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Contractors start the new calendar year with customers funded for the fiscal year. But some new rules and procedures will take some attention. To get an outlook for 2023, the Federal Drive with Tom Temin spoke with federal sales and marketing consultant Larry Allen.
Tom Temin Larry, let’s start with the funding aspect of all of this. Now, it was just a few days ago before New Years that the President signed the omnibus bill. But that doesn’t mean the money is in the accounts ready to go, does it?
Larry Allen Tom, that’s exactly right. The President signed the bill. But it’s going to take, I think, until the first two weeks of February before each individual federal office gets their official spending number from the Office of Management and Budget. It usually takes at least a month. And given the time of year, we’re in probably a little bit longer for OMB to get all of its work done, and then transmit the final spending figures to each office. So if you’re a government contractor, between January and now you want to keep doing what you have been doing. Understand that your federal customer is going to have money, and that the projects that you’ve been waiting to work on should be able to move forward. But there’s not going to be any spending commitment for the most part until those dollars hit the accounts.
Tom Temin In other words, agencies can’t obligate yet until they get the go ahead from OMB. It’s not a Treasury issue. It’s an OMB White House issue.
Larry Allen That’s right. OMB takes the congressional appropriations bill, parses it up, figures out what it means agency by agency, and then goes to the sub-agency level based on the budget and anything special that Congress directed in terms of earmarks, and then each office gets its number. And they’re off. They can do all the planning they want until then, but no obligations.
Tom Temin Right. So therefore, what is a good procedure for new projects in the meantime, since contractors technically can’t get obligated funds, and they can’t get paid, then. Should they start?
Larry Allen Oh, Tom, I think absolutely, you should start. I think you probably should have started a month ago, because we had a fairly good idea that this was going to happen. Although certainly Congress kept things interesting, as they usually do, right up to the last minute, contractors should definitely be out talking to their government customers doing the planning, doing the procedures that they would normally do to develop business. What the big difference between last fiscal year and this fiscal year, Tom, is there’s going to be just a little bit more time, a couple of months more time, for agencies to plan, to maybe do things that are a little bit in more of a strategic manner. And that’s going to benefit I think both contractors and government because everybody will have an opportunity to talk a little bit more, to plan a little bit more. It should lead to a somewhat longer buying season, although I certainly am predicting that most of the big spending will come in August and September.
Tom Temin Okay. And just to make sure we’re super clear on this, the contractors then should feel confident in expending costs pursuant to a new project, even though they won’t get paid for it until sometime after the funds flow into the agencies and the agencies can then sign off on purchase orders and invoices.
Larry Allen If you’re doing your business development costs, Tom, or even things like bid and proposal dollars, I think those are reasonable expenses to incur, particularly on any projects you’ve been following carefully. I wouldn’t obligate funds and spend things on a customer if they don’t have an appropriation yet; you may not get paid. But in terms of bid and proposal preparation, BD money, all that pre-sign-on-the-dotted-line effort. That’s stuff that can certainly be done now.
Tom Temin But if an agency says we’re planning on doing a new customer experience application, and we’re going to need 7000 hours of programming, and 6 million lines of code from you, you can’t start that coding and delivery of blocks of code yet.
Larry Allen That’s correct. I would urge all contractors to make sure that they don’t do work unless they have something signed by a contracting officer that actually obligates the government.
Tom Temin Confine your work to the whiteboard at this point, because markers are cheap, and coders are expensive. We’re speaking with Larry Allen, president of Allen Federal Business Partners. And there’s another issue that kind of popped up. This was a bill that the President signed regarding conflict of interest requirements for contractors, and this sounds like a lot of new busy work.
Larry Allen It is to some extent, Tom, because we already have existing conflict of interest laws on the books, but clearly this legislation that originated in the Senate is something that Congress felt was necessary. It’s called the Preventing Organizational Conflicts of Interest in Federal Acquisition Act. It doesn’t exactly trip off the tongue, Tom. But there you have it. And basically, the bill wants contractors and government contracting officers to look carefully for organizational conflicts of interest. When you’re talking about conflicts of interest, there are two basic types. There’s personal and organizational. And this really came about, I think, primarily because of a reaction to McKinsey and Company, where McKinsey provided consulting services at the same time for both the [Food and Drug Aministration], that oversees drug renewals and approvals, and for a pharmaceutical company that had actions in front of the FDA. That caught the attention of some of the lawmakers and here we are with a new conflict of interest law for all contractors.
Tom Temin Yes, luckily, none of the members of Congress ever have investments or stocks in companies to which legislation has affected. We just want to thank the Lord for that little lack of conflict of interest. But what about the conflict of interest when, say, a McKinsey or some sort of company helps with requirements development, and then bids on those requirements as a contract? That’s usually what you think of is organizational conflict of interest.
Larry Allen Right. And that’s still a big no-no too Tom. There are certainly laws on the books and more than one contractor, even experienced contractors, have gotten themselves in trouble by providing a lot of help to a federal agency on preparing a procurement, even some point helping prepare the bid documents. And then of course, they’re precluded from bidding on the requirement, because they’ve helped shape it too much. They may get paid for their work in preparing all that documentation. But that’s a percentage of what most of the contracts are that they would actually like to bid on. So if you’re a government contractor, you certainly want to be a good partner with your federal agency customer. But you don’t want to be so much of a partner that you’re doing all of their work for them, and putting your own business opportunities in jeopardy at the same time.
Tom Temin And getting back to this new law. There is a FAR change that is required. And there’s something interesting in the FAR, in the federal acquisition regulation that will need to be included as part of the rules here.
Larry Allen Yeah, I thought this was pretty interesting, Tom. The Senate actually included a provision that says the FAR counsel shall prepare an “illustrative example.” And the example must define a company’s conflict of interest based on a contractor providing consulting services to a regulatory agency, that also has employees working for the private sector client at the same time. Clearly, this is something that got under a particular senator’s skin, and it made it into the final version of the bill. We don’t see too many illustrative examples in the Federal Acquisition Regulations, Tom. But this is Senate language, now congressional language that directed Congress to do that in this circumstance.
Tom Temin And finally, TikTok seems to be in trouble pretty much everywhere you look in the government, at state level now. Some headlines on cable TV erroneously reported the House banned TikTok on federal devices, which they can’t do — the wrong branch of government. But the administration is considering that. What about contractors and their people with TikTok?
Larry Allen I think if you’re a government contractor working on any type of sensitive government project, even if it’s not technically classified, you really want to examine your TikTok use policy for the devices that you may issue to your employees. We have now a governmentwide ban that’s coming into place from the appropriations bill that was just signed. [The departments of Defense and Homeland Security] are two agencies that have already banned TikTok on their own devices. A number of states have also passed similar laws. It’s not far fetched at all, Tom, to think that government contractors, particularly those that work with DoD, DHS, or any type of sensitive project probably will come in for the next round of TikTok exclusions. If you want to do business on a government contract, you have to have a policy that says you don’t allow your employees to access TikTok on devices you issue to them. And it’s all about security. I’m not saying that that’s here now. I’m saying that I wouldn’t be at all surprised to find that that’s what comes next, maybe in the next session of Congress. And that’s something that contractors I think should get on, get out ahead of right now, Tom. Take the steps to monitor what’s going on, understand the risks associated with this app, and consider putting in place their own policies to mitigate that risk.
Tom Temin Yeah, I think so. Besides, you have to wonder about the mature judgment of anyone, an adult, that even looks at TikTok in the first place. It’s like people that like to drink Fireball Whiskey; you question their judgment. Same thing with watching TikTok on their phone. Just a personal opinion.
Larry Allen So for the record, about the only time I’ve ever used Fireball is to help me shovel the driveway during those rare Washington snow storms. It certainly provides some intestinal fortitude. But in terms of TikTok, I think you’re right. I think companies have to understand that they’re doing business with a government agency, they’re supporting an agency, they may have access to sensitive data. We know that there are risks associated with TikTok, allegations over close ties to the Chinese government, and particularly the amount of data that TikTok collects from its users, that data can be potentially leveraged to put an employee in a compromising position, which jeopardizes not just the employee, but the performance of the company. If you understand that there’s a risk and your government customer has already said, “Whoa, this is too much of a risk for us,” you as a government contractor ought to be taking a serious look at the TikTok issue.
Tom Temin Larry Allen is president of Allen Federal Business Partners. Thanks so much for joining me and let’s look forward to a great year in ’23.
Larry Allen I agree. Happy New Year to you and all of your listeners. And as always happy selling.