Interview transcript:
Terry Gerton I want to talk about a new program that Treasury has just announced. It’s called the Savings Award for Verified Efficiencies, SAVE. Always start with your acronym first. But it offers Treasury employees up to $10,000 for identifying contract efficiencies. What kind of efficiencies are we talking about here?
Alex Major Yes, well it’s a program that’s intended, it’s a joint program by the Treasury and GSA, and it’s intended to encourage Treasury employees to identify what is viewed as quote unquote non-essential or non-savings-related contracts, and bring them to the attention of leadership management for evaluation of whether they should be cut or canceled. And if they do, then that employee could be entitled up to $10,000 for surfacing those wasteful, allegedly wasteful contracts.
Terry Gerton What’s your take on that incentive structure?
Alex Major I get what they’re trying to do, but the big issue is you’re basically putting contract programs into the hands of non-acquisition professionals that might not see the big whole picture. The fact that Treasury is teaming with GSA, I think is intended to sort of help that issue. Hopefully GSA can maybe take a broader look. But I think it poses a real risk to contractors that are working with the Treasury Department or any of its seven bureaus, whether it be IRS or Financial Crimes Enforcement Network, FinCEN. So those contractors need to be sort of prepared, as it were.
Terry Gerton This applies to any non-senior executive person at Treasury, right? So as you mentioned, they don’t have to be in the contract shop watching over these contracts.
Alex Major Correct. They can be an individual in an element of one of those bureaus. So they could be at the United States Mint and think they found something, or the Office of the Comptroller and see something. It’s anybody who is, what is it, GS-7 and above, up to SES. So it’s sort of a, it’s a good effort. However, oftentimes these contracts and these contracting programs are intended to be broader than a particular element. So it’ll be interesting to see to what extent these contracts, to see what contracts are evaluated and or affected by the SAVE program.
Terry Gerton So say a little more about the kinds of contractors or contractor actions that you think are most vulnerable under this new program.
Alex Major Well, this is sort of under the auspices of GSA’s Defend the Spend program, which was sort of revealed a little bit earlier this year. So I suspect that what they’re going to be looking at are contracts that don’t really have a clear return on investment. So, there is a return on investment, but they just don’t see it. You don’t get that feel. So I think any contract that might be report heavy, so those consulting engagements that were addressed by by GSA earlier, maybe underutilized IT or software licenses, if agencies are paying for a lot of seats and they don’t necessarily need them. Support contracts could be at risk, where multiple vendors might be performing overlapping advisory or program management roles. Those are possibly issues. Training, coaching or facility contracts. I think we’ve all sat through training and said, well, that was worthless. It’s not worthless. There’s a need for it. There’s a purpose behind it. But those those types of things I see could being maybe at risk of being flagged.
Terry Gerton You mentioned GSA’s role. When I read the the memo, my take on it is GSA is there to verify the savings, not guarantee permission for the change in the contract action. How do you read that?
Alex Major Yeah, it’s weird. It really doesn’t spell out GSA’s evaluation criteria. So we don’t know, will there be a checklist? There’s nothing there of how GSA is going to evaluate every proposed savings action. Are they going to do a cost benefit analysis? Are they going to be in a situation where they’re looking at a particular program, holistically, shall we say, and or understanding the benefits and costs that maybe the IRS gets because of the manner in which the contract is distributed throughout all seven bureaus. So it’s really unclear how exactly GSA is going to evaluate, independently confirm, that the action has occurred and that the savings are quote unquote real. And the other side of it is they need to make sure the whatever evaluation stems directly from the employee’s recommendation, right? Or is this something that’s already on the chopping block, or is this something that’s already waning in regards to performance? But really, only after GSA concurs can a cash award be paid. So that partnership is going to be rather interesting to watch, to see how it actually happens.
Terry Gerton I’m speaking with Alex Major, he’s a partner and co-chair of the government contracts practice at McCarter & English. Well, you’ve advised contractors to stay audit ready for this. What does that look like in practice, especially for firms that have maybe non-competitive awards or flexible pricing models?
Alex Major Yeah, so there, I think any company that really kind of positions themselves as an efficiency enabler will be in a good place here. I would say that in the past, that would be SBA, 8(a) or women-owned small businesses, but those certification programs are facing a little bit more scrutiny and legal challenges right now. So you can’t really rely on standalone status. But really, agencies are going to need help with things like contract closeouts and compliance. So small firms with niche expertise, like the Lean Six Sigma or Financial Operations, really might be in a position as cost-saving partners, but contractors themselves that are maybe already in partnership with these agencies and these bureaus, the Treasury and the bureaus, really need to prepare for termination for conveniences. They need to expect it, they need to have a plan, they need to know their rights under 52.249 on how to recover costs for the work performed and settlement expenses, and then maintain meticulous records. I think especially, as we move in this era, contractors need to be able to lead with efficiency and demonstrate their impact, and then watch for opportunities. So that’s, I think, going to be maybe the biggest takeaway, is really when making offers or when performing, really lead with efficiency.
Terry Gerton Could this program lead to more False Claims Act referrals?
Alex Major Potentially. I think it could also lead to quite a bit of cost override too. We understand that, in the past, money has been spent in investigating these. So now you’re asking non-procurement professionals to raise their hand if they see something that they believe is different or maybe not very effective, and where that could cost a lot of money. That could cost a lot of government money to investigate, examine, and do what GSA has to do in terms of evaluating their efficiencies. We’ve seen that before with the Department of Defense when billions of dollars were spent on particular systems, the contract was terminated and then recompeted within days or weeks. So we want to make sure that, the GSA and the Treasury want to make sure that what they’re actually cutting, if they cut stuff, is not just going to be recompeted in a week and a half, because then you’re going to basically get billed for the same job twice. And for the citizens, if a Bureau of Fiscal Service contract is de-scoped too aggressively, it can disrupt payments to veterans, Social Security recipients or federal employees. And like I said, in the Defense Department, we saw that with billions wasted restarting personnel pay systems after premature cancelations. So we want to make sure we avoid that because this can really touch America’s daily life. And that’s, I think, probably one of the biggest concerns for Treasury, GSA for the taxpayer.
Terry Gerton Well, this program at Treasury is billed as a pilot program. What is the potential for it expanding to other agencies and if it does, how does that change contractors’ risk calculus?
Alex Major Yeah, so that’s a good question. It’ll be interesting to see how it works at Treasury and what role GSA actually plays in that effort and if it’s starting to make sense. There’s a lot of similarities between this, GSA’s Defend the Spend and then the Defend the Spend, the letters that DOGE provided contractors and agencies. So it really remains to be seen. But I think a lot of contractors right now are becoming much more savvy on preparing for terminations for convenience and being ready for terminations for convenience, unfortunately. So I think that is probably going to be one of the key takeaways is, again, being ready for those terminations for convenience, but at the same time really trying to put their best efficiency foot forward in describing their services to the customer.
The post Treasury employees could be rewarded for identifying contract savings first appeared on Federal News Network.