Interview transcript:
Terry Gerton So I was thinking, it’s literally just one week til the end of the fiscal year. As a former comptroller, this is the time when you get really antsy about pushing money out the door. From your perspective, what are you hearing? What’s the mood in agency contracting shops and financial management shops right now this year?
Emily Murphy As you can imagine, any fiscal year, you’ve got contracting officers working incredibly hard, staying late, working around the clock, trying to get money out the door. I still remember when I was the CAO at GSA back in the Bush administration, we would send contracts west over the course of the day to make sure that we got as much signed as we could. And this year, you’ve almost got a perfect storm of things. You’ve got a very compressed fiscal year, the full-year CR wasn’t even signed until March 15th. So you’ve got essentially six months in which the contracting officers had to do a full year’s worth of work. You then have on top of that a very different set of oversight concerns that are happening. So, you’ve got agency heads becoming much more involved in looking at acquisitions and wanting to review them. You’ve got a lot more political review of contract decisions that are going out the door, from the Department of Homeland Security where the secretary is reviewing everything over $100,000, to the Hegseth memos that came out of DoD requiring reviews of contracts, GSA, others, the reduced use of purchase cards. So there’s been a lot more work and a lot process for contracting officers this year. And then there’s a sense that maybe not spending all the money isn’t the worst thing in the world, which is very different than in the past. In the past, you wanted to get every dime allocated before midnight. You wanted to make sure that you’d taken the money that Congress had entrusted to you and spent the way that they told you to spend it. This year, there seems to be more some back-shatter that maybe if things lapse or if things aren’t spent, that maybe that’s money that’s saved. And that puts contracting at a really tough spot because they want to do right by the program offices that are their customers. They want to make sure that they obligate those funds the way that they’ve been instructed to do so, and they do right by the American people in doing so. But they also need to follow the rules that are being put in place by their leadership and make sure they’re getting those reviews in place. So that it’s a lot more work in a very compressed timeframe.
Terry Gerton And what about the perspective of the contractors themselves? One of the other things you typically worry about at the end of the year is expiring funds. And we’ve heard a lot with all of these extra procedures and changes in policy. The government’s a little behind on making its payments. And so how are contractors perceiving all of this uncertainty?
Emily Murphy So contractors are nervous, and they’re nervous, first of all, whether or not they’re going to have work that would have in the past been routine to have an option exercised or an award made if that’s going to happen, if there’s enough workforce to do it, if there is enough time left to do it, if the process still allows it to happen. So they’re concerned about that, but they’re also concerned that there’s no guarantee we’re going to have a continuing resolution by September 30th. In fact, it’s looking like there’s going to be a shutdown. So if you’re a contractor, getting funds on contract right now is imperative because otherwise they’re looking at being unable to function at the beginning of the new fiscal year. They’re already dealing with being behind and receiving payments that they had outstanding. So they’re in a tough spot as well. And they’re also facing a situation where they’ve been asked to make some pretty substantial discounts. And so they did that, and they’re hoping that in consideration for having made those discounts, that they’re going to get the payments that they’re owed.
Terry Gerton I’m speaking with Emily Murphy. She’s senior fellow at the George Mason University Barone Center for Government Contracting and former GSA administrator. So Emily, there’s a lot of uncertainty that’ll play out over the next week and perhaps into early October with a potential shutdown, but there are some other acquisition rules and processes and timelines that are moving into October. So let’s take first the FAR threshold increase that goes into effect 1 October.
Emily Murphy 1 October, and it’s an exciting one because it’s the inflation adjustment that’s been required to go into place. They’re supposed to review all the thresholds every five years, and so you’re seeing the micro purchase threshold go from $10,000 to $15,000. That’s a 50% increase. It’s a pretty substantial increase. You’re seeing the simplified acquisition threshold go from $250,000 to $350,000, which is itself a pretty big increase. But then you’re also seeing the simplified acquisition procedures threshold go up from $7.5 million to $9 million. You’re seen the thresholds for pre-award notices, those are staying at $25,000. Justifications for a good full and open competition goes up to $900,000. So you’re seeing a lot of inflation adjustments, and at the same time, if you’re tracking the house version of the NDAA, you’re saying some additional increases that could be coming on the heels of these. So it’s interesting, we were just talking about this tension, all the new oversight. We’re also, though, seeing both legislatively and regulatorily, an emphasis to streamline processes and make things faster and make them easier.
Terry Gerton This does seem like it will give contracting officials much more flexibility and speed in these kinds of procurements.
Emily Murphy It will, and it also, it’s important to note that this, right now, the simplified acquisition threshold, the $250,000 is also the small business reserve. So when that goes to $350,000, it means that everything under $350,000 is supposed to be set aside for small business unless it’s being awarded through a multiple award contract. So that also is an increase in the dollars that should be going to small business and small contracts, but it’s a substantial amount of work.
Terry Gerton Well, let’s switch gears a little to the Revolutionary FAR Overhaul. They continue to roll out pieces of this towards an October target. What’s the latest news there?
Emily Murphy So we’ve had some additional parts come out, but one that I’d like to revisit with you is Part 8, because we talked about this last month and it was really exciting then, but there’s been some changes that have been made and those are still exciting, but they’re maybe not as clear right now. So if you remember when we talked last month, Terry, the Part 8 said that the order of priority for using contract vehicles, it elevated the best in class, or BIC, contracts. It was a really clear signal that these best in class contracts were going to be the preferred contract vehicles the government had. But then at the very end of August, there was another change made to Part 8, and that reference to best in class contracts came out. And it was replaced with the concept that the Office of Federal Procurement Policy was going to designate some contracts as mandatory contracts. But if you remember also the BIC contracts, when they’ve been in the FAR, if an agency chose not to use them, they had to get the head of the agency to sign off on it. But if an agency chooses instead to not use one of the OFPP-designated contracts, it only has to be signed off on by the head of contracting activity. And there was a lot of confusion as to what’s happening and why it’s happening. And one theory I’ve heard is that this is going to be a way for them to really promote the use of the OneGov contracts. And to try and funnel some demand because it was very possible that you could meet, you could find the same offerings on multiple best in class contracts. And so it didn’t give you the way to really leverage the government’s demand signals to get the best pricing. So by having OFPP take this role, maybe we’re going to be able to do that. It’ll be really fascinating to see what signals and what standards OFPP puts in place for what these mandatory contracts are going to be.
Terry Gerton So what will you be watching for on that front?
Emily Murphy So, OFPP had already said it was going to come out with a new definition of best in class. But I’m going to be really curious to see what they say the mandatory contracts are. Are they going to say that it’s a required use contract to use a OneGov contract? Is it a required use to use the schedules? Is it some subset of BIC contracts? Are there contracts that are not currently BICs? Are things like commercial platforms program, did those become best in class contracts, because that gives a lot more insight into what’s happening at the micro purchase level and below. What contracts are those? Is it things like the travel contracts that are already considered pretty much mandatory use contracts? So it’s OFPP signaling that there’s going to be a shift in the definitions. Hopefully, it’s going to be towards a results-based contract, pricing, savings, meeting the various goals that the administration has. So, trying to really leverage all of those and give a clearer signal to contracting officers as to which contracts they’re supposed to use, and frankly to vendors as to what contracts they need to be obtaining.
Terry Gerton Emily, as we look forward into the next fiscal year, what additional changes to acquisition policy or procedures are you expecting to hear from the Trump administration?
Emily Murphy So there are a few big things we’re still waiting to hear about. We’re still waiting for Part 15 and 16 of the FAR and Part 19 of the FAR. And those are the three that I’m really holding out, holding my breath, waiting to see what they come out with. Cause I don’t know if you, back when the last time they did a major rewrite of Part 15, it was a multi-year process. So, this is a chance to do things. The new CAS regulations, the cost accounting standards that came out of OFPP this month also are pretty exciting because they look, it’s really signaling that they’re serious about commercialization. And then we’ve got the implementation of how this is going to happen. We’re expecting in November that there’s going to be a real request for comments on all of these FAR changes. But also you’ve got, GSA has announced that it’s set up its Office of Centralized Acquisition Solutions, OCAS, and they put Tom Meiron in charge of it, he’s building out his team. They’re looking at how they’re going to deliver the services there now. And that’s going to be interesting to watch, especially in the first quarter, how that launches and how GSA provides those services.
Terry Gerton The devil will be in the details for sure.
Emily Murphy There’s so much opportunity in it, but there is a lot of work ahead of everyone.
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