Acquisition reforms would give auditors upper hand

Infotech & the law | Legal insights for today's market

Richard Rector

As we approach this year's
midpoint, a number of contracting
reforms are taking shape. After
months of stops and starts, it appears
that a handful of "accountability in
contracting" measures will be heading
to conference as part of the Defense
Authorization Act for fiscal 2008.

Some of the reforms would have a
significant effect on the day-to-day
business of federal contracting.
Although included in a Defense
Department bill, the reforms would
apply to contracts at both Defense
and civilian agencies.

Many of the key reforms are in the
House version of the Defense Authorization
Act (H.R. 1585). Most of them
are lifted verbatim from the much
broader Accountability in Contracting
bill (H.R. 1362), which the House
passed in March on a 397-27 vote.

The Senate has not yet voted on its
version of a Defense Authorization bill,
which is likely to contain similar reform
provisions in several areas. Thus, it is
not clear that the House reforms will
prevail in conference and become law.
But they stand a good chance. The
House appears to have cherry-picked
the provisions of the Accountability in
Contracting bill that enjoy the broadest
support, and there is conceptual support
within the Senate Armed Services
Committee (see S. 1547) for several of
the House reforms.

If passed, the five reforms in H.R.
1585 that would be significant for the
contracting community are:

Definition of Commercial Services. This
provision would require a revision of
the Federal Acquisition Regulation to
change the definition of commercial
services. The change would eliminate
the words "of a type" from the definition,
thereby narrowing the kinds of
services that could be purchased on a
commercial-item basis. Notably, the
change could require contractors to
provide cost information in connection
with the sale of commercial services.
It likely would mean the withdrawal
of certain service contractors
from the federal market.

Cost or Pricing Data for Commercial Items
Acquired on Sole-Source Basis.
This provision
would take another step away
from commercial acquisition methods.
It would require the submission
of cost or pricing data for commercial
items procured using noncompetitive
procedures, if the agency believes such
data is necessary and the contractor
has previously submitted such data on
another contract.

Disclosure of Audit Findings. This provision
would require agencies to provide
Congress on a quarterly basis with a
list of completed audits that describe
contractor costs in excess of $10 million
that have been identified as
"unjustified, unsupported, questioned
or unreasonable," and material deficiencies in a contractor's performance
or business system. Agencies would
give the lists
to five congressional
committees,
which could
then request
that a full, unredacted copy of any
audit be provided within 14 days.

Limitation on Length of "Urgent and
Compelling" Contracts.
This provision
would limit the period of performance
for contracts valued at more than
$1 million if the contracts were
awarded without competition due to
"urgent and compelling" circumstances.
In general, such contracts
would be limited to not more than
one year in duration, unless such a
limitation would seriously injure the
government's interests.

Public Disclosure of Basis for Noncompetitive
Contracts.
This provision
would require an agency to make publicly
available, within 14 days of award,
the justification and approval documents
that provide the basis for a noncompetitive
contract. Although current
law makes such documents publicly
available, the change would require
that they be available on the Web site
of the agency and through the Federal
Procurement Data System.

Trade organizations have objected
to the first three of the reforms
because they represent a dramatic
step backward from commercial-item
contracting and a return to the days
when auditors were king.

Richard Rector is chairman of the government
contracts practice at DLA Piper US LLP
in Washington. He can be reached at
richard.rector@dlapiper.com.

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