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Late last week, the Office of Management and Budget released another in a series of pandemic memos. Now it looks as if there is solid commitment on the part of the government to ensure contractor employees, who can’t get on premises to do their work, to get paid leave. That’s both a matter of equity and to ensure contractors stay in a ready-to-roll state. For industry reaction, Federal Drive with Tom Temin turned to the president and CEO of the Professional Services Council, David Berteau.
Tom Temin: David, did that last memo look like what contractors felt they needed?
David Berteau: Tom, thank you. It’s a memorandum that we were anticipating for quite some time. There’s been lots of discussions about the pending OMB guidance memo on what’s known as section 3610 of the CARES Act. And I think OMB had an opportunity here to provide guidance that really clarified a number of issues. In fact, as you know, PSC and a number of other trade associations had submitted a letter to OMB asking for some additional clarity in the guidance associated with that. The memorandum in some ways provides that clarity. But in other ways, it reinforces the inconsistencies that we’re already we’re seeing across the agencies or even within the agencies. And you know that – it builds on an earlier OMB memorandum, one you and I discussed last month, which was issued on March 20. And that’s the one that emphasized the maximize teleworking, which we think has been executed by and large across the agencies. But it also emphasized the need to maintain key personnel and skilled employees in a mobile ready state. And actually, section 3610 of the CARES Act was designed to help agencies do that by reimbursing them for some of their costs. The statute itself has a number of definitions that are unclear or at least that we see agencies have interpreted in different ways. I’d be happy to cover some of those. And unfortunately, the memorandum from OMB did not actually clarify many of those. It did create a clear start date, effective date of March 27. Although it doesn’t prohibit agencies – and some agencies have done this – of covering costs prior to March 27, because section 3610 actually has words that during the emergency that was declared as of Jan. 31. And so there’s some evidence that Congress intended for it to go all the way back to that emergency declaration.
Tom Temin: So there’s some wiggle room apparently on the part of agencies and you’re seeing inconsistency in the dates over which they’ll cover this paid leave or what else? What are some of the variations you’re seeing?
David Berteau: The dates are there, the extent to which companies can start billing for these costs before the contract has been modified. Some agencies have issued guidance says you can go ahead and start including those costs in your invoice for reimbursement. The question of what’s included in reimbursement, you know, the OMB memo clearly says that you reimburse at contract or billing rates, but that it should not include profit or fee. And yet in many cases, particularly, for example, fixed price contracts, those billing rates include an assumption of basis of estimates for fees in those billing rates themselves. And so there’s a lot of ambiguities that still need to be worked out. Unfortunately, it’s not very good if these are worked out one contract at a time and one Contracting Officer at a time so what we were looking for from OMB was enough clarity that would provide some consistency. And then finally, I think it’s important to remember both from the CARES Act point of view and actually from much of the broader guidance that the White House has put out, that is not just a question of maintaining performance on the contract. It’s a question of, in fact, keeping the missions going, keeping all of the government operating, and keeping people employed and on the payroll. The economic benefit of that, the governance benefit of that, and that gets short shrift in this OMB memo unlike some of the other memos that we’ve seen from other agencies, which clearly emphasized the need to keep Mission Operations going to keep companies working to keep civilians, federal civilians working as well. And to keep people on the payroll. These are important broader issues that we would like to have seen addressed in the OMB memo.
Tom Temin: We’re speaking with David Berteau, president and CEO of the Professional Services Council. So basically, you were looking for a bullet-point-by-bullet-point start date, allowable costs to be reimbursed and types of work to be reimbursed – all of these things to be spelled out by OMB and that just didn’t happen.
David Berteau: Well, what you don’t want is you do not want to undermine the contracting officers’ roles and responsibilities. What you want to do is to emphasize that in the execution of those roles and responsibilities, there are certain characteristics which they should take into account. And that gets back to the broader question of you know, keep the government operating not just the part of the government that’s addressing coronavirus, but all of the government operating to keep people working and to keep companies getting paid so that they can stay in business and reduce the economic impact. It was those broader things that we think contracting officers should take into consideration. And would have been useful had OMB emphasized that more dramatically. There are other things going on, of course, across the board as well, you know, that I think are worth mentioning. You know, one of the things that OMB emphasized in their previous memo and that actually, both Federal Acquisition Regulation rules and defense supplement rules have been issued over the last few weeks to accelerate the payments to companies, right, and particularly for small businesses, where cash flow may be a real problem. And PSC recently issued a press release praising some of the government’s actions there. I’ll provide you a link to that so that you can post it on your website. But we think it’s really critical that the government accelerate payments across the board wherever possible. Not just to small business, but even to all businesses in order to keep the cash flow going. This is one part of the economy where the funds are already appropriated for fiscal year 2020, so it’s not going to cost additional money. And it would be useful to get that money into the hands of the company so they can keep paying their workers and keep the economy going.
Tom Temin: And there’s also even a few little shoots of thought of reopening parts of the government.
David Berteau: Well, you saw last week that the White House posted a statement of three phases of reopening and those phases are each judged by a variety of characteristics that have to do with testing capabilities and where the disease is going and what the incident is, etc. And we don’t have a timetable for these yet, but one of the lessons that we’ve learned, I think, from the past is that bringing the government back after people have been away for a while is not a seamless “just snap your fingers and it’s done in an instant” kind of thing. And in addition, you’re likely to have at least in the first phase and maybe in the second phase as well, a requirement for instance for agencies to continue – everybody has to be six feet apart, or you’re wearing masks, etc. And there are a lot of work spaces in the federal buildings – you’ve been in them and you’ve seen them – where it’s pretty hard for people with the existing workforce to stay more than six feet away from everybody else. So there’s some real questions as to how this is going to come into play. Part of those questions would be where’s teleworking actually working today? And you know, many of our companies 80% or 90% of their employees are teleworking and I think it presents a really unique opportunity for the government to revisit how it buys services because, all too often as you’ve seen, many of these contracts are just buying people labor hours, labor categories, I want Joe sitting at this desk outside my office, rather than actually focusing on getting the results delivered that the government needs to have in exchange for its money on these services contracts. So a focus on getting better results and measuring those results as opposed to measuring input would be a real welcome benefit from this whole price and in the reopening there. So we’d love to see that happen.
Tom Temin: I guess people are at the point of saying, “Well, you know, Old Joe is great to have out there doing all that work, but he does eat sardines for lunch. So maybe it’s best if he stays home and still does the work?”
David Berteau: Well, hopefully, we’ll focus on getting the real results needed there. Meanwhile, of course, Congress has a challenge as well, in addition to the activity going on with, you know, the small business funding that ran out from the CARES Act and consideration of the next emergency supplemental, whatever it’s going to be. There’s also the regular order provisions of you know, the National Defense Authorization Act and the full year appropriations. We saw some real signs of progress in the past week, when the house appropriations committees sent out the allocation numbers for each of the subcommittee’s the staff are marking these things up. You know, Congress may not be here, but the work is moving forward at the PSC we have a number of provisions that we’re pushing in the National Defense Authorization Act. And of course, we think that the single most important thing Congress could do to combat coronavirus and the economic impact would be to enact the FY 2021 appropriations on time in advance of the start of the fiscal year on Oct. 1. This will provide certainty for agencies of what they’re going to get in FY 2021. And it would allow them to obligate the available funds for FY 2020 without having to hold them back due to the uncertainty of what’s going to happen after Oct. 1. So we’re encouraging customers to move out on all of those fronts as rapidly as possible under the circumstances.
Tom Temin: David Berteau is president and CEO of the Professional Services Council. Thanks so much.
David Berteau: Thank you, Tom.
Tom Temin: We’ll post this interview at www.FederalNewsNetwork.com/FederalDrive. Subscribe to the Federal Drive at Apple Podcasts or Podcastone.