Redstone Government Consulting Blog

The recent memo from the Defense Pricing Center (DPC) has created quite the stir around the current economic uncertainties in the government contractor community tied to inflation. The unfortunate reality is that for many years, economically speaking, the risk of inflation has been a steady 2-3% and so both contractors and the acquisition professionals on the other side have not had to realistically consider this factor in pricing/negotiating contracts. History has shown us that the threat is all too real and can cause significant hurdles for contractors to weather an inflationary period like we saw in the 80s, early nineties and as recently as 2009. The question of is it transitory or are we headed toward a recession is best left to our friend the magic 8-ball, but I do think there are a few things that all contractors should be aware of during this time.

There seems to be a lot of questions and misconceptions about purchase orders and subcontracts. Is there a difference? When is it appropriate to issue either instrument?

Recent Armed Services Board of Contract Appeals (ASBCA) cases have rejected contractor requests for equitable adjustments (REAs) related to the impact of COVID-19 on contract performance under firm fixed price (FFP) contracts. In both cases, discussed below, the ASBCA turned to the Connor Bros. Federal Circuit decision (550 F.3d 1368 (2008)). In that decision the Federal Circuit found the act of the Sovereign Government does not result in an act of the Government as a contracting party. Therefore, under the “Changes” clause (FAR 52.243-1, Changes-Fixed-Price) that was in Connor’s contract this did not give rise to an equitable adjustment in the contract price. The basis of the Connor Bros. decision and the two recent cases is the “Sovereign Acts Doctrine.”

Katie Donnell and I attended the Unanet Champions Conference in Phoenix, Arizona, May 1-3, 2022. Unanet Champions started out with an amazing motivational speaker, Carey Lohrenz. Carey was the 1st Female F14 Pilot in the US Navy. Carey overcame many obstacles as the 1st Female F14 Pilot. Talk about inspiration! As someone who was used to flying at Mach 2, working in a fast-paced and constantly changing environment, she spoke about adapting quickly to avoid risks and shared steps in leadership that will help your team win every time.

The FAR Council published a final rule on March 7, 2022, implementing revisions to the Buy American Act. The final rule strengthens the impact of Federal procurement preferences for products and construction materials domestically manufactured from substantially all domestic content and is effective October 25, 2022.

Overview

• The 2021 EEO-1 data collection period closed on May 17, 2022, but there’s still time to file your report if you missed the deadline!
• The Office of Federal Contract Compliance Programs (OFFCP) has released a new Corporate Scheduling Announcement List (CSAL) for Supply and Service Contractors.
• Covered federal contractors must certify their Affirmative Action Plans (AAP) through the OFCCP Contractor Portal by June 30, 2022. Please contact our HR Team if you need assistance with your AAP or the certification process.
• The US House of Representatives passed the CROWN Act on March 18, 2022.
  

In the previous blog of this series, we focused on the requirements of federal government contractors (prime and subcontractors) who meet the basic threshold requirements (specific dollar thresholds and fewer than 50 employees). As we progress in this series on OFCCP and Affirmative Action Requirements, we begin to dive into OFCCP’s expectations of a contractor’s Affirmative Action Program (AAP). As a reminder, contractors are required to have an AAP when meeting the dollar thresholds mentioned above and have an employee count of 50 or more.

We recently got all of our employees together for a Spring Fling. BBQ, axe throwing, and spending time with one another. A great time was had by all!

What is a CPSR Review?

A CPSR Review is a Contractor Purchasing System Review. This review is performed by the Government on a contractor, in order to:

• assess the overall health of the purchasing organization,
• evaluate the efficiency and effectiveness of the contractor’s practices in expending Government funds,
• perform an independent review of the contractor’s system to optimize its effectiveness in compliance with Government policy, and
• identify risk to provide the Administrative Contracting Officer (ACO) a basis for approving or disapproving the purchasing system.

Does the Total of All Proposed Subcontract Costs Exceed 70% of the Total Contract Costs?

Is your company submitting a proposal to the government/prime contractor that includes a total of all subcontract costs exceeding 70 percent of the total costs proposed? If so, you must identify “added value” in your proposal so the government/auditor does not classify the indirect cost applied to the total subcontract cost as “excessive pass-through charges.”  The government considers indirect costs and profit/fee that a contractor applies to subcontract costs that exceed 70 percent of the contract to be “pass through costs.” This applies to lower tier subcontract costs also. If there is no negligible value added by the contractor, the government or auditor will question the indirect costs and profit/fee applied to the subcontract costs as unallowable excessive pass through under FAR 31.203(i).