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Procurement & Government Contracting Compliance (Series: Corporate & Regulatory Compliance Boot Camp)

The United States government is one of the largest purchaser of goods and services in the world. The volume and complexity of transactions related to procurement are some of the reasons that transactions with the government are most vulnerable to corruption. State and federal regulatory compliance can be tough to navigate and the process can make even routine sales and marketing practices vulnerable to civil and criminal liability. This webinar analyzes the regulatory framework, including identification of some of the legal risks in solicitations, pre- and post-award bid protests, contract compliance, change orders, and contract claims and disputes. The webinar also discusses defense strategies of a company that is accused of fraud or civil non-compliance. The panel will also examine how the pandemic has increased activity in certain sectors and how the volume, speed, and emergent conditions have presented new challenges in terms of compliance in government contracts.

To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/procurement-government-contracting-compliance-2021/

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Procurement & Government Contracting Compliance (Series: Corporate & Regulatory Compliance Boot Camp)

  1. 1. 1
  2. 2. 2 Practical and entertaining education for attorneys, accountants, business owners and executives, and investors.
  3. 3. Disclaimer The material in this webinar is for informational purposes only. It should not be considered legal, financial or other professional advice. You should consult with an attorney or other appropriate professional to determine what may be best for your individual needs. While Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate, Financial Poise™ makes no guaranty in this regard. 3
  4. 4. Meet the Faculty MODERATOR: Rafael X. Zahralddin - Elliott Greenleaf PANELISTS: Ben Kacher - Verizon Alfredo Gonzalez - Genovese Joblove & Battista Christopher Garcia - Crowell & Moring 4
  5. 5. About This Webinar – Procurement & Government Contracting Compliance The United States government is one of the largest purchaser of goods and services in the world. The volume and complexity of transactions related to procurement are some of the reasons that transactions with the government are most vulnerable to corruption. State and federal regulatory compliance can be tough to navigate and the process can make even routine sales and marketing practices vulnerable to civil and criminal liability. This webinar analyzes the regulatory framework, including identification of some of the legal risks in solicitations, pre- and post-award bid protests, contract compliance, change orders, and contract claims and disputes. The webinar also discusses defense strategies of a company that is accused of fraud or civil non-compliance. The panel will also examine how the pandemic has increased activity in certain sectors and how the volume, speed, and emergent conditions have presented new challenges in terms of compliance in government contracts. 5
  6. 6. About This Series - Corporate & Regulatory Compliance Boot Camp – Part I This webinar series covers corporate and regulatory compliance as it relates to procurement and government contracting, the Foreign Corrupt Practices Act, data privacy and social media. The various episodes examine these topics from a company’s perspective, delving into compliance issues that pertain to specific company practices across industries and borders and impact companies of all sizes and types. Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and executives without much background in these areas, yet is of primary value to attorneys, accountants, and other seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that participants will enhance their knowledge of this area whether they attend one, some, or all episodes. 6
  7. 7. Episodes in this Series #1: Procurement & Government Contracting Compliance Premiere date: 2/10/21 #2: Foreign Corrupt Practices Act Compliance Premiere date: 3/20/21 #3: Data Privacy Compliance Premiere date: 4/14/21 7
  8. 8. Episode #1 Procurement & Government Contracting Compliance 8
  9. 9. Procurement and Government Contracts • Government contracting covers a wide range of services and products. • The Department of Defense is the largest government purchasing agency (aircraft components and accessories, electronic components, instruments and laboratory equipment, and vehicular equipment, among other goods and services). E.g. the 2017 Fiscal Year (Oct. 1, 2016-Sept. 30, 2017) DOD procurement budget was approximately $112.3 billion. • There is also a great deal of goods and services that are subcontracted by government contractors to other businesses, with the construction industry being the largest sector with subcontracts. • Compliance issues arise whether you are a prospective or actual contractor (or subcontractor). • There are also state rules, regulations, and laws that affect compliance for state contracts. 9
  10. 10. Law (Federal) • Individual government employees are bound by rules to ensure that every citizen can have complete confidence in the integrity of the Federal Government, shall not hold financial interests that conflict with their performance of duty, and shall not give preferential treatment to any private organization or entity. Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R § 2635 (as amended, at 76 FR 38547 (July 1, 2011)). • Company representatives must be briefed or trained on the tenets of ethical standards for federal employees before meeting with individual government employees, to ensure an appropriate understanding of the target audience’s restrictions and avoid violations of any rules or statutes. • The Federal Government, through the Office of Government Ethics (OGE), delineates the principles of ethical conduct for federal employees and provides instruction on the application of these principles when situations are not otherwise specifically addressed by regulation. 10
  11. 11. Law (Federal) • In instances of uncertainty, OGE encourages employees to seek advice from agency ethics officials, and where a matter involves any appearance of conflicts, OGE prescribes that circumstances be judged from the perspective of a reasonable person with knowledge of the relevant facts. 5 C.F.R. § 2635.107. • The Federal Acquisition Regulation (FAR) governs procurement by federal government executive agencies. • The FAR authorizes federal government agencies to issue or authorize agency-specific regulations that implement or supplement the FAR. • These implementing or supplementing regulations are parallel to the FAR in format, arrangement and numbering. 11
  12. 12. Federal Procurement • Regulations reflect public policy, and make contracting with the government very different from contracts with the public sector. • Terms heavily favor the government. • Selection is based on an open, uniform, and competitive process because the U.S. government is spending the taxpayers’ money and to promote the efficient use of this money. 12
  13. 13. Policy Considerations (Federal) • Employee/worker protections. • Environmental regulations and considerations. • Geopolitical and national security issues and requirements (including cyber and information security). • Supply chain considerations. • Ethical considerations and requirements. • False Claims Act (FCA). 13
  14. 14. Policy Considerations (Federal) • Examples and related considerations:  Cost/pricing issues  Competition and competition conflict issues  Nondiscrimination, affirmative action in hiring laws, and programs that promote the participation of small businesses, and minority and women-owned businesses, in the contracting process.  Certain contracts must be regulated for wage-hour and drug-free workplace compliance.  Examples of wage-hour compliance are: o the Service Contract Act, o the Contract Work Hours and Safety Standards Act, o the Davis-Bacon Act, and o the Walsh-Healey Public Contracts Act.  Lobbying activities and sometimes political contributions and governmental conflicts of interest must be disclosed. 14
  15. 15. Procurement Methods • To fulfill the FAR’s requirement that it use competitive procedures to award contracts, the federal government typically uses one of the following methods:  Contracting by negotiation;  Sealed bid / LPTA (lowest price technically acceptable) process;  Sole-sourcing;  Other transaction authority (OTA); or  Simplified acquisition procedures. 15
  16. 16. Sealed Bids • Invitations for bid (IFBs) are used when bids are evaluated primarily on price. • IFBs must clearly describe the government’s requirements, including bid preparation instructions and details concerning payment, technical data and specifications and be timely submitted. • Responsive and Responsible lowest bid will win. • Responsive = complying with the material aspects of the IFB. • Responsible = adequate financial resources, a satisfactory record of performance, integrity and business ethics, as well as the necessary organization, technical skills and facilities. 16
  17. 17. Contracting by Negotiation • Requests for proposal (RFPs) are used to solicit and then evaluate offers when the federal government needs to take into account factors in addition to price, such as past performance, technical excellence, management capability and personnel qualifications. • RFPs include the factors, and their relevant importance, that the government will use to evaluate proposals. • The standard in a competitive proposal is to choose the “best value.” 17
  18. 18. Procurement Methods - Considerations • “[I]n acquisitions where the requirement is clearly definable and the risk of unsuccessful contract performance is minimal, cost or price may play a dominant role in source selection. The less definitive the requirement, the more development work required, or the greater the performance risk, the more technical or past performance considerations may play a dominant role in source selection.” FAR section 15.101. • The Federal Government can award contracts without full and open competition under certain circumstances, such as when the number of potential sources is limited, under the simplified acquisition threshold ($100,000), and for certain other micro-purchase limits such as the contingency or defense operations for nuclear, biological, chemical or radiological attack limits ($15,000 within the U.S. and $25,000 outside of the U.S.). 18
  19. 19. Procurement Methods - Considerations • The Federal Government may also acquire goods and services in varying quantities for discounts associated with volume purchases through the Federal Supply Schedule (FSS) program, also known as the GSA Schedules Program or the Multiple Award Schedule Program. 19
  20. 20. Protests • An interested party in the federal government contracting process can file a protest with the contracting agency, the Government Accountability Office (GAO), or the Court of Federal Claims  An interested party is an actual or prospective offeror with direct economic interest that would be affected by the award of a contract or by failure to award a contract.  Federal government encourages interested parties to seek resolution with the agency before filing a protest with the GAO or in court. • Protests:  Pre-award, or  Post-award 20
  21. 21. Ethics and Compliance • Certain private sector practices are not acceptable in the federal government contracting marketplace. • Penalties include:  suspension,  debarment,  contract termination,  contract damages, and  criminal sanctions. 21
  22. 22. Contractor Responsibility • Federal government contractors and subcontractors must be “responsible.” • A contractor or subcontractor is responsible when it has adequate financial resources, a satisfactory record of performance, integrity, and business ethics, and the necessary organization, technical skills, and facilities. • Pursuant to this requirement, failure to comply may result in suspension or debarment from federal contracting. • Suspended or debarred contractors are prohibited from receiving prime or subcontract awards, and agencies cannot solicit offers from, award contracts to, or consent to subcontracts with these contractors, unless the agency head determines that there is a compelling reason to deviate from the consequences of the suspension or debarment. 22
  23. 23. Conflicts of Interest (Revolving Door) • Federal government employees and officers are prohibited from participating “personally and substantially” in matters in which they or organizations in which they serve or with which they are negotiating for employment have a financial interest. • Employees and officers are subject to criminal sanctions. • Federal statute prohibits contractors from engaging in employment discussions or making employment offers to agency officials who participated personally and substantially in a federal contract in which the contractor participated. • Federal statute imposes various “revolving door” restrictions on federal government employees who have contracting responsibilities. 23
  24. 24. Revolving Door Criminal Post - Employment Restrictions • Restrictions on post-Government employment do not bar someone from working for any particular employer. • The restrictions are designed to address certain activities that involve, or may appear to involve, the unfair use of prior Government employment. • How these restrictions apply depends 24
  25. 25. Criminal Restrictions (OGE Pamphlet, Oct. 2007) • As an executive branch employee, you are barred permanently from trying to influence any Federal agency or court, by communications or appearances on behalf of someone other than yourself or the United States (i.e., “representational contacts”), on a matter that has parties (such as a contract, grant, or lawsuit) if you worked on that matter as a Government employee. If the matter was under your official responsibility during your last year of Government service, even if you did not personally participate in it, you are barred from making representational contacts about that matter for two years. 25
  26. 26. Criminal Restrictions (OGE Pamphlet, Oct. 2007) • If you served as a “senior employee” during your last year of Government service, you are subject to a one-year prohibition on making any representational contacts to your former agency on any matter, regardless of whether the matter involves parties or whether you previously worked on the matter. Senior employees include certain Presidential appointees, General and Flag Officers, most members of the Senior Executive Service (and some high-level employees in similar pay systems), and private- sector participants in the Information Technology Exchange Program. 26
  27. 27. Criminal Restrictions (OGE Pamphlet, Oct. 2007) • If you work for a large department, you should contact your ethics official and inquire about whether your department is divided into smaller components for post-employment purposes. If so, the restriction on your representational contacts, which otherwise would extend to your entire department, may be limited to a smaller subset of offices within your department. • If you served as a “very senior employee,” you are covered by a two-year cooling-off period with respect to representational contacts made to your former agency and to any Executive Schedule employee serving in any agency in the executive branch. Very senior employees include cabinet officers, the Vice-President, and certain very high-level White House staff. 27
  28. 28. Criminal Restrictions (OGE Pamphlet, Oct. 2007) • If you are a former senior or very senior employee, you are subject to a one-year prohibition on representing, aiding, or advising a foreign government or foreign political party, with an intent to influence any officer or employee of a department or agency. You also may be prohibited from representing a foreign entity before Congress. • If you worked on certain trade or treaty negotiations during your final year of Government service and have had access to certain restricted information, you are barred for one year from aiding or advising anyone other than the United States concerning those negotiations. • If you were a private-sector participant in the Information Technology Exchange Program, you may not aid, counsel, or assist in representing anyone other than the United States on any contract with the agency in which you served for one year after the end of your assignment. 28
  29. 29. Criminal Restrictions (OGE Pamphlet, Oct. 2007) • If you will be working for a firm that represented clients before either the executive branch or any court where the United States had an interest, you are prohibited from sharing in the profits earned by the firm for those matters. The restriction applies if the firm’s work before the Government occurred while you were employed by the Government. • If you were involved in certain large procurements or in the administration of contracts, you may not be able to accept compensation from certain contractors for one year. • If you are an attorney or other licensed professional, you should consult your local bar rules or similar professional code for any special restrictions on employment following Government service. • If your agency has special post-employment laws and regulations, you may be subject to additional requirements and restrictions not mentioned here. 29
  30. 30. Federal Crimes • Giving, promising or offering anything of value to a public official because of an official act performed or to be performed by that official is a federal crime which includes giving anything of value to a public official with the intent to influence an official act or induce the public official to commit fraud or violate an official duty. • The Anti-Kickback Act prohibits giving anything of value to federal government prime contractors or subcontractors in order to improperly obtain or reward favorable treatment in if connection with a federal government prime contract or subcontract (an affirmative obligation to disclose if there are reasonable grounds to believe that the company, a subcontractor or an employee has engaged in this activity). 30
  31. 31. Federal Crimes • Federal government, directly or indirectly, for payment. • False claims includes product substitution, overcharging, time-charging fraud, and false progress reports/certifications. • The False Statements Act broadly prohibits knowingly and willfully making a false statement or certification regarding a matter within the jurisdiction of any federal government agency. 31
  32. 32. Procurement Integrity Act • The Act prohibits present and former U.S. officials, including members of the Armed Forces, from knowingly:  Disclosing contractor bid or proposal information or source selection information before the award of a Federal agency procurement contracts. • Also prohibits other individuals from obtaining such information before the award of a Federal agency procurement contract. • Fines for individuals can be $50,000 plus twice the compensation received or offered. For corporations it can be $500,000 plus twice the compensation received or offered. • Individuals may be subject to five years in prison and contractors are subject to cancellation of the procurement, rescission of the contract, and debarment proceedings. 32
  33. 33. Contractor Bid or Proposal Information • Cost or Pricing Data (see, 10 U.S.C. section 2306a(h) and section 304A(h) of 41 U.S.C. section 254b(h)). • Indirect costs and direct labor rates. • Proprietary information about manufacturing processes, operations, or techniques marked by the contractor in accordance with applicable law or regulation. • Information marked by the contractor as “contractor bid or proposal information,” in accordance with applicable law or regulation. • Source selection information. • Information covered by the Privacy Act and Trade Secrets Act. 33
  34. 34. Source Selection Information • Bid prices submitted in response to a Federal agency solicitation for sealed bids, or lists of those bid prices before public bid opening • Proposed costs or prices submitted in response to a Federal agency solicitation, or lists of those proposed costs or prices • Source selection plans • Technical evaluation plans • Technical evaluations of proposals 34
  35. 35. Source Selection Information • Cost or price evaluation of proposals. • Competitive range determinations that identify proposals that have a reasonable chance of being selected for award of a contract. • Rankings of bids, proposals, or competitors. • Reports and evaluations of source selection panels, boards, or advisory councils. • Other information marked as source selection information by the head of an agency or a contracting officer that would jeopardize the integrity or successful completion of the Federal agency procurement to which the information relates. 35
  36. 36. Contractor Business Code of Ethics • As of December 2007, contractors performing certain federal government contracts must have a written business code of ethics. • Federal contracts valued at more than $5 million must contain a clause requiring the contractors to have ethics policies in place and internal controls to maintain them within ninety days of the contract award. • Applies to subcontracts that are valued at more than $5 million and have a performance period of 120 days or longer. • Contractors should have business ethics and compliance training programs for employees, as well as relevant internal control systems. • A contract may also require contractors to post a hotline number where employees can report possible violations of the business code of ethics. • Each agency decides whether it will require a hotline poster and the information required to be contained on the poster. 36
  37. 37. Gifts • Government employees are prohibited from soliciting or accepting gifts from prohibited sources or gifts given because of their official position. • The term “prohibited source” includes anyone seeking business with, or official action by, an employee’s agency and anyone substantially affected by the performance of the employee’s duties. 5 C.F.R. § 2635.203. • A “gift” is defined to include nearly anything of market value.  It does not include, however, items that are clearly not gifts, such as publicly available discounts and commercial loans.  The definition also does not include inconsequential items, such as coffee, donuts, greeting cards, and certificates.  It may not, however, be paired with a catered lunch since providing a meal to an individual government employee would violate OGE’s inconsequential items rule and meet the definition of a gift. 37
  38. 38. Conflicts • There may be ethical implications if an individual government employee’s financial interests conflict with his or her official duties. • Federal agencies may prohibit an employee from acquiring or retaining certain financial interests, and prohibit an employee from participating in an official government capacity in a matter in which he has a financial interest or in which his spouse, minor child, employer, or any one of several other specified persons has a financial interest. • The provision includes alternatives to nonparticipation, which may involve selling or giving up the conflicting interest or obtaining a statutory waiver that will permit the employee to continue to perform specific official duties. 5 C.F.R. § 2635.401 et al. 38
  39. 39. Appearance of Loss of Impartiality • OGE additionally outlines a circumstance in which employees should not perform official duties in order to avoid an appearance of loss of impartiality. • This provision, entitled “Personal and Business Relationships,” states that employees should obtain specific authorization before participating in certain government matters where their impartiality is likely to be questioned. • The matters specifically covered by this standard include those: 1. Involving specific parties, such as contracts, grants, or investigations, that are likely to affect the financial interests of members of employees’ households § 2635.502; or 2. In which persons with whom employees have specific relationships are parties or represent parties. This would include, for example, matters involving recent employers, employers of spouses or minor children, or anyone with whom the employees have or seek a business or financial relationship. § 2635.503. 39
  40. 40. Misuse of Official Position There are four provisions designed to ensure that employees do not misuse their official positions. These include: 1. A prohibition against employees using public office for their own private gain for the private gain of friends, relatives, or persons with whom they are affiliated in a non-government capacity, or for the endorsement or any product, service, or enterprise § 2635.702; 2. A prohibition against engaging in financial transactions using nonpublic information, or allowing the improper use of nonpublic information to further private interests § 2635.703; 3. An affirmative duty to protect and conserve government property and to use government property only for authorized purposes § 2635.704; and 4. A prohibition against using official time other than in an honest effort to perform official duties and a prohibition against encouraging or requesting a subordinate to use official time to perform unauthorized activities. § 2635.705. 40
  41. 41. Supplemental Agency-Issued Standards • Some federal agencies have issued Supplemental Standards of Ethical Conduct for their employees. • For example, DOE requires written notice to an employee’s supervisor of disqualifying financial interests under its supplemental standards. • Supplemental Standards of Ethical Conduct for Employees of the Department of Energy, Part 3301 (July 5, 1996). • Written notice is also required for an employee to disqualify him or herself to ensure impartiality, regarding matters effecting prospective employers, and to withdraw notification that disqualification from participation in a matter is no longer required. § 3301.102. • Thus, if a company representative is engaged in a transaction with an employee of DOE and an employee’s participation requires disqualification, the company should create a written memorandum memorializing the disqualification. 41
  42. 42. About the Faculty 42
  43. 43. About The Faculty Rafael X. Zahralddin - RZahralddin@atllp.com Rafael X. Zahralddin-Aravena is a skilled business lawyer and litigator with significant experience advising clients in corporate and commercial litigation, insolvency, distressed M&A, compliance, corporate law and entity formation, corporate governance, commercial transactions, cyber law, regulatory actions and cross-border issues. Rafael represents clients in all aspects of bankruptcy and restructuring and has extensive experience in international commercial law issues, including cross-border insolvency, federal bankruptcy court matters, and assignments for the benefits of creditors and receiverships. Rafael’s international law experience particularly in international commercial transactions brings a unique and nuanced approach to business issues both inside and outside of distressed situations. He has also worked for two decades with early stage companies and venture capitalists and private venture funds as both a transactional lawyer and a corporate litigator. He has assisted businesses in starting, selling, or buying a business, and dealing with employees and contracts, among other operational issues. This experience has been critical in representation of both debtors and creditors committees in chapter 11. Rafael is noted for his problem solving abilities, especially with varied constituencies on official and ad hoc committees, including trade creditors, bondholders, labor unions and other key stakeholders in insolvency matters. 43
  44. 44. About The Faculty Ben Kacher - benjamin.kacher@verizon.com Ben is primarily a government contracts attorney, but also has experience with and handles many other legal matters in the defense and technology industries. Ben has experience with litigation, investigations, international, intellectual property, environmental, corporate, labor, employment, and other matters. Ben has particular expertise in matters dealing with major weapon systems, international affairs, and intellectual property. Ben currently works as legal counsel for Verizon. Ben previously worked as legal counsel for BAE Systems, and previously for the U.S. Navy and Department of Defense. He lives in Atlanta, Georgia, with his wife and four children. He loves family, books, outdoors, travel, and donuts. 44
  45. 45. About The Faculty Alfredo Gonzalez - agonzalez@gjb-law.com Alfredo has more than 40 years of experience in real estate, international transactions, land use, governmental, healthcare, environmental and aviation law. Moreover, he has extensive experience representing governmental agencies including the Federal National Mortgage Association, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the Florida Housing Finance Authority, and various local municipalities. He also has substantial experience representing Receivers in the disposition of assets. Alfredo is a licensed real estate broker and is a past board member of the Miami-Dade Expressway Authority (MDX). He is an active member of the American Bar Association, The Florida Bar, the Dade County Bar Association, and the Cuban American Bar Association. Alfredo is a past member of the Board of Directors, Realtor Association of Miami Dade and the Beaches. He is also a trustee to the Greater Miami Chamber of Commerce and participated in a blue ribbon committee that drafted recommendations to improve the City of Miami Building and Zoning Code. 45
  46. 46. About The Faculty Christopher Garcia - CGarcia@crowell.com Christopher Garcia is an associate in the Washington, D.C. office of Crowell & Moring, where he is a member of the firm’s Government Contracts Group. As part of his government contracts practice, Chris conducts internal investigations regarding False Claims Act issues and defends against related government inquiries and investigative demands. Chris also assists clients with technology- related issues, including counseling clients in the areas of patents and data rights, and defending against government challenges to technical data and computer software rights assertions. In addition, Chris performs government contracts due diligence for buyers in transactional matters, representing government contractors in a range of industries. As part of the firm’s State and Local Practice, Chris also counsels clients on state and local procurement issues, including reviewing state and local opportunities, and leading negotiations with government customers regarding contractual terms and conditions. Chris also advises contractors on the federal Freedom of Information Act as well as state-level public records laws. He has counseled contractors in numerous reverse-FOIA actions at the federal and state levels. 46
  47. 47. Questions or Comments? If you have any questions about this webinar that you did not get to ask during the live premiere, or if you are watching this webinar On Demand, please do not hesitate to email us at info@financialpoise.com with any questions or comments you may have. Please include the name of the webinar in your email and we will do our best to provide a timely response. IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education. 47
  48. 48. About Financial Poise 48 Financial Poise™ has one mission: to provide reliable plain English business, financial, and legal education to individual investors, entrepreneurs, business owners and executives. Visit us at www.financialpoise.com Our free weekly newsletter, Financial Poise Weekly, updates you on new articles published on our website and Upcoming Webinars you may be interested in. To join our email list, please visit: https://www.financialpoise.com/subscribe/

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