New DoD Rule for Approving Payment Requests

Last January, we wrote about the DoD proposal to streamline the Government's process for approving interim vouchers. We noted that "Streamlining" in this case was a euphemism  for effectively removing DCAA (Defense Contract Audit Agency) from the voucher processing business and allows all defense contractors to bypass the auditor when submitting payment requests, regardless of how that Agency views a contractor's billing practices and procedures. That proposal is now final.

Under the new rule, DCAA will use sampling methodologies to select interim vouchers for a prepayment review. All others will be "considered provisionally approved and will be sent directly to the disbursing office".

Under the old rule, DCAA could authorize contractors to directly submit their vouchers for provisional payment to the disbursing office when DCAA is satisfied that the contractors billing system was "adequate". Of course, it was almost impossible to get an "adequate" rating from DCAA so relatively few contractors qualified for direct billing. Under the new rules, everyone qualifies and the only exceptions are when vouchers are randomly selected for pre-payment reviews.

DCAA has yet to publish its sampling methodologies or specify what procedures will be performed in a pre-payment review. When we learn what those are, we will pass it along.

Well Now, Isn't That Interesting

We periodically visit DCAA's (Defense Contract Audit Agency) public website to reference the Agency's Contract Audit Manual and to view newly published audit guidance. When we accessed it the other day, we thought something looked a little different. So, since "inquiring minds want to know", we compared the current home page with a cached version. Sure enough, there was something different. DCAA has added a prominent link for reporting complaints of fraud, waste, and abuse. The link takes you to DoD's Office of Inspector General, the Agency in charge of the DoD hotline.

Here's the old home page:

Here's the new home page:

We guess this link is mainly to make it easier for contractor employees to report suspicions of fraud, waste, and abuse as this site is the Agency's public website, they've got another site, an intranet, that its auditors use.

Safeguarding Government Information on Contractor Information Systems

The FAR Councils published a proposal last Friday that addresses basic safeguards for contractor information systems that contain information provided by or generated for the Government (other than public information) that will be resident on or transiting through contractor information systems. "Basic protection measures" are first-level information technology security measures used to deter unauthorized disclosure, loss or compromise. Specifically, contractors will be required to provide protective measures in the following areas:

• public computers or web sites
• transmitting electronic information
• transmitting voice and fax information
• physical and electronic barriers
• sanitization (wiping hard drives)
• intrusion protection
• transfer limitations.

This proposed rule will apply to all contractors and subcontractors, regardless of size or business ownership. The FAR Councils do not believe the cost impact of compliance will be significant because first level protective measures are already employed at most locations as part of the routine course of doing business. The Councils believe that the cost of not employing first level protective measures could be very costly to both the Government and contractors if sensitive or valuable information is lost. In this case, the potential benefits greatly outweigh the cost.

You can read the full proposal here. Public comments are due by October 23rd.

One Hour Late - Lost Opportunity

The Comptroller General (CG) recently published a bid protest decision from last May that had been withheld due to a GAO protective order. The protest was filed by an unsuccessful bidder (Phillips) who complained that the successful bidder's proposal (McKesson) was ineligible for award because it was not submitted by the date and time set for receipt of the proposals. The Comptroller General agreed and sustained the protest.

The deadline for submission of proposals was noon on December 2, 2011. The Agency (the Veteran's Administration in this case) did not receive McKesson's proposal until an hour after that deadline (1:04 pm, to be specific). McKesson blamed the delay on email and the VA said it was due to an uncommon spelling of the contracting officer's name.

The CG held that it is an offeror's responsibility to deliver its proposal to the proper place at the proper time and late delivery generally requires rejection. Similarly, it is an offeror's responsibility, when transmitting its proposal electronically, to ensure the proposal's time delivery by transmitting the proposal sufficiently in advance of the time set for receipt of proposals to allow for time receipt by the agency. While the rule seems harsh, it alleviates confusion, ensures equal treatment of all offerors, and prevents one offeror from obtaining a competitive advantage that my accrue where an offeror is permitted to submit a proposal later than the common deadline set for all competitors.

The VA offered a couple of excuses but the CG didn't buy them, mainly because the excuses had no basis in the regulations. Ultimately, the CG ordered the VA to re-compete the solicitation and pay Phillips the cost of appealing the decision including reasonable attorney fees.

Yeah, but...

The Project on Government Oversight (POGO) published an infographic the other day comparing the average CEO compensation at the top five defense contractors to the annual salaries of aerospace and defense industry workers. The average CEO earned an impressive $21.5 million (in, presumably 2010) equating to the total compensation for 268 aerospace and defense industry workers.

Fortunately, the Federal government does not pay or reimburse these contractors anywhere close to $21.5 million per year. Executive compensation is capped by statute at $694 thousand for 2010 and $763 thousand for 2011 so most of this compensation comes out of profits or from the contractor's commercial business. POGO did make a good point though; in the event of a sequestration, that level of compensation would preserve a lot of industry jobs.

While on the subject of compensation, there is still an amendment pending that would lower the executive compensation cap to the annual salary of the vice president, $230,700.

They Walk a Mighty Fine Line

Approximately 80 percent of the Department of Energy's workforce is comprised of contractor personnel who provide services to assist with managing projects and programs. This type of environment, according to DoE's Office of Inspector General, can present unique situations that require special diligence from DoE managers, requiring them to balance support needs with ensuring that applicable Federal regulations and procurement guidelines are followed.

Generally, Federal employees are prohibited from becoming involved in contractor employee personnel matters such as hiring and terminating personnel, supervising contractor employees and assigning tasks to contractor employees that, by Federal regulation, can only be performed by Federal employees.

In a recently released "Inspection Report", the DoE Inspector General reviewed allegations that a manager at one of its sites tried to influence contractor hiring decisions. In one case, the manager spoke with contractor officials regarding the qualifications and hiring of a particular individual. Although the manager did not order or direct the contractor to hire the individual, the contractor ultimately hired him.

In the second case, about two years later, the same manager attempted to secure a position for the same individual at another service contract. That attempt failed when the individual was hired by someone else.

The IG found that the manager had taken certain actions on behalf of a particular contract individual but there was insufficient information gathered during the review to indicate that he violated Federal procurement guidelines. Nevertheless, the IG concluded that the actions taken by the manager may have caused others to perceive that the manager acted improperly.

As a general rule, Federal managers must not

1. direct a contractor to hire a particular individual (but they may provide the contractor with the names of individuals that are competent.
2. direct a contractor to fire a particular individual
3. design work requirements around a single individual