't Like 60 Day Suspension of New Regulations

Three United States Senators (Wyden, McCaskill, and Markey) published a letter they wrote to the Secretary of Energy (Rick Perry) concerning whistleblower protections for employees of DOE (Department of Energy) contractors.

On January 31, 2017, DOE published a notice that it was issuing a stay on implementation of final rules allowing DOE to hold contractors accountable for retaliation against whistleblowers who reported nuclear safety violations. The Senators requested DOE to immediately reinstate these rules which, according to them, have clear impacts on public safety and national security.

DOE published final regulations establishing that retaliation against whistleblowers for raising nuclear safety concerns was a nuclear safety violation on December 27, 2016. These new rules allowing DOE to assess civil penalties against certain contractors and subcontractors for violations of the prohibition against retaliating against an employee who reports violations of law, mismanagement, waste, abuse, or dangerous/unsafe workplace conditions, among other protected activities, concerning nuclear safety we to become effective on January 26, 2017.

These new rules however were halted (or temporarily suspended) by the new administration who established a new process for managing the Federal regulatory process. The temporary stay is 60 days.

The Senators didn't like the action. In their letter, they wrote:

Whistleblowers at DOE have exposed substantial waste, fraud and abuse, as well as prevented serious safety violations across the DOE complex. That DOE contractors have retaliated against these whistleblowers is well documented. What's missing is DOE's willingness to do something to reverse the culture of retaliation among its contractors and to demand accountability. After failing for years to close a regulatory chasm that prevented the DOE from fully using its nuclear safety authority to protect whistleblowers, including the use of civil penalties, DOE finally di so in December, only to then suspend them a month later. We request that you immediately lift this suspension and reinstate these rules.

Good grief, its only a 60 day suspension. Do the Senators really think that contractors will use this 60 day stay to retaliate against whistleblowers?

$6 Million Fraud Case Related to Humvee Production

The U.S. Army Tank-Automotive and Armaments Command (TACOM) is the organization responsible for buying Humvees (High Mobility Multipurpose Wheeled Vehicles). A company named "Ibis Tek" had a subcontract to produce Vehicle Emergency Escape Window (VEE Window) kits for the Humvees.

A couple of brothers who ran the subcontractor, Ibis Tek, are now in a lot of trouble with the Army (and the Justice Department). It has been alleged that the brothers set up another company, Alloy America to purchase window frames from China for $20 each and sell them to Ibis Tek for $70 each. That's a nice little markup for doing nothing more than pass-through. However, the nature of the subcontract made such markups inappropriate. Inter-company transfers were to have been made at cost.

In addition to inflating the cost of purchased parts, Ibis Tek sold scrap aluminum collected in the manufacturing process but failed to credit that money back to TACOM, according to the terms of the subcontract (see FAR 31.205-26 (b)(1) - the contractor shall adjust the costs of material for income and other credits, including available trade discounts, refunds, rebates, allowances, and cash discounts, and credits for scrap, salvage, and material returned to vendors and credit such income and other credits either directly to the cost of the material or allocate such income and other credits as a credit to indirect costs).

Between the inflated cost of the window frames from China and the sale of scrap aluminum, Ibis Tek overcharged TACOM by more than $6,000,000. That, according to the Justice Department, constitutes a "Major Fraud Against the United States" (see 18 USC 1031) and carries significantly higher penalties.

But that's not all. There was a Government civilian employee who accepted more than $1,000,000 of illegal gratuities from the brothers. This Deputy Project Manager is not only in trouble for accepting the gratuities (bribes) but also for failing to report the million dollars as taxable income on his tax returns.

The defendants in this case are expected to enter guilty pleas.

The Justice Department press release does not explain how the fraud was uncovered. There are a number of possibilities but most likely, a whistleblower came forward to spark the Government's interest.

New Standards of Conduct Manual

The Department of Defense, Standards of Conduct Office recently issued an updated version of its Encyclopedia of Ethical Failure. This 176 page book - available free in PDF format - contains a huge selection of cases of ethical failures. The purpose of the book is to provide DoD personnel with real examples of Federal employees who have intentionally or unwittingly violated the standards of conduct. Since Government contractors are also required to implement standards for ethical conduct, which, in many cases mirror those applicable to Government employees, this book will be useful as a training tool for contractors.

These case studies include descriptions of multiple jail and probation sentences, fines, employment terminations and other sanctions that were taken as a result of ethical failures. Violations of some ethical standards involve criminal statutes.

The book is organized according to offense. Some of the offenses categories include:

• Abuse of position
• Bribery
• Conflicts of interest
• Credit card abuse
• Endorsements
• Financial disclosure violations
• Fraud
• gambling and other contest violations
• Gift violations
• Misuse of Government resources and personnel 
• Political activity violations
• Post-employment violations
• Time and attendance violations
• Travel violations

Did you know that running a fantasy football league in the workplace or on Government computers was an ethical violation for Government employees? What about your workplace? Do your standards of conduct cover gambling?

What kind of standards do you have for employees who have side businesses? What prohibitions are in place to prevent such employees from using subordinates to "help" out?

What procedures are in place to discourage employees from abusing time and attendance reporting? Abuses in time and attendance reporting often result in increased costs on Government contracts. One employee had to pay back $10 thousand for falsifying time worked.

Contractors are encouraged to use this handbook to augment required training on ethical conduct.

Bills Introduced to Bolster U.S. Manufacturing and Employment

Congressman Ryan (Ohio) introduced two new bills last month aimed at bolstering U.S. manufacturing and employment.

He calls the first of these the "Retain Act" which modifies the U.S. Code for civilian and defense contracts by adding a preference for contractors that promise to retain jobs in the United States. To be eligible for the preference, an applicant for a federal contract must submit a certification that confirms the contractor and its subcontractors will not relocate jobs from the United States to foreign countries during the period of performance of the contract and will use products substantial manufactured in the United States and services provided in the United States under the contract.

It seems to us like this addresses a problem that doesn't exist. If every bidder promises to retain jobs in the U.S., everyone gets the preference and then there is no preference.

The second bill is called the "Investing in America's Small Manufactures Act". This Act increases access to credit for small manufacturers through the Small Business Administration's (SBA's) loan guarantee program. This legislation increases affordable loans to manufacturers, incentivizes manufacturers to grow operations, eliminates the startup penalty, expands education assistance to small manufactures, and consolidates loan guarantee programs.

There is a companion bill in the Senate for the Investing in America Act.

Navy Erred but Error Had No Impact on Solicitation

The U.S. Navy needed 270 gas stoves for base housing in Italy. Using FAR Part 12, Acquisition of Commercial Items, the Navy specified on a brand name or equal basis a model manufactured by Glem Gas and listed as salient characteristics a depth of 60 centimeters and internal volume of 95 liters. To be considered for award, offerors of equal products must include sufficient information to show that the offered items meet the salient characteristics listed in the solicitation. Award was to be made to the lowest-priced, technically acceptable basis.

The Navy received four quotations, all of which were technically acceptable. Gaeta, which submitted the lowest-priced quotation, offered an alternative stove that had a depth of 50 centimeters and an oven capacity of 92 liters. The Navy awarded the contract to Gaeta so Glen Gas who offered the lowest price for the Glen Gas stove, protested the award on the basis that Gaeta's proposed did not meet the solicitation's salient characteristics.Glen Gas argued that the Navy should have rejected Gaeta's quotation as technically unacceptable, because it failed to meet the dimensions and oven capacity specified in the solicitation for a non-brand name product.

The Navy acknowledged that Gaeta's product offered alternate depth and capacity but maintained that the deviations were minor and therefore inconsequential. The Navy stated that these "Insignificant differences would not impact the stove's performance capabilities - the two stoves would do the same job in a like manner with the same results." The Navy contended that since the stoves are functionally interchangeable and will perform identically, waiver of the two specifications was appropriate. The Comptroller General ruled the Navy was incorrect but its actions provided no basis to sustain Glem Gas' protest.

An agency can waive compliance with a material solicitation requirement in awarding a contract only if the award will meet the agency's actual needs without prejudice to other offerors. Competitive prejudice from such a waiver exists only where the requirement was not similarly waived for the protester, or where the protester would be able to alter its quotation to its competitive advantage if given the opportunity to respond to the relaxed term. The pertinent question here is whether Goem Gas would have submitted a different offer that would have had a reasonable possibility of being selected for award had it known that the requirement would be waived.

Although the Comptroller General agreed with Glem Gas that the Navy improperly waived the solicitation's salient characteristics, the CG also agreed with the Navy that the protester had not shown that it was prejudiced by the waiver. Glem Gas did not allege that it would nave quoted a lower price for its brand name model, or that it would have offered another similar product, if it had known that the Navy would waive the solicitations salient characteristics. Thus, the CG had no basis to sustain Glem Gas' protest.