Federal health care contractors providing supplies and/or services to the VA, such as health care products, medical devices, pharmaceuticals or nursing home care services, should pay particular attention to the Agency’s proposed rule and procurement reform initiative because the proposed changes may require modifications to contractors’ internal procurement policies when doing business with the VA. The suggested changes relate to improper business practices, personal conflicts of interest, and the calculation of overtime wages for contractors providing nursing home care to veterans, among other things. The VA also proposes sweeping changes to VAAR regulations governing the use of sealed bidding for VA contracts.

General Proposed Changes to the VAAR

In order to streamline the VAAR, the proposed rule removes redundant material that is already addressed in the FAR, and removes outdated material that is no longer necessary. The VA also proposes to remove any guidance within the VAAR that is applicable only to the VA’s internal operating processes or procedures. The VA proposes that such guidance instead be included in the VA Acquisition Manual (VAAM) as internal agency guidance.

Changes Related to Improper Business Practices and Personal Conflicts of Interest

The VA proposes new definitions of two “key terms” used within the revised VAAR part 803, Improper Business Practices and Personal Conflicts of Interests, addressing debarment and suspensions. The newly defined “key terms” are:

Debarment and Suspension Committee means a committee authorized by the debarring official to assist the debarring official with debarment and suspension related matters. The Debarment and Suspension Committee is also referred to as the D&S Committee.

Suspension and debarring official means the Senior Procurement Executive (SPE) or Deputy Senior Procurement Executive (DSPE) if further delegated in writing by the SPE. The Suspension and Debarring Official is also referred to as the SDO.

82 F.R. 22635 at 22639. The VA added these definitions to ensure a clear understanding of the meaning of these terms when used within the VAAR, and to clarify who is designated as the Suspension and Debarring Official (SDO).

The proposed rule also amends many VAAR provisions regarding improper business practices and personal conflicts of interest. The proposed rule clarifies that contractors are prohibited from making reference to VA contracts in their commercial advertising. The modified VAAR language reads:

VA Policy prohibits contractors from making references in its commercial advertising to VA contracts in a manner that states or implies the Government approves or endorses the product or service or considers it superior to other products or services. The intent of this policy is to preclude the appearance of bias toward any product or service.

82 F.R. 22635 at 22640.

The VA also proposes to amend VAAR subpart 803.2, Contractor Gratuities to Government Personnel, to update the policy governing improper business practices and personal conflicts of interests. The suggested changes make the Agency’s policies clear, provide notice of due process rights, establish that the SDO will determine whether or not a violation of the Gratuities clause has occurred, and establish what procedures are followed when the SDO makes that decision.

Contractor employees performing acquisition functions also are the subject of proposed changes under the rule. The VA will require certain contractor-covered employees who perform acquisition functions that are closely associated with inherently governmental functions to sign a Non-Disclosure Agreement in order to prohibit disclosure of non-public information accessed through contract performance. Contractors and subcontractors at any tier whose employees perform acquisition functions closely associated with inherently governmental functions will be required to obtain the signed non-disclosure forms from each covered employee.

Changes for Contractors Providing Nursing Home Care for Veterans

The proposed rule also clarifies certain labor requirements for contractors providing nursing home care for veterans. The modified VAAR provision uses plain language to state the conditions that a contractor must meet in order to use the variation to the Contract Work Hours and Safety Standard Act regarding the payment of overtime wages under such nursing home contracts. Specifically, revised VAAR Section 822.304 will state:

For contracts providing nursing home care for veterans, the Secretary of Labor has allowed a variation to the requirements of Contract Work Hours and Safety Standards (the statute) (40 U.S.C. 3701, et seq.) regarding the payment of overtime (see 29 CFR 5.15(d)(2). The variation provides that overtime may be calculated on a basis other than a 40 hour workweek (as an alternate work period) when—

(a) Due to operational necessity or convenience a work period of 14 consecutive days may be accepted in lieu of the workweek of 7 consecutive days for the purpose of computing overtime compensation, pursuant to an agreement or understanding arrived at between the contractor and the contractors' employees before performance of the work; and

(b) If the contractor's employees receive compensation for employment in excess of 8 hours in any workday and in excess of 80 hours in such 14-day period at a rate not less than 11/2 times the regular rate at which the individual is employed, computed in accordance with the requirements of the Fair Labor Standards Act of 1938, as amended.

82 F.R. 22635 at 22641. The VA will require all solicitations and contracts for nursing home care for Veterans to contain a related clause regarding Contract Work Hours and Safety Standards, and will require the contractor to flow down this clause into all subcontracts at any tier.

Changes to VA Acquisition by Use of Sealed Bidding

Finally, the VA proposes sweeping amendments to VAAR subpart 814.1, Use of Sealed Bidding, including the deletion of the subpart in its entirety and the addition of new provisions that better implement the FAR. The VA also proposes the addition of a new subsection to explain and clarify how awards will be made on summary bids and bids on groups of items, explaining in proposed VAAR 814.201-2:

(1) When the contracting officer determines that it will be to the Government’s advantage to make an award on the basis of a summary bid …[t]he award will be made on either the bid price for individual items or the summary bid price summary for all items, whichever results in the lowest price to the Government. Therefore, to assure proper evaluation of all bids, a bidder quoting a summary bid price must also quote a price on each individual item included in the summary bid price.

(2) When a contracting officer determines that it will be to the Government's advantage to make an award by group or groups of items … [a]ward shall be made on the basis of the bid price for each identified group of items. The individual price of each line item in the group does not have to be the lowest bid received for that item. This may apply when the items in the group or groups are readily available from sources to be solicited; and one of the following applies—

(i) Furniture or fixtures are required for a single project and uniformity of design is desirable.

(ii) The articles required will be assembled and used as a unit.

82 F.R. 22635 at 22640. In addition, the VA proposes a general rule that when bid samples are required under a solicitation, bidders must submit samples produced by the manufacturer whose products will be supplied under the contract. According to the VA, the addition of this clause will ensure that the products that are actually proposed and would be delivered under the contract, if awarded, are the products that are submitted for evaluation.

The ultimate aim of the VA’s proposed rule is to keep the VAAR in line with the FAR as much as possible in order to meet the overall federal policy goal of ensuring procurements are handled “fairly and consistently,” with a known set of rules for both the government and contractors that guarantees overall best value for the government, according to the VA. Thus, the VA seeks to supplement the government-wide federal acquisition regulation only when specifically required.

Federal health care contractors impacted by any of the above proposed changes may wish to submit public comments on the proposed rule for the Agency’s consideration in formulating the final rule. Contractors may submit comments through regulations.gov. The Agency must receive comments on or before July 17, 2017, to be considered.

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This publication was originally distributed as a Reed Smith Client Alert (2017-135) and was republished by Government Contracting Law Report.