New Regulations Needed for Government IT Contracting

It's generally known that government IT projects are some of the riskiest projects out there. They are often enormous projects, with complicated specifications and requirements. At the same time, the nation has a greater need for efficient systems than ever before. Civilian and military agencies have a lot to manage, with projects ranging from defense systems for battlefield wireless networks to systems that support the recent changes in health care.

"Cloud computing" is one hot area of research and development, and a new GSA contract will have 11 different vendors providing cloud computing and storage to a number of different government agencies. Such interagency cooperation may require new ways of defining contracts, especially for projects that require delivering a wide array of services, from storage to software licensing. This is in keeping with President Obama's creation of a new task force on interagency contracting cooperation.

Meanwhile, government contracting specialists and industry analysists are experiencing a shift in perspective. Our current contracting models simply don't work for IT projects. Software cannot be produced the same way as, say, the F-22 Raptor, or a new levee for New Orleans. Our enemies and our project requirements are constantly evolving; massive contracts with set requirements are an anathema to our ability to respond.

On top of this, massive IT projects lend themselves to poor contracting procedure, a subject we've covered in our article series "Contracting Principles the DoD Forgot," about the DoD's withholding contractor payments due to poor contract management. When you combine this new penchant among legislators and members of the Executive branch to hold back payments, with little recourse and devastating consequences for small businesses, the implications are enormous. If we do not change how IT contracts are developed and written, it will be a wonder if we have any IT vendors willing to assume the risk of contracting with the federal government at all.

Two recent articles discuss some remedies: "Bite-size procurements can minimize big-time problems" at Federal Computer Week, and "Gov't IT Contracting Reform Needed" at PCWorld. Both suggest a smaller, bite-sized, incremental approach.

What this means for federal procurement regulations is up in the air right now, but it's clear that federal acquisition regulations would need to change to better accommodate this incremental approach. Contractors need to be familiar with the FAR now, but IT vendors in particular need to keep an eye on the regulations for the foreseeable future as the President's Interagency Task Force keeps working.

Government Contractors: Know Your Regs, or Else?

We wanted to give a shout-out to Mike Anderson over at Tech Biz Blog for noticing the same thing we have: contracting regulations matter more now than ever before. This is true not only for the big guys, but small businesses and everyone who subcontracts. No one--prime contractor, subcontractor, or federal agency--is going to want to risk working with your company unless you have a good handle on the FARS.

Implications of the GTSI Suspension: FARS Management

Jonathan S. Aronie over at GovernmentContractsLawBlog.com pointed out some interesting implications of the recent GTSI suspension.

He astutely points out some possible consequences:

"Prime contractors reassessing their current relationships with small businesses. (And small businesses doing the same.)

Greater contracting officer focus on the SBA’s rules, and greater scrutiny of proposals in set-aside procurements.

SBA OIG audits of large and small teammates on set-aside contracts, like SEWP or FirstSource."

A greater focus on the rules. Audits. Sound familiar? Anyone who has been following contracting news knows that the Obama Administration has placed a greater focus on oversight and regulations. But what is a contractor to do about it?

Small businesses that find themselves under greater scrutiny by prime contractors should take a look at how they manage the FARS. Proving competence with the FARS is a good way for contractors to keep each other comfortable with the arrangement. Would you do business with someone who doesn't keep track of the terms of the contracts you make with them? Someone who ignores applicable regulations--which may in turn get you suspended, or get you negative ratings in the FAPIIS system, or may cause the DoD to withhold payments? Someone who would make you look less trustworthy to the greater contracting community?

Yet the FARS and their supplements are a monstrosity. How can a small business compete? It's increasingly apparent that in order to stay competitive, a FARS management system is crucial. It's not enough to print out regulations, stuff them into a folder and never look at them again. It's not enough to keep them in overflowing email inboxes. Competitive contractors of all sizes face the need to prove regulatory competence, the same way ISO-certified companies must.

Mr. Aronie also points out in his post:

"When push comes to shove, you may not get the expected mileage from a defense based upon the oral advice of a contracting officer."

Contractors shouldn't take the word of others; they need to be responsible for this information themselves. Competitive contractors must show that they have the regulations at their fingertips, and that applicable regulations are revisited frequently to ensure compliance. ISO certified companies often attest to the increased business brought by their certifications; we believe the same will be true of contractors who can show good FARS management.

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Contractor GTSI suspended; who is next?

As we reported earlier on our Twitter feed, the SBA has suspended GTSI from government work based on allegations of contracting fraud. According to a Washington Post article:

"There is evidence that GTSI's prime contractors had little to no involvement in the performance of contracts, in direct contravention of all applicable laws and regulations regarding the award of small business contracts," an SBA official wrote in a letter to GTSI's chief executive, Scott W. Friedlander. "The evidence shows that GTSI was an active participant in a scheme that resulted in contracts set-aside for small businesses being awarded to ineligible contractors."

The article goes on to say it's the first time in decades that such an action has been taken.

This comes as no surprise to government contracting newshounds. This administration has stated many times that stopping contracting fraud, waste, and abuse is a priority. President Obama's memorandum back in March challenges federal agencies to ferret out companies that don't follow contracting rules.

Contracting and subcontracting, including small business contracting, have become increasingly important targets in Congress; as we reported earlier, the new Small Business Jobs and Credit Act aims to enforce subcontracting plans. Congress is looking at agencies like the Department of Homeland Security to ensure proper management and oversight of contracts. And Congress may yet pass a version of the DoD's payment withholding plan in the National Defense Authorization Act 2011 for contractors who don't follow the rules.

If a large contractor like GTSI can be taken to task under this increased oversight, it is likely that other contractors will as well. Furthermore, knowledge of the Federal Acquisition Regulations is increasingly at a premium; even the smallest subcontractors could stand to lose business if they are not followed. No prime contractor will want to assume the risk of being suspended because of a failure to follow regulations along the supply line. Contracting officers will be on the lookout for companies that can demonstrate good management of the applicable regulations. An effective FARS management system reduces the regulatory burden and ensures compliance, which in turn protects against suspension.

It will be interesting to see what other companies may be suspended by the SBA; if what is alleged against GTSI is true, it is possible there are many other "GTSIs" out there that could be suspended. Time will tell, but in the meantime, contractors and subcontractors should take a close look at their FARS management and ask themselves if they can prove their competence in this era of increased oversight.