All posts by : Shamima A

The Federal Acquisition Service should closely scrutinize pricing when consolidating multiple award schedule contracts to secure the lowest cost for government agencies, according to the General Services Administration’s Office of Inspector General.

FAS did not always use the government’s buying power when performing price analyses for MAS contract consolidation processes, the OIG said in a Monday audit report.

After studying 19 consolidated contracts from fiscal year 2022, the office found that FAS’ contract consolidating practice contradicts GSA policy and discourages contracting personnel from fully exercising their responsibilities.

Notably, FAS contracting personnel resorted to pricing comparisons with other government contracts instead of using transactional data reporting when performing price analyses.

The OIG report observed that FAS’ price analyses are inconsistent and ineffective, thus restricting the government’s target of establishing reasonable pricing for products and services under consolidated contracts.

The audit concluded that FAS failed to fully comply with the GSA guidance and federal regulations when carrying out its contract consolidation initiative.

To address the problem, the OIG called on FAS to establish an oversight process for contract consolidation to ensure that agency personnel adhere to GSA policy and assess all supporting contract documents.

The report also urged FAS to revisit previously consolidated MAS contracts to check if their products and services met federal regulations and GSA policy requirements.

Deputy Secretary of Defense Kathleen Hicks said the establishment of the Defense Security Cooperation Service is one of the results of a tiger-team review aimed at improving the foreign military sales process and other security cooperation efforts.

“Now, the launch of the Defense Security Cooperation Service comes at a pivotal moment for America’s security cooperation enterprise. Because the assistance you provide our allies and partners is more in-demand than ever before,” Hicks said Tuesday during her speech at the Pentagon.

“Why so much demand? It’s because like-minded nations and democracies around the world, from Eastern Europe to the western Pacific, are worried about naked aggression in their own backyards, to an extent that they haven’t contemplated in a long time,” added the 2024 Wash100 awardee.

Federal News Network reported that DSCS will help ensure that security cooperation officers are better prepared to work with allies and partners during the foreign arms transfer process and will provide a range of services, including human resources training, budgeting, policy support and family care.

“Launching the DSCS has been a priority for two reasons. First, it’s a critical pathway to strengthen relationships with allies and partners, which is a key component of our national defense strategy. And second, DSCS will develop a workforce that can adapt to the dynamic geopolitical environment while simultaneously bringing expertise into the security cooperation environment,” said Amanda Dory, acting under secretary of defense for policy.

Register now to attend the Potomac Officers Club’s GovCon International Summit on Oct. 10. Listen to speakers as they discuss how international partnerships, emerging technologies and coalition warfare are reshaping the defense landscape and how the U.S. can stay ahead of the curve.

The U.S. Army’s Program Executive Office Enterprise Information Systems has changed its name to Program Executive Office Enterprise.

PEO Enterprise said the change became official on Tuesday and was approved on Sept. 4 by Assistant Secretary of the Army for Acquisition, Logistics and Technology Douglas Bush, a 2023 Wash100 Award winner.

The name change aligns with the PEO’s mission of delivering enterprise business offerings that drive U.S. Army dominance. The new name and modernized branding coincide with the organization’s digital transformation initiative.

The rebranding follows the PEO Optimization in October 2023 when the PEO EIS network portfolios were transitioned to other PEOs. This enabled the PEO EIS to focus on mission-critical Army software and new enterprise requirements, including the United Data Reference Architecture.

The new name was first previewed during AFCEA TechNet Augusta in August 2024.

Bill Hepworth, program executive officer of the PEO, noted that simplicity is one of the core pillars of the organization, said, “The new PEO Enterprise branding has been simplified to reflect a more modern, agile organization with a mission that’s broad and flexible enough to include enterprise software and technology services, both now and in the future.”

The organization, known as the Program Executive Office, Standard Army Management Information System when it was established in 1987, changed its name to PEO EIS in 2001.

The Department of Defense has released a document establishing policy and outlining the authorities for the administration of DOD’s Value Engineering Program.

The latest DOD Instruction took effect Tuesday, Oct. 1, and was approved by Heidi Shyu, DOD’s undersecretary for research and engineering and a 2024 Wash100 awardee.

Value engineering, or VE, allows DOD components to analyze the functions of projects, programs, systems, products and services, among others, and reportedly plays a key role in helping the department meet its mission of providing the military with the equipment and other systems needed to deter war and protect national security.

The issuance states that DOD components should implement a VE program to foster innovation, enhance value and reduce costs over the acquisition and operation life cycle.

A component VE program has two areas: a government-only program using VE proposals to implement changes and a government contractor process that uses contractor-initiated VE change proposals, or VECPs, to implement government-approved changes.

The instruction outlines the responsibilities of the undersecretary of defense for research and engineering—or USD R&E—and DOD component heads, as well as those of the two governance bodies: the department’s VE executive steering group and the VE management advisory group.

Brian Mazanec, deputy director for the Administration for Strategic Preparedness and Response’s Center for Preparedness within the Department of Health and Human Services, said a cybersecurity division within the Office of Critical Infrastructure Protection serves as the focal point for ASPR’s cyber work with the healthcare sector, Federal News Network reported Tuesday.

According to Mazanec, the cyber division has employed an “initial tranche” of federal personnel and incident response is one of its core responsibilities.

For instance, the ASPR team will work with the Cybersecurity and Infrastructure Security Agency and the FBI to help respond and provide support in the event of a cyber attack on a major hospital.

“We come in and try to understand, well, what are the patient impacts, what systems are down, what things can we offer to potentially help or be monitoring, to maybe take further actions to again, blunt those patient impacts,” the deputy director said.

Mazanec noted that “communication and education” is another key facet of the cyber division within ASPR, which he said is bolstering its proactive outreach efforts on cyber issues within the health sector.

In December 2023, HHS released a concept paper outlining the planned steps to improve cyber resilience and ensure patient safety as part of its cybersecurity strategy for the healthcare sector.

Attend the Potomac Officers Club’s 2024 Healthcare Summit on Dec. 11, and explore the transformative trends and innovations shaping the future of the U.S. health care sector. Register now!

Three times the CIA awarded a contract for medical services to the same company. Three times the losing bidder protested. Finally a court said the protestor might be right. But it let the CIA go ahead with the original award anyway. Haynes Boone procurement attorney Zach Prince shared lessons learned on the Federal Drive with Tom Temin.

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Interview transcript: 

Tom Temin I guess this protester was nothing if not persistent and ultimately right in some sense, and they still lost. Tell us more.

Zach Prince Yeah, that’s right. So this protest was going on for a while in many different iterations. So it started back in 2021 when the agency put out the RFP the first time, 2022. They got three offers. They made an award. The PGI continues to be the awardee, and there was quickly a protest. And then they took corrective action and there was quickly a protest. And that cycle continued until pretty recently.

Tom Temin And PGI was actually a company, Patriot Group International, and the company protesting was Assessment and Training Solutions Consulting Corp.

Zach Prince Yeah, that’s right. That’s right. That’s the shorthand that the court uses. So I’m falling into the pattern.

Tom Temin Sure. And what was the CIA exactly buying here?

Zach Prince You know, it’s a little bit vague and I don’t have the statement of work and it might well be classified, but they described it as international tactical and non tactical medical support services.

Tom Temin Yeah. Okay. Sounds like field doctors or something. Well, it could be anything. That’s what they could have said. But you don’t know what they’re actually doing. All right, well. So three protests. What were the grounds and why did it keep lingering like that?

Zach Prince The last protest at GAO, at least that GAO summarized, the crux of the argument was about ATC arguing PGI violated solicitation formatting requirements. So the argument was that PGI used a trick to shove more text in to its proposal than it was allowed. You know, these RFP is often contain very strict requirements or limitations for pages. You can only have X number of pages in this volume, X number of pages in that volume. And because they’re familiar with the tricks you can do to get more text in, the agency here, at least said it has to be 12 finds. And I think they indicated what the margins had to be in the line spacing. I mean, you can shove a lot of text in if you have no margins essentially, and lines that are under one rule. They said you can’t do any of that.

Tom Temin Microsoft Word goes down to, I think, eight point type, which is pretty darn small. So, yes, small margins, teeny type and close line spacing, you can get unlimited even in 6 or 7 pages.

Zach Prince Yeah, that’s right. So ATC argued that that’s what PGI did here, that there is an exception in the RFP for smaller font sizes for charts, graphs, tables and figures. And according to ATC, at least that was abused by PGI that they shoved a lot of explanatory text that really was part of their technical volume and their past performance volume into these supposed tables when they really weren’t supposed to be used for that purpose.

Tom Temin Boy, that is a highly technical grounds for protest. It wasn’t on the technical proposal. It wasn’t on the pricing. It wasn’t on the services offered, but the format of the bid.

Zach Prince Yeah, I mean, they had a lot of that other stuff too. I mean, you know, you file processor go typically, I don’t want to say most people take the kitchen sink approach. But you see a lot of those and go address those issues too. But it was much more as an afterthought because that wasn’t the core of the argument. Usually when you get to the point where you’re arguing that the agency’s technical evaluation was wrong, it’s often subjective and you’re likely to lose. So you want an objective ground that you can win on if you’re going to have a real hope and a protest.

Tom Temin All right. We’re speaking with Zach Prince. He’s a procurement attorney and a partner at Haynes Boone. But when it finally got to the final round of the court, that’s where the findings kind of got interesting.

Zach Prince Yeah. So the court started off by saying actually GAO is wrong. The RFP did not just give you carte blanche to put anything you want into a table and call it, you call it a table, you put a box around it and now you can do anything. With that, which GAO had essentially said that the text, the RFP, really did allow you to put whatever you want in those tables within certain pretty broad limitations. The court said, no, that’s not true. But it doesn’t matter because ETSE is complaining of something that it did. It did the same exact thing, just to a lesser extent, where it’s you shove the explanatory text in to suppose the tables, right?

Tom Temin So it used the proverbial nine point type instead of the eight point type and accused the other one. It’s kind of the pot calling the kettle black here.

Zach Prince That’s right. And the court used a whole bunch of analogies that had sought, including the part as the court said, the pot may choose to call the kettle black, but it’s a sure fire way to lose a case.

Tom Temin Right. So what what are the lessons learned here then, for bidders?

Zach Prince I have first is if you’re going to take a position as to the meaning of a solicitation, you have to be consistent. You can’t have your cake and eat it, too, to maybe mixed metaphors. But if you’re going to take the position that it only allows you to do certain things then stick with that in your proposal. Because otherwise if you complain later that another party did something else, you don’t have a basis to argue anything. The other point here though, that I thought was interesting, the court says, yeah, we’re agreeing with PGI and the government and it’s this case is done. But even if we didn’t, we still wouldn’t grant a injunction. We wouldn’t stop this procurement because this is national security and it’s at stake.

Tom Temin So national security almost overrides many common protest grounds.

Zach Prince It does, or at least it can. You get it at the court. They have to grant an injunction to stop performance, right? It’s not, you don’t get a mandatory stay of the procurement like you do with GAO. The court has to do this balancing test to decide if you get a stay. Usually the government just stays it anyway. It’s easier that way. You don’t waste time and money litigating whether an injunction is appropriate. But here they didn’t. The government didn’t agree to stay it, apparently. The court said with this balance, they set aside the fact that you are losing on the merits. Even if you had a real argument here, the public interest is clearly served based on a classified declaration that the CIA submitted to the court, at least, in favor of letting this continue. This is something the agency needs. National security is a stake. This has got to continue.

Tom Temin Well, one wonders what the court might have said if the grounds of the protest were not override of all in the court’s opinion. All right. Formatting and what font you used is a technical violation of the solicitation, but it’s not anything content wise. Suppose there had been an organizational conflict of interest in the winning bidder. Or something substantial like that, where there’s real ethics involved. Again, rhetorically, just wondering what the court might have decided in that case.

Zach Prince I suspect that the balance of interests would have been different. But it’s hard to say because this procurement has gone on for three years and apparently it was really quite significant for the government. They needed whatever it was that’s being vaguely described in this procurement quite badly. And so it might be the case that even if the agency had some real issues here, the court still would have said, no, we’re not going to enjoin action. But it’s hard to say because the public interest and trust in the procurement system or saving the taxpayer dollars and sure, you’re getting the best goods and services. I don’t know that that weighs more strongly, I think, in favor of an injunction. But that wasn’t the case here.

Tom Temin And there is the question too, if that the CIA said 12 point type, 1.5-inch spacing and one-inch margins, ten pages, maximum, whatever they said. I’m making that up. Then, you know, why did the all the parties not do that? And the CIA didn’t say, folks, we said 12 point type, 1.5 line spacing and one-inch margins, ten pages. Go back and give us again that.

Zach Prince Yeah, I think they had already gone back and redone enough things. They were not going to redo this, especially where both parties made the error that was being complained about.

Tom Temin Plus, if they have people lying in kinetic situations that need medical care. Again, there’s the overriding interest. Interesting case. Procurement attorney Zach Prince is a partner at Haynes Boone. Thanks so much.

Zach Prince Thanks for having me.

Tom Temin And we’ll post this interview with federalnewsnetwork.com/federaldrive. Subscribe to the Federal Drive wherever you get your podcasts. And this program note, be sure to register for day two of Federal News Network’s online Cyber Leaders Exchange. Hear the latest thinking from top federal cybersecurity practitioners from throughout government today at 1 p.m. here, the National Security Agency’s Christina Walter. Register now at federalnewsnetwork.com. Sponsored by Carahsoft.

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.

The FBI and the Defense Criminal Investigative Service’s search of Carahsoft Technology Corp.’s headquarters last week is sparking new questions and concerns about the long-term viability of vendors selling in the federal market and dependable access to specific technologies by agencies.

Former federal executives and industry experts said it may be time to rethink the IT value added reseller (ITVAR) approach as the FBI and DCIS raid shined a brighter light on supply chain risks that most vendors and agencies generally glossed over until now.

“I’m hearing a lot of client angst,” said one industry consultant, who like many others for this story requested anonymity for fear of hurting their relationship with Carahsoft. “A lot of them are asking questions about what is next and what does this mean. While I don’t think anyone knows yet because there isn’t a lot of information out there, it’s unclear what this means for my clients, for Carahsoft and for their government customers.”

One industry source, who works for a technology company, said almost all of their federal business goes through Carahsoft, causing them to ask more questions about how they sell to the federal market and whether they need to partner with other ITVARs.

“If they stop processing orders, even if for a day, we will lose money. So the question now that is coming up is should we allow that much business to go through one reseller?” said the source. “Even if this event didn’t happen at the end of the fiscal year, what do we do? I think the government and industry are asking that question now. I expect there to be fallout on the supply chain risk management side no matter what happens to Carahsoft. That is where everyone is freaking out.”

Single source of supply concerns

For several technology companies, Carahsoft is their main conduit to the federal agencies. In fiscal 2023, Carahsoft won $1.4 billion in federal contracts. The company had won more than $960 million so far in 2024, according to the USASpending.gov portal.

Additionally, Carahsoft says it works with more than 10,000 government contractors, value-added resellers, solution providers and system integrators. These include nearly every major technology supplier to the government from Adobe to AWS to Dell to Google to Microsoft to Splunk.

For many small and medium-sized businesses, Carahsoft is their best, and maybe only, route to the federal market.

“Having exclusive agreements and single sources of supply causes potential challenges to a lot of us and the government,” said an industry official, who is a former federal executive. “Agencies may not be able to access the best technology if something happens to one of these resellers. We all face a higher supply chain risk in events where certain companies or channels don’t become available.”

It’s unclear what actions, if any, the FBI or Justice Department will take next, but should the government decide to suspend or propose Carahsoft for debarment, the ripple effect would be immense.

As several industry sources said, the FBI and DCIS don’t raid companies if it’s just a civil matter. Without knowing any details of Carahsoft’s situation, sources said history has shown if the FBI shows up, there usually is something more serious and illegal going on.

Another industry source, who has been involved in civil False Claims Act cases in the past, said usually there are meetings with the Justice Department and the company, and eventually the company writes a check to settle the allegations.

FBI raids are “extreme”

But, the source said, when the FBI decides to arrive at your door unannounced, it’s usually an “extreme” situation.

“I’ve had clients who pushed back, delayed and then negotiated what the Justice Department really wanted. Then, you do a rolling release of documents, and even sometimes you will fall behind the schedule and the government isn’t happy, but I’ve never seen it get to the level of a raid,” the industry source said. “This had to be a massive non-compliance with a lot of missed deadlines and something criminal going on. It was our operating assumption that you try to narrow it to lessen your burden, but you couldn’t say ‘no’ to the [civil investigative demand].”

Other sources said the FBI and DCIS served Carahsoft on Sept. 24 with two criminal and one civil subpoenas.

Trey Hodgkins, a long-time federal procurement expert and now senior vice president at Phoenix Strategies, a government affairs firm, said he could see agencies looking for alternatives to Carahsoft until they know more about what’s going on.

“They will look at those contracts and see if they can this technology from somewhere else. If I was government employee and this was going on, part of my thinking would be how do I get what I need and not buy it here,” he said. “I would think companies also are examining whether they can partner with someone else, especially if an agency is not willing to use that company for now.”

The concerns expressed by several industry executives aren’t just about Carahsoft, but around the entire ITVAR approach.

Reseller model is worth revisiting

While many industry experts praised the role of value-added resellers, which also include companies like Red River, World Wide Technology and the Immix Group, they said the rise of these vendors as an easier path for how many companies go to the federal market is more a problem with government acquisition rules than with the companies themselves.

“Other equipment manufacturers are incentivized to go through one VAR and not many. There are things like deal registration and exclusive agreements that give them reason to work with only one or a limited number of companies,” said the former federal official, who is now in industry. “There are downstream risks from that are biproducts of the market and do not lead to healthy outcomes for the government.”

Aileen Black, a former executive with Google, VMWare and other federal contractors, said ITVARs provide a much needed service for many contractors and the government alike.

“Carahsoft, for example, provides infrastructure at reasonable cost to have all contract vehicles that allows the government to buy things especially from innovative companies,” she said. “Carahsoft does this at an extremely low margin compared to going through a big systems integrator. They do a great service and provide innovation.”

Additionally, industry officials say, ITVARs also reduce the risk and administrative burdens for companies to work with the government.

For example, one company looked at what it would cost to work directly with the government and their estimate is it would take 5-to-10 full-time employees to manage and oversee the entire effort. These employees would have to do everything from managing contracts to keeping up with pricing changes to keeping on top of all the legal and cybersecurity compliance requirements and much more.

For a small or medium-sized business, having to hire as many as 10 people is a huge cost that they either can’t afford or would rather use the money for business development or technical skills.

“This is an indication of the barriers that the government poses. I’m not faulting the government, but they have to understand why these barriers exist and why many companies can’t afford to overcome them,” said the former federal official. “Many large companies also support the ITVAR model. It’s not a mission critical effort for them to hire a team to manage contract vehicle access. Outsourcing this work to a VAR means they don’t have to worry about it. But it also means taxpayers are paying more than they have to for these technology services.”

Procurement rules are too burdensome

The challenge, Black and other industry executives say, is the ever-growing complexity of the federal acquisition system.

Alan Thomas, a former commissioner of the Federal Acquisition Service in the General Services Administration, said while there are good reasons for some of the complexities in the federal acquisition sector, this situation may be a catalyst for agencies and industry alike to revisit the question of whether the processes need to be so challenging.

“Carahsoft is a billion dollar company because the government requires companies to meet so many conditions,” said Thomas, who is now founder of AlphaTango Strategies. “The government must look at the root causes that require the use of these VARs. What are the requirements laid on vendors that causes folks to look for ways to reduce their risks? We need to look at those requirements and consider some pruning.”

The former federal executive added whatever the issue is with Carahsoft and the third party they have done business with, it’s a symptom of the larger issue around the increased risks of the supply chain.

If companies are unwilling or unable to work with the government, they will find alternative and less risky ways, in this case intermediaries like ITVARs.

“Why don’t companies want to work with the government directly? Why take the risk? Whether it’s the price reduction clause on the GSA schedules or the hassle of getting on and maintaining contracts, using an intermediary reduces their risk. They also see some legal and administrative benefits too,” the source said. “But there needs to be some accountability on the procurement ecosystem side too. If there is a limited number of suppliers that have captive market because it’s too hard to do business with the government, the government has to consider whether it can lower policy barriers, figure out ways to ensure flexible pricing and other common obstacles.”

There are some signs that the trend is starting to reverse. Microsoft recently reversed course and started selling directly to the federal market instead of going through resellers.

Sources credited GSA for trying to lower the risk to vendors by implementing new programs like the Transactional Data Reporting (TDR) initiative to replace the Price Reduction Clause.

Congress paying attention

Additionally, Congress is starting to pay more attention to this issue. Sens. Brian Schatz (D-Hawaii) and Pete Welch (D-Vermont) recently wrote to GSA Administrator Robin Carnahan wanting to know how the agency is mitigating the risks of relying on too few contractors to operate such a large share of the federal government’s IT systems.

“This is particularly true for software that has kernel access and high-level privileges to critical government systems,” Schatz and Welch wrote.

Lawmakers haven’t shown any public interest in the Carahsoft situation, spokespeople for both the Homeland Security and Governmental Affairs Committee and Rep. Gerry Connolly (D-Va.) said they had no comment on the current situation.

A former Hill staff member said they wouldn’t be surprised if certain lawmakers are watching this situation closely and starting to ask some questions, specifically of GSA to try to understand what the DOJ is going after.

“It definitely would’ve piqued my interest when I was on the Hill,” the former staff member said. “I don’t think the reseller issue is widely understood on the Hill so I wouldn’t be surprised to see some questions about how it works and how can GSA or any agency ensure access to technology they need.”

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.

Tom Temin And this rule applies to a pretty specific slice of the whole question of organizational conflict of interest. Tell us more.

Stephanie Kostro Thanks, Tom, and it’s great to be speaking with you. So we have long anticipated a rule here from the Department of Defense in response to a section, specifically Section 812 of the fiscal year 2024 National Defense Authorization Act. And this is really targeted at consulting services provided by contractors to not only the Department of Defense, but potentially China, Russia, other countries that are on the lists of thou shalt not do business with for a State Department or the Department of Commerce. And so we’ve been eagerly anticipating to see what shape this proposed rule takes. And I’m grateful that it’s been released. We do see that it does apply to particular NAICS code, which is 5416, and that is management, scientific, technical, consulting services. And it does impact any company that might be doing business with those countries that I mentioned earlier. There is waiver authority, which we were eager to see sort of how the department couched that ability to apply for a waiver, to get a waiver and also a conflict of interest mitigation plan, which we are also grateful to see incorporated into the proposed rule.

Tom Temin Right. In other words, this would somehow give contracting officers a little bit more discretion and that the fact that a certain company is doing business, say, with China, is not I don’t know what the legal word is, prima fascia, that they cannot do business with the United States.

Stephanie Kostro Exactly. So when I look at language like a conflict of interest mitigation plan, it allows the company to take a look at the work that it’s doing for the department, but also for those other governments and saying, all right, so where is the potential for conflict of interest here? What am I, what steps are we taking to mitigate that COI, and is that mitigation plan acceptable to the contracting officer? I will say the threshold for getting the waiver is pretty high. It is the secretary of defense, the undersecretary or anybody within that chain who is Senate confirmed. And so it is a very high bar to get to that waiver. It’s not just the contracting officer. And so I appreciate that there are two elements here, the COI mitigation plan and the potential for waiver.

Tom Temin Right. And does this, in a practical sense, only apply to the large consulting firms, the giant ones that we all know their names that are also among some of the largest federal contractors, or are there small companies that also may have a niche work and they’re helping design a boat ramp in China somewhere?

Stephanie Kostro It’s a great question, Tom. So to unpack this proposed rule a little bit. So the offer has to certify that themselves, their subsidiaries and their affiliates don’t do these consulting services with the covered foreign entities. In addition, this does apply for contracts below the simplified acquisition threshold. So for services. And so as we move forward, it is going to impact not just the big guys, but anybody who does these kinds of services or provides these kinds of services within that NAICS code in particular.

Tom Temin All right. And what is PSC’s kind of official position representing so many services contractors that you’re okay with the high bar required?

Stephanie Kostro We appreciate the fact that the conflict of interest mitigation plan can be reviewed by the contracting officer. We very much like the fact that not everyone at the highest of levels needs to look at these in what can be very lengthy mitigation plans. The waiver authority, it’s a great question. I understand why it’s written this way. I suspect this is an area where we may say, can we have a little bit more discretion here? To be honest, this is a wait and see how often would a waiver be invoked? Who’s going to be the canary in the coal mine here, in terms of who’s going to get the first waiver and for what kinds of services? And so as this proposed rule makes its way through the process, and we’ve got 60 days to comment on it, PSC will pull our members like we usually do, and and see what they would like us to represent as far as comments.

Tom Temin We are speaking with Stephanie Kostro. She’s executive vice president for policy at the Professional Services Council. And as you noted, this was in the 2018 National Defense Authorization Act. You wonder what took them so long.

Stephanie Kostro So this particular proposed rule is a direct result of the 2024 Authorization Act. There was a similar, there was a foci mitigation and foci is that foreign ownership and control and influence. That was in the 2018 bill. This kind of is in parallel with not only that, but a broader act called the Preventing OCI in Federal Acquisition Act, which was the action items for that were headed to the Office of Management and Budget. So it’s the 2018 NDAA, the 2024 NDAA, and this preventing OCIs organizational conflicts of Interest and Federal Acquisition Act. And in fact, GAO, the Government Accountability Office, did an assessment of where we stood with all three of these acts, and released a report this summer. And I’m glad to see that we’re finally seeing action, this has been long anticipated. How is the government going to tackle these things? Is it just going to be China or are we going to add Russia? We now have answers to those questions. And again, the waiver authority and the conflict of interest mitigation plans, these are essential for us. So we appreciate that they were included.

Tom Temin I would think the complication comes from the fact that it’s unlikely that the big companies, and I don’t want to name anyone in particular, but it seems likely they would have a subsidiary overseas staffed by local nationals that would do the work there, and somehow the profits get back to the partners here, as opposed to sending Americans from the McLean office, over to Beijing and then from thence to some distant province where they’re designing underground bunkers to help them with the architecture. I’m making an extreme example. But isn’t that the reality you think of the practical quality of this?

Stephanie Kostro Yeah. When you mentioned earlier some of the smaller firms, and those are not the ones you’re giving in your examples here. The large firms oftentimes would have a subsidiary. You think of the large management consulting firms and you realize that they are global, and they have offices in all of the major cities around the world, Beijing, Shanghai to be included, Moscow even. And so what the expectation here is from the government, I understand the expectation is that those companies would have conflict of interest mitigation plans in place to make sure that there’s a bright line distinction between the work being performed by local hires in those capitols or elsewhere. And then the Americans who are doing work for the Department of Defense. And so it’s just a matter of laying out what’s in that mitigation plan, and making sure that there is that bright line distinction.

Tom Temin It works in reverse, too, for companies from countries that we’re actually friendly with. Even so, if they want to have a defense business, there’s all kinds of rules that create subsidiaries in effect with almost a firewall between the board running the U.S. piece, and the French or the Belgian or the Canadian piece. And it’s pretty common.

Stephanie Kostro It is common. And I mentioned earlier this FOCI, this foreign ownership control and influence. There are foreign companies that have U.S. subsidiaries, and there are U.S. companies that have foreign subsidiaries. And oftentimes it’s not just the U.S. law, but if you’re operating in a foreign country, they have their own laws about bright line distinctions. And so, again, global economy, global industry, making sure that we are being responsive to what the U.S. government wants, but in a common sense way.

Tom Temin So and again, in a practical sense, we’re more worried about China taking over Taiwan, than we are about Canada taking over Long Island.

Stephanie Kostro I don’t know. I’m a Long Islander, I don’t know if I agree with that assessment, but fair enough.