In June 2017, Congress proposed online marketplaces for commercially available off-the-shelf (COTS) products where the Competition in Contracting Act (CICA) is waived for the online provider contract, a sea change for how agencies buy COTS items. Congress also introduced legislation to extend current U.S. Department of Defense (DoD) restrictions on the use of lowest price technically acceptable (LPTA) acquisitions to civilian agencies. The House of Representatives has also released a number of appropriations bills for Fiscal Year (FY) 2018.
The Trump Administration advanced its efforts to reduce the regulatory burden on federal agencies. In turn, DoD and the General Services Administration (GSA) sought public comment on implementing the Administration's Executive Order 13777, also known as the "2-for-1" Order, which requires "that for every one new regulation issued, at least two prior regulations be identified for elimination."
June also brought notable federal reports and guidance, as well as procurement updates. This article reviews those developments.
- Online Marketplaces for Commercial Products Exempt from CICA. On June 26, 2017, Chairman William "Mac" Thornberry (R-TX) of the House Committee on Armed Services released his Chairman's Mark of H.R. 2810, the FY2018 National Defense Authorization Act (NDAA), which authorizes a $696.5 billion defense budget. One critical aspect of the Chairman's Mark is the inclusion of Section 801, Procurement Through Online Marketplaces, which requires the Administrator of General Services to "establish a program to procure commercial products through online marketplaces for purposes of expediting procurement and ensuring reasonable pricing of commercial products." The online marketplace platforms would be run by "multiple commercial online marketplaces for the procurement of certain COTS products" and "would not require GSA to use competitive procedures to contract with each marketplace." Furthermore, the marketplaces themselves would not be required to use competitive processes in selecting vendors, because of the committee's view that "marketplaces generally ensure competition."
The Secretary of Defense would be required to purchase COTS products for DoD using the online marketplace program in appropriate circumstances as well. A few of the criteria for the online marketplace, among others, are that it must be widely used in the private sector; must provide "dynamic selection" and "dynamic pricing," such that suppliers, products, and prices are frequently updated; and must enable offers from multiple suppliers to be sorted by product and shipping price, delivery date, and product or supplier reviews. The Coalition for Government Procurement has called this "the most consequential procurement policy change in a generation."
Section 801 contemplates that procurements through the online marketplace "shall be made under the standard terms and conditions of the marketplace relating to purchasing on the marketplace." It does not specify what those standard terms and conditions must contain. It contemplates that the marketplaces would require some government clauses, which the bill summary refers loosely to as "compliance with suspension and debarment, domestic sourcing, and other similar statutes." The current language suggests that Congress might contemplate a separate category of rules and required clauses for COTS items that must be purchased on the marketplaces. It does not describe whether Section 801 would effectively partially repeal prior statutes that give agencies flexibility to purchase COTS items and protects COTS procurements from many, but not all, Federal Acquisition Regulation (FAR) clauses.
Nor does Section 801 explain how the requirements intersect with strategic sourcing initiatives, which encouraged agencies to compete large quantities of repetitive orders at one time, so as to leverage the agencies market power. It is not clear if platforms would have a role in strategic sourcing, or how they would strategically source without competition.
The requirement and criteria for the establishment of the online marketplace is substantively very similar to H.R. 2511, the Defense Acquisition Streamlining and Transparency Act, that Rep. Thornberry introduced on May 18, 2017. One major difference, however, is that H.R. 2511 required the Secretary of Defense to establish the online marketplace program, rather than the Administrator of General Services. This change indicates a shift in focus from an exclusively DoD online marketplace to a government-wide marketplace for the procurement of commercial products.
- Proposed Legislation to Extend the Restriction on LPTA to Civilian Agencies. On June 23, 2017, Rep. Mark Meadows (R-NC) and Rep. Don Beyer (D-VA) introduced the "Promoting Value Based Procurement Act of 2017," which would "require executive agencies to avoid using lowest price technically acceptable [(LPTA)] source selection criteria in certain circumstances." The bill mirrors legislation introduced by Rep. Beyer last year, the "Promoting Value Based Defense Procurement Act," the substance of which was later incorporated into the FY2017 NDAA. The new bill would apply to civilian agencies, rather than just DoD.
Federal Budget and Appropriations Update
- FY2018 Budget Deadline Is Looming. As the end of the federal fiscal year approaches (September 30, 2017), the clock is ticking for Congress to agree to a federal budget for FY2018, which governs the top-line spending amounts and is the primary mechanism by which the "reconciliation" measures can be used to by-pass Senate filibuster rules. A tentative agreement is rumored to have been struck among Republicans that includes a $200 billion cut in mandatory spending and an increase in military spending that may be in the $70–80 billion range.
- Appropriations Subcommittees Continue Work. The Appropriations subcommittees are continuing to work on their 12 respective appropriations bills. It remains unclear if a continuing resolution (keeping FY2017 spending) will govern spending after September 30, if a "minibus" or "cromnibus" will be enacted that maintains some FY2017 spending levels and some new spending, or if all 12 new spending bills will be combined in an omnibus. In the meantime, the steady pace of mark-ups proceeds in the House, while the Senate has yet to commit any drafts to print yet.
- Military Construction and Veterans Affairs FY2018 Appropriations Bill Increases Overall Funding. On June 15, 2017, the House Committee on Appropriations approved the FY2018 Military Construction and Veterans Affairs Appropriations bill, which provides $88.8 billion in discretionary funding—$6 billion above the FY2017 level. This includes $638 million in Overseas Contingency Operations funding (including funding for European Reassurance Initiative projects). Funding for the Department of Veterans Affairs was increased by $4 billion and military construction was increased by $2.1 billion.
- DoD FY2018 Appropriations Bill Reflects Increases in DoD Spending. On June 29, 2017, the House Committee on Appropriations approved the draft FY2018 Defense Appropriations bill. The bill provides for a total of $658.1 billion for DoD, which includes $584.2 billion in discretionary spending. This discretionary amount represents a $68.1 billion increase above the FY2017 enacted level and an $18.4 billion increase above President Trump's Defense budget request. The bill also provides $73.9 billion in Overseas Contingency Operations/Global War on Terrorism funding.
- Agriculture FY2018 Appropriations Bill Reflects Reduction in Overall Spending. On June 29, 2017, the House Committee on Appropriations considered the FY2018 Agriculture Appropriations bill, which includes an $876 million reduction from FY2017 discretionary spending levels, but $4.64 billion more than the President's request. The bill provides $2.8 billion for agriculture research programs, including the Agricultural Research Service and the National Institute of Food and Agriculture; $45 million for infrastructure rehabilitation to help small communities meet current safety standards for watershed projects; and $1.8 billion for overseas food aid and to promote U.S. agricultural exports.
- Financial Services and General Government FY2018 Appropriations Bill Reflects Reduction in Overall Spending. On June 28, 2017, the House Committee on Appropriations released the FY2018 Financial Services and General Government Appropriations bill, which includes a $1.284 billion reduction from FY2017 spending levels and a $2.483 billion reduction from the President's budget request. The bill provides $848 million for the Small Business Administration (SBA) "to help promote opportunities for American small businesses to begin, grow, and prosper." The bill also includes a $149 million reduction to the Internal Revenue Service budget.
Executive Branch Activity
- Reducing Regulatory Burden on Federal Agencies. On June 15, 2017, the Office of Management and Budget (OMB) issued a memorandum titled, "Reducing Burden for Federal Agencies by Rescinding and Modifying OMB Memoranda." The memorandum eliminates, modifies, and pauses certain previously issued OMB memoranda "to alleviate reporting and compliance burdens and allow agencies to focus their efforts on higher value activities." Of particular note for Government contractors is the elimination of OMB memoranda requiring quarterly progress reports to OMB on accelerated payments to small business subcontractors. The memorandum states that "[a]gencies are encouraged to continue to accelerate payments, to the best of their ability, to small businesses and prime contractors with small business subcontractors." OMB states that the reporting requirement change does not affect agencies' responsibilities under the Prompt Payment Act. OMB also eliminated guidance requiring agencies to set a 100% target for reporting past performance on awards above the simplified acquisition threshold. While OMB found that "[e]mphasizing the quality of a contractor's past performance in future award decisions is an important tool for holding contractors accountable to the taxpayer and making sure the government receives good value from its contracts," OMB eliminated the reporting target "to ensure agencies' efforts are focused on using this tool as an incentive to achieve successful performance outcomes, and not on rigid compliance with meeting a goal."
- Input to Reduce Regulations Under the 2-for-1 Order. Agencies are beginning to seek input from the public as part of the requirements of President Trump's Executive Order 13777, "Enforcing the Regulatory Reform Agenda," which directed Federal agencies to establish Regulatory Reform Task Forces to evaluate existing regulations and make recommendations for their repeal, replacement, or modification. On May 31, 2017, GSA issued a Request for Comments requesting input from the public specifically on "GSA's supplement to the FAR, the GSA Acquisition Regulations (GSAR), the GSA Acquisition Manual (GSAM), or acquisition policies, standards, business practices and guidance that have not been codified through regulation, but may still be appropriate for repeal, replacement or modification." Comments are due by July 31, 2017. DoD followed suit on June 20, 2017, also issuing a Request for Comments "seeking input on DFARS solicitation provisions and contract clauses that may be appropriate for repeal, replacement, or modification." Comments are due by August 21, 2017.
- SBA Authority To Hear Size Standard Petitions. On June 2, 2017, the SBA issued a Final Rule that amends the rules of practice of the SBA Office of Hearings and Appeals (OHA) to implement Section 869 of the NDAA for FY2016 and Section 1833 of the NDAA for FY2107. The Final Rule, which became effective July 3, 2017, authorizes OHA to hear and decide Petitions for Reconsideration of Size Standards, which may be filed at OHA after the SBA publishes a final rule in the Federal Register to revise, modify, or establish a size standard. The Final Rule also revises OHA's rules of practice for appeals of agency employee disputes.
Federal Reports and Guidance of Interest to Contractors
- DoD Slides on Protecting Unclassified Information. The DoD Chief Information Officer released the slides from the DoD Industry Information Day on June 23, 2017 on Protecting DoD's Unclassified Information. The slides analyze the various federal cybersecurity regulations, policy, and guidance affecting DoD's unclassified information. Contractors that handle, possess, use, share, or receive Controlled Unclassified Information or Covered Defense Information, or that operate, use, or have access to a system of records containing such information (whether for DoD or another federal agency) should ensure compliance with the requirements set forth in DoD's presentation.
- GAO Report on FITARA. The Government Accountability Office (GAO) issued GAO-17-686T, titled "Information Technology: Sustained Management Attention to the Implementation of [Federal Information Technology Acquisition Reform Act (FITARA)] Is Needed to Better Manage Acquisitions and Operations." The report found that, as of May 2017, OMB and federal agencies had fully implemented about 47% of the approximately 800 recommendations that GAO made between fiscal years 2010 and 2015 "to address shortcomings in IT acquisitions and operations." The recommendations were spurred by failed IT investments in the past that incurred "cost overruns and schedule slippages" or "contributed little to mission-related outcomes." Such failures led to the enactment of the FITARA, which was intended to "improve agencies' acquisitions of IT and enable Congress to monitor agencies' progress and hold them accountable for reducing duplication and achieving cost savings." The GAO will continue to monitor agencies' progress and implementation of its recommendations.
- GSA Added 500 Small Businesses to STARS II. On June 13, 2017, GSA added approximately 500 small businesses to the 8(a) STARS II Governmentwide Acquisition Contract during the Open Season. The STARS II GWAC is a multiple-award IDIQ contract for 8(a) small businesses to provide various IT services and solutions under four functional areas: Custom Computer Programming Services (NAICS 541511); Computer Systems Design Services (NAICS 541512); Computer Facilities Management Services (NAICS 541513); and Other Computer Related Services (NAICS 541519). The STARS II GWAC now includes more than 800 providers and ordering is available through August 30, 2021.
- DHS Cancels FLASH. The Department of Homeland Security (DHS) cancelled its $1.54 billion procurement for agile design and development services, known as Flexible Agile Support for the Homeland, after nine companies protested the award of 11 indefinite-delivery, indefinite-quantity contracts at the GAO. The GAO dismissed the protests after DHS determined that the procurement contained a number of flaws, that "substantial modifications to the requirements would need to be made to ensure that FLASH meets DHS' evolving mission needs," and thus that "cancellation of the FLASH solicitation … is the only viable option to address the many issues that DHS has identified as problems with the requirement and the record."