Where the contractors look, the government looks back

Larry Allen The audit report says exactly where the GSA IG will look. And as you alluded to, there are several parts of the multiple award program that will be under the lens. That’s not too surprising because the schedule show is something of a perennial IG favorite. So for this year, they’re going to look at one of our old favorites, the Trade Agreements Act. It should come as no surprise to businesses, Tom, that with all the emphasis on secure supply chains and supply chain management, trade agreements act on issues of where businesses get their stuff , from where they are substantially transformed, which remains. second only to price reduction issues in the Compliance Hall of Fame multi-award program program. So if you’re selling products or even if you’re selling services and you’re not sure where they’re coming from, if you’ve outsourced some services, for example, if you know that the IG is going to be looking at TAA, you know that your procurement manager is going to look at that and will proceed accordingly.

Tom Temin Therefore, the content of what you are selling, you must be able to justify it according to the Commercial Agreements Act. But with price swings up and down, this has ebbed and flowed over the years. There was a time when that was a big problem in programming, and then the schedules tried to be a little more market oriented, I think in the late 90s, maybe early 2000s. And so what would they of doing companies in terms of prices to keep what GSA wants as, I guess, the best customer?

Larry Allen Well, Tom, for 2025, the GSA IG has said that they’re going to look specifically at the schedules, the economic price adjustment clause, and how it’s being implemented. And of course, GSA gives with one hand and takes with the other in this case. And what I mean by that is that this year you have GSA’s Office of Acquisition Policy coming up with some pretty common sense changes designed to make it easier for companies to get economic price adjustments when they’re justified in seeking them, setting a standard by which procuring agents and contractors can go through this process. And then the IG sees the simplification coming and says, You know what, we’re going to look at the economic price adjustment clauses in FY25, which I really think will have the net effect for contractors of having to provide more and more more data every time they look for a price adjustment. You’re at your best if you’re trying to find one now, so those who can justify it. What you don’t want to do is get to the point where you haven’t had one for 2 or 3 years, and now all of a sudden you want to catch up. Even with the new flexes, Tom, I think it’s going to be a pretty steep hill to climb. So while it may be difficult to get a price adjustment now because you will have to provide it in different ways. It’s even better to keep those prices up to date.

Tom Temin And will the IG look at contractor pricing or will they look at their own procurement officers’ oversight of contractor pricing?

Larry Allen Well, IG always looks at the prices a bit, Tom. So I would never say the prices are off the table. For example, they will continue to do pre-award audits that make specific price recommendations when contractors are looking for contract modifications, new contracts, things of that nature. But mostly, the IG will audit what I call, and many others call the Small A auditors. These are the GSA contracting staff who conduct these contractor evaluation visits that are not technically an audit, but are something that the contractors must take seriously. Get them every two years. And the IG will come in and audit the industrial operations analysts who are doing these reviews to make sure that they’re collecting the data correctly and they’re analyzing the data correctly. It’s always been an irony, Tom, that a contractor can end up getting a negative grade for one of these reviews, but there’s no upside to actually getting an A on the report card. And this is kind of a continuation of this topic.

Tom Temin We’re talking with Larry Allen, president of Allen Federal Business Partners. And another question about the whole IG audit plan, the mentor protégé is something I think we’ve talked about before, which is being looked at because the government somehow seems to think they’re too successful .

Larry Allen And so that’s definitely going to be an area that the GSA IG is looking at, and that’s protected guardians and joint ventures. What they’re looking for is to make sure that each part of these deals actually brings something to the table, and not just brings something to the table, but actually works. So what they’re trying to get away from is people who are window dressing, behaviors through which a larger company can unduly claim some sort of socioeconomic status. They will also look at whether some of these companies are actually controlled by each other or not. Are they really separate entities or are they different sides of the same coin? So again, the GSA IG is not alone in this. SBA has made this a high priority area, and I suspect the VA will as well. So if you’re in one of those protected mentor or partnership agreements, you really want to make sure you’ve got the paperwork right before the government comes knocking on your door.

Tom Temin We were both drawn to an article in one of the major newspapers, The Wall Street Journal, which reported that 40% of the stock market capitalization of the Standard&Poor 500 is under investigation by the Department of Justice. And that could include some of the federal contractors who have the dual burden of general economic regulation and federal specific procurement regulation.

Larry Allen Well, Tom, we are well aware that government contractors are the targets of audits. We were just talking about the GSA IG, but it’s not just the inspector general who can come see you as a contractor. Many contractors have found out the hard way that the Department of Justice can look at their books during a False Claims Act investigation. It can also be done by the Department of Labor for different issues related to work and employment. The EPA can come in and look, the Small Business Administration can come in and look at your small business outsourcing plans. That’s just a handful of the alphabet soup here. And I think what was interesting about this article is that it shows that whether or not you’re a government contractor, the industry in general is under the microscope to be successful. And people want to understand what makes you successful and are you defrauding the government? Are you hooking your business customers on sight? If you’re a company, particularly a larger company, but not just the larger companies, Tom. You really have to make sure you have your back office in order because people are watching, you’re not being paranoid. They are actually taking a look at what you are doing. And if you’re a contractor, that doesn’t always translate to your performance on an actual contract, it can be some of these other issues as well. So don’t go gently into this business world, with success comes scrutiny.

Tom Temin for sure And tomorrow, we’ll hear from one of the lawyers at the Center Law Group about the scope of the false claims investigations that Justice has launched. And now they are record numbers.

Larry Allen ok And any time people see, to be honest, any time you see that you’ve got career advancement going after a contractor for a high monetary settlement, that’s going to be a strong incentive for any young DOJ attorney.