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October 8, 2018 By AMK

Facing industry pressure, Pentagon backs off contract payment changes

Following a wave of criticism from the defense industry and members of Congress, the Pentagon on Monday backed off proposed changes to how companies receive cash flow on their contracts.

In a statement released at the unusual time of 7:19 PM, Deputy Secretary of Defense Patrick Shanahan said the decision to withdraw the proposed acquisition changes stemmed from a lack of “coordination” inside the department.

“Recently, proposed amendments to the Defense Federal Acquisition Regulation Supplement (DFARS) were prematurely released, absent full coordination,” Shanahan’s statement read. “As a result, the Department will rescind the proposed amendments. In coordination with industry, the Department will create a revised rule to implement section 831 of the FY2017 NDAA.”

“The department will continue to partner closely with Congress and industry to examine all reform opportunities, ensuring we provide the best value to taxpayers and critical capabilities to military personnel who defend this great Nation,” Shanahan said.

Keep reading this article at: https://www.defensenews.com/pentagon/2018/10/02/facing-industry-pressure-pentagon-backs-off-contract-payment-changes/

Filed Under: Government Contracting News Tagged With: advance payment, contract payments, DFARS, DoD, industrial base, industry, mobilization, NDAA, payment, payments, Pentagon, performance-based payment

December 2, 2011 By AMK

Counterfeit parts, fixed-price contracts, contractor pay rules and SBIR addressed in Senate Defense Authorization bill

The Senate on Nov. 30 cleared another hurdle in the path to passing its version of the National Defense Authorization Act, capping the amount of time it will continue to debate the bill and indicating that passage of the legislation could come as early as this week. Now, some members of the defense industrial base are reacting to some of the bill’s language.

A number of existing provisions in the bill and amendments that have been added in the past 10 days of debate are targeting the business of the Defense Department, including extensive plans for acquisition reform such as the prevention of counterfeit parts in the DOD supply chain and rules for contractor pay.

One amendment, proposed by Sens. Carl Levin (D-Mich.), the Senate Armed Services Committee chairman, and John McCain (R-Ariz.), the committee’s ranking member, will require contractors to monitor their supply chain and be held responsible for counterfeit parts. The contractors also would have to pay for new parts to replace any fake items, as well as the reworking of the product to integrate the new parts.

That legislation comes on the heels of a recent Senate hearing investigating the use of counterfeit parts, many originating in China, in military weapons systems and other goods.

As part of the amendment, contractors would be required to buy parts whenever possible from a list of DOD-designated trusted suppliers, or from original manufacturers and their authorized dealers. DOD would also have a list of “untrusted suppliers.”

“The counterfeit electronics provision is probably the most impactful” for defense IT contractors, said Trey Hodgkins, senior vice president for national security and procurement policy at TechAmerica, an industry trade organization. “These are provisions that provide a level of attention that’s been lacking for years for an important issue.”

Still, Hodgkins said there are concerns with the counterfeit goods provisions, in particular, a need for better definitions of what’s counterfeit and identification of preferred suppliers. While the amendment enhances contractors’ liability to replace counterfeit parts in DOD systems, there’s no determination of what happens if contractors use the approved suppliers but still end up with counterfeit goods somehow, he said.

There’s also the risk that new measures could contribute to price increases – which could end up being borne by the taxpayer, he pointed out.

Hodgkins said there are a number of simple measures that could be enacted to improve supply-chain security, even without formal legislation. No matter which direction Congress chooses, he said, industry should be part of the discussion.

Other industry groups voiced concerns with limitations on the government and contractors in the current version of the authorization bill.

The Acquisition Reform Working Group (ARWG), a conglomeration of industry groups, said that the bill would throw out a statistical formula for determining how much the government will reimburse a defense contractor for compensating its top executives. An amendment would cap the reimbursement at the president’s salary.

Industry groups say it might make defense contractors less attractive to potential talented employees.

“Defense companies must compete for talent with commercial companies, and considering that the market drives such compensation, costs—with the exception of the top five executives—should be based upon the ‘reasonableness’ standard that has always existed,” ARWG wrote.

The payment has been a contentious issue in recent months, with the Obama administration proposing the cutback on what it’s willing to pay company executives. The administration didn’t increase the annual Executive Competition Benchmark, which is currently $694,000. The amount is based on salaries in the private sector.

Senators are interested in pushing DOD to use more fixed-price contracts to get the most of its money while holding companies accountable and keeping major defense acquisition programs on track. However, the ARWG said the limitation may hurt DOD instead.
The provisions “would likely result in greater use of fixed-price contracts in situations where their use is inappropriate and less beneficial to government in the long run,” according to the group.

Experts say since fixed-price contracts put the investment risk on the company, companies may tend to offer higher prices for work as their own protection.

Furthermore, “the amendment sends a message to DOD contracting officers that their use of cost-type contracts will be under additional scrutiny, even after a contracting officer has negotiated the obstacles that this amendment would establish,” ARWG said.

Finally, the group said senators should reconsider an amendment to require timely payments to small business subcontractors. The provision would require contractors pay the small businesses within 30 days after receiving a payment from the government. But companies make sure they have appropriate information before issue checks.

“Today, contractors do not pay subcontractors, regardless of size, until the contractor receives an accurate invoice and evidence that the work was performed,” ARWG wrote.

The group also supports a number of amendments. It’s in favor of public-private competitions for government work. The competitions have been banned for several years. ARWG supports hiring authority for the cyber workforce and IT jobs in DOD and the creation of an independent commission to reform the federal acquisition rules.

Small business could also get a boost from the bill from an amendment reauthorizing eight years of funding for the Small Business Innovation Research and Small Business Technology Transfer programs.

About the Authors: Amber Corrin is a staff writer for Federal Computer Week covering defense and national security.  Matthew Weigelt is a senior writer covering acquisition and procurement. This article appeared Nov. 30, 2011 at http://fcw.com/articles/2011/11/30/defense-authorization-nears-passage.aspx.

Filed Under: Government Contracting News Tagged With: counterfeit parts, DoD, fair and reasonable price, fixed price, payment, SBIR/STTR, small business

July 18, 2011 By AMK

New board could reset federal spending, Kundra says

President Obama’s new Government Accountability and Transparency Board could be a “total reset” in terms of how the government manages its payments, Federal Chief Information Officer Vivek Kundra told lawmakers Thursday.

The new board, established by executive order in June, will be modeled on the Recovery Accountability and Transparency Board, which tracks money spent on the reset happy president’s $787 billion stimulus program.

The RAT board’s signature initiatives are requiring recipients of federal money to complete extensive reports on how they’re spending money — rather than making government employees track the information down — and then posting all of that information in a single, searchable public database.

Implementing the new board’s initiatives could afford the government an opportunity to rationalize how it pays for things, Kundra told members of a House Oversight panel, such as by automatically sharing data between agencies that issue a grant or contract and the systems, often in the Treasury Department, that actually cut the checks.

A common system for how spending is recorded across the government could also reduce the amount of data entry some federal agencies are still doing by hand, Kundra said.

Rep. Darrell Issa, R-Calif., chairman of the House Oversight Committee and Sen. Mark Warner, D-Va., have introduced bills that would write something similar to the GATB into law.

— By Joseph Marks – NextGov.com – 07/14/11 04:39 pm ET – at http://techinsider.nextgov.com/2011/07/new_board_could_reset_gov_spending_kundra_says.php?zone=NGtoday

Filed Under: Government Contracting News Tagged With: payment, Treasury Dept.

January 3, 2011 By AMK

DoD auditors fault Northrop Grumman for BAMS invoices

The Navy gave Northrop Grumman as much as $300,000 in profit for filling out $3 million worth of travel expense forms–and some of those expenses should have never been approved, says the Defense Department inspector general.

In a Dec. 23 report on the Navy’s $1.8 billion Broad Area Maritime Surveillance system development and demonstration cost plus contract, auditors find that Northrop Grumman submitted at least $206,000 worth of travel vouchers for trips to golf outings and air shows in Washington, D.C., Paris and Singapore. While the Defense Department recovered that money from Northrop Grumman, a company official told auditors that they have not reviewed all travel vouchers or other charges related to the BAMS contract.

“There is a potential for additional unallowable expenses charged and paid to the BAMS contractor,” the report warns. BAMS is a unmanned aircraft system based on the Global Hawk meant to perform persistent intelligence, surveillance and reconnaissance within a range of 2,000 nautical miles. Naval Air Systems Command awarded in April 2008 Northrop a BAMS development contract with a fixed base award fee of 3 percent with an additional 7 percent award fee tied to performance. A “fee” is often how the government dubs “profit.”

Although legitimate travel is an allowable cost under cost plus contracts, auditors say they question giving contractors any fee at all tied to travel expenses, since “it is difficult to evaluate the contractor’s performance on travel.” But in the case of Northrop’s BAMS travel vouchers, the performance was arguably bad enough to preclude it from receiving any award fee, the report says. NAVAIR officials told auditors they’ll consider making travel just a cost reimbursement line item in future procurements.

The report also faults Navy personnel for not reviewing Northrop Grumman bills or going through the government acceptance process before issuing payment. Invoices from the company didn’t itemize amounts billed by labor hour, materials and other costs. For example, one invoice for $22.6 million simply stated that it was a bill for a “cost plus item” and that the unit of measure was “each” with a quantity of “one.”

For more: download the report, D-2011-028 (.pdf)

– Jan. 3, 2010, posted at www.fiercegovernmentit.com

Filed Under: Government Contracting News Tagged With: DoD, IG, invoice, Navy, payment

January 3, 2011 By AMK

Feds offer peeks at companies’ subcontract relationships

The federal government is the newest occupant in the peep-show district of the business world.

It has moved in with its business partners peep show, a place where anyone — no matter their age — can get a glimpse of what’s happening between government contractors and their partners.

The place where everything’s transparent — the USAspending.gov website — is giving intimate peeks into business relationships with its new subcontracting award information, which went online in December.

To grab people’s attention, the government can advertise that it’s the only place where people have an opportunity to watch company relationships grow closer and then apart as business changes.

The government’s massive website of contracting data posted its first subcontracting award information in December, wrote Jacob Lew, director of the Office of Management and Budget, on the OMB Blog last month. It’s another step toward the ultimate goal of the Federal Funding Accountability and Transparency Act. For the first time, the public can track a government agency’s payments to a contractor and the contractor’s payments to its subcontractors.

Until now, two companies’ relationship was for the two companies alone. Government officials had regarded the details of relationships between contractors and subcontractors as something they shouldn’t release, said Kevin Plexico, senior vice president for research and analysis services at Input.

That has changed now, though, as officials pull back the curtain on companies’ partnerships.

In early December, Lew wrote that USAspending.gov had roughly 930 subcontracting awards posted, accounting to about $750 million in federal funding.

“We expect this number to increase significantly over time, but it represents a critical milestone in our efforts [to provide] the public with unprecedented transparency into how and where tax dollars are spent,” he wrote.

The show will include some veterans who are used to having their spending figures available for all to see. As prime contractors, they’ve had to do it for years. It comes with being a federal contractor. However, there will be some companies who’ve never shown that much information before.

The transparency requirements “may be uncomfortable for the subcontractors, who, by the way, are not typically exposed to this kind of reporting,” Plexico said.

Nevertheless, the data might be good. The peeks at companies could impress other businesses interested in potential partnerships.

As the amount of subcontractor data increases, “it should be a useful tool for companies and agencies to gain insight into partner relationships and patterns,” Plexico said. The data could also help companies find qualified subcontractors and give more insight into their past performance.

– by Matthew Weigelt – Jan. 03, 2011 – Federal Computer Week

Filed Under: Government Contracting News Tagged With: awards, payment, small business, subcontracting

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