June 2011 / Published by the Professional Services Council
Q&A with VA Deputy secretary scott gould CSIS New Cost Accounting Method | Sounding Board on Innovation | Policy Spotlight on FFRDCs FAQs on FAPIIS
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June 2011 / Published by the Professional Services Council
Service Contractor is a publication of the Professional Services Council 4401 Wilson Blvd., Suite 1110 Arlington, VA 22203 Phone: 703-875-8059 Fax: 703-875-8922 Web: www.pscouncil.org All Rights Reserved PSC Staff Stan Z. Soloway President & CEO email@example.com Alan Chvotkin Executive Vice President & Counsel firstname.lastname@example.org Bryan Bowman Manager, Marketing email@example.com Matt Busby Manager, Member Services firstname.lastname@example.org Elise Castelli Manager, Media Relations email@example.com Karen L. Holmes Office Manager/Receptionist firstname.lastname@example.org Roger Jordan Vice President, Government Relations email@example.com Teddy Kidd Manager, Legislative Affairs firstname.lastname@example.org Carrington Kilduff Manager, Event Support email@example.com Jeremy W. Madson Manager, Federal Affairs firstname.lastname@example.org Melissa R. Phillips Director of Meetings & Events email@example.com Robert Piening Director of Finance firstname.lastname@example.org Jean Tarascio Membership Associate email@example.com Kristine Thomas Executive Assistant firstname.lastname@example.org Callander S. Turner Vice President, Marketing & Membership email@example.com For advertising or to submit articles or items for the Member News section, contact: Bryan Bowman
Innovation - Page 6
Spotlight - Page 32 Pay on Display - Page 27
Table of Contents
4 President’s Corner 6 The Sounding Board: Government Innovation 8 Q&A with VA Deputy Secretary Scott Gould 12 Workforce Cost Comparison: An Alternative Approach 20 Bill Tracker 27 Pay on Display– Understanding the Executive Compensation and Subcontractor Data Reporting Requiremens & Ramifications
30 FAQs about FAPIIS 32 Policy Spotlight: Renewed Concerns with FFRDC’s 34 Spring Conference Highlights 35 Member News 38 PSC Scene & Heard
Professional Services Council
Service Contractor /June 2011 / 3
The Unified Voice of the Government Services Industry
o one can say that the last few months have not been interesting, even dramatic, for our government customers and our industry. The appropriations scramble created disruption throughout the government and, of course, the lateness and changes in the approved continuing resolution pretty well ensures a hectic and unpredictable conclusion to the fiscal year. As we have been suggesting for some time, and as the appropriations debate made clear, we are in for a long slog on appropriations matters. Even if the Congress and administration can agree to top line budget numbers for fiscal year 2012 and beyond, beneath that line will be intense and fluid debates over where and how to spend the available funds. Beyond the budget, there remains a lot of notable activity in our market, and in this issue we have tried to cover some of the most significant of those developments. We are pleased to feature an interview with the Deputy Secretary of Veterans Affairs, Scott Gould, on the progress being made as well as challenges being faced at the VA on its strategic initiatives. And in our regular Sounding Board feature, three members of the PSC Board of Directors—Deepak Hathiramani from Vistronix, Andy McCann from HP, and George Schindler from CGI—share their thoughts on best practices for and barriers to innovation in government. This issue also features an article by David Berteau, Joachim Hofbauer, Jesse Ellman and Guy Ben-Ari of the Center for Strategic and International Studies, in which they summarize their new report on how DoD has, to date, been determining the relative costs of
public versus private performance (not well) and CSIS’s recommendations for a more complete costing taxonomy. Those of you who attended the PSC Spring Conference received a preview of this important CSIS report, which is now being shared across the Defense Department, Office of Management and Budget, and Congress. In addition, although the Federal Awardee Performance and Integrity Information System (FAPIIS) went live for public consumption on April 15, the business rules governing its use remain incomplete. As such, Holly Emrick Svetz from PSC member law firm Womble Carlyle Sandridge and Rice PLLC, offers her perspectives on the legal implications and risks associated with public access to FAPIIS. As well, Tom Marcinko from Aronson LLC offers an analysis of current executive compensation rules for government contractors, an area of continued confusion and complexity. Finally, in our Policy Spotlight, Alan Chvotkin explores the dynamics of, and our concerns about, the quiet but steady growth in federally funded research and development centers (FFRDCs), from the expanded service offerings of some to the potential creation of new such entities. The rules governing FFRDCs are actually pretty clear—but is anyone paying attention? Our goal is for Service Contractor to be a valuable, substantive resource. Please let us know what you think and what we can do better. Thanks, as always, for your support of PSC.
Stan Soloway President & CEO
4 / Service Contractor / June 2011
Professional Services Council
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Professional Services Council
Government Innovation QUESTION: Throughout government, agency leaders are focused on driving innovation across their operations. What do you think are the keys to successful innovation in government and where are the barriers? Are there ways in which any government practices and policies work in opposition to the innovation goal? Deepak Hathiramani, President and CEO, Vistronix, Inc. Innovation is defined as something new or different—a new idea, method, process or device. Within organizations, innovation may be new ways of doing business or approaching problems. Organizations that are the most successful in incorporating innovation into their culture have characteristics that fall into three broad categories— the right people with a positive attitude towards continuous improvement and change, a culture of open communication and collaboration, and an appetite for experimentation. These basic tenets, coupled with a drive and passion to be market leaders, have been core to the success of innovative companies such as Apple and 3M. In today’s environment of global competitiveness, budgetary pressures and the rapid pace of change of technology, it is imperative that government look at new ways of doing business and approaching problems. In essence, government must pursue innovative approaches to problems. Recognizing the importance of innovation to our nation, President Obama signed a presidential memorandum on March 11, 2011. The memorandum establishes the Government Reform for Competitiveness and Innovation Initiative to develop proposals for
Andy McCann, Vice President, U.S. Public Sector, HP Enterprise Services Accelerating innovation in government must be a priority. And industry can and should play an important role. Recently, we convened a group of government leaders recognized as successful in their innovation approaches. We wanted to share their learning with a diverse group of government officials interested in launching their own campaigns. At that session, I learned the importance of agreeing on a definition for innovation. Without clarity and agreement, people trip over unspoken assumptions, which stymies progress. The definition offered there is one adapted from Gartner and I will offer it here: “Innovation is change that bridges the gap between performance—existing activities, services, results, or outcomes—and expectations —customers or stakeholders, now or for the future.” I learned from the innovators’ discussion that clarity of purpose and collaboration are paramount. It is the leader’s challenge to identify the critical inflection points that encourage or inhibit the clear communication among parties. Amending key processes or introducing new ones can engage an army of people to work on behalf of the goal. The introduction of “challenges” such as those conducted by VA and GSA are great examples. The process promises to open the “idea field” to a much broader community.
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George Schindler, President, CGI Federal Government innovation often calls to mind groundbreaking efforts like the creation of the Internet or manned space flight. We tend to believe that innovation is big and that you need a lot of resources and a grand vision to make it happen. During challenging times, however, I am reminded of the adage, “necessity is the mother of invention.” In today’s federal agency environment, the combination of tight budgets, reforms, and increased focus on accountability and transparency are helping to change the status quo. The administration and agencies also have renewed focus on desired technological outcomes such as information security, efficiency, and sustainability through initiatives like data center consolidation and cloud computing. Together, these external forces and the IT advances create a situation rich with opportunity for innovative thinking and action by federal agencies and their industry partners. Much like the shift to modular IT delivery, innovation in government today should be focused on incremental, business-driven improvement. Innovation then becomes achievable and repeatable at the “point of action”—whether that action is focused on a policy, process, or system. Too often, agencies and/or their industry partners establish innovation as a destination instead of as part of the path to achieving a tangible business or continued on page 18 Service Contractor / June 2011 / 7
Q with Scott Gould
Deputy Secretary, Department of Veterans Affairs More than one year after the Department of Veterans Affairs launched a series of strategic initiatives to transform the department, the deputy secretary gives Service Contractor an inside look into the improvements made and goals achieved across the 16 major focus areas. 8 / Service Contractor /June 2011
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Q Q: It has now been over a year since Secretary Shinseki
and you launched the VA strategic initiatives. As you look across the 16 major focus areas that this broad initiative encompasses, what are the most significant areas of progress and success thus far? What enables that success?
SG: Three of the most significant areas of progress among VA’s Major Initiatives include: execution of the new GI Bill, reduction in the number of homeless veterans, and implementation of VA’s integrated operating model. The GI Bill required development of a new business process and supporting technology system that was implemented from a standing start and today serves over 500,000 veterans and pays over $6 billion in tuition annually. Over the past two years, the population of homeless veterans has fallen from approximately 131,000 to about 76,000 on our way to ending veterans’ homelessness by 2015. Finally, a new approach to management has resulted in acquisition savings of $1 billion, reduction in material weaknesses from four to one, and improvement in our rates of on-time, on-budget IT deliverables from 20 percent to 80 percent. Secretarial leadership and focus on delivery were essential elements of our success. Q: What elements of the initiatives are you less pleased with in terms of the progress being made? What aspects are proving more challenging than you anticipated? How are you tackling them?
SG: Our capacity to manage complex, large-scale projects is
an area where we still have progress to make. The rate limiting factor is the availability of trained and certified project managers, especially in IT. We have tackled this challenge through a hiring initiative that has garnered over 1,000 new IT personnel in the past six months, training for 758 IT employees, and certification of 153 program managers at Level III of the Federal Acquisition Certification for Program/Project Managers, delivered through our VA Acquisition Academy. We are making the investments to improve hiring, training, and management needed to build our capacity to manage large scale projects. We already have the scope and scale of projects to provide the challenge and experience our employees need to build better skills.
Q: What has been the most significant lesson you’ve learned about driving change in an agency as large and disaggregated as VA? How has that caused you to rethink some of your strategies?
SG: The most significant lesson I have learned about driving change in an agency as large and complex as VA is the essential role that leaders play in training and developing people. Leaders train personnel to execute their current duties, but they also develop leaders to prepare them for greater responsibilities in the future. Since strong, vibrant organizations are constantly growing and improving, both training for today and leader development for tomorrow are needed to support growth. This aspect of
the “people factor” takes time and energy. Shortchanging this investment hurts organizations in the long term.
Q: How has the initiative been affected by the budget situation and the expected budget austerity in the years ahead?
SG: VA’s Major Initiatives will do well even as we respond to the budget pressure that we feel across the broader agency. There are several reasons for this. First, the generous budget increase that the President and Congress provided in 2010 and 2011 helped VA make significant and early commitments to transformation. Second, the priority that Secretary Shinseki and I have placed on supporting and funding these initiatives within our budget cap tends to preserve resources for this purpose. Finally, the initiatives are helping us achieve better value for veterans – creating a pathway to a better cost position for VA in the future and thereby helping us control budget growth.
Q: The Office of Management and Budget has launched a major initiative, known as the “Myth Busters Campaign” designed to re-energize the scope and quality of communications between government and industry. What has been your core message to the VA workforce regarding how best to engage with and capitalize on private sector capabilities? How was it received?
SG: Our core message to the VA workforce is that the private sector is an indispensable partner in achieving our mission. Roughly one third of our discretionary budget is used to purchase the goods and services that assist our workforce in delivering our health care, benefits, and cemetery services. At VA, we have two overarching responsibilities in working with our commercial partners: transparency and value. It is not only “OK” to talk with industry—it is encouraged within common sense and ethical standards. Two-way communication is the foundation of a functioning partnership. This guidance is challenging to execute on an individual level. Program managers and acquisition specialists can feel that they are taking some risk in doing so. But solid communication can be facilitated on an organizational level through the use of requests for information (RFI), unsolicited proposals, surveys, industry symposia and structured meetings with management, acquisition specialists, and legal counsel. All of these industry outreach activities have either started or increased over the past two years. For example, we recently held a conference in Chicago to assist small businesses, in particular veteran-owned and service-disabled veteran-owned small businesses, gain a better understanding of how to do business with the department. From Aug. 15-18, 2011, VA will host the National Veteran Small Business Conference and Expo in New Orleans to further this effort. Both events highlight the continued on page 10
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president’s commitment to empower America’s entrepreneurs, small business owners, and veterans. Also, VA’s Technology Acquisition Center is hosting an Advanced Planning Brief to Industry on June 9, 2011, in Eatontown, N. J. This conference, which is open to large and small businesses, furthers the president’s initiative for transparency and open government by sharing projected contract opportunities and new agency initiatives with conference participants. VA also is conducting a Supplier Relationship Transformation initiative, recognizing the supplier community as a critical component to its success in meeting the challenges of supporting veterans. We will capitalize on industry expertise in an effort to improve the VA acquisition process as a whole.
RFIs where appropriate. These help VA get the requirements right, which should lower risk for both parties. And while participants bear the risk of revealing an innovative strategy or hard-won intelligence, it helps your client get to the best solution. The acquisition team notices when contractors participate and put their best foot forward. This should help companies capture business with VA over time. Second, post award, conduct joint training with your delivery team and VA project manager, contracting officer, and contracting officer technical representative. VA now pays for this time at the start of every contract of $5 million or greater. It is an opportunity to get things right from the start. And we do it because we believe that we will get better value for government over the life of the contract. Third, we need to learn how to contract for services more effectively. GSA Administrator Martha Johnson and others are actively looking for ways to improve the process for both government and commercial partners. We are going to have to find a better way to contract for services to ensure that the government can get better value from the approximately $500 billion spent annually. The only way to make that happen is to work out a new approach together. 3
Q: You’ve spent many years in both the public and
private sectors. What would you like to see industry do better in how it engages with VA, both prior to award and during contract performance?
SG: We need stronger partnerships with industry. This could be accomplished in three ways. First, in the requirements definition phase, engage in pre-solicitation conferences and use
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Professional Services Council
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Workforce Cost Comparison: An Alternative Approach by David Berteau, Joachim Hofbauer, Jesse Ellman and Guy Ben-Ari, Center for Strategic and International Studies
ver the past decade, federal spending on professional services nearly doubled (in constant terms) from $150 billion in 2000 to $290 billion in 2010. Spending on all service contracts more than doubled during this period, from $164 billion in 2000 to $343 billion in 2010.1 Recent policies have attempted to reverse this outsourcing trend, touting insourcing of services as a means to generate cost savings, yet providing little data or guidance on how this will be achieved. The Defense Department (DoD) has been particularly active in this field. In April 2009, Defense Secretary Robert Gates announced a plan to replace some 30,000 contractors with DoD civilian employees between 2010 and 2015.2 Assuming that federal employees would be significantly less costly than contractors, DoD expected budgetary savings equal to 40 percent of the cost of the contractors being replaced. More recent DoD statements claimed savings of 25 percent, yet neither figure appears justifiable. Rather, research has shown that the majority of savings from public-private competitions—around 65 percent—derive from the competition itself, not from any intrinsic advantage on either the public or private side.3 Yet despite dissatisfaction of DoD leadership with the initiative’s results, the FY 2010 DoD budget reflected those savings, as have subsequent DoD budget proposals to Congress. This article summarizes a study the Center for Strategic and International Studies completed in April that identified the shortfalls in current and past cost
estimation mechanisms DoD used for conducting sourcing decisions between private- and public-sector providers. This study also developed an alternative cost comparison methodology. The Current Cost Comparison Methodology: The Directive Type Memo In Jan. 2010, DoD’s Director for Cost Analysis and Program Evaluation (CAPE) signed Directive Type Memorandum (DTM) 09-007 “Estimating and Comparing the Full Costs of Civilian and Military Manpower and Contract Support.” This DTM constitutes current DoD guidance for insourcing decisions and the National Defense Authorization Act for FY 2011 mandates DoD use the DTM’s costing methodology “or any successor guidance for the determination of costs when costs are the sole basis for the decision.” However, there are key shortcomings in the procedures laid out in the DTM for calculating the government’s costs for performing a service. Specifically, the DTM: • Lacks ability to calculate fully burdened government wide costs; • Fails to account for the full cost of DoD-owned capital but includes those costs for contractors; • Fails to account for taxes forgone by the federal treasury or state or local governments; • Fails to account for the inherent risk of cost growth among public producers; • Overlooks the imputed costs of insuring and indemnifying in-house producers;
• Fails to use a detailed scope of work as a basis for cost estimation; and • Lacks specificity on how to calculate cost components. Of these shortcomings, the first is critical. If the true cost of public performance of commercial services cannot be determined, any budgetdriven insourcing decision becomes immediately suspect. Even for insourcing decisions conducted on the basis of inherently governmental considerations, DoD should still understand the full budgetary implications of the decision so that it can properly weigh the benefit gained from boosting in-house capabilities against the budgetary impact. Previous Cost Comparison Methodology: OMB’s Circular A-76 OMB Circular A-76 (first issued in 1966 and most recently revised in 2003) was the previous cost comparison methodology used by DoD. It is a more useful tool than the DTM for cost comparisons between the public and the private sector in several respects. Most notably, the A-76 methodology provides greater specificity on major cost components, enabling cost estimators to compute a greater range of fully burdened costs. In contrast to the DTM, which provides only general explanations (aside from direct labor costs), A-76 provides line-item specificity for many cost elements. Key advantages of A-76 over the DTM are that it: • Includes the cost of in-house production at a private-sector rate of
Center for Strategic and International Studies (2010) Structure and Dynamics of the U.S. Federal Professional Services Industrial Base, CSIS, Washington, DC. Gates, Robert M., Defense Budget Recommendation Statement, as prepared for delivery, Arlington VA, April 06, 2009. 3 Snyder, Christopher, Robert Trost, and Derek Trunkey (1998) Bidding Behavior in DoD’s Commercial Activities Competitions, Center for Naval Analyses, Alexandria, VA; Trunkey, Derek, RobertTrost, and Christopher Snyder (1996) Analysis of DoD’s Commercial Activities Program, Center for Naval Analyses, Alexandria VA. 1 2
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return on new investments; • Includes forgone federal taxes as a cost element for in-house producers; • Requires that in-house producers take into account the imputed cost of insurance; and • Requires a performance work statement. At the same time, A-76 has flaws which must be recognized. The two major points of contention are the use of a blanket 12 percent overhead rate for all government functions and a failure to account for the true cost of capital on the public side. The CSIS Cost Estimation Methodology Given the inadequacies of current and previous cost comparison methodologies for DoD, CSIS developed an alternative taxonomy and methodology intended to provide the basis for uniform and analytically sound procedures to determine accurate cost estimates of private and public sector performance. Determining these costs will enable a more transparent and fair conduct of public-private competitions for potential insourcing and outsourcing of commercial activities. The CSIS methodology draws on the cost comparison guidelines developed in the most updated version of A-76 and the DTM, while addressing the key shortcomings of both. The foundation of the CSIS cost estimation methodology is a clear, detailed statement of work (SOW). Conducting meaningful public-private cost comparisons or public-sector cost estimates requires a common starting ground with uniform, clearly defined performance parameters. Issuing a binding SOW at the beginning of each competition would create a level playing field for both sides and ensure that private and public bids would be evaluated based on identical criteria, pre- and post-contract award. Such a SOW should, at a minimum, include the following components:
• A clear description of the scope of work associated with the activity; • Historic workload data, including workload stability from which quantitative and qualitative staffing requirements can be deduced; • Clearly defined performance parameters with minimum requirements and, if applicable, evaluation criteria for performance in excess of these requirements; • A stated period of performance; • Availability of government furnished equipment, materials and services; and • Quality and oversight requirements for performance. A second key element in the CSIS methodology is the calculation of real overhead costs, a core shortcoming of past and current cost estimation methodologies. The 12 percent overhead rate used in A-76 (the result of negotiations rather than analysis) is several times lower than the lowest generally acknowledged private-sector overhead rates. Furthermore, overhead rates vary significantly across sectors, making analytically suspect any single overhead rate covering the vast universe of government functions. The challenge in determining an adequate overhead rate stems from the fact that there is no universally accepted
definition of what costs constitute overhead. CSIS recommends line-item specificity for estimating overhead similar to the discreet, line-item elements of the major A-76 cost components other than overhead. The following line-items should be used to generate an estimate of public-sector overhead for any function: • Operational overhead – management and oversight • Information technology • HR/personnel • Legal support • Accounting • Payroll • Headquarters management • Miscellaneous Line-item granularity also guides CSIS’ cost estimation methodology for other cost components. Overall government performance has six major cost components: • Personnel (direct labor and fringe costs for military and civilian personnel, including health insurance and retirement) • Material and supply (general, inflation, insurance, maintenance and repair) • Facilities (cost of facility, rent, insurance, maintenance and repair, capital improvements, utilities) • Capital (cost of capital assets and continued on page 14
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depreciation of existing capital assets) • Overhead • Additional costs (liability insurance, travel, subcontracts, nonrecurring workloads, minor items, medical exams, training, cost growth, conversion costs, administration and oversight costs) For the private sector’s cost estimate, the base contract price in the bid constitutes the basis, and includes most of the above cost components. Income tax adjustments must be accounted for, as private bids must be credited for the additional federal, state, and local taxes that would be forgone with public performance. Costs incurred by the government for contract administration and oversight must also be considered. Lastly, as with the public side, conversion costs for cases where work is shifted from public to private must be reflected in the private bid.
Final thoughts The challenge of conducting accurate cost estimating has importance beyond the issue of insourcing. In a time of budgetary strain, the U.S. government must have repeatable, verifiable, and data-driven mechanisms for making decisions and understanding their resource implications, including associated costs. This goes hand-inhand with the push to bring DoD up to generally accepted government accounting standards. If DoD wishes to justify its resource requirements in a deficit-conscious environment, it must be able to support its decisions with empirically backed figures. The CSIS cost estimation methodology outlined here provides a first step toward this goal. Better access to DoD internal cost data and additional research efforts will be needed to develop a further refined cost estimation methodology.
The Defense Industrial Initiatives Group at the Center for Strategic and International Studies focuses on issues related to the health and governance of the global defense-industrial base. David Berteau is a senior adviser at CSIS and director of the group. Joachim Hofbauer is a fellow with the group, Jesse Ellman is a research associate, and Guy Ben-Ari the group’s deputy director.
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Deepak Hathiramani continued from page 7
making our government more effective and efficient. However, being innovative in government presents its own set of challenges—regulatory and compliance requirements, limited accountability and transparency and a deep rooted bureaucracy. In order to succeed in this environment innovators need to understand the historical reasons behind why budgeting, procurement and personnel rules are the way they are in the first place. Successful innovators have a clear understanding of these rules and how to navigate them, speeding innovation. Private sector organizations have significantly more flexibility in terms of budgeting, procurement and personnel, and government innovators need to understand that in applying private sector innovations to the government. For instance, legal doctrines established to keep government agencies focused on their core missions can sometimes hinder innovation and initiative. They can tie the hands of innovators because they create legal hurdles that do not keep up with changing technologies and markets. Issues such as these make it hard for managers to pursue innovation because of the belief that the rewards for exceptional government performance are often less than the price of failure. Walt Disney once said, “You can dream, create, design, and build the most wonderful idea in the world, but it requires
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the ‘right’ people to make the dream a reality.” Innovation begins with talent. In order to drive innovation across their operations, agency leaders need to focus on ensuring they have the right talent—individuals with a passion to challenge the status quo and drive change. For example, both the ARPANET (the predecessor to the Internet) and more recently the Global Positioning System were invented by very talented individuals in the public sector. However, within the government bureaucracy, talent alone will not suffice to drive the level of innovation needed to keep us at the forefront of today’s global economic race. An essential balance of policy and flexibility tied to a culture of collaboration and open communications are essential to innovation. A key barrier to creating that culture is the bureaucratic procedures that take on a life of their own. Agency leaders need to be change agents by having a proactive approach in eliminating outdated and cumbersome policies and procedures and overcoming personal agendas. Our policies and regulatory and compliance requirements should be periodically evaluated to ensure that they provide the right level of oversight and flexibility while creating a culture and appetite for continuous improvement. We must reduce barriers for the private sector to bring solutions and innovation to government and for government to be more willing to collaborate and share best practices, both within government and the private sector. Occasionally, the government contracting community creates unacceptable barriers to innovations due to personal vested interests in the outcome. Contractors must be a trusted partner to government and it is imperative that the contracting community recognize the potential positive impact innovation could have in creating efficiencies, improving productivity and improving return-on-investments. In order to accelerate the innovation cycle within government, leadership must be receptive to change while creating an accountability framework—one that solicits ideas from stakeholders, supports the rapid evaluation and implementation of ideas and rewards and celebrates success—all while ensuring transparency. Innovations become part of the culture when leadership holds accountable those responsible for implementing change. Leadership must have an appetite for experimentation and be willing to accept that failure is an acceptable option and individuals across government must believe they have the permission to venture into uncharted territory, within pre-defined boundaries of course and not be penalized for failure. As Albert Einstein once said, “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” This statement is true in terms of innovation. Innovation is a critical process that must be ingrained in the government DNA—only then will we be successful in driving the change needed to help shape our nation’s future and keep us at the forefront of the global economy. 3 Professional Services Council
Andy McCann continued from page 7
Even within the necessary confines of traditional procurement practices, a process critical to broadening the idea pool, there is opportunity to deepen appropriate communications in ways that foster innovation. I offer some practices that can improve or hinder communication, and therefore innovation. These suggestions would simply require a change in practice rather than the more daunting change of legislation or even policy. A committed leader could institute these with relative ease and engage a more focused “army of innovation.” One practice that enhances communications and innovation can be found in the draft RFP process. Draft RFPs allow industry to work with government to refine the RFP prior to release. The government has a better chance to define the scope and requirements, gain better industry solutions, and receive bids and support from contractors with appropriate, responsive resources. All parties gain insight from dialogue. This can significantly improve the number of valid bidders. Such robust competition can increase the chances for cost-effective, innovative solutions. Another communications and innovation enhancing practice is the in-depth debrief with clear, quality feedback. Debriefs with detailed slides and in-person meetings give tangible insight into improvement areas, particularly when a comparison with the winning bidder is offered. This data allows industry to improve the quality of their proposals and approaches. It can even help the government with easier evaluations of subsequent proposals. Unfortunately, there are practices that the government engages in that hinder communications and innovation. One example is the formal written question and answer session, which often provides inadequate communications with industry. All too often the Q&A process leads to more confusion rather than improved communications. In this formal written process, it is easy for both government and industry to misinterpret questions resulting in answers that do not provide the desired information. In addition, questions are often answered too late in the RFP process to allow industry to adjust approaches and incorporate changes into their proposals. On GWACs, communication and innovation are hindered because communications between program teams and contracting offices are often stretched. While GWACs provide significant benefits and efficiencies in government contracting, one unintended consequence seems to be poorer communications between the program office and the contracting offices. This is especially true when the GWAC is managed by one executive agency (e.g. GSA) and the program office is within a different agency (e.g. DoD). Political, geographical, operational and cultural differences between agencies may create barriers to effective communications and may lead to difficulties in understanding expectations and needs—especially when working through issues with the contractor. This may Professional Services Council
result in unnecessary issue escalation and inordinate time consumed on attempts to fix communication challenges rather than on innovation and flawless delivery. Further hindering innovation is the fact the government doesn’t receive desired input from industry days. Although the concept of industry days makes sense, we have found that it does not facilitate the desired communication since contractors are not willing to ask questions in front of their competitors that would potentially disclose their lack of knowledge or a competitive advantage. Many industry days are a “one way” communication from the government to bidders of basic information that could be more cost effectively shared electronically. Since this forum does not facilitate interactive communication, it is an expensive way to share such information. Not only does the government incur costs associated with hosting such an event, contractors incur the costs to travel to the event. Those costs are passed on to the government via bid and proposal costs that are included in contractor’s indirect pools. A series of confidential one-onone meetings with industry would ensure better interactive communication and could potentially provide insights to both industry and the government. Finally, the current organizational conflict of interest (OCI) environment has a chilling effect on communication and innovation—especially so for incumbents. Recent changes to OCI rules have contractors and the government tip-toeing around many technical discussions for fear of triggering an organizational conflict of interest. The government often does not have in-depth technical knowledge and seeks to gain more knowledge through interactions with industry. Yet, some believe that such interactions could trigger an unintended OCI for the company from which the government seeks information. I offer these examples of lawful changes in practice that could have big impacts on bridging the gap between performance and expectations, and to engage the best from industry to drive innovation, particularly when budgets are constrained. 3
View A Personalized
California • Georgia • Texas Service Contractor /June 2011 / 17
George Schindler continued from page 7
mission goal. In the model I describe, innovation grows from the grassroots level in order to transform the agency’s (or the government’s) operations. For the past 35 years, I have seen this practical innovation at work through CGI’s engagement with federal agencies. We have anticipated the shifts in requirements and the federal environment and worked with clients to inject creative ideas and innovative approaches into a range of business priorities—from financial management and open government to cloud computing and cybersecurity. There are numerous examples of this innovative action going on in government today. One of the hottest business discussions in government has centered on green government and sustainability. Much has been written and discussed about these topics, including understanding what they mean, what success looks like, and how you get there. No matter your view, most people agree that focusing on sustainability requires innovation in both thinking and action. With this in mind, the CGI Initiative for Collaborative Government, a joint publicpolicy project with leading academic institutions, examined this topic in the recently released inaugural issue of Leadership, an executive journal for government leaders. In Leadership, government leaders talk about sustainability initiatives within their agencies, including the General Services Administration’s (GSA) Administrator, Martha
18 / Service Contractor / June 2011
Johnson, whose ambitious goals are to have GSA viewed as a “green proving ground” that one day leaves no environmental footprint. Johnson and her team are injecting innovative thinking into what they do. They are a prime example of focusing on business-driven innovation that is achievable and repeatable for GSA and across government. For example, 95 percent of new contracts are to be awarded for environmentally friendly goods and services; they are doubling the number of hybrid vehicles in their fleet; and they are developing a way to give competitive advantage to companies that voluntarily measure, reduce and report their greenhouse gas emissions. She is also setting an example for innovating how she works as a senior federal official—from her reliance on instant messaging instead of email to holding ‘slams’ where she brings together key stakeholders for a mega-meeting where decisions are made and an action plan is developed before the meeting ends. With a focus on data sharing and transparency, the National Oceanic and Atmospheric Administration (NOAA) also serves as an example of innovative thinking in action. With governments, businesses, nonprofits and universities clamoring for climate data, NOAA is now proposing to create a single climate service to integrate its data sharing approach across various parts of its organization. NOAA hopes to spur innovation among industry in the same way that the National Weather Service did with weather forecasting data—the climate service data could result in many new private services and products based on the opening up of this data. Molly O’Neill, a CGI Initiative Fellow, CGI VicePresident, and the former Chief Information Officer at the Environmental Protection Agency, summarizes well the green effect on government by noting, “Greening the government is generating cost savings and conserving resources. It’s also starting to do something else. As innovative green technologies are put in place, they are also laying the foundation for transformative change—in government operations, in how public employees perform their work, and in how citizens are using ostensibly environmental or green data to enhance both their personal lives and economic activities. In fact, the beginnings of this transformation are already taking shape.” Today’s environment is challenging for federal agencies but I believe the future of innovation in government is promising. As demonstrated by the examples I have outlined, when federal agencies begin with a business or mission goal in mind and then take innovative action as part of the path toward the goal, transformational change can occur. It’s not an innovation ‘big bang’ but, rather, an evolutionary process that requires commitment to doing things differently and being open to change. As industry partners, we must work with our clients to understand their goals, learn and share best practices, and help deliver meaningful innovation at each “point of action.” 3 Professional Services Council
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Bill Tracker: 112th Congress-First Session (2011) H.R. 4
Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, Lungren (R-CA) Summary Repeals the expansion of information reporting requirements for company payments of $600 or more to other entities or corporations. STATUS Became Public Law 112-9 on 4/5/11.
Homeland Security Cyber and Physical Infrastructure Protection Act of 2011, Thompson (D-MS) Summary Seeks to enhance cybersecurity capacity by creating and enforcing performance-based standards. STATUS Referred to Oversight and Government Reform and Homeland Security Committees on 1/5/11.
Federal contractors participation in the E-Verify Program, Gallegly (R-CA) Summary Would require federal contractors and subcontractors to utilize E-Verify to confirm the employment eligibility of all of their employees. STATUS Referred to Judiciary and Education and the Workforce Committees on 1/12/11.
Electronic Employment Eligibility Verification and Illegal Immigration Control Act, DeFazio (D-OR) Summary Would require the Secretary of Homeland Security to create and maintain a publicly available and accessible online database of contracting and subcontracting individuals or entities which discloses the number of employment eligibility violations and employment eligibility verification rejections each contracting or subcontracting individual or entity has received. STATUS Referred to Judiciary, Ways and Means, and Education and the Workforce Committees on 1/26/11.
Alaska Native Corporations contracting reforms, Thompson (D-MS) Summary Would eliminate the preferences and special rules for Alaska Native Corporations under the program under section 8(a) of the Small Business Act. STATUS Referred to Small Business and Natural Resource Committees on 2/9/11. Related bill: S. 236.
United States-Afghanistan Status of Forces Agreement (SOFA) Act of 2011, Woolsey (D-CA) Summary Would require the President to seek to negotiate and enter into a status of forces agreement with Afghanistan, mandating that U.S. Armed Services and contractor personnel be completely redeployed from Afghanistan. STATUS Referred to Foreign Affairs Committee on 2/10/11.
3 percent withholding repeal, Herger (R-CA) Summary Would repeal the 3 percent withholding on government payments to vendors. STATUS Referred to the Ways and Means Committee on 2/11/11. Related bills: S. 89, S. 164.
E-Verify Modernization Act of 2011, Gingrey (R-GA) Summary Would amend the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (8 U.S.C.1324a note) to make the E-Verify Program permanent and mandatory. STATUS Referred to Judiciary and Education and the Workforce Committees on 2/14/11.
Government Neutrality in Contracting Act, Sullivan (R-OK) Summary Would preserve open competition and federal government neutrality toward the labor relations of federal government contractors on federal and federally funded construction projects. STATUS Referred to the Oversight and Government Reform Committee on 2/16/11. Related bill: S. 119.
Intelligence Authorization Act for Fiscal Year 2011, Rogers (R-MI) H.R. 754 Authorizes appropriations to all intelligence-related agencies for the fiscal year 2011. Summary
Presented to the president on 6/1/11. Related bill: S. 719
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Professional Services Council
Bill Tracker: 112th Congress-First Session (2011) H.R. 829
Contracting and Tax Accountability Act of 2011, Chaffetz (R-UT) Would prohibit the award of contracts in excess of the simplified acquisition threshold unless the prospective contractor certifies in writing to the awarding agency that the contractor has no seriously delinquent tax debt. Reported by the Oversight and Government Reform Committee on 4/13/11.
Independent Task and Delivery Order Review Extension Act of 2011, Lankford (R-OK) Summary STATUS Summary STATUS
Prohibits U.S. assistance for Afghanistan unless the United States and Afghanistan enter into a bilateral agreement which provides that work performed in Afghanistan by U.S. contractors is exempt from taxation by the government of Afghanistan. Referred to the Committee on Foreign Affairs on 3/3/11. Executive Cyberspace Coordination Act of 2011, Langevin (D-RI)
Patriot Corporations of America Act of 2011, Schakowsky (D-IL)
American Jobs Matter Act of 2011, Murphy (D-CT)
Federal Acquisition Improvement Act of 2011, Connolly (D-VA)
Summary STATUS Summary STATUS
Stop Taxing American Assistance to Afghanistan Act, Welch (D-VT)
Would amend title 41, United States Code, to extend the sunset date for certain protests of task and delivery order contracts. Reported by the Oversight and Government Reform Committee on 3/17/11. Related bills: S. 498, H.R. 1540.
Would establish within the Executive Office of the President the National Cyberspace Office to coordinate issues relating to achieving an assured, reliable, secure, and survivable information infrastructure and related capabilities of the federal government. Referred to the Oversight and Government Reform and Homeland Security Committees on 3/16/11.
Would grant a preference to “patriot” corporations in the evaluation of bids or proposals for federal contracts. Provides a definition of “patriot corporation.” Referred to the Oversight and Government Reform and Ways & Means Committees on 3/17/11.
Would amend titles 10 and 41, United States Code, to allow contracting officers to consider information regarding domestic employment before awarding a federal contract. Referred to the Oversight and Government Reform and Armed Services Committees on 4/4/11.
Would reorganize the Federal Acquisition Institute to implement government-wide training standards and certification requirements and clarify FAI’s budgetary and reporting authority and requirements. Referred to the Oversight and Government Reform Committee on 4/7/11. Related bills: S. 762, H.R. 1540
Creating Jobs Through Small Business Innovation Act of 2011, Ellmers (R-NC)
Department of Defense and Full-Year Continuing Appropriations Act of 2011, Rogers (R-KY)
Would reauthorize and improve the SBIR and STTR program. Reported by Science, Space, & Technology, Small Business, and Armed Services Committees on 5/26/11. Related bill: S. 493.
Summary Makes appropriations for the Defense Department and other departments and agencies of the government for fiscal year ending Sept. 30, 2011. STATUS Became Public Law 112-10 on 4/15/11. Related bill: H.R. 1.
Professional Services Council
Service Contractor /June 2011 / 21
Bill Tracker: 112th Congress-First Session (2011)
Freedom From Government Competition Act of 2011, Duncan (R-TN)
National Defense Authorization Act for Fiscal Year 2012, McKeon (R-CA)
Fairness in Federal Contracting Act of 2011, Cole (R-OK)
CLEAN UP Act, Sarbanes (D-MD)
Summary STATUS Summary STATUS Summary STATUS Summary STATUS H.R. 2008
Would require the government to purchase goods and services from the private sector. Provides exemptions, such as inherently governmental functions. Would require the use of competitive procedures as well as public-private competitive sourcing analysis in accordance with OMB procedures. Referred to the Oversight and Government Reform Committee on 4/12/11. Related bill: S. 785.
Would authorize appropriations for fiscal year 2012 for military activities of the Department of Defense and for military construction as well as prescribe military personnel strengths for fiscal year 2012. Passed by the House on 5/26/11.
Would amend title 41 of the United States Code to prohibit executive agencies from requiring the disclosure of political contributions by an entity submitting an offer for a federal contract. Referred to the Oversight and Government Reform Committee on 5/13/11.
Would suspend public-private job competitions indefinitely and encourage agencies to bring contracted work back in-house. Referred to the Committee on Oversight and Government Reform on 5/23/11. Related bill: S. 991 Keeping Politics Out of Federal Contracting Act of 2011, Issa (R-CA)
Summary Would amend title 41 of the United States Code to prohibit executive agencies from requiring the disclosure of political contributions by an entity submitting an offer for a federal contract. STATUS Referred to the Oversight and Government Reform Committee on 5/26/11. Related bill: S. 1100
Cyber Security and American Cyber Competitiveness Act of 2011, Reid (D-NV)
Withholding Tax Relief Act of 2011, Vitter (R-LA)
Summary STATUS Summary STATUS
Would secure the United States against cyber attack, enhance American competitiveness and create jobs in the information technology industry, and protect the identities and sensitive information of American citizens and businesses. Referred to the Homeland Security and Governmental Affairs Committee on 1/25/11.
Would repeal the imposition of the 3 percent withholding on certain payments made to vendors by government entities. Referred to Finance Committee on 1/25/11. Related bills: H.R. 674, S. 164.
Government Neutrality in Contracting Act, Vitter (D-LA)
Withholding Tax Relief Act of 2011, Brown (R-MA)
Summary STATUS Summary STATUS
Would preserve open competition and federal government neutrality towards the labor relations of federal government contractors on federal and federally funded construction projects. Referred to the Homeland Security and Governmental Affairs Committee on 1/25/11. Related bill: H.R. 735.
Would repeal the imposition of the 3 percent withholding on certain payments made to vendors by government entities. Referred to Finance Committee on 1/25/11. Related bills: H.R. 674, S. 89.
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Professional Services Council
Bill Tracker: 112th Congress-First Session (2011) S. 235
Lieutenant Colonel Dominic â€˜Rockyâ€™ Baragona Justice for American Heroes Harmed by Contractors Act, McCaskill (D-MO) Would provide personal jurisdiction in causes of action against contractors of the United States performing contracts abroad with respect to members of the armed forces, civilian employees of the United States, and United States citizen employees of companies performing work for the United States in connection with contractor activities. Referred to the Homeland Security and Governmental Affairs Committee on 1/31/11.
Alaska Native Corporations contracting reforms, McCaskill (D-MO) Summary Would eliminate the preferences and special rules for Alaska Native Corporations under the program under section 8(a) of the Small Business Act.
Referred to Small Business and Entrepreneurship Committee on 1/31/11. Related bill: H.R. 598.
No Contracting with the Enemy Act of 2011, Brown (R-MA) Summary Would require the rescission or termination of federal contracts and subcontracts with enemies of the United States. STATUS Referred to Homeland Security and Governmental Affairs Committee on 2/14/11. Related bill: H.R. 1540
Cybersecurity and Internet Safety Standards Act, Cardin (D-MD)
Summary Would reduce the ability of terrorists, spies, criminals, and other malicious actors to compromise, disrupt, damage, and destroy computer networks, critical infrastructure, and key resources.
Referred to Commerce, Science, and Transportation Committee on 2/16/11. Federal Contractors Accountability Act, Pryor (D-AR)
Summary Would amend the Internal Revenue Code to expand the 100 percent continuous tax levy for delinquent taxes to include payments to Medicare providers and suppliers and payments due to vendors of real property sold or leased to the federal government.
Referred to the Finance Committee on 3/3/11. SBIR/STTR Reauthorization Act of 2011, Landrieu (D-LA)
Summary Would reauthorize and improve the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.
Reported by the Small Business and Entrepreneurship Committee on 3/9/11. Related bill: H.R. 1425. Independent Task and Delivery Order Review Extension of 2011, Lieberman (I-CT)
Summary Would amend title 41, United States Code, to extend the sunset date for certain protests of task and delivery order contracts.
Passed by the Senate on 5/12/11. Related bill: H.R. 899, H.R. 1540. Small Business Contracting Fraud Prevention Act of 2011, Snowe (R-ME)
Summary Would prevent fraud in small business contracting by making improvements to HUBZone and Section (8)a programs and issuing an annual report in Congress outlining suspension, prosecution and debarment.
Referred to the Small Business and Entrepreneurship Committee on 3/17/11.
Professional Services Council
Service Contractor /June 2011 / 23
Bill Tracker: 112th Congress-First Session (2011) S. 719
Intelligence Authorization Act for Fiscal Year 2011, Feinstein (D-CA) Would authorize appropriations for fiscal year 2011 for intelligence and intelligence-related activities of the United States government, the Community Management Account, and the Central Intelligence Agency Retirement and Disability System. Reported by the Committee on Intelligence on 4/4/11. Related bill: H.R. 754
Acquisition Workforce Improvement Act of 2011, Collins (R-ME) Summary Would establish a government-wide Acquisition Management Fellows Program and related funding and reporting requirements to improve the federal acquisition workforce.
Referred to the Homeland Security and Governmental Affairs Committee on 4/7/11. Federal Acquisition Institute Improvement Act of 2011, Collins (R-ME) Would reorganize the Federal Acquisition Institute to implement government-wide training standards and certification requirements and clarify FAIâ€™s budgetary and reporting authority and requirements.
STATUS Reported by the Homeland Security and Governmental Affairs Committee on 4/13/11. Related bills: H.R. 1424, H.R. 1540
Freedom from Government Competition Act, Thune (R-SD) Would require the government to purchase goods and services from the private sector. Provides exemptions, such as inherently governmental functions. Would require the use of competitive procedures as well as public-private competitive sourcing analysis in accordance with OMB procedures.
STATUS Referred to the Homeland Security and Governmental Affairs Committee on 4/12/11. Related bill: H.R. 1474.
Information Technology Investment Management Act of 2011, Carper (D-DE) Would require executive agency participation in real-time transparency of investment projects as well as performance and governance reviews of all cost overruns on federal information technology investment project. Referred to the Homeland Security and Governmental Affairs Committee on 4/12/11.
CLEAN UP Act, Mikulski (D-MD) Summary Would suspend public-private job competitions indefinitely and encourage agencies to bring contracted work back in-house.
Referred to the Homeland Security and Governmental Affairs Committee on 5/12/11. Related bill: H.R. 1949. Small Business Additional Temporary Extension Act of 2011, Landrieu (D-LA)
Summary Would provide an extension until July 31, 2011 of the SBIR and STTR programs under the Small Business Act and the Small Business Investment Act of 1958.
Became Public Law 112-17 on 6/1/11. Related bills: S. 493; H.R. 1425. Keeping Politics Out of Federal Contracting Act of 2011, Collins (R-ME)
Summary Would amend title 41 of the United States Code to prohibit executive agencies from requiring the disclosure of political contributions by an entity submitting an offer for a federal contract.
Referred to the Homeland Security and Governmental Affairs Committee on 5/26/11. Related bill: H.R. 2008.
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Professional Services Council
Service Contract Act Training Complying with the Service Contract Act (SCA) is one of the most technically challenging aspects of administering a federal service contract. The SCA governs pay rates for many service occupations— get it wrong, and your company can face loss of reimbursement or even debarment. But getting it right is no small feat. To comply with the SCA, the entire contracting operation—from executive leadership to business developer, from proposal writer to accountant, from project manager to human resources specialist—needs to be conversant with the requirements of the act. PSC is pleased to offer the only SCA training conducted in partnership with the U.S. Department of Labor, Wage & Hour Division.
Upcoming sessions held at the NRECA Conference Center, 4301 Wilson Blvd., Arlington, VA: June 1 - 2, 2011 November 2 - 3, 2011
Program Overview In addition to the basic provisions of SCA and related contract labor standards, the course will address: • • • • • • •
employee classifications; collective bargaining agreements under SCA Sec. 4(c); payment of wages and benefits, hours worked; compliance procedures; contract proposals and contract price adjustments; challenging Department of Labor decisions; and communicating contract labor standards issues with federal procurement officials.
Attendees will also be offered up-to-date information on issues pertinent to the most significant cost factors in service contracting.
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For questions, please contact Melissa Phillips at 703-875-8059 or email@example.com. Professional Services Council
Service Contractor /June 2011 / 25
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26 / Service Contractor / June 2011
Experts for the 21st Century
Professional Services Council
Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications Tom A. Marcinko – Principal Consultant, Aronson LLC’s Government Contract Services Group
he person who said that there is nothing new under the sun was not familiar with government contracting. One of the most significant changes in 2010 was the requirement for prime contractors to report subcontractor data and executive compensation. Not only does this heretofore mostly confidential information need to be reported, it will be made available to the general public. The Reporting Requirements The reporting requirement is contained in Federal Acquisition Regulation (FAR) subpart 4.14 “Reporting Executive Compensation and First-Tier Subcontract Awards” and the clause at FAR 52.204-10 “Reporting Executive Compensation and First-Tier Subcontract Awards.” The new clause has broad applicability, applying to all non-classified contracts of $25,000 or more unless the contract is with an individual. This includes GSA schedules, FAR Part 12 commercial contracts, contracts with small businesses, and Government Wide Acquisition Contracts. While the clause will not be retroactively added to existing contracts or task orders, it will be added to existing IDIQ contracts so that future task orders are covered. The clause does not apply to second tier subcontracts. Prime contractors with less than $300,000 in gross revenue during the previous tax year do not have to report information on subcontract awards. In addition, subcontracts awarded to firms with less than $300,000 in gross revenue do not need to be reported. Prime contractors subject to this clause must report a litany of information about their first tier subcontracts by the end
of the month following the month of a subcontract award worth $25,000 or more. The information must be updated any time there is a change to any of the previously reported data. Much of the required information is similar to the information required to register in the Central Contractor Registration (CCR) database. However, unlike CCR, project specific information, such as a description of the work, the value of the subcontract and the place of performance, are also required. The more controversial aspect is the requirement for both the prime and the first-tier subcontractors to report the total executive compensation for
their five most highly compensated executives. Prime contractor executive compensation must be reported if the prime contractor receives at least 80 percent of its revenue from government sources and the total government revenue exceeds $25 million. Publicly traded companies do not need to disclose their compensation information if it is already available in their SEC filings. Prime contractors must also obtain and report the compensation information for any of their first-tier subcontractors who meet the same criteria. This is true even if the prime does not have to report their own executive compensation. The continued on page 28
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from page 27
executive compensation information will be available to the public on USASpending.gov. Practical Compliance Tips This is a relatively complicated reporting requirement. Much of the information must be obtained from subcontractors and the reports are due at various times depending on when the prime contract and first-tier subcontracts are awarded. Therefore, prime contractors will need to develop a reporting plan to ensure that the required data is collected, reported and updated in a timely manner. The responsibility for collecting and reporting the information should be assigned to an internal organization, such as the contracts or purchasing divisions, which have relationships with the subcontractors. The finance department is the most likely candidate for calculating and reporting executive compensation.
Small contractors lacking robust back office infrastructure should consider “outsourcing” these functions rather than assign it to already overworked operational executives. Companies will need to develop a tracking system with triggers and prompts to keep track of the various due dates for the different types of reports. Of course, subcontract templates will have to be revised to ensure that subcontractors are contractually obligated to provide the information. Companies that meet the criteria for disclosing executive compensation need to identify their five most highly compensated executives and carefully calculate their compensation. The compensation calculation should be reviewed with the contractor’s public accounting firm or tax advisor to ensure it is correct and consistent with the compensation calculations used for other purposes.
Will Public Disclosure Change Government Contracting? The general purpose of making subcontractor and compensation information publicly available is to allow citizens to see how their tax dollars are being spent. However, not everybody who reviews this information will be doing so for altruistic purposes. Competitors, subcontractors, employees, and government officials (many of whom know exactly how the money is being spent), may have different motives for seeing this information. Competitors can see how your team was structured and could easily tell which subcontractors are performing what work, where, and for how much. This knowledge may help the firms compete against you the next time a similar solicitation is released. Subcontractors, especially small businesses, will know how much
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28 / Service Contractor / June 2011
Professional Services Council
of what type of work is being given to each subcontractor on the team. Employees of your firm will know how much the executives make, which could hurt morale. Executive recruiters will have a new source of leads, complete with compensation information. The Defense Contract Audit Agency could use disclosed compensation information in lieu of general compensation surveys, to determine the allowability of executive compensation for similar companies. Or perhaps contractors can use the compensation information to defend the allowability of their executive compensation. The public, as well as some government contracting personnel may consider the executive compensation to be unreasonably high, even though it was deemed allowable. There may be other uses for this information that have yet to be discovered.
Conclusion While the repercussions of the new reporting and disclosure requirements are not known, one thing is certain– ignoring the issue will only make it worse. A systematic approach is required in order to ensure compliance with the requirements. Contractors should: • Review the clause to determine exactly what information is required; • Develop and implement a plan of action for collecting and reporting the data; • Monitor the regulations as changes are likely; • Consider how this newly available information can help them; and • Be aware that others are viewing it the same way. Despite the uncertainties, the good news is the rule creates a level playing field because everyone has to report. The best way to impress your customer
is to implement an efficient process for collecting and timely reporting accurate data. If nothing else, such an approach will most likely distinguish your company from many of your competitors. And contractors should always take advantage of an opportunity to make a good impression. Tom Marcinko is a principal consultant in Aronson LLC’s Government Contract Services Group. He is responsible for providing clients with a broad variety of both pre and post award support. He has over 27 years of government contracts experience, including proposal development, contract and subcontract administration, FAR compliance, small business programs, and government audits.
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FAQs about FAPIIS: As Information Goes Public Know the Risks of Disclosure, Debarment, and Non-responsibility Determinations By Holly Emrick Svetz, Member of Womble, Carlyle, Sandridge & Rice, PLLC Government Contracts Practice
n April 15 all information posted in the Federal Awardee Performance Integrity and Information System (FAPIIS), except for past performance reviews, became publicly available.1 This newly available, comprehensive database replaces the use of Freedom of Information Act requests to obtain the same information, much of which would not be otherwise publicly available. Opening FAPIIS to public scrutiny raises several questions for the government contracting industry about what is disclosed and how it will be used.
Q: What information will be disclosed in the public FAPIIS database? Suspension/Debarment Information
Since the issuance of Executive Order 12549 of Feb. 18, 1986, the Excluded Parties List System has been available to the public to determine which individuals and organizations have been suspended or debarred from government contracting or nonprocurement programs, to include grants and cooperative agreements. Outcomes of Proceedings
Two FAR clauses became effective in January 2011 to implement the “proceedings outcomes” aspects of FAPIIS. These clauses affect contractors and other fund recipients who have current active federal government contracts, grants, and cooperative agreements with a total value greater
than $10 million.3 To comply with the new requirements, covered contractors and fund recipients must certify that, as of the date of the submission of the proposal, the information entered in FAPIIS is current, accurate, and complete in the Central Contractor Registration (CCR)/Online Representations and Certifications Applications (ORCA).4 They must also update the information in FAPIIS on a semi-annual basis via the CCR/ORCA database, throughout the life of any contract that contains either of the two FAPIIS clauses. These disclosures involve all judicial or administrative proceedings the offeror and/or any of its principals has been the subject of in connection with the award to or performance of a federal government contract or grant.
Proceedings that must be reported include: • Any criminal proceeding resulting in a conviction. • Any civil proceeding with a finding of fault and liability that results in payment of a monetary fine, penalty, reimbursement, restitution, or damages of $5,000 or more. • Any administrative proceeding5 with a finding of fault and liability resulting in a payment of a monetary fine or penalty of $5,000 or more or payment of a reimbursement, restitution or damages in excess of $100,000. • Any of the above disposed of by consent or compromise with an acknowledgment of fault if the proceeding could have led to any of the above outcomes. Q: What will be done with all this information?
The government is collecting the information primarily to centralize contractor data for procurement officials. Under the FAR, contracting officers must review FAPIIS information and other past performance information for all bidders before awarding a contract in excess of the simplified acquisition threshold.6 However, instructions order them to use sound judgment in determining the weight and relevance of the information contained in FAPIIS and how it relates to the present acquisition.
Likely in response to concerns expressed by the public, there is a notice for contracting officers on the site advising them to take appropriate steps to ensure that they do not post information in the system on or after April 15, 2011 that would create a harm protected by a disclosure exemption under FOIA. It says, for example, heightened attention might need to be given to whether documentation supporting a non-responsibility determination or termination for default decision should be redacted before the determination or decision is posted. 2 FAR 52.209-7 and 52.209-9. These FAR clauses replaced FAR 52.209-8 and 52.209-10, which were issued in April 2010. 3 It includes the total value of all current, active contracts and grants, including all priced options; and the total value of all current, active orders including all priced options under indefinite-delivery, indefinite-quantity, 8(a), or requirements contracts (including task and delivery and multiple-award Schedules). 4 As implemented in www.ccr.gov, the outcomes of proceedings disclosure only applies to the organization whose DUNS number is represented on the CCR record at issue. https://www.bpn.gov/ccr/doc/CCR_TPIN_Update_Screenshots.pdf 1
30 / Service Contractor / June 2011
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Since FAPIIS may contain information on any of the offeror’s previous contracts and information covering a five-year period, some of that information may not be relevant to a determination of present responsibility. For example, a prior administrative action, such as debarment or suspension that has expired or otherwise been resolved, or information relating to contracts for completely different products or services, may have no bearing on present responsibility for a pending action. Where information in FAPIIS indicates a determination of non-responsibility, the contracting officer should promptly request additional information from the offeror to demonstrate the offeror’s present responsibility7 and notify the appropriate agency debarment official if the information appears appropriate for the official’s consideration.8 Once information is considered and action is taken, contracting officers must then document in the contract file how they considered the FAPIIS information and explain any action taken as a result.9 With the increasing demands for consolidated information about contractors and their contracts, the private sector has been more concerned that information will be used for other than its intended purpose. In particular, there has been grave concern that past performance information will now be used as part of a responsibility determination, which should be an upfront decision whether the offeror is eligible for award regardless of the quality and value of its proposal. As described above, the rule attempts to explain that evaluation of past performance for a source selection decision and determination of nonresponsibility are different analyses that accomplish different goals. There is also a nod towards due process in that the offeror gets an opportunity to provide information in support of its status as a responsible offeror. With the procurement budgets shrinking, companies are concerned about being tossed out of contract competitions on the basis of any one of several foreseeable scenarios: • A contracting officer has not been trained about or does not understand the distinction between past performance evaluations and responsibility determinations. • To limit their workload, contracting officers will seize on another method of limiting the number of proposals that must be evaluated in full.
• Contracting officers will act out of fear of public or congressional criticism and will shy away from awarding contracts to any offeror with the least bit of negative past performance or other FAPIIS-disclosed information. Q: What should you do?
First, review all updates to your organization’s record. Contractors should receive notifications whenever the government updates information or posts new information to their record.10 A best practice is to ask the contracting officer for an opportunity to review information the government intends to post before it is posted to ensure that no trade secrets or competition-sensitive information is released. Second, if you disagree with the information posted or think it is presented out of context, promptly respond with a clarification or rebuttal. Contractors will have an opportunity to post comments and those comments will be retained as long as the associated information is retained, usually six years.11 Do not wait to respond to posted information until you begin preparing an important proposal because the government’s source selection team may capture information before you expect. Finally, survey your records and all of your officers and principals at least every six months to determine if additional covered information must be disclosed.12 You must ensure this information is correct and up-to-date to avoid failing to comply with contract requirements, and avoid allegations of False Claims Act violations. Holly Emrick Svetz is a member of the government contracts practice group at Womble Carlyle Sandridge and Rice, PLLC. Combining her technical background, extensive litigation experience and indepth attention to regulatory compliance requirements, she handles deals, disputes and advice in all aspects of government business. A former U.S. Air Force officer, engineer and program manager, she understands how to achieve positive results for her clients. She can be reached at (703) 394-2261 or HSvetz@wcsr.com.
“Administrative proceeding” means a non-judicial process that is adjudicatory in nature in order to make a determination of fault or liability (e.g., Securities and Exchange Commission administrative proceedings, Civilian Board of Contract Appeals proceedings, and Armed Services Board of Contract Appeals proceedings). This includes administrative proceedings at the federal and state level but only in connection with performance of a federal contract or grant. It does not include agency actions such as contract audits, site visits, corrective plans, or inspection of deliverables.
FAR 9.104-6(a) & (b). FAR 9.104-6(c)(1). 8 FAR 9.104-6(c)(2). 9 FAR 9.104-6(d). 10 FAR 52.209-9(b)(1). 11 FAR 52.209-9(b)(2). 12 FAR 52.209(a). 6 7
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Renewed Concerns with FFRDCs By Alan Chvotkin, PSC Executive Vice President and Counsel
hirty-nine years ago, PSC was formed by several business leaders concerned about the government’s schizophrenia over outsourcing and the federally funded research and development centers’ (FFRDCs) accretion of work traditionally performed by contractors. Both issues still occupy an important part of PSC’s advocacy agenda. In recent months, the FFRDC issue has gained renewed visibility. In March, the Centers for Medicare and Medicaid Services (CMS), part of the Department of Health and Human Services, published a public notice of their intent to sponsor an FFRDC to facilitate the modernization of CMS business processes and supporting systems and operations. CMS identified 16 areas of activity for the FFRDC to assist CMS in its delivery of certain program requirements. The notice complied with the requirement for an agency to publish a public notice of the intent to sponsor an FFRDC, but the Federal Acquisition Regulation (FAR) specifically requires that a sponsoring agency ensure that existing alternative sources for satisfying agency requirements
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cannot effectively meet the agency’s special research or development needs and to clearly differentiate between work that should be performed by the FFRDC and the work that should be performed by non-FFRDCs. We didn’t believe that CMS met these two regulatory requirements. Since CMS did not make any other information publicly available, in mid-April PSC sent a letter to CMS opposing the agency’s sponsorship of an FFRDC. We highlighted the key regulatory requirements that CMS did not appear to address and commented that many of the 16 areas of activity for the proposed FFRDC were where PSC member companies were already awarded contracts to assist the agency. We have had several discussions with CMS and other government officials about our concerns and believe the agency will take action to significantly narrow the final scope of work of the FFRDC. Nevertheless, if CMS does go forward with the sponsorship of an FFRDC, we’ll plan to closely monitor its work assignments as best we can. We’ve also seen significant growth in the work assigned to existing FFRDCs, particularly those
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sponsored by several Defense Department and Homeland Security Department agencies. PSC member companies report having on-going work or new work cancelled and reassigned to the FFRDC. But it is difficult to pierce the darkness surrounding the types of work performed by FFRDCs and the funding they receive from their sponsoring agencies. While the National Science Foundation does collect limited information from sponsoring agencies on research spending with FFRDCs, there is no public transparency into the scope of work they perform or the total amount of funds agencies spend with them. We’ve started researching public sources to put this information together and have discussed with policymakers in both the Congress and the executive branch the options that may be pursued. Finally, since the FAR specifically requires that FFRDCs operate free from organizational conflict of interest, some agencies have assumed that broad areas of work traditionally awarded through contracts can be assigned on a no-bid basis to these “conflict free” organizations. For example,
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DoD Under Secretary Ash Carter’s “better buying initiative” specifically acknowledges that FFRDCs are an appropriate alternative for agencies to consider for specialized work for defense activities. In addition, the final DoD regulation on organizational conflict of interest recognizes a preferred status for FFRDCs. In numerous comments to DoD on both their buying initiative and the proposed OCI rule, PSC raised concerns about the unfettered authority conferred on them and questions as to whether they are, in fact, “conflict free.” We will continue to be vigilant on how these two DoD initiatives are further implemented. With the reemergence of concerns with FFRDCs, we intend to aggressively pursue these policy initiatives and to hold agencies accountable for complying with the regulations. But we need the eyes of all of our member companies to help us monitor the use of FFRDCs to be sure that they are performing only appropriate research and special functions and not work that should be competed for by the private sector.
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Dave Dacquino, CEO of VT Group, moderates an all-star panel focused on the impacts and implications of current efficiency initiatives. The panel was stocked with acquisition heavyweights, seated from left to right, Asst. Navy Commander for Acquisition Robert Griffin; Deputy Asst. Army Secretary Installations and Housing Jospeh Calcara; Energy Dept. Director of Infrastructure and Facilities Robert Herrera; and Air Force Deputy for Installation Policy James Holland.
Gary and Donna Giarratano enjoy a beautiful evening at the opening reception for Marketview 2011.
Another packed house at the PSC Spring Conference. Attendees know the Spring Conference is the place to hear about tactical-level strategies and real-world solutions to today’s acquisition challenges.
Marketview 2011: the PSC Spring Conference
Over 230 PSC members attended the PSC Spring Conference at the Gainey Ranch in Scottsdale Arizona in March. Designed to help companies prepare and plan for the impacts of major
The Hon. Christopher Shays delivers the opening keynote address, focusing on his role as the co-chair of the Commission on Wartime Contracting in Iraq and Afghanistan.
acquisition initiatives and trends, the conference drew top-level Hill, agency, and industry participants, allowing for in-depth analysis of current and future acquisition plans. In addition to learning, attendees had plenty of time to visit with old friends and forge new business partnerships at PSC’s many networking David Berteau from the Center for Strategic and International Studies gave Marketview 2011 attendees a sneak-peak at CSIS’s new methodology for evaluating public-private costs of work performance. The CSIS study has since been released and is receiving a lot of attention in acquisition and regulatory circles.
events throughout the weekend. See what you missed. Now, will you be there next year?
Zach Parker, CEO of TeamStaff, Inc., engages a panel of experts with his thoughts on the current environment of collaboration and partnership.
Seated left to right, DCMA Director Charlie Williams; Air Force Procurement Executive Officer Maj. Gen. Wendy Masiello; Army Contracting Command Executive Director Jeff Parsons; and Asst. Navy Commander for Acquisition Robert Griffin, explored the current trend of shifting risks from the government to contractors. RGS Executive Vice President Dyson Richards (at the rostrum) moderated the panel discussion. 34 / Service Contractor / June 2011
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M E M B E R NE W S New Hires, Promotions and Appointments: Sabre Systems, Inc. announced the promotion of three employees. Former Director of Systems Engineering Vince Sieracki was recently promoted to executive technical director for systems engineering. Additionally, former Business Director Charles Strimpler was recently promoted to executive business director for command, control, communications, computers and intelligence (C4I) programs. Finally, former Executive Director of Financial Analysis and Reporting Martin Buniva has been promoted to director of finance. Argy, Wiltse & Robinson, P.C., a certified public accounting and business advisory firm, recently announced the addition of John Harder as a partner in the Business Consulting Group. Rich Wilkinson recently joined Watkins Meegan LLC as a director to their Government Contracting and Technology team. Wilkinson recently worked for Deltek, Inc.
New Offices Sabre Systems, Inc. recently relocated its headquarters from Warminster, Pa., to a new, eco-friendly facility in Warrington, Pa. The new facility offers the extra office space and updated technology that will support the company as it continues to meet its growth goals. ASM Research, Inc. has announced its expansion into a new corporate headquarters in Fairfax, Va. This move will consolidate offices, while maintaining a satellite office for operations in Falls Church, Va. The move was essential in order to maintain the steady growth of the company, the client base, and the number of employees.
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Corporate Giving: Transformation Systems Inc. (TSI) has just announced the company’s 2011 Feed to LeadSM Program award winners in fields of education/literacy and fighting hunger. They are the KISS Institute for Practical Robotics Botball Tournament, the Marine Corps’ Toys for Tots Foundation’s Literacy Program, and So Others Might Eat (SOME) Dining Room for Women and Children. TSI launched the Feed to LeadSM Program to feed the bodies, minds and spirits of young and adult leaders in underserved communities as part of the company’s commitment to give back to the communities where its professionals live. TSI donates one-half a paid day for any professional who wishes to volunteer for any of those groups selected for its Feed to LeadSM awards. Sabre Systems, Inc. made a donation to the American Red Cross’ Japan Earthquake and Pacific Tsunami Fund. In response to the magnitude 8.9 earthquake and resulting tsunami disaster that occurred in Japan on March 11, Sabre held a monetary collection to provide support to the people of Japan. The company matched employee contributions dollar-for-dollar, and was able to donate nearly $2,500 to the cause.
Awards PSC member companies have shined in the first two quarters of 2011, receiving accolades and honors from all corners of the government contracting community and beyond. Five PSC member companies have been named to DevEx’s Top 40 Development Innovators list. Results of a survey of thousands of development professionals from around the world honored Abt Associates, Inc.; AECOM International Development, Inc.; Booz Allen Hamilton; Deloitte Consulting and Development Alternatives Inc. (DAI)
for their application of ground-breaking concepts and approaches against stubborn development challenges. The Small and Emerging Contractors Advisory Forum honored two PSC members as excellent partners to small businesses during the Annual SECAF Awards Gala. The winner of the Small Business Partner Award (revenue $25 million to $100 million) was RobbinsGioia, LLC and the winner of the Small Business Partner Award (revenue more than $100 million) was Science Applications International Corp. (SAIC). Washingtonian Magazine recognized employees of eight member companies among its list of 100 “Tech Titans” of 2011. They are Walter P. Havenstein, SAIC’s CEO; Deborah Alderson, president of SAIC’s Defense Solutions Group; Anne Altman, general manager of IBM’s Global Public Sector; Wes Bush, CEO of Northrop Grumman; Edward Casey , CEO of SERCO; Linda Gooden, executive vice president of Lockheed Martin; Fred Humphries, vice president of U.S. government affairs for Microsoft; Sudhakar Kesavan, CEO of ICF International; and Donna Morea, president of CGI for U.S., Europe, and Asia. JBS International, Inc. received two awards from the Alliance for Workplace Excellence—the AWE Workplace Excellence Award and Health and Wellness Trailblazer Award. Workplace Excellence Award winners show an outstanding commitment to overall workplace quality from communication, diversity, employee growth and life-work balance, to corporate culture and management practices. Health and Wellness Trailblazer Award winners demonstrate an outstanding commitment to employee health and wellness by developing innovative programs. Service Contractor /June 2011 / 35
M E M B E R NE W S Jerri Shaw co-CEO and president of JBS International, Inc., received a 2011 Communitas Award for Leadership in Ethical and Environmental Responsibility. The Communitas Awards, sponsored by the Association of Marketing and Communication Professionals (AMCP), are an international effort to honor excellence in community service and social responsibility and to recognize the spirit of communitas—people helping people. Shaw’s nomination highlighted four areas where she has led the effort to create and maintain a company and work environment that focuses on people’s strengths, fosters growth, and supports innovation. ASM Research, Inc. (ASM) has been recognized as a recipient of the 2011 Nunn-Perry Award from the Department of Defense Office of Small Business Programs (OSBP) for excellence and outstanding achievement in the DoD Mentor-Protégé program. This award recognizes significant achievement for both ASM and its protégé company, Networking and Engineering Technologies, Inc. (N.E.T.), an SBA certified 8(a) IT Solutions
and Management Consulting firm in Northern Virginia. This partnership has helped both companies achieve impressive goals in management, development, and growth. JustinBradley has been named to Inavero’s 2011 Best of Staffing™ Client list for the second time. Best of Staffing, presented in partnership with CareerBuilder, is the nation’s only satisfaction award that recognizes exceptional client service within the staffing industry. Fewer than 1 percent of North American staffing firms have been named to the 2011 Best of Staffing Client List. DELTA Resources, Inc., was named to the Virginia Chamber of Commerce’s “Fantastic 50” list as one of the fastest growing companies in the state. The “Fantastic 50” measures revenue growth from 2006 to 2009. During that period DELTA revenues grew by over 200 percent ranking it 44th among nominated companies.
Have a story for Service Contractor’s Member News section? E-mail Bryan Bowman at firstname.lastname@example.org.
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SCENE&HEARD PSC staff cheer up the Children’s Inn at the National Institutes for Health for St. Patrick’s Day by decorating the Inn on March 8. PSC members relax and grow their business network at another great PSC Networking Happy Hour on May 19 in Tysons Corner. FAA Administrator J. Randolph Babbitt gives PSC members a look at FAA’s priorities at a May 19 Dialogue Series Breakfast. PSC Executive Vice President and Counsel Alan Chvotkin (left) warned Congress on May 12 that an ill-conceived draft executive order would inject politics into the contracting process. PSC Vice President of Government Relations Roger Jordan (second from left) testifies on May 5 to the House Small Business Committee, offering recommendations to improve the March 16 SBA proposed revisions to the size standards for the professional services industry.
PSC Executive Vice President and Counsel Alan Chvotkin (right) and PSC International Development Initiative Director Larry Halloran (left) addressed concerns that the Commission on Wartime Contracting’s reviews of international development work were inadequate, during a May 2 public forum. Gary Lazor, co-chair of the PSC International Development Task Force, also addresses industry’s concerns over the Commission’s reviews of international development during the May 2 forum. PSC President and CEO Stan Soloway (center left) and Federal CIO Vivek Kundra (center right) discuss the implications of the administration’s IT procurement reform initiatives on the contracting community to the board of the Northern Virginia Technology Council on March 8. Photo courtesy of the NVTC.
PSC President and CEO Stan Soloway moderates a March Dialogue Series luncheon panel featuring, from left to right, DCAA Director Patrick Fitzgerald, DPAP Director Shay Assad and DCMA Director Charlie Williams. 38 / Service Contractor / June 2011
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