Don't be scared off by new rules for government contracts

By Adam Briggs
Godfrey & Kahn

As new stimulus dollars reach the marketplace and new public investments in industries such as energy and construction emerge, Wisconsin businesses continue to find new opportunities to play an active role in the nation’s economic recovery through federal government contracting.

From a business standpoint, the advantages of working with the federal government are alluring. Obtaining a government contract award means expanded markets, a predictable and reliable revenue stream and, in many cases, a substantial long-term return on investment.

Yet, even as Wisconsin businesses have more opportunities than ever to sell their products and services to the federal government, those engaged in or considering government contracting also face an ever-expanding set of federal regulations as lawmakers continue to demand unprecedented levels of efficiency, transparency and accountability from those getting federal money. For businesses, every new federal dollar comes with new strings attached.

In May of this year, for example, President Barack Obama signed the Fraud Enforcement and Recovery Act (FERA). FERA increases the federal government’s authority to bring fraud prosecutions and civil lawsuits against government contractors and recipients of federal money, including funds arising from the American Recovery and Reinvestment Act of 2009 (ARRA) and the Troubled Asset Relief Program (TARP).

FERA also expands the federal False Claims Act (FCA), an already far-reaching law carrying stiff penalties for businesses that overcharge the federal government. FERA extends FCA whistleblower protections to include not just contractor employees but even certain agents of a business accused of making a false claim. FERA also expands the federal government’s authority to demand documents and information from contractors without filing a lawsuit or criminal charges.

In addition, FERA nullifies the requirement that a false claim must be “presented” directly to the federal government to give rise to liability. Under FERA, even claims for payment that are never directly transmitted to the government can expose government project subcontractors to penalties if they are presented to general contractors and are higher than they should be.

President Obama also recently signed the Weapon Systems Acquisition Reform Act of 2009 (WSARA). Several WSARA provisions should be of immediate concern to defense contractors. One portion of the new law, for example, establishes a “Director of Independent Cost Assessment” to review defense contractor cost estimates and add pressure on contractors and subcontractors to itemize costs meticulously. Another provision gives the federal government increased authority to terminate defense projects if it decides that the project’s costs have grown excessively.

Defense contractors also should keep in mind that the federal government continues to expand its enforcement of federal export regulations. These regulations, including the State Department registration requirement, can apply even to businesses that never sell anything overseas and provide defense-related goods or services only to the U.S. military.

In March of this year, several federal agencies also unveiled new interim rules designed to ensure proper use of ARRA stimulus funds. One such rule would require certain contractors to document and report any use of any stimulus funds on an ongoing basis. Another provision is designed to require funding recipients to accept extensive new federal auditing authority as a precondition to receiving funds. Construction industry recipients can also expect new “Buy American” requirements. In addition, the Office of Management and Budget (OMB) issued guidance in June of this year on the types of information that ARRA funding recipients may be required to provide, including detailed “funds expended” and “jobs created” information.

More OMB guidelines expected for later this year will standardize and control federal agencies’ procurement practices, increase competitive pressure among contractors, and reduce the “outsourcing” of traditionally governmental jobs.

When added to the already-voluminous Federal Acquisition Regulations (FARs) and the many employment laws applying specifically to federal contractors, these reforms might raise questions about the time and cost required for successful government contracting.

But the government’s contracting rules — both new and old — do not require current government contractors to abandon the practices that have made them successful in the past, nor do they require would-be contractors to shy away from promising potential business partnerships with the government.

The ingredients of a good contracting relationship with the government remain unchanged. Businesses that adopt risk-reducing hiring and employment procedures, submit carefully drafted and competitive formal bids to the government, secure and define their subcontractor relationships, and closely monitor internal cost-accounting and pricing practices are in the best position to enjoy positive and profitable long-term relationships with the government.
 

madison.com ©2009 Capital Newspapers. All rights reserved.