Easy Corp Case

Easy Corp was awarded a five year contract to provide program office support to a government agency. In the first year of the contract, the enterprise has raised concern with the contracting officer’s representative (COR). Easy Corp has habitually submitted erroneous and often late invoices, as well as late and incomplete management reports. Moreover, both the COR and Easy Corp employees rarely see the program manager for the contract. The purpose of this paper is to identify the ramifications for both the government and contractor from such negligence, as well as make recommendations concerning Easy Corp to the contracting officer.

Government agencies review and certify invoices to ensure adequate information exists to support payment of contractor invoices in a timely manner. The Improper Payments Elimination and Recovery Improvements Act of 2012 requires agencies to have these cost-effective program controls to prevent, detect, and recover overpayments by implementing policies and directing activities that review and verify payments before they are made (Payment Accuracy, n. d. ).

Despite having a control process, improper payments are still made to contractors due to erroneous invoices, insufficient supporting documentation, discounts offered but not received, as well as other invoicing errors; representing a loss to the government (U. S. Government Accountability Office, 2006). Contractors like Easy Corp who submit erroneous invoices and incomplete reports compound the problem of improper government payments. The Federal Acquisition Regulation (FAR) Subpart 32. 905 “Payment documentation and process” is very specific as to how it prescribes contractors to submit a proper invoice.

If the invoice does not comply with the requirements, the designated billing office may return it within seven days of receipt (FAR 32. 905). For the contractor, this could be problematic as the invoice will not be paid. If the contractor is a small business and invoices are rejected continuously, cash flow could be halted. In turn, the Government could be left without services or the product that the contractor was providing; this would be detrimental to productivity and costly. Additionally, employees of such a quandary could go unpaid.

Moreover, Easy Corp inattentiveness to contract requirements could lead to adverse contractor performance reporting. “Past performance is relevant information, for future source selection purposes, regarding a contractor’s actions under previously awarded contracts or orders. . . (FAR 42. 1501)” For this reason, past performance evaluations are prepared annually and at the time the work is under contract or the order is completed (FAR 42. 1502). Past performance ratings range from exceptional to unsatisfactory (FAR Table 42-1).

Unfavorable reporting could be consequential to Easy Corp ability to win another federal contract. Lastly, almost every federal contract contains a clause allowing for termination for default or convenience (BizFilings, 2012). Including this clause permits the Government to terminate all or a part of a contract for its convenience, or for default, which signifies the Government did not think the contractor was performing adequately (BizFilings, 2012). Easy corp incomplete management reports, and invoicing problems, could constitute failure of performance to provisions of the contract.

Prior to terminating a contract for default, the Contracting Officer will typically provide a written notice, known as a “cure notice” (BizFilings, 2012). The notice allows the contractor ten days to rectify any defects (BizFilings, 2012). If the failure of performance is then not cured within ten days, the Contracting Officer may issue a notice of termination for default (BizFilings, 2012). Termination of a contract such as Easy corp would not only be damaging to the organization, but it would leave its employees jobless.

The aforementioned consequences can be avoided by Easy Corp by improving their processes. Under the Prompt Payment Act, the federal government has to pay small businesses within 30 days after receipt of the invoice (BizFilings, 2012). If the invoice has to be resubmitted because it was initially rejected, this clock restarts (BizFilings, 2012). Therefore, to comply with the contract and receive prompt payment it would behoove Easy Corp to submit proper invoices the first time. Easy Corp can do this by implementing their own internal control mechanisms.

A Program Control Analyst should be assigned to the contract to track rates, funding, and expenditures. Working in conjunction with the Program Control Analyst, an invoice should be reviewed by the Program Manager to ensure labor categories and hours are billed appropriately for work performed, the invoice period of performance covers the progress report period of performance, the rates and costs billed are authorized rates for that period of performance, travel and other direct cost are approved, accurate math, and so on…

Moreover, the Program Control Analyst can assist the Program Manager in compiling management reports for the customer. It is imperative that the Contracting Officer discusses Easy Corp deficiencies both with the Chief Executive Officer, and the Program Manager assigned to the contract in a program review. To do so the Contracting Officer will rely heavily on the CORs observations and documentation on supplies or services that do not confirm with contract requirements (Department of Defense, 2012).

It is vital that the COR notify the Contracting Officer immediately of unsatisfactory contract performance, so remedial steps can be taken (Department of Defense, 2012). In this case, if the Contracting Officer does not advise Easy Corp of unsatisfactory performance this could be interpreted as acceptance of substandard services or performance by the contractor (Department of Defense, 2012). This could adversely affect the Government’s right to withhold payments, terminate for cause or default, or otherwise exercise certain rights under the contracts (Department of Defense, 2012).

In preparation for the program review, the COR should supply the Contracting Officer with performance assessments. These assessment reports should include Easy Corp’s lack of timeliness, quality, and management of key personnel. The COR should also include any testing or inspections performed as listed in the contract. The results should be provided to the Contracting Officer with documentation on the number of observations made, the number and type of problems, actions taken to notify the contractor, and any corrective actions already taken by the contractor (Department of Defense, 2012).

Since Easy Corp has not resolved the performance deficiencies outlined by the COR, the Contracting Officer should bring the matter to the attention of the contractor in the program review, and obtain a commitment for an appropriate corrective action plan (Department of Defense, 2012). If Easy Corp fails to deliver the corrective actions outlined, the Contracting Officer should send an official notice of failure of performance to the contractor (Department of Defense, 2012).

Easy Corp should then notify the Contracting Officer of the cause of delinquency so a proper determination can be made concerning continuation or termination of the contract (Department of Defense, 2012). Depending on the cause of the delinquency, if the Government can work with Easy Corp personnel to prevent problems before they arise they should do so. However, any action taken should be to protect Government rights and interests before delivery is due (Department of Defense, 2012).

In closing, the stakes are high for both the Government and Easy Corp. Performance issues that Easy Corp is experiencing are not beyond the realm of repair. Easy Corp should implement proper program controls to fulfill contract requirements, and improve performance. If Easy Corp cannot undertake such actions, the Government should move forward with formally notifying the contractor of deficiency, obtain an appropriate corrective action, and move forward as appropriate.