Getting in Front of Regulation Compliance

Transcription

1 Getting in Front of Regulation Compliance Perspective & disclaimers Premise Process suggestions Cases and audits References Questions? Practitioner; ~ 42years experience I am not a lawyer Responsible for policies, procedures, computer systems, training since ~1992 Tap-danced with: Lawyers, DCAA, IG Investigators, GAO auditors, KPMG & public audit firms, Internal auditors, OFPP staff, NARA staff. and other nefarious organizations AA - 1

2 Survival; taking the least contentious path Citations; numerous, overlapping and ambiguous Requirements; not black and white Outcome influenced by Interpretation & politics Benefit (or injury) analysis Auditor interpretations Management challenges Clear written policy Effective training Rigorous process Documented compliance Protest Decisions Audit reports Policy bulletins raise sensitivity to issues reveal process weaknesses provide meaningful auditor interpretations provide regulation & case references provide examples for training discussion Subscribe to newsletters & notices A quick look for interest Subject matter Buyer loses Major finding, new rule, important changes Search for buzzwords Look for citations & regulation interpretation Watch for useful references Capture the salient points & links as you go You ll never get back to it - First review has to count AA - 2

3 B ,B , McConnell Jones Lanier & Murphy, LLP, October 21, 2015 McConnell Jones Lanier & Murphy, LLP (MJLM), of Houston, Texas, protests the award of a contract to Alternate Perspectives, Inc. (API), of Leesburg, Virginia,.. for the operation of the Shriver Job Corps Center... MJLM argues that the agency's evaluation of offerors' proposals and the resulting award decision were improper. We deny the protest. Ho Hum nothing of interest here 7 B , Eastern Forestry, November 9, Eastern Forestry, of Spring Grove, Virginia, protests the terms of invitation for bids (IFB) No. W91QF5-15-B-0007 (IFB-0007), issued by the Department of the Army for landscaping services at Fort Lee, Virginia. Eastern Forestry asserts that the IFB, as amended, did not provide sufficient time to prepare and submit a bid. We sustain the protest. What does the court think is sufficient? What reg.? Buyer Loses why? of the FAR, allow a reasonable period of time. at least 30 calendar days shall be provided. FAR (a)... when specifications must be changed,.must consider the period of time remaining until bid opening. we require a showing that the time allowed was inconsistent with statutory or regulatory requirements or otherwise unreasonable, or that it precluded full and open competition. See B a reasonable opportunity will depend on the circumstances of the particular acquisition, such as complexity, commerciality, availability, and urgency. FAR 5.203(b); Now we have a Far reference and also another case discussing exceptions 8 GAO Case B , Kollsman Inc., Oct 2012 the source selection decision did not discuss the past performance evaluation Given the lack of documentation and support we find no basis to conclude the agency reasonably evaluated. protest is sustained Buyer Loses!.where the record does not support the rating Lack of contemporaneous record generally = loss Court often sides with the buyer if analysis is 1 Consistent with the RFP 2 A matter of interpretation 3 Well documented & contemporaneous 9 AA - 3

4 GAO report: micropurchase transactions (<$3.5K) Little evidence of fraud found Some process weaknesses identified Useful comments and observations 1. Cites process controls required by OMB- Circular A- 143 Appendix B 2. Figure 2 - Actions taken by Govt. in last 10 years to strengthen credit card purchasing controls. 3. Figure 7 High risk purchase categories 4. Table 4 Targeted data review by agency 5. Table 5- Agency process description Matter of: NOVA Corporation File: B ; B Documentation must be contemporaneous AA - 4

5 U.S. Federal Claims Court C, Orlosky Inc. v. Navy Determinations based on facts; rigorous, logical, consistent & documented This proposal was largely a waste of time for plaintiff another hoop through which plaintiff leapt due to the incompetence of the Navy s San Nicolas Island personnel For their part the Navy witnesses were marginal, at best. At one point the court was constrained to advise defense counsel that the Navy s (now fortuitously retired) Contract Manager, Mr. Smith, was showing himself insufficiently coherent to be allowed to continue to testify. The court could not credit Mr. Smith with being other than derelict in contract coordination duties... GAO case B Correctly includes RFP requirement designed to differentiate responsible offerors. Correctly discards one offeror who does not meet requirement. Correctly allows Small Business to request Certificate of Competency from SBA ( which was denied) Correctly refuses to reconsider based on extraneous assertion which has no legal value Past performance can be a factor in selecting contractors, if applied consistently and the decision well documented. Rationale for making a determination, mitigating circumstances and analysis documented in the file makes it easier for an auditor, reviewer, or the court to decide the buyer exercised due diligence. (even if there are disagreements about the conclusions ). From a negotiation perspective consider it this way If, after reading the file documentation, it looks like you have done your homework, Then for a reviewer, it s a lot more effort for me to challenge your analysis and assertions Reviewer: Is your decision reasonable? AA - 5

6 Suspect Counterfeit Electronic Parts Can Be Found on Internet Purchasing Report: GAO , Feb 21, 2012 Revelation: GAO sets up fake company and purchased bogus parts from low bidders in online marketplace web sites! Lesson Learned: Anyone, from Warning: Vendors will sell you anything anywhere, will sell you anything if Even parts that don t exist you let them. Waiving a fist full of dollars in an online auction or Any business can look legit online marketplace will attract a lot of flies. A flashy and attractive web presence today is trivial Online Sourcing web sites make money from both sides of the transaction More vendors and More buyers = more profit They register just about any vendor they can drag up and make that vendor look as good Question vendor registration practices for reverse auction and portal web sites Most - don t perform business validation and have little information about the vendors A vendor s certification that the part is correct is only as good as your verification process Corollary: if an auditor can set up a legit looking fake company anyone can! Due diligence is our responsibility in vendor selection and relationship management DOE-IG /3/2015 failure of the Contracting Officer to act on known issues Investigating Fraud, Waste & Abuse in IT acquisition Spent ~$5.2M for a system that did not meet its needs Significant weakness in planning, acquisition & contract administration Contract problems including language changes Total Cost analysis omitted Vendor Past Performance showed risks > not mitigated another contributing factor was a lack of adequate due diligence on the part of key personnel, as evidenced by the absence or inadequacy of required contract reviews and the failure of personnel to address known issues AA - 6

7 Similar to contract issues we have Staff augmentation blanket contracts, technical evaluation of labor Rationale & references that we can use GAO opinion: reverse auctions are O.K. Lowest Price, technically acceptable, evaluation process for staff augmentation contracts with multiple labor categories. Discussion of using blended rates because technical staff would be too complex to compare Albeit there were 6 modifications to the solicitation so it wasn t easy IMO: buyer won because of several key elements: 1. Evaluation criteria was discussed and documented before solicitation 2. Evaluation plan was clearly laid out in the solicitation 3. Reverse auction process did not violate fair solicitation rules 4. Selection process was well documented and clearly followed the plan Questioned costs related to subcontracting because of weaknesses in incurred cost audits of subcontractors. Declared the cost of the subcontract for the independent auditing firm to be potentially unallowable since the subcontract audits the firm conducted apparently did not meet audit standards. First few paragraphs of the management response document circumstances relative to prime contractor changes that exacerbate the problem. Coast Guard source selection contract for big ticket items and complex spec GAO decision B Took the higher offer and GAO agreed it was a reasonable thing to do! Fixed price with economic adjustments for one unit; option to buy 33 more.. Proposed price $1.3B Most arguments about technical details and there were a lot of them In our view, the record reflects that the agency performed a detailed and relatively extensive price reasonableness analysis, which considered a comparison of the offerors' proposed prices, as well as a comparison of the offerors' proposed prices as adjusted to account for the differences in the FRC-Bs. Accordingly, we find no basis to object to the methodology used by the agency in the performance of its price reasonableness analysis, or the agency's conclusion that Bollinger's proposed price was reasonable. MMC argues that the agency improperly and unreasonably determined that Bollinger's proposed price was reasonable. Agency "created several IGCEs [Independent Government Cost Estimates], with each IGCE estimation based upon each offeror's proposal: Where, as here, a fixed-price contract is contemplated, the government may use various price analysis techniques and procedures to ensure a fair and reasonable price, including the comparison of proposed prices received in response to the solicitation; adequate price competition can establish price reasonableness, as can a comparison of proposed prices with an IGCE.[23] See Federal Acquisition Regulation (FAR) sect (b); A price reasonableness determination is a matter of administrative discretion involving the exercise of business judgment by the contracting officer that..we [GAO] will question only where it is unreasonable AA - 7

8 Use your Network to set up a team Communication plan to review publications. Use your co workers or your network Student members? Team member reviews one publication Item of interest? - summary and link to team members Use Outlook to sort reading into a separate folder Keep a file and search electronically for issues GAO Case B Source selection officials have broad discretion to determine the manner and extent to which they will make use of evaluation results it is the function of the source selection official to perform a cost/technical tradeoff a single evaluation factor--even a lower-weighted factor--may properly be relied upon as a key discriminator for the purposes of a source selection decision GAO protest B (pretty easy to see why the buyer lost): VA improperly rejected its bid for the Trane chiller not meeting the specifications in the IFB. The record is remarkably absent of any rationale to support the agency s arguments in this regard. The contemporaneous record contends vaguely that cut sheets for the Trane chiller were questionable and that the R-123 refrigerant associated with the Trane chiller did not meet the specifications of the IFB, without any explanation of what was questionable or what specifications were not met. During the development of the protest, we sought explanation from the agency, and the agency merely repeated that the bid was lacking and thus, nonresponsive and failed to meet the criteria established by the agency in its IFB. Contracting Officer s Statement at 2; Supp. AR at 1. Despite multiple opportunities, the agency has not explained why VCG s proposal failed to meet the IFB s requirements, which of the 384 pages of specifications and drawings were not met, or what in the 14 pages of documentation describing the chiller model VCG included in its bid was questionable. Without support for its conclusions,..we cannot find that the agency acted reasonably in rejecting VCG s bid. Buyer lost in part because the file, subsequent correspondence and evidence failed to specifically identify sections of the specification that caused the offer to be rejected. Lesson: When making a determination of responsiveness, be specific. Show exactly what part of the specification or requirement the offer does not meet. Instead of " the offered equipment does not meet specs " be more specific. Example: "Specification section 2.6 requires contractor to provide chemicals in a Klein bottle however contractor proposed on page 38 to use mason jars." AA - 8

9 Report: - Solyndra Department did not do an effective due diligence analysis of available data to detect company misstatements, and misleading assertions.. Solyndra provided the Department with statements, assertions, and certifications that were inaccurate and misleading, misrepresented known facts, and, in some instances, omitted information that was highly relevant to key decisions in the process to award and execute the $535 million loan guarantee. investigative record suggests that the actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department. [gotta wonder why they stopped short of fraud ].We also found that the Department s due diligence efforts were less than fully effective Solyndra officials provided certain information that, had it been considered more closely, would have cast doubt on the accuracy of certain of Solyndra s prior representations missed opportunities to detect and resolve indicators that portions of the data provided unreliable Lesson to be learned: Contractors may exaggerate the truth [really?] We should validate facts, statements and assertions relevant to our decisions Confirm that analysis is independent and effective and be skeptical rather than rush to judgement Hold contractors accountable when their management representations and controls are unreliable Ensure analysis, determination and documentation is clear, complete and accurate Notice a HUGE subcontracting issue wherein representations and promises were apparently made that were not represented in the written contract AL , 10/24/2011 Allowability of Incurred Costs Due to Contractor Errors Determining the allowability of costs that are not specifically unallowable, but that may be unallowable because they are not reasonable, requires the exercise of judgment by the contracting officer If it were possible for a contractor to operate a zero error financial system at no cost, no incurred cost due to error would be allowable because it would be unreasonable. the cost-reimbursement contractor and the government must make prudent business judgments about the benefit versus cost of the contractor s financial system It would not generally be prudent, for example, to spend $100,000 to save $10 in cost If a contractor working under a cost-reimbursement contract incurs a cost due to its error, the cost may or may not be unallowable Typical Year-end summary outlines cases, reports and sorts by topic AA - 9

10 DOE-IG report summary Full List & this PPT at GAO Comptroller General legal decisions, testimony & reports: NARA: DOE IG DOE directive subscription : DOE Policy Flashes: [might have to contact this person to get on the mailing list Barry.Ross@hq.doe.gov ] Federal Register Subscriptions: ACFE FraudInfo Newsletter : GAO legal decisions, testimony & reports AA - 10