Federal Contract Law: DHS sets fierce procurement rules

Joseph J. Petrillo

Companies seeking to do business with the Homeland Security Department are eager for any clues to the characteristics of this still-new customer.

They especially want to know whether and how its contracting practices will differ from those of the legacy bureaus that Congress assembled to form the department. People in other agencies ought to be curious too.

At long last, DHS' interim procurement regulation is out, and we can read the tea leaves. The new Homeland Security Acquisition Regulation is a supplement to the Federal Acquisition Regulation. It applies to all components of DHS except for the Transportation Security Administration, which has its own procurement processes. DHS procurement chief Greg Rothwell expects the other component agencies to implement the new regs ASAP.

To read the HSAR, go to www.gcn.com and enter 222 in the GCN.com/search box.

The HSAR implements a congressional ban on contracting with 'corporate expatriates,' basically, companies that incorporate in tax havens to avoid paying U.S. income tax. There are some loopholes here, including a waiver procedure, but if a prospective contractor gets branded as a corporate expat, it is barred from contracting with DHS.

Surely, it's a good idea to stop businesses from setting up shell corporations to dodge taxes. But why couldn't Congress fix this problem once and for all in the tax code, instead of saddling DHS with a job totally outside its mission?

Also on the prohibited list are colleges and universities that bar ROTC or military recruiters from their campuses.

The HSAR has extensive coverage of computer security for nonclassified systems. Systems handling classified material are already subject to special requirements. The standard contract clause requires each contractor to prepare and implement an IT security plan. Contractors also must earn an IT security accreditation from DHS. A separate publication tells how.

As long as we're talking about security, DHS service contractors may have to promise not to disclose sensitive information, and to provide security training for their staffs. Contractor employees might also be subject to security screening, including background checks, disclosure forms and fingerprinting.

The HSAR also has an extensive solicitation provision on conflicts of interest. It mandates disclosure of all organizational, financial, contractual or other interests that may pose a conflict. It covers affiliates, consultants, major subcontractors, key personnel, owners with more than a 20 percent interest and senior managers. After disclosure, a company seeking a contract must explain why it won't affect the contract, or else agree to a mitigation plan satisfactory to the contracting officer.

The new regulation implements DHS' special ability to use streamlined acquisition techniques or the special pared-down rules for commercial items for any procurement. But these powers require approval at a high level'no lower than a political appointee'as well as reporting to congressional committees in both houses. So they probably won't be used frequently.

One question the new reg doesn't answer is how to say the acronym 'HSAR.' Some may choose to call it the 'aych - sar.' However, I vote for pronouncing it the same as 'hussar,' the fierce cavalryman. Sounds more secure.

Joseph J. Petrillo is a lawyer with the Washington law firm of Petrillo & Powell. E-mail him at [email protected].


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