There were a couple of events this year that will impact Government Contractors in the future relative to the False Claims Act. The False Claims Act (US Code, Title 31, Para 3729) is the regulation that imposes a liability on anyone who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval." The law specifies "any person" that knows so this is open for some interpretation but includes both prime and subcontractors. The liability can be stiff as it involves a financial penalty of $5,000 to $10,000 plus 3 times the damages suffered by the Government due to the false claim plus liability to cover the cost of civil actions by the government. In addition, the government will most probably debar a contractor that is found to be in violation of the False Claims Act. The two events this summer of interest were:1) The Supreme Court issued a decision in the case Read More
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In a discussion with some associates a week ago I was surprised to hear they were not aware of the LPTA practice that is becoming more popular in evaluating government contract bids. First, let’s look at what LPTA is. This is the government’s acronym for Lowest Price Technically Acceptable practice of evaluating contract bids. This is described in the Federal Acquisition Regulations paragraph 15.101-2 as a source selection process to be used when “best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price”. Confused? Yea, I must admit that the wording here leaves a little to be desired. If you read further in the FAR paragraph here it also says “…past performance need not be an evaluation factor in lowest price technically acceptable source selections.” Wow, really? I read a story about a contractor that was having difficulty filling their obligations under a contract and had even had several cure letters written during the contract. When the contract went out for re-bid, the incumbent was able to qualify as “technically acceptable” and thus lowered their price to get the award of the new contract. Clearly this is not in the government’s best interest as they already knew of problems with this supplier and, with the lowering of their price, I’m sure further issues are bound to crop up.
So what is the issue with LPTA. The real issue is that with the current budget issues in Washington (including the effects of sequestration), all agencies are looking to cut costs however they can. This is why there is an increase in the number of LPTA contracts and the number is forecast to continue to increase for the next couple years. It means that the government will be buying more and more items and services at the lowest price. Now I don’t think that anyone will argue that if you buy a commodity at the lowest price, which is just smart business. When these types of evaluation criteria creep into other types of procurements, the level of quality or the value provided to the government suffers. Some studies have already been conducted (Deltek-Centurion study) that indicates less qualified contractors are winning LPTA contracts. They are meeting the bare minimum of qualifications but the value to the government is debatable. This is like settling for the lowest price tires on your car. They may not last very long, and they could have blowouts that are not covered by warranties, they could cause vibrations at highway speeds due to imbalance but they will allow the car to roll down the road. In other words, LPTA type contracts in these instances will drive the procurement to lower levels. Rather than striving to achieve an ‘A’ in school, we will be satisfied with a ‘D’, it is the lowest acceptable passing grade.
I have had several calls this week from small businesses that are interested in doing business with the Federal Government but they obviously don't know how to or where to start. While many of the same basic marketing and selling techniques that are used successfully in commercial companies apply to government contract opportunities, there may be some nuances that are not obvious.
Many years ago I attended a seminar/work session on Negotiating. The objective of negotiation was defined as “…a process of discovery that moves toward an agreement that satisfies both parties.” I think this definition holds true on commercial negotiations for sure. In government negotiations, this holds true but there are many more guidelines that govern the process that both sides need to understand to produce a result that will satisfy both parties. The government objective might be “…a process of discovery that moves toward an agreement that will satisfy the Government and it’s requirements and provide a result for the contractor.” To understand this, if the contractor doesn’t understand the rules and guidelines (specifically the Federal Acquisition Regulations or FAR) then they may not be satisfied in having to produce cost and pricing data as part of the negotiations, especially if they were not prepared to do this from the proposal stage on.
The other day I talked about how there could be a lot of funding released in the next 3 months. I think there is some evidence already of this activity beginning. For instance, in the last week the US Army announced they have issued a 5 year multiple award contract totaling up to $7B. There were 8 companies chosen and now each of these companies can compete for task orders under the multiple award agreement. Granted, this is not yet a release of funds (until one of the 8 wins the first task order) but it shows that things are starting to happen. Here is a sample of other announced major awards from the last several weeks:
When you receive a contract or a grant from the Federal Government, there are always lots of terms and conditions attached to these relationships. One of the most onerous is related to how you do your accounting so the government can make sure it is getting the most favorable customer status (the best pricing). In dealing with the Federal Government it is always pointed out that all of the terms, conditions, regulations and other items are publicly available. This is very true. What may not be obvious is that these terms, conditions and regulations are very intertwined and difficult to fully understand and therefore difficult for a small business to comply with. When you compound this with the issue that a small business needs to focus on the core competencies to make the business successful, it becomes obvious that it might be not only a good idea but it could be financially proven to be the best decision to outsource routine tasks like compliance and accounting. So what are the top 10 reasons that you should outsource your accounting? This is our list, you may notice others:
There has been no shortage of news and writing about Sequestration and how that is affecting Federal Contracts. As the dust begins to settle it is becoming obvious that some of the loudest complaints about Sequestration could have been just political positioning. For instance, Dr. Stephen Fuller of George Mason University indicated last week that the cuts in the 2012 Federal Budget were more severe than the Sequestration cuts of 2013. Certainly things like threatening to shut down air traffic control are done in a grandstanding manner to draw attention to certain areas and create public sympathy for the agency facing budget cuts. There are beginning to be more and more examples of the amount of political positioning that was going on in the name of Sequestration. There also are other consequences from Sequestration that perhaps are less publicized.