Interview transcript:
Aron Beezley First of all, federal funding for R&D, or research and development, at colleges and universities has been steadily increasing over the past decade or so. So agencies such as the Department of Defense, Department of Energy, National Science Foundation, NIH, et cetera, all rely on universities and colleges to carry out vital research. And so in many cases these days, the line between what is considered a grant or a contract, that activity is becoming blurred with increasing frequency. And so universities are now performing work that falls squarely under the Federal Acquisition Regulation, or FAR, which is the regulatory framework that governs traditional government contracts. And universities are also finding themselves being subject to agency-specific supplements to the FAR, such as, for example, the Defense Federal Acquisition Regulation Supplement. Now, at the same time, universities are also generally subject to what’s called the Uniform Guidance, and that pertains to grants at universities. And so universities, for a long time, have been familiar with and used to complying with what is now codified and referred to as the uniform guidance for grants, but they’re also having to comply with additional rules and regulations under the FAR, et cetera, that they haven’t had to comply before. So not only are you getting increased federal funding, you’re getting increased university participation in grants and federal contracts. And so universities and colleges are now being subject to more rules and regulations. At the same time, you’re getting increased scrutiny from federal agencies, inspector generals and the Department of Justice. And so this has really created the perfect storm for colleges and universities, whereby both compliance burdens and compliance risks are at an all-time high.
Jared Serbu And can you give us an example of some of those risks? In what ways are agencies stepping up their enforcement? And in cases where agencies have stepped ahead with enforcement actions, what have been some of the negative consequences for colleges and universities on the wrong side of that?
Aron Beezley Yeah, great question. So, a recent example is Georgia Tech University. Georgia Tech settled a False Claims Act case that was brought by the government. They did not admit any wrongdoing, but nonetheless, they settled the case. That’s obviously a huge administrative headache, a lot of time, a lot of money, and then there’s a reputational component that comes along with it. That case had to do with cybersecurity and data protections. So that’s another thing that historically, universities have not had to comply with to the same extent as, say, your traditional defense contractor. And so universities now are really having to comply more and more with increasingly complicated cybersecurity rules and requirements. And when they don’t comply, they run the risk of all sorts of adverse and negative consequences, including, but not limited to, allegations that the university violated the False Claims Act. And again, a recent example of that is the Georgia Tech case.
Jared Serbu The piece of this with more FAR-based procurements going to colleges and universities is super interesting to me. And a lot of government contractors in our audience, so there’s a lot folks out there that are going to be saying, yeah, I feel your pain here. But do you have any sense of what’s behind that kind of shift from the grant space to the contract space in education? And the second part of that question really is, what do colleges need to do there? Do they need to start building their own certified cost accounting systems in the way a big government contractor would?
Aron Beezley Yeah, that’s a great question. So it’s a couple or a few things. One, there’s a lot of money in federal contracting and colleges and universities are seeing this. And so you’re seeing them more and more go after traditional federal contracts. So an example of this is like a university going after a data collection contract solicitation that was issued by Department of State. Universities are going after those, and then they’re finding themselves in the arena with traditional federal contractors. So the example that I mentioned about a Department of State data collection and management contract, the University of Maryland, for example, bid on that, did not end up getting that contract, and then ended up filing a bid protest at the Government Accountability Office. And so, colleges and universities, historically, are not used to participating in those types of arenas, the bid protest arena, having to deal with FAR-based contracts, FAR-based compliance systems, et cetera. And so they’re having to get up to speed quickly as they are becoming more involved in these spaces. And obviously, the more compliance obligations you have, the more of compliance risk there is. With respect to your second question about what colleges and universities can be doing or should be doing, it depends. Not all colleges and universities are the same. Some are small, some are big, some are more heavily reliant on research and research funding. But a common thing that we generally recommend is to have a centralized compliance framework. So rather than a fragmented framework, say, that is implemented on a department-by-department basis or some other similar basis, it’s important to have a top-down, centralized compliance framework that involves all requisite stakeholders. So office of general counsel, outside counsel, research administration, procurement team, internal auditors, et cetera. So you want the left hand talking to the right hand, you want a universal and centralized compliance framework so that there’s no uncertainty at the university in terms of who needs to be doing what and what the expectations are and what the rules are.
Jared Serbu But I imagine within that centralized compliance hub, you would still want a cadre of grant specialists and contract specialists since the worlds are pretty different. Is that kind of a best practice, or how have you seen people do it?
Aron Beezley Yeah, that’s right. And again, it really depends on how heavily involved in traditional federal contracting a university is going to be. Grant specialists, yes, most universities have a lot of those, at least large research institutions. But with respect to universities that are gradually becoming more involved in the traditional government contract space, so with FAR-based contracts, I don’t know of a specific university that has one specific person whose sole job is devoted to overseeing, administering and tracking compliance. As things progress, if universities get into those spaces more and more, it’s quite possible that those types of positions will start to exist. But what we mostly see is universities relying on outside consultants, their existing compliance personnel, existing in-house attorneys, and then of course outside counsel.
Jared Serbu And I guess one last thing we should clarify here, just because the changing role of the government getting involved in higher education under this particular administration has been in the news a lot lately, just want to make sure folks understand, is that the sort of thing we’re talking about here or the things that we’re describing here, longer-term trends that span beyond one administration?
Aron Beezley Yeah, that’s a fantastic question. So, so far, the things I’ve been talking about have really been administration agnostic. There are, as I’m sure folks have seen in the news, this administration and the DOJ has been, has discussed apparently using the False Claims Act and other similar tools to try to police university compliance with the administration’s diversity, equity and inclusion agenda. That’s something that is definitely worth keeping an eye on if you’re a college or a university, and that obviously has a lot of university general counsels losing sleep at night. But what I’m referring to really is much more, like I said, apolitical and administration agnostic. It has to do with mostly research, development, things like that that goes on under any administration.
Jared Serbu But the same basic tools for enforcement are there kind of no matter what the issue is, right? Because I can remember a time when people were surprised that the False Claims Act could be used on, for example, the Georgia Tech cyber issue that you mentioned. You could see False Claimed Act cases being brought on almost any sort of policy or ideological basis, I guess.
Aron Beezley Yeah, you’re exactly right. And so the same type of repercussions or consequences that have always been there are still there. There’s just an increased risk of being subject to those consequences. So among the consequences are, at one end of the extremes, False Claims Act liability or suspension or debarment from federal programs where you can no longer get federal contracts or federal funding. At the other end, it’s things like adverse audit findings, investigations with conclusions that recommend remedial actions that colleges or universities take in order to shore up their processes and procedures and things like that. The only other thing that I might add where we’re seeing increased activity from colleges and universities, and in turn an increased compliance risk, is in the other transaction authority space. The government is relying increasingly on other transaction authorities to get its need met because of the flexibility associated with OTAs, and now we’re seeing prestigious research institutions like University of Colorado, Johns Hopkins, Georgia Tech and others who are now participating in OTA agreements and consortia. And those arrangements are not necessarily subject to the FAR, but the government can choose to incorporate FAR provisions into those agreements, which in turn subjects colleges and universities to FAR rules and requirements. And so that’s another way that colleges and universities are getting more involved with federal funding and where compliance risk and enforcement risk is really increasing at the same time.
The post Big contract compliance burdens…aren’t just a problem for contractors first appeared on Federal News Network.