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SmallGovCon Week In Review (December 10-14, 2018)

I wanted the pithy introduction to this week’s Week In Review to be a corny Christmas-themed joke. But there’s one problem: I don’t know any! (My dad jokes tend to come on the fly.)  If you know any (clean) holiday jokes, send them my way. We’ll try to feature them in next week’s edition!  But for this week’s edition, let’s focus on government contracting. We’ll look at the potential Christmas shutdown, GSA’s consolidation of schedule contracts, a VA-pilot program for facility construction, and non-compliance and oversights remain an issue, GAO’s report on noncompetitive contracts, and more. Have a great weekend! Which agencies will be hit from the potential shutdown? [GovExec] GSA consolidates 24 multiple award schedules into a single acquisition vehicle. [FederalTimes] GAO finds DOD and HHS erred in reporting competition data for IT contracts. [GAO] VA pilot program to accept donations for facility construction [GAO] Inspector General criticism of GSA raises questions. [GovExec] GAO report released shows additional guidance needed to improve oversight under the Improper Payments Elimination and Recovery Act. [GAO] Treasury, Labor and Agriculture departments fall short of 2017 compliance for improper payments. [GovExec] OMB unveils its plan to establish the GEAR Center in 2019. [FedScoop]
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Koprince Law LLC

Koprince Law LLC

 

Bill Changes Size Determination Measurement Period from Three Years to Five

With the stroke of a pen, Congress may have just paved the way for some soon-to-be large businesses to remain small for longer.  Both the House of Representatives and the Senate have passed a bill that would amend the Small Business Act to change the period of measurement used to determine the size of a business from three years to five. The bill awaits the president’s signature to become law.  The Small Business Runway Extension Act of 2018 simply amends Section 3(a)(2)(C)(ii)(II) of the Small Business Act “by striking ‘3 years’ and inserting ‘5 years’.” The House passed the bill on September 25 and the Senate passed it on December 6. It went to the president’s desk for signing on Tuesday (December 11).  Leaving aside the sloppy editing (my lord, Congress, why are you striking “years” and replacing it with “years”?), this simple change has the potential to preserve the small-size status of growing businesses for much longer.  Businesses are not born fully functional like Athena from the head of Zeus, with the newborn grace of a baby gazelle. Most have at least one lean year as they grow.  In many industries, the SBA’s current system calculates a business’s size by adding up the annual receipts of the last three years and dividing by three to get the average. (The rules are a little different for companies that haven’t been in business for three years).  That means, by year four of a business’s existence, those lean times no longer get included in the calculus.  The purpose of the bill, according to the House Committee on Small Business report, is to “help advanced-small contractors successfully navigate the middle market as they reach the upper limits of their small size standard.” By making the period of measurement five years, even a relatively quickly growing new business can stay small for far longer. According to Congress, the Act will allow businesses more time to prepare for “graduation” to other-than-small status, allowing businesses to develop the infrastructure needed to compete with the Boeings and Lockheeds of the world.  The change will also build in some wiggle room for companies to take on additional revenue in a particularly robust fiscal year. Congress said this will “reduce the impact of rapid-growth years which result in spikes in revenue that may prematurely eject a small business out of their small size standard.” In other words, through careful planning, a business could double its receipts in a particular year without exceeding the size standard, because the difference is spread out over a much longer time.  Although this change may benefit businesses that have grown at a relatively linear rate, others that, for example, had planned on having a particularly robust year fall out of their calculation, will now face the prospect of remaining “other than small” for an additional two years. One of the things missing from the Congressional record is any idea of how many businesses the change will impact positively, and how many it will impact negatively.  If the bill becomes law—and we should say that there is no reason to think that it will not—it will become effective immediately. Although the SBA will need time to update its regulation (found at 13 C.F.R. § 124.104), the text of the Small Business Act will be clear that the measurement period will be five years, not three. Because statutes override regulations, the law will be five years and the SBA will have to follow that rule immediately. 
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Koprince Law LLC

Koprince Law LLC

 

HUBZone Joint Ventures: FAR Council Gets It Wrong

The FAR Council’s proposed update to the limitations on subcontracting, and the DoD’s subsequent FAR deviation, have been met with widespread approval by small contractors. But for HUBZone Program participants, the proposed rule and DoD deviation contain a glaring problem: a requirement that the HUBZone member of a joint venture take sole responsibility for meeting the applicable limitations on subcontracting.  This requirement, which doesn’t apply to joint venturers in other socioeconomic programs, is unfair to HUBZones, and at odds with SBA regulations. Before delving into the FAR Council’s proposed rule, a little background may be helpful.  Under the SBA’s regulations, when a joint venture will pursue a set-aside contract, two separate work share requirements apply. First, the SBA has a comprehensive regulation, 13 C.F.R. 125.6, governing the division of work between a prime contractor and its subcontractors.  When the prime contractor is a joint venture, the regulation applies to the division of work between the joint venture (which, as the prime contractor, performs work through its members) and third-party subcontractors. You don’t have to take my word for it–the SBA  has regulations on this stuff.  For the HUBZone Program, 13 C.F.R. 126.616(d) says that the joint venture is responsible for meeting the limitations on subcontracting: (1) For any HUBZone contract to be performed by a joint venture between a qualified HUBZone SBC and another qualified HUBZone SBC, the aggregate of the qualified HUBZone SBCs to the joint venture, not each concern separately, must perform the applicable percentage of work required by [Section] 125.6 of this chapter. (2) For any HUBZone contract to be performed by a joint venture between a qualified HUBZone SBC and a small business concern or its SBA approved mentor . . . the joint venture must perform the applicable percentage of work required by [Section] 125.6 of this chapter  and the HUBZone partner to the joint venture must perform at least 40% of the work performed  by the joint venture. As you can see, the SBA regulation offers two alternatives.  The first applies when the joint venture consists of two or more HUBZone companies–which, in my experience, is rather unusual.  The second, more ordinary, circumstance applies when a HUBZone company joint ventures with a non-HUBZone small business or SBA-approved mentor.  In either case, the joint venture members, together, constitute the “prime contractor” for purposes of the subcontracting limits.  That’s the first work share requirement: the limitations on subcontracting.  The second is the internal work share requirement within the joint venture itself. While the joint venture, as the prime contractor, is responsible for meeting the limitations on subcontracting, the SBA doesn’t want joint ventures to be vehicles for pass-throughs.  So the SBA’s regulations require that the joint venture member holding the “right” certification (such as HUBZone) perform at least 40 percent of the joint venture’s work.  For HUBZone joint ventures, as you saw, 13 C.F.R. 126.616(d)(2), says that “the HUBZone SBC partner to the joint venture must perform at least 40% of the work performed by the joint venture.” As an example of how these two requirements would work in real life, consider a joint venture between a HUBZone company and its non-HUBZone All Small mentor.  The joint venture is awarded a $1 million contract for services.  Under 13 C.F.R. 125.6, the joint venture, as prime contractor, may subcontract up to $500,000 to entities that are not similarly situated.  Assuming that the joint venture subcontracted the maximum $500,000 to a non-HBUZone subcontractor, the joint venture members must perform the remaining $500,000.  Of this amount, the HUBZone protege would have to perform at least $200,000 (40% of $500,000, if my mental math is correct). That brings us to the FAR Council’s recent proposal and DoD deviation.  The FAR Council proposes to revise FAR 52.219-4, which enacts the HUBZone Price Evaluation Preference.  That clause provides that, to receive the price preference, a HUBZone company must agree to comply with the limitations on subcontracting.   The proposed revision keeps this requirement (as it should), but that’s where things get odd.  Instead of amending the clause to refer to FAR 52.219-14, where the FAR Council otherwise consolidates all of the limitations on subcontracting, the proposed revision to FAR 52.219-4 spells out the subcontracting limitations in Paragraph (d).  Then comes Paragraph (e), which says: (e) A HUBZone joint venture agrees that the aggregate of the HUBZone small business concerns to the joint venture, not each concern separately, will perform the applicable requirements specified in paragraph (d) of this clause. That’s it.  Notice a little something missing?  The proposed Paragraph (e) uses the SBA’s language for joint ventures involving multiple HUBZone companies, but completely omits the much more important language governing joint ventures between HUBZones companies and non-HUBZones, including SBA-approved mentors. Without that important language, Paragraph (e) would seem to apply to any HUBZone joint venture seeking to take advantage of the price preference clause.  And applying this language to all HUBZone joint ventures seems directly at odds with the SBA’s regulation. Let’s return to the example above of a joint venture between a HUBZone company and its mentor, but this time let’s assume the joint venture avails itself of the HUBZone price preference and is awarded an unrestricted contract.  As before, the value of the contract is $1 million and the joint venture chooses to subcontract $500,000 to a non-HUBZone company.  So far, so good. We’re again left with $500,000.  So how much must the HUBZone company self-perform?  The SBA regulation would say $200,000.  But as I read the FAR Council’s proposal, revised FAR 52.219-4 will require the HUBZone protege to perform all $500,000 of the joint venture’s work, with nothing performed by the mentor.  After all, how else can the “HUBZone small business concerns to the joint venture” meet the 50% requirement? Treating HUBZone joint ventures this way is inconsistent with the remainder of the FAR Council’s proposal.  In proposed FAR 52.219-14(f), which would apply to all set-aside contracts, the FAR Council sets forth the specific limitations on subcontracting in Paragraph (e), then uses this language: (f) A joint venture agrees that, in the performance of the contract, the applicable percentage specified in paragraph (e) of this clause will be performed by the aggregate of the joint venture participants. Yes!  That is exactly right!  The “aggregate of the joint venture participants” should be responsible for meeting the performance of work requirements–not some subset of the aggregate, like the HUBZone member.   The FAR Council’s “aggregate of the HUBZone small business concerns” language applies only to the use of the HUBZone price preference, and not to HUBZone set-aside contracts.  So is this language really inconsistent with the SBA’s regulation? My highly professional opinion, is: “darn tootin’ it’s inconsistent.'”  The SBA’s regulation applies to any “HUBZone contract,” which is broadly defined, in another SBA regulation, to include “[a]wards to qualified HUBZone SBCs through full and open competition after a price evaluation preference is applied to an other than small business in favor of qualified HUBZone SBCs.”  By proposing to require the “aggregate of the HUBZone small business concerns” to meet the performance requirement, the FAR Council has, in my view, created a clear conflict between its proposed rule and the SBA’s active rule. The FAR rule, of course, is just a proposal.  But the DoD’s deviation is in effect right now, and it contains the same problem.  Even worse, the DoD’s deviation maintains this “aggregate of the HUBZone SBCs” language in FAR 52.219-3 (Notice of HUBZone Set-Aside or Sole Source Award), which applies to all HUBZone contracts.  At DoD, then, the deviation would seem to effectively render HUBZone joint ventures all but useless. The restriction the DoD uses exists in the current FAR, from an era in which the SBA only allowed HUBZone firms to joint venture with other HUBZones.  But the SBA eliminated this requirement in 2016, and one would have thought that a late-2018 FAR deviation would take the same approach.  That said, I can only criticize the DoD so much: the class deviation ain’t perfect, but it’s better than nothing, and will eventually be superseded by a final FAR rule. Now, some of my gentle readers will undoubtedly think I’ve wasted a lot of ink (or rather, pixels) on a relatively minor issue.  And in the grand scheme of things, this problem may not rate as highly as some others, like that still-missing SBA women-owned small business certification program. But the Government has consistently fallen well short of its 3% HUBZone goal in recent years, “A” grades notwithstanding.  The SBA, to its credit, has been taking action to try to fix the problem.  The SBA has removed HUBZone-specific restrictions, like the former requirement that HUBZones could only joint venture with other HUBZones.  More recently, the SBA proposed a major overhaul of the HUBZone Program’s rules, in a thoughtful proposed rule that recognizes many of the program’s structural shortfalls.  The SBA’s intention, in both regulation and policy, is to eliminate unnecessary “HUBZone only” regulatory roadblocks.  Unfortunately, when it comes to HUBZone joint ventures, the FAR proposal and DoD deviation maintain one of those roadblocks.   Hopefully, the final FAR rule will eliminate this wrongheaded restriction.  In the meantime, though, HUBZone joint ventures find themselves in the same spot they have been for the last several years: uncertain which rule to follow.  For years, I’ve been asked which limitations on subcontracting rule a small business should follow: the FAR, or the SBA?  The answer hasn’t been clear. HUBZone joint ventures are now looking at a disconnect between the FAR Council’s proposal and DoD deviation, on the one hand, and SBA regulation, on the other.  Which governs?  Beats me.   I’ll keep you posted.
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Koprince Law LLC

Koprince Law LLC

 

Handling a Protest with Kid Gloves: GAO Questions Army’s Domestic Leather Requirement

In these cold winter months, gloves with touchscreen capabilities are all but essential. Recently, the Army sought to procure touchscreen-compatible combat gloves, but required that all goatskin leather used for the gloves be “100% Domestic” in accordance with the Berry Amendment. In Mechanix Wear, Inc., B-416704 (Nov. 19, 2018), however, GAO sustained a protest against this requirement because the item being procured was subject to a Berry Amendment exception.  In its initial RFP, the Defense Logistics Agency (“DLA”) included DFARS clause 252.225-7012, “Preference for Certain Domestic Commodities,” which implements the Berry Amendment. The Berry Amendment was originally passed in the early days of World War II to promote DoD’s purchase of U.S. goods. As we’ve previously discussed on this blog, basic products covered by the Berry Amendment include clothing and handwear, or more specifically, gloves. Preparing leather products for use in wearable clothing contains several steps, including skinning the animal, salting or pickling and soaking the skin, removing hair or fur, tanning, and other processes. The original RFP stated “that while pickled-state goat/kidskin from foreign sources could be used, all tanning and processing of the goat/kidskin must be done domestically.” After issuing the original RFP, DLA conducted “market research” about whether skins of this kind, produced from start to finish in the United States, were available. When two sources indicated such skins existed in quantities necessary to meet DLA’s needs, DLA updated its RFP to state that “‘[a]ll Goat/Kidskin ‘MUST’ be 100% Domestic to include all tanning process.’” In response, Mechanix Wear, Inc., a glove manufacturer, protested when it was only able to locate one source for the leather requested, arguing that an exception to the Betty Amendment applied. This exception references a list, located at FAR 25.104(a), a part of the Buy American Act. The exception indicates that Berry Amendment requirements do not apply to this specific list of materials not traditionally available in the U.S. in the quantities demanded by the Government, including, among many others, cobra venom, platinum, olive oil, and most notable here, goat and kidskins. In contrast, the DLA responded market research was required to prove, or disprove, whether an item on the list was truly unavailable in the U.S., based on the list’s context within the Buy American Act. If found to be available based on the market research, DLA argued, the exception should not apply. Ultimately, GAO concluded that the Buy American market research requirements and DFARS Berry Amendment exceptions were pieces of “two similar, but distinct schemes” and that neither the plain language of the relevant FAR and DFAR provisions, nor relevant history of either “demonstrate[d] a clear intention for the market research requirements . . .  applicable to the Buy American Act, to apply to Berry Amendment restrictions.” Thus, GAO “recommend[ed] that the agency either (1) provide further reasonable support for its decision to require that these gloves be made with domestic leather, consistent with the applicable regulations; or (2) amend the solicitation’s restriction on goat/kidskins consistent with this decision and the applicable regulations.” In cases like this, requirements can get confusing, especially when certain regulatory requirements incorporate other bodies of regulatory law by reference, as they did in this case. When complex regulatory schemes like these have got your goat, contact Koprince Law; we’re happy to help!
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Koprince Law LLC

Koprince Law LLC

 

Supreme Court Could Limit Agency Power

Monday, the U.S. Supreme Court decided to hear a case that could have far reaching implications in agency law—including for government contractors. The Court granted certiorari to a case that could greatly diminish the amount of deference given to agencies interpreting their own regulations.  For contractors, a Supreme Court decision to curtail agency deference could lead to increased success rates in bid protests and other disputes.   The case, Kisor v. Wilkie, involves a veteran seeking disability benefits dating back the 1980s. According to the petition, the outcome turns on what the word “relevant” means a Department of Veterans Affairs regulation. The lower court found that both the agency and the veteran provided reasonable interpretations of an ambiguous regulation, but previous case law—which Kisor may overturn—required the court to defer in such circumstances to the agency’s interpretation. In other words, when an agency and a party both offer reasonable interpretations of an ambiguous regulation, the tie goes to the agency.  The cases establishing this level of deference are 1997’s Auer v. Robbins and 1945’s Bowles v. Seminole Rock & Sand Co. The Auer case articulated that an agency’s interpretation of its own regulation would stand, so long as the interpretation is not “plainly erroneous or inconsistent with the regulation.” This new case could overturn Auer and Seminole, thereby limiting federal agencies’ power across the board.  Such a decision could have significant impact in the federal contracting world. For example, last year in Veterans Contracting Group, Inc. v. United States, the U.S. Court of Federal Claims relied in part on Auer to determine that the SBA’s service-disable veteran-owned small business ownership rules were legal, resulting in a business being eligible for the VA’s SDVOSB program, but not the SBA’s SDVOSB program. In a lamenting tone, the court said that the SBA’s interpretation “produces draconian and perverse results in a case such as this one.” But, nevertheless, Auer meant the court had to defer to the SBA’s interpretation, even though the court obviously disagreed.  This is not the first time that the Supreme Court has been asked to overturn these cases. As Amy Howe notes on SCOTUSblog.com, “[t]he Auer doctrine has been a target for conservatives and business groups for some time[.]”  A 2016 petition asking basically the same thing was denied. So what’s new? Twenty-two percent of the Court is. Since that denial, Justices Gorsuch and Kavanaugh have joined the high court. And if you allow yourself to read the tea leaves, the future of Auer does not look bright.  For one thing, the Federal Circuit has a high rate of cases reversed or vacated (83 percent, according to one accounting). And the Federal Circuit itself noted ealier this year, that several Supreme Court justices had already indicated a willingness to revisit Auer, including Justices Alito, Roberts, and Thomas. That’s already three of the five needed to overturn. Thus, the future of Auer may rest on the shoulders of the two newest members of the Court. In other words, Auer may not be long for this world. While its little more than rampant speculation at this point, it is interesting to consider what an overturn would mean. Would that put agencies on equal footing with other parties when interpreting their own regulation? Would the most reasonable interpretation win out? Or would agencies be given some other level of deference? For contractors, one likely result would be an increased level of success in certain bid protests and other disputes. The Veterans Contracting Group protest, for instance, almost certainly would have been sustained if the court hadn’t felt its hands were tied.   We’ll soon find out. The case is expected to be argued some time next year. 
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Koprince Law LLC

Koprince Law LLC

 

Thank you, El Paso!

Last week I had the wonderful experience of giving several presentations at the 13th Annual Veterans Business Conference on base at Fort Bliss (El Paso, Texas). The conference was an excellent opportunity for veteran business owners to come together and learn about opportunities.  Organized by the Contract Opportunities Center, the event brought together small businesses and government agencies to meet and learn about wide-ranging topics. I was given the opportunity to discuss the All Small Mentor-Protege Program and joint venturing, size and affiliation issues, and provide the lunch audience with an update on the whirlwind of changes occurring as the U.S. Department of Veterans Affairs and the Small Business Administration work to combine their two Service-Disabled Veteran Owned Small Business programs. If you were there and have questions, please reach out.  We all got to listen to the incredibly moving speech of Justin Constantine, retired Lieutenant Colonel in the U.S. Marine Corps. His tale, and the lessons he learned, is certainly one worth taking to heart.  Thanks especially to Pablo Armendariz and Melissa Murphy for their steady hand on the wheel. Hope to see you all again soon. 
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Koprince Law LLC

Koprince Law LLC

 

SmallGovCon Week in Review: December 3-7, 2018

The first week of December went by in a flash. Santa Claus will be here before you know it; hopefully you’ve all been very good this year! In this week’s edition of the SmallGovCon Week In Review, data and cloud computing continue to be hot topics, GAO looks at post-disaster contractor performance, and we see the lengths the DEA is willing to go to have clean floors. Have a great weekend! DoD blazing the trail for back-office cloud computing. [FederalNewsNetwork] New FAR supplement restricts low price source selection.[FederalRegister] 2019: Year of the hybrid cloud. [FedScoop] DOL announces new policies for contract compliance. [DOL] The DEA is hiding surveillance cameras in vacuums. [Govexec] GAO report for disaster related advance contract performance. [GAO]
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Limitations on Subcontracting: DoD Issues Comprehensive FAR Deviation

Earlier this week, the FAR Council issued a proposed rule to conform the FAR to the SBA’s regulation governing limitations on subcontracting.  But the DoD isn’t waiting around while the FAR Council finishes the process. The DoD has issued a comprehensive FAR deviation, effective immediately.  The DoD’s FAR deviation will, effectively, temporarily conform the DoD’s use of the FAR to the SBA’s regulation while the FAR Council works on a final rule. The deviation instructs DoD contracting officers to use alternate FAR clauses when issuing small business set-asides, small business partial set-asides, and set-asides or sole source awards to 8(a) Program participants, HUBZones, SDVOSBs, EDWOSBs and WOSBs.  The alternate FAR clauses, in turn, use the same formulas as the SBA’s regulation (and underlying statute) to calculate compliance with the limitations on subcontracting.  Importantly, the alternate FAR clauses allow small prime contractors to count work performed by “similarly situated entities” toward the primes’ own performance thresholds. The language of the deviations tracks the language of the FAR Council’s proposed rule.  Overall, that’s a good thing, but as I mentioned in my post earlier this week, I don’t agree with the requirement in the FAR Council’s proposal (and now the DoD’s alternate clauses), requiring the HUBZone member(s) of a joint venture to comply with the limitations on subcontracting–without, apparently, counting work performed by non-HUBZone members.  To me, this requirement incorrectly conflates the limitations on subcontracting with the internal work split requirements of a joint venture.  Further, imposing this requirement only on HUBZone joint ventures seems to deviate from the SBA’s policy from mid-2016 onward, which has been to avoid imposing more restrictive provisions on HUBZone contractors than on other socioeconomic categories. That nit aside, the DoD’s action is good news.  Small prime contractors have long been confused about which limitations on subcontracting–FAR or SBA–they must follow.  At the DoD, at least, that confusion should now effectively be resolved.  I hope to see something similar on the civilian side.
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Don’t Rely on Auto-Generated EPDS Filing Emails, says GAO

Earlier this year, GAO unveiled its new Electronic Protest Docketing System (“EPDS”) for bid protests. EPDS serves as the central filing system for all bid protests pursued before GAO. As a courtesy, EPDS will automatically generate a courtesy email notice anytime a new document is filed with GAO. In a recent Request for Reconsideration, however, GAO was asked to reconsider its dismissal of a protest after the protester failed to receive the automatically-generated EPDS notice that the Agency Report had been filed. GAO held that the protester in question couldn’t rely on its failure to receive the email to avoid the ordinary timeliness rules applicable to GAO bid protests. Silverback7, Inc.—Reconsideration, B-415311.9 (Comp. Gen. Nov. 15, 2018), involved a procurement for survival, escape, and evasion instruction at Fort Rucker, Alabama. Silverback7 was an unsuccessful offeror and filed a bid protest with GAO through EPDS. GAO subsequently docketed Silverback7’s protest, and sent the standard docketing letter to the parties. Among the items discussed in the docketing letter was GAO’s policy of dismissing protests when the protester fails to file Comments within 10 days of the agency filing its Agency Report with GAO. The parties were advised the Agency Report was due on October 1. Silverback7’s Comments on the Agency Report would be due 10 days later, on October 11. The Agency timely filed its agency report with GAO. Silverback7, however, did not file Comments by this date. A week later, GAO dismissed Silverback7’s protest in an unpublished decision. Following the dismissal, Silverback7 filed a Request for Reconsideration with GAO. Silverback7 argued that dismissal was improper because it was not notified that the agency filed its Agency Report with GAO. According to Silverback7, it had not received any automatically generated email form EPDS when the Agency Report was filed. As such, Silverback7 argued that its failure to timely submit Comments should be excused. GAO did not agree. As a preliminary matter, GAO reviewed its bid protest regulations with respect to notice. As GAO explained: Thus, according to GAO, the Agency’s mere act of filing the Agency Report in EPDS placed all parties on constructive notice of its presence, regardless of whether a courtesy email was sent. GAO then turned to Silverback7’s principal argument: that its failure to submit Comments on the Agency Report was excusable because it did not receive a courtesy email from EPDS when the Agency filed its Agency Report. GAO was not persuaded. As GAO explained “the auto-generated EPDS email notifications of new filings in a case are a courtesy provided to parties, they are not a substitute for parties actively checking the EPDS docket for new filings and diligently pursuing the case.” GAO also noted that its EPDS instructions and guidance state that “’it is the user’s responsibility to regularly review the docket for new case developments . . . the failure to receive any system generated emails will not excuse a party’s failure to timely respond to case developments.’” As such, failure to receive the automated message is not an excuse for not meeting a deadline. As a final point, GAO noted that its decisions have “consistently explained that a protestor must notify GAO when it fails to receive the report by the due date specified in the initial development letters generated by our Office and request an extension because late receipt does not alter the period for submitting comments.” As such, it was Silverback7’s responsibility to timely notify GAO if it did not receive the agency report by the due date established by GAO. Thus, when Silverback7 did not receive a courtesy email or other message from EPDS regarding the filing of the Agency Report by 5:30 PM EST, it was Silverback7’s responsibility to check the EPDS docket and notify GAO that it had not received the Agency Report. GAO’s decision in Silverback7 is a cautionary tale for protesters relying on GAO’s EPDS system: beware of overreliance on EPDS’s automatically generated filing notification emails. According to GAO, any filing with EPDS places the parties on constructive notice of the filing. Thus, it is prudent to keep close tabs on any active dockets to ensure important filings are not going unnoticed.
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Limitations on Subcontracting: FAR Council Finally Proposes Rule Change

For small government contractors, the disconnect between the SBA’s updated limitations on subcontracting rule and the FAR’s outdated rules has been very confusing.  For more than two years, the FAR and SBA regulation have used different formulas to determine compliance, and the SBA rule–but not the FAR–allows the use of “similarly situated entities” on small business set-asides and 8(a) contracts. This has created major headaches for small businesses, who have had no definitive answer to what should be a simple question: “which rule do I follow?”  Now, finally, there is some important progress to report in clearing up this discrepancy: yesterday, the FAR Council issued a proposed rule to update the FAR’s limitations on subcontracting provisions and conform them to the SBA’s rule. By way of quick background, way back in January 2013, former President Obama signed the 2013 National Defense Authorization Act into law. The 2013 NDAA made major changes to the limitations on subcontracting.  The law changed the way that compliance with the limitations on subcontracting is calculated for service and supply contracts–from formulas based on “cost of personnel” and “cost of manufacturing,” to formulas based on the amount paid by the government.  And, importantly, the 2013 NDAA allowed small primes to claim performance credit for “similarly situated entities.” Interestingly, about a year later–well before either the SBA or the FAR Council had amended the corresponding regulations–the GAO issued a decision suggesting (although not directly holding) that the similarly situated entity concept was currently effective.  But most contractors and Contracting Officers continued to apply the “old” rules under the FAR and SBA regulations. On May 31, 2016–about three and a half years after the 2013 NDAA was signed into law–the SBA published a final rule implementing the changes, now codified at 13 C.F.R. 125.6.  The SBA’s regulation took effect on June 30, 2016.  Less than a month later, the VA issued a Class Deviation, incorporating by reference the new SBA regulations for VA SDVOSB and VOSB acquisitions.  But for many other procurements, contracting officers continued to include FAR 52.219-14, which uses the old formulas and makes no mention of similarly situated entities.  (FAR 52.219-14 applies to small business and 8(a) contracts.  For HUBZone, non-VA SDVOSB procurements, and WOSB/EDWOSB contracts, the subcontracting limits are implemented by other clauses). This, of course, has led to a lot of confusion.  Does a prime contractor comply with the SBA regulation?  The FAR clause?  Both?  Some contracting officers have taken the position that the FAR clauses govern until they’re amended.  But the SBA, of course, wants contractors to follow the SBA regulations.  Indeed, a joint venture formed under the SBA’s regulations must pledge to comply with 13 C.F.R. 125.6.  It’s been (to use official legal terminology), a hot mess. Now, more than two years after the SBA updated its regulations, the FAR Council has finally taken the first major step toward corresponding changes.  Yesterday, the FAR Council published a proposed rule in the Federal Register, which, when finalized, will update the FAR to conform with the SBA’s regulation and the underlying statute. The substance of the proposed FAR rule isn’t terribly surprising, nor should it be.  Substantively, the rule largely conforms with the SBA’s rule codified in 13 C.F.R. 125.6.  Indeed, in its commentary discussing the proposed rule, the FAR Council repeatedly mentions the intent to align the FAR with the SBA’s regulation. That said, I thought a few points were worthy of mention: FAR 52.219-14 Expanded.  Instead of the hodgepodge of FAR clauses governing limitations on subcontracting, the revised FAR proposal would consolidate the limitations on subcontracting for all small business programs in FAR 52.219-14. Nonmanufacturer Rule Changes.  The proposed rule would provide more guidance to Contracting Officers and contractors alike regarding the application of the nonmanufacturer rule.  Among other things, the proposed rule implements a 2016 SBA change requiring Contracting Officers to notify offerors when a nonmanufacturer rule waiver will apply.  The proposed rule would also eliminate the requirement under FAR 19.1303, that, for a HUBZone firm to qualify as a nonmanufacturer, the end manufacturer also must be a HUBZone company. Similarly Situated Entities.  The proposed rule would, as expected, allow prime contractors to use similarly situated entities to meet their performance thresholds.  This is great news for small businesses, many of whom have wondered whether, in the absence of a FAR change, they can avail themselves of the statutory and SBA provisions regarding similarly situated entities. HUBZone Price Preference.  The proposed rule would allow HUBZone firms to obtain the HUBZone price preference by subcontracting to other HUBZones.  So far, so good.  More troubling, however, the proposed rule states that in a HUBZone joint venture, the “HUBZone small business concerns to the joint venture” would have to meet the applicable limitations on subcontracting.  That strikes me as an incorrect conflation of the limitations on subcontracting, on the one hand, and the SBA’s internal work share rules for joint ventures, on the other.  We’ll see how this gets addressed in the final rule but I hope the SBA weighs in to help clear this up. The FAR Council is accepting comments on the proposed rule until February 4, 2019.  From there, public comments will be considered and a final rule issued, probably sometime in mid-to late-2019. For now, of course, this remains a proposed rule, and the disconnect between the FAR and the SBA regulation remains.  But at least things are moving in the right direction.
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2018 GAO Bid Protest Report Shows 44% Success Rate, With Little Change Compared to Prior Years

The holiday season is upon us, time for cherished traditions. If you’re anything like us at Koprince Law, one of these traditions is reviewing the GAO’s annual bid protest report. The overall picture I got from the report, while perhaps not the best clickbait, is that GAO bid protest figures have remained remarkably steady over the past few years. As it has been for the last few years, close to 50% of protests succeed. This stability is a story worth repeating. The GAO Bid Protest Annual Report to Congress for Fiscal Year 2018 fulfills GAO’s statutory duty to report to Congress (1) each instance in which a federal agency did not fully implement a recommendation made by GAO (2) if any bid protest decision was “not rendered within 100 days after the date the protest is submitted,” and (3) “include a summary of the most prevalent grounds for sustaining protests.” It also summarizes the general statistics for bid protest decisions. If you were holding your breath on these required reports, you can stop. GAO met the 100-day deadline in all cases and the agencies followed all of GAO’s recommendations. This is good and shows the GAO bid protest system is efficient and respected by agencies. The main grounds for sustaining protests are not too revealing, as they are pretty generic, despite additional statutory instructions (in the 2017 NDAA) to provide these grounds. The three most common grounds were: Unreasonable technical evaluation Unreasonable cost or price evaluation Flawed selection decision Here are some key numbers from the report: 2,474 – Number of total protests. The total number of cases was 2,607, but this larger figure includes claims for costs and requests for consideration. 622 – Number of cases decided on the merits, rather than through dismissal. 92 – Number of sustained protests 15% – Percentage of sustained protests 44 – Effectiveness rate (percentage sustained or where agency took corrective action) 0.51% – Percentage of cases with hearings The effectiveness rate is an important metric. As GAO tells it, the effectiveness rate can be viewed as the percentage of protests in which a protester succeeded in “obtaining some form of relief from the agency” either through corrective action or a sustained protest. A corrective action is an admission from the agency that there was some flaw in the evaluation and the agency counsel thought it would lose at GAO. In other words, the effectiveness rate is a measure of whether the protester succeeded in getting another chance at winning the award. The 44% effectiveness rate for 2018 is right around the rate for the last 4 years, which ranged from 43% to 47%. Interestingly, the hearing rate has decreased every year for the last four years, going from 4.7% of cases in 2014 to 0.51% this year. And this is not a consequence of there being more cases filed, as this year’s total of 2,607 cases is right in line with the average of 2,646 over the prior four years. This statistic demonstrates that GAO is relying on hearings less every year (not that GAO held that many hearings in the past). The bottom line, contrary to some calls for reform arguing that there are too many bid protests, is that the total number of protests and the protest success rate have been quite steady over the last five years. The only thing that has really changed is there are less hearings being held. As my colleague Steven Koprince has astutely observed, the problem might not be that there are too many protests. The problem might be “that evaluators are messing up a lot of source selections.”  But that is not an issue that bid protest reform can address.
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Government-Wide SDVOSB Certification: More Details on New Bill

I’ve long predicted that Congress would eventually adopt a formal, Government-wide SDVOSB certification program (or “verification” program, if you prefer).  Maybe my crystal ball is finally right.  As my colleague Matt Schoonover wrote last week, a new bill introduced in the House of Representatives would do just that. The full text of the bill has now been published.  Here are some of the key details of the Government-wide SDVOSB certification proposal. Government-wide SDVOSB verification won’t happen overnight.  The House bill calls for the certification requirement to kick in “2 years after the date of enactment of this Act.”  What’s more, the SBA and VA can jointly extend the enactment date “an unlimited number of times by a period of not more than 6 months.”  Now, I know that starting up a Government-wide verification program isn’t a simple task, but two years ought to be enough time to get it done.  Are extensions–especially unlimited extensions–really necessary? Self-certified SDVOSBs will get a grace period.  The House bill says that once the program goes live (an event the bill calls the “transfer date”), a self-certified SDVOSB will have one year to file an application for certification.  If the application is filed within the one-year period, the company can continue to rely on its self-certification for non-VA contracts until the SBA makes a decision on the application.  Failing to apply within one year, however, will render the self-certification invalid.  One can quibble about whether companies should get more or less time, but I think that a grace period is a good idea.  Otherwise, SDVOSBs might experience the sort of problems that occurred when the VA’s verification program began.  The VA, you may recall, ultimately adopted a short-lived class deviation to the VAAR in an effort to allow expedited treatment of certain applications.  It seems that Congress may have learned something from that unpleasant experience. SBA will be in charge.  As Matt mentioned in his post, the House bill says that the SBA, not the VA, will be in charge of the Government-wide SDVOSB certification program.  Many veterans, who have been frustrated with the VA’s oversight, will cheer this move.  And the move makes sense, given that the SBA runs all of the other Government-wide socioeconomic programs.  That said, I’d caution veterans to temper their enthusiasm somewhat about this particular change.  The VA, it’s true, made a pretty big mess of things in the early years of the CVE, but it has improved quite a bit since then.  At the same time, the SBA’s own track record is rather spotty.  The SBA’s newest initiative, the All Small Mentor-Protege Program, has been a big success in terms of speed and efficiency.  But that’s not true of the 8(a) Program, where applications can sometimes languish for many, many months.  I’m going to wait and see how the SBA does before judging whether this move will be a good thing for veterans. SDVOSB sole source threshold will increase.  Although it doesn’t have anything directly to do with certification, the House bill would increase the sole source threshold for non-VA SDVOSB contracts.  For manufacturing contracts, the sole source threshold would increase from $6.5 million to $7 million.  For other contracts, the threshold would jump from $4 million to $5 million.  While this is good news for SDVOSBs, only the VA would retain the ability to award SDVOSB sole source contracts even if the agency is aware of multiple qualified SDVOSBs.  Outside of the VA, SDVOSB sole source contracts will likely remain rare, because a Contracting Officer can only award a sole source SDVOSB contract when he or she “does not have a reasonable expectation that offers would be received from two or more” SDVOSBs. Ordinarily, my colleagues and I wouldn’t spend so much time discussing a bill.  After all, most bills introduced in Congress never become law.  But I think that some version of this bill will be adopted.  The non-VA SDVOSB program is the only remaining socioeconomic preference program allowing self-certification.  (Although see here for my recent take on the WOSB certification program).  Congress seems uncomfortable allowing self-certification to continue.  Whether as a stand-alone bill, or perhaps part of the 2020 NDAA, my guess is that Government-wide SDVOSB certification is on its way. We will keep you posted.
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Don’t Skip the Notes: OHA NAICS Code Decision Relies on Footnote

Many people skip the footnotes when they read. Why not? There’s rarely anything important in them, right? Not necessarily. In recent NAICS appeal Advanced Concepts Enterprises, Inc., SBA No. NAICS-5968 (Oct. 24, 2018), a single footnote made all the difference. In September 2018, the Missile Defense Agency issued an RFP seeking expansion of existing Ballistic Missile Defense System (BMDS) “test assets.” The “test assets” are used “to realistically emulate/simulate the complex weapon systems of the BMDS” and “include guided missiles and space vehicles tactical hardware and software.” Simply, these assets required updates to include new sensors and tactical systems. The RFP was designated as a WOSB set-aside under NAICS code 541715, “Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology).” While the NAICS code’s corresponding size standard is normally 1,000 employees, an exception exists for “Guided Missiles and Space Vehicles” which extends the size standard to 1,250 employees. However, Advanced Concepts Enterprises, Inc. (the Appellant) filed a NAICS code appeal with the SBA Office of Hearings and Appeals, arguing that NAICS code 541513, Computer Facilities Management Services, which has a corresponding $27.5 million annual receipts size standard, was more applicable. In deciding the case, OHA took a deep dive into the requirements of the RFP. An estimated 41 % of the Full Time Equivalents were dedicated to Network Design, which the Appellant argued did not contain research and development, while three other primary objectives each amounted to less than 17%. Despite the Appellant’s arguments to the contrary, OHA ultimately decided that the Research and Development NAICS code was appropriate. Normally, the NAICS Manual defines “research” as “original investigation undertaken on a systematic basis to gain new knowledge”, and ““experimental development” as “the application of research findings or other scientific knowledge for the creation of new or significantly improved products or processes.” Both a “research” and a “development” component must be present for a “Research and Development” NAICS code to apply. Footnote 11(d), however, presents a slight exception. Footnote 11(d) to 13 C.F.R § 121.201, which provides small business size standards in accordance with their NAICS codes, states that under NAICS code 541715 “‘Research and Development’ for guided missiles and space vehicles includes evaluations and simulation, and other services requiring thorough knowledge of complete missiles and spacecraft.” In other words, when a solicitation deals with guided missiles or spacecraft, the definition of “Research and Development” is broad enough to include almost any task requiring a deep understanding of missiles or spacecraft. OHA hammered home the importance of a broader definition when it comes to guided missiles, stating “the BMDS is an extraordinarily complicated and sophisticated undertaking, compared to ‘hitting a bullet with a bullet.'” OHA concluded that because “[t]he contractor will be servicing the necessary [BMDS] modeling and simulation equipment,” the solicitation “explicitly require[d] . . .  a thorough knowledge of missiles, and thus fits into the description of the NAICS exception in Footnote 11(d).” While this decision can also teach us a lot about how guided missile systems work, the most important take away for contractors is the importance of checking out the footnotes. Footnotes were the deciding factor in this case and had a significant impact on the applicable size standard. The same may be true in any case, so make sure you glance at the superscript references. It’s not rocket science!
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SmallGovCon Week in Review: November 26-30 , 2018

Thanksgiving has come and gone, so that means holiday season is upon us! It was a balmy 62 degrees here in Kansas on Turkey Day, and 48 hours later we were in the middle of a blizzard. Gotta love Kansas weather! Stuffed full of turkey and snowed in, we had some time to catch up on what’s been happening in the government contracting world. In this two-week edition of SmallGovCon, we’ll look at GSA’s proposed consolidation to its schedule contracts, a DOL hiring discrimination dispute, Amazon’s role in the federal marketplace, and more. Have a great weekend! GSA delivered on its long-awaited promise to reform the Multiple Awards Schedule program. [Fedscoop] Watch your step when side stepping the Federal Acquisition Regulation! [Fedscoop] The SBA releases its latest HUBZone Program Evaluation. [HUBZoneCouncil] Pentagon still behind on adequate guidance for the GAO. [GovExec] Amazon providing its fair share of federal cloud computing.  [CNN] Defense Department rescinded a plan to pay contractors less money. [GovExec] DOJ gets aggressive on bid rigging after military fuel supply investigation. [ChannelNewsAsia] NIH seeking contractors to roll joints. Couch potatoes need not apply! [GovExec] Federal contractors shelled out a combined $16.4 million to settle workplace discrimination. [BlombergLaw] Wrongly accused NASA contractor finally has his day in court. [Forbes] Contracting  Officer sentenced to prison for making false statements. [Department of Justice] DOL settles hiring discrimination dispute with building supply contractor. [Department of Labor] Pentagon’s first department wide audit is a major milestone. [GovExec] Federal jury convicts contractor for fraudulently obtaining over $11 million. [Department of Justice] FEMA contractors in Puerto Rico charges total over $1 billion for simple repairs. [NYTimes]
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Size Protest Was Untimely Because CO Did Not Require Size Recertification

Let’s suppose that you, a small business, were previously awarded a long-term contract set aside for small businesses. But over the past few years, business has been good and you’ve outgrown the size standard assigned to the contract. Can you still be awarded a task order under the contract? Yes–if the contracting officer doesn’t require you to recertify your size in connection with the task order request, and no contract-specific terms–like mandatory off-ramps–say otherwise. This important principle recently played out in DNT Solutions, LLC et al., SBA No. SIZ-5962 (2018). There, the General Services Administration issued a task order request under the Alliant Small Business Government-Wide Acquisition Contract. Both ASP and DNT submitted an offer. After GSA announced that ASP was the apparent awardee, DNT filed a protest with the Small Business Administration challenging ASP’s size. SBA initially dismissed the protest as untimely because it found that the task order request did not require offerors to recertify size. DNT appealed and OHA required SBA to conduct further investigation into whether the contracting officer had required recertification. On remand, SBA assessed two issues. First, it found that the task order was not set aside for small businesses. Thus, the task order did not categorically prohibit large businesses, holding the GWAC, to bid on the task order. Second, it found that the contracting officer required businesses to recertify themselves as small in order to be eligible, thus making DNT’s protest timely. As you can imagine, ASP appealed SBA’s decision, arguing that the task order request did not require offerors to recertify as small. DNT also appealed the portion of SBA’s decision in which it found that the task order was not set aside for small businesses. For OHA, the key question was “whether the [task order request] required [offerors] to recertify size for the instant task order.” This issue was critical because “it is well-settled that a size protest against an order under a long-term contract is timely only if the [contracting officer] requested recertification in conjunction with that order.” In assessing whether the contracting officer required recertification, OHA found that the contracting officer’s statement (disavowing any intent to require recertification) and his actions during the procurement process militated against any finding of such a requirement. In particular, OHA found it significant that the task order request did not expressly require recertification, nor was there any language requesting a new certification or recertification. In the end, OHA, citing 13 C.F.R. § 121.1004(a)(3), held that DNT’s appeal was untimely because the task order request did not require ASP to recertify its size. It summed up its holding this way: Under SBA regulations, a size protest on a long-term contract may be filed within five business days after any of three events: when the contract is initially awarded; when an option is exercised; or when there is a request for recertification in connection with an individual order. . . . None of these situations was present here. ASP most recently recertified for the [GWAC] contract in 2014, and the instant TOR did not require recertification. Therefore, DNT’s protest . . . was untimely. So the simple lesson is this: if a contracting officer doesn’t require recertification for an order under a long-term contract, then a disappointed offeror cannot protest the awardee’s size. But if a recertification request is made, and you suspect the awardee is not small, be sure to file your size protest within 5 business days.
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Alert! House Committee Proposes Ending SDVOSB Self-Certification

SmallGovCon readers know that the federal government currently operates two SDVOSB socio-economic designations: a VA-specific program (that requires the business to be verified by the VA’s Center for Verification and Evaluation), and a program through the SBA (that allows the business to self-certify). These dual programs have been the source of confusion among SDVOSBs. Thankfully, relief might be on the way, as the House Small Business Committee has introduced legislation to consolidate SDVOSB verification under the SBA. Dubbed the Verification Alignment and Service-disabled Business Adjustment (or VA-SBA) Act, this proposed legislation would end self-certification among SDVOSBs. Instead, the VA-SBA Act would impose a certification requirement for SDVOSBs government-wide. The Act would also give the SBA responsibility for overseeing the certification requirement. What benefits would SDVOSBs see from the VA-SBA Act? Really, simplicity: instead of having two different programs (one requiring verification, the other allowing self-certification), SDVOSBs would have to be certified by the SBA. This certification, moreover, would operate government-wide—for work solicited by DoD, the VA, or any other agency. Importantly, the VA-SBA Act would maintain the SDVOSB/VOSB contracting preference at the VA. More than a decade after its adoption, and only two years removed from Kingdomware, we continue to see pushback against this preference. It’s nice to see that Congress intends to affirm its commitment to this priority in the Act. Because the VA-SBA Act was only recently proposed, it’s too early to know whether or when it might be signed into law. Until it is, the status quo remains the same: SDVOSBs must be attuned to both socio-economic programs, at the VA and through the SBA, to effectively work with the federal government. We’ll keep you posted as the VA-SBA Act progresses through Congress. In the meantime, please call us with any questions about SDVOSB regulations or contracting.
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SBA OHA: Contracting Officer’s Termination Decision Won’t Change Size Appeal Deadline

Following a size determination, any person adversely affected by that determination may file an appeal with the SBA’s Office of Hearings and Appeals. To be timely, the appeal has to be filed within 15 calendar days from the date the person receives the determination. If not timely-filed, the appeal will be dismissed. This 15-day deadline is strict. The OHA doesn’t have the power to extend it, even if good reason exists to do so. In fact, the OHA’s recent decision in Sentient Digital, Inc. dba Entrust Government Solutions, SBA No. SIZ-5963 (2018) makes clear that this deadline applies even when an agency changes its decision to terminate a contract following an adverse size determination. The facts in Sentient Digital are fairly straightforward. Following its award under a solicitation seeking IT engineering support services, a disappointed offeror challenged Sentient’s small business eligibility under the solicitation’s $27.5 million size standard. On August 23—about a month-and-a-half after the award decision was announced—the SBA found Sentient ineligible based on its affiliation with an ostensible subcontractor. The following day, the contracting officer reached out to Sentient to ask whether it would appeal the determination. The contracting officer also said that he was considering whether to terminate the award or to allow Sentient’s performance to continue for the base period. In response, Sentient told the contracting officer that it would appeal only if the agency intended to terminate the contract. On August 31, the contracting officer told Sentient that it would not terminate the contract. Sentient’s deadline to appeal the determination expired on (or around) September 10. But on September 12, the contracting officer informed Sentient that the agency was still considering whether to terminate the contract following the size determination—contradicting what the agency had said just a few weeks earlier. On September 20, the agency then said that, unless Sentient appealed the determination, the contract would likely be terminated. Following this back-and-forth, Sentient appealed the size determination on September 26. Though it conceded that the 15-day appeal deadline expired, Sentient nonetheless argued that its appeal should be considered timely because it relied on the contracting officer’s representations about the award termination. Citing the 15-day deadline, OHA dismissed the appeal as untimely. Doing so, it noted that there are “no exceptions” to the regulations’ 15-day deadline. It simply does not matter whether (or how) an agency will react to the size determination; an appeal must be filed within 15 days, no matter what: There is nothing in the regulation which permits an appellant to rely upon the word of a procuring agency to extend the time limit for filing a size appeal. Indeed, the regulation prohibits OHA from extending the deadline for filing an appeal. The fact that the CO initially indicated [the agency] would not terminate the award does not alter the time limit Appellant faced after receiving the size determination. Appellant relied upon the CO’s word to its detriment. The regulations mandates that I dismiss this appeal. Though this result seems a bit harsh, I think the OHA got it right. The SBA’s regulations do not include any exceptions to the 15-day timeliness rule. And although the contracting officer might have changed his position on contract termination, this doesn’t change the fact that, together with its ostensible subcontractor, Sentient was too large to be eligible. Allowing Sentient to wait to appeal an adverse decision until it knows whether it would lose an award it wasn’t actually entitled to would only disrupt the contracting process. So what’s the lesson from Sentient Digital? Simple: if you’re thinking about appealing a size determination, make sure that your appeal is timely-filed—even if you have a good excuse for being late.
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The Mysterious Case of the Missing SBA Women-Owned Small Business Certification Program

On December 19, 2014, then-President Obama signed the 2015 National Defense Authorization Act into law.  The 2015 NDAA eliminated the statutory basis for federal agencies to award women-owned small business set-aside contracts to self-certified companies.  In essence, then, the 2015 NDAA effectively eliminated WOSB self-certification. Flash forward almost four years, and the SBA has not yet implemented a WOSB certification program.  In fact, the SBA hasn’t even proposed rules to implement such a program.  Instead, although the SBA continues to license a few third-party certifiers, the SBA also continues to say that WOSBs “can self-certify directly at certify.sba.gov by answering questions and uploading documents.” So where the heck is the mysteriously missing SBA WOSB certification program?  And is it even legal for the SBA to continue allowing WOSB self-certification? The WOSB Program and Elimination of WOSB Self-Certification  Let’s hop into our DeLorean, check the flux capacitor, and set the dials for December 2014. The world was a very different place.  My Chicago Cubs had yet to erase their record-breaking World Series drought, and after a 73-89 season, fans had little reason to think that would change anytime soon.  The Star Wars sequel trilogy was still a year away.  And the population had to make do with the lowly iPhone 6, a far cry from the three new iPhones we have in 2018.  (To be fair, I’m not quite sure of the technical differences between iPhone models, but given the excitement anytime a new model is released, I’m assuming that the 2018 iPhones can do things like baking a perfect souffle). In 2014, the WOSB program was still in its infancy.  Although Congress authorized a WOSB contracting program in 1994, the SBA’s final rule implementing the program wasn’t published until 2010.  In 2011, WOSB provisions were added to the FAR, and Contracting Officers began issuing set-aside contracts for WOSBs. When the program began, the underlying statute, the Small Business Act, allowed Contracting Officers to award contracts to either certified or self-certified WOSBs.  The statute, 15 U.S.C. 637(m)(2) read, in relevant part: (2) Authority to restrict competition
In accordance with this subsection, a contracting officer may restrict competition for any contract for the procurement of goods or services by the Federal Government to small business concerns owned and controlled by women, if—
***
(B) the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by women will submit offers for the contract; 
***
(E) each of the concerns–
(i) is certified by a Federal agency, a State government, or a national certifying entity approved by the Administrator, as a small business concern owned and controlled by women; or
(ii) certifies to the contracting officer that it is a small business concern owned and controlled by women and provides adequate documentation, in accordance with standards established by the Administration, to support such certification. In other words, under the statute that existed when the WOSB program began operating, companies could choose to obtain a formal certification or rely on self-certification.  Although the SBA licensed four non-profits to provide formal certifications, the SBA did not take on WOSB certifications itself.  Understandably, most WOSBs chose to self-certify rather than undertake the time and expense of obtaining a third-party certification. WOSB self-certification soon came under fire.  NASA’s Office of Inspector General published an audit report in 2013 concluding that seven out of 20 awards the agency made to self-certified WOSBs were potentially improper.  NASA’s OIG didn’t mince words, writing “we believe that the level of false self-certification as a woman-owned business is troubling and may exist Government-wide.” The GAO followed with a report issued in October 2014.  The GAO concluded that Contracting Officers weren’t using WOSB set-asides, which amounted to less than one percent of contracts awarded to WOSBs.  Among problems with the program, the GAO wrote that Contracting Officer’s found the WOSB self-certification documentation requirements to be “burdensome or complex relative to other SBA programs with set-asides.”  Further, the GAO said, Contracting Officers may lack confidence that self-certified WOSBs are actually eligible, especially given that examinations of self-certified WOSBs “found high rates of ineligibility.” Perhaps because of these reported problems, Congress eliminated the self-certification option in the 2015 NDAA.  Effective December 19, 2014, and continuing until today, 15 U.S.C. 637(m)(2) reads, in relevant part: (2)Authority to restrict competition
In accordance with this subsection, a contracting officer may restrict competition for any contract for the procurement of goods or services by the Federal Government to small business concerns owned and controlled by women, if—
***
(B) the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by women will submit offers for the contract; 
***
(E) each of the concerns is certified by a Federal agency, a State government, the Administrator, or a national certifying entity approved by the Administrator as a small business concern owned and controlled by women. As I read it, under the Small Business Act as it has existed since December 2014, a Contracting Officer cannot establish a WOSB set-aside competition unless the Contracting Officer has a reasonable expectation of receiving two or more offers from certified WOSBs. The SBA Continues Allowing WOSB Self-Certification In March 2014, the SBA acknowledged that Congress had eliminated WOSB self-certification.  But the SBA indicated that it would continue to allow self-certification until it addressed the statutory change.  In what proved to be the beginning of a troubling pattern, the SBA offered little legal rationale for why it could continue to permit the very thing that Congress had just eliminated. Meanwhile, the SBA Office of Inspector General began urging the SBA to quickly respond to the 2015 NDAA.  In a study published in May 2015, the SBA’s Office of Inspector General concluded that 15 of the 34 WOSB and EDWOSB awards it had analyzed were improper.  In another report released in November 2015, the SBA OIG wrote that the SBA’s implementation of WOSB sole source authority (which was also permitted by the 2015 NDAA), without “implementing the contemporaneously required certification program, is inconsistent with SBA’s statutory authority and exposes the program to abuse.” On December 18, 2015–nearly one year to the day after the 2015 NDAA was signed into law–the SBA published a notice in the Federal Register.  But instead of explaining how the SBA intended to address the new certification requirement (something the agency had 12 months to ponder), the SBA simply sought the public’s input about how it ought to proceed. In March 2016, the SBA launched its certify.sba.gov website.  In a statement accompanying the launch of the new website, the SBA said that WOSB self-certification documents could be uploaded to “certify,” and that “self-certification is still permitted” while the SBA develops criteria for WOSB certification. Since 2016, the SBA has stayed pretty quiet when it comes to WOSB certification.  But watchdogs have continued to push for SBA to implement the WOSB certification program.  In June 2017, the GAO issued a report saying that, as a result of the SBA’s foot-dragging, “potentially ineligible businesses may continue to incorrectly certify themselves as WOSBs, increasing the risk that they may receive contracts for which they are not eligible.”  In June 2018, the SBA OIG again pushed the SBA to act on WOSB certification, in a report indicating that many WOSB and EDWOSB sole source awards were improper. Meanwhile, the Government missed its 5% WOSB  contracting goal in Fiscal Years 2016 and 2017, but the SBA awarded the Government “A” grades anyway.  My modest proposal to replace this sort of grade inflation with agency participation trophies has, rather shockingly, failed to gain traction. So here it is, November 2018.  In December, it looks like we’ll all be able to pop some champagne corks and celebrate the fourth anniversary of Congress’s elimination of WOSB self-certification.  (Apparently, the traditional gift for a fourth anniversary is linen or silk, although a more modern list suggests the ever-so-romantic gift of electrical appliances). So, almost four years in, where on earth is the long-awaited WOSB certification program?  And, while it’s worth wondering exactly how many more anniversaries will actually pass before the SBA acts (the “modern list” suggests “pen and pencil sets” as a seven-year gift), I am wondering something else: is WOSB self-certification even legal? The Legal Problem with WOSB Self-Certification So, yeah, about that legality issue.  To my knowledge, the SBA has never formally set forth its legal basis for continuing to allow WOSB self-certification.  The closest I’ve seen was the SBA’s initial statement in March 2015, which basically amounted to, “well, Congress didn’t say we couldn’t!” But is that right?  What evidence does the SBA require, aside from Congress’s deletion of the statutory authority itself?  Isn’t the fact that the statute used to allow self-certification, and then Congress eliminated it, pretty persuasive when it comes to ascertaining Congress’s position? From a legal perspective, I think the SBA’s continued allowance of WOSB self-certification is shaky, at best, at least when it comes to WOSB set-aside contracts.  Two well-established lines of legal authority lead me to this conclusion. First, when a statute conflicts with a regulation, the statute governs.  As the Supreme Court put it in a 2014 case, “an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.”  This rule, of course, is essential to the functioning of our democracy.  If an agency–an unelected body–could simply ignore or effectively rewrite statutory authority, it would have the power to thwart the laws adopted by Congress and the President. Second, as the Supreme Court said in another case, “absent a clear direction by Congress to the contrary [a statute] takes effect on the date of its enactment.”  This rule, too, is essential to a well-run democracy.  Otherwise, an unelected agency could refuse to implement Congressional directives indefinitely, again thwarting the laws adopted by our elected officials. Applying these principles to the WOSB Program, I struggle to see how the SBA believes that Contracting Officers can issue WOSB set-asides based on self-certification. The SBA’s regulations may allow self-certification for WOSB set-aside contracts, but the underlying statute doesn’t, and the conflict between the two must be resolved in favor of the Small Business Act.  And while it may have been a good idea for Congress to allow the SBA a reasonable period of time (say a year or 18 months) to implement a WOSB certification program, the 2015 NDAA was silent when it comes to any future effective date.  The SBA seems to think Congress’s silence means, “hey, guys, if you could maybe, um, get around to a WOSB certification program in, say, um, five-to-ten years, that’d be great.”  But as the Supreme Court has held, Congressional silence indicates that the statute is effective immediately. The Small Business Act says that a Contracting Officer can’t issue a WOSB set-aside solicitation unless the Contracting Officer has a reasonable expectation of receiving two or more offers from certified WOSBs.  The Small Business Act doesn’t say that companies can’t continue self-certifying as WOSBs for other purposes, such as for purposes of the Government’s five percent goal.  In fact, the paragraph of the statute defining the term “small business concern owned and controlled by women,” 15 U.S.C. 637(D), doesn’t mention certification.  So it may well be that the Government can continue to accept WOSB self-certifications outside the universe of set-aside contracts. But WOSB set-asides are the centerpiece of the WOSB Program, and the Government’s main vehicle to attempt to achieve its five percent goal.  So if the statute prohibits set-aside contracts for self-certified WOSBs, why is the SBA still allowing them? For nearly four years, I’ve been waiting for a legal decision to be issued helping to resolve the issue, but it’s been crickets.  Perhaps anyone who thought of filing a protest challenging the legality of self-certification figured that the protest would go to the SBA, which would undoubtedly toe the party line.  In fairness, that’s likely what would happen if, after award of a WOSB set-aside contract, an unsuccessful offeror tried to file a WOSB status protest challenging the awardee. I have a different idea. If I wanted an impartial judicial or administrative decision to force the SBA’s hand, here’s how I’d go about it.  I would wait until an agency issued a WOSB set-aside solicitation.  Then, on behalf of a non-WOSB, I would file a pre-award protest with the GAO or Court of Federal Claims challenging the terms of the solicitation. I would argue that the Contracting Officer, pursuant to the Small Business Act, could only issue such a set-aside if the Contracting Officer had a reasonable expectation of receiving two or more offers from certified WOSBs.  Because SAM and the SBA’s Dynamic Small Business Search system don’t distinguish between certified and self-certified WOSBs, the only way that the Contracting Officer could glean such information would be through a sources sought, RFI, or similar request.  (I’d make sure, of course, that no such request had been issued for the procurement in question). There’s no way to tell how such a protest would be decided, of course, but if I were a betting man, I’d wager that the Court or GAO would sustain it.  By doing so, legal precedent would be established, the word would quickly get out, and the SBA would–I imagine–feel compelled to quickly implement the WOSB certification program to fix the problem. The Practical Problem with WOSB Self-Certification  By now, you may be thinking, “Wait!  You’d temporarily torpedo all WOSB set-asides just to force the issue with the SBA?  You’re crazy!” I may be a few fries short of a Happy Meal, as they say, but I don’t think this particular idea is crazy.  As I see it, WOSB self-certification just doesn’t work well.  It’s basically a failure.  You don’t have to look any farther than the SBA’s own small business report cards showing that the Government has been unable to even achieve its lowly 5% goal over the past couple fiscal years. In my view, WOSB self-certification doesn’t work because Contracting Officers don’t trust it.  And why should they?  After all, report after report has been issued showing that many self-certified WOSBs aren’t eligible. Further, as the GAO pointed out in its 2014 report, Contracting Officers find the WOSB self-certification document requirements–which are unique to the WOSB Program–to be burdensome and complex compared to other socioeconomic programs.  It’s little wonder that Contracting Officers prefer certifications they can trust, with fewer paperwork requirements. I’ve long felt that adopting a WOSB certification program may cause a temporary dip in WOSB contract awards, but will ultimately significantly increase the use of WOSB set-asides.  Once Contracting Officers can trust WOSB certifications, and once the unique self-certification document requirements are eliminated, I believe that Contracting Officers will begin issuing many more WOSB set-asides. With the Government stuck at a measly 4.7% WOSB “achievement” in Fiscal Year 2017, there’s little to lose.  But even if the overall numbers go down, a WOSB certification program will help ensure that WOSB dollars go to legitimate WOSBs.  As someone who works daily with legitimate WOSB owners, it’s very frustrating to think about the opportunities these companies have lost to illegitimate competitors. The Road Ahead For the last couple Decembers, I’ve given a “Federal Contracting Year in Review” webinar in partnership with the fine folks at Govology.  (Another one’s coming on December 13, 2018, so register today!)  Each year, I’ve ended with some predictions of major changes to expect in the new year, and each year, I’ve predicted that the SBA will finally unveil its proposal for a WOSB certification program. This year, my Magic 8-ball says “Don’t count on it.”  Truth be told, I have no clue when SBA will finally address the 2015 NDAA’s mandate regarding WOSB certification.  I’ll keep my eyes peeled, and hope to blog about a formal SBA proposal in 2019.  But I’m going to hedge my bets and put an elegant “pen and pencil” set in my Amazon cart, too, just in case the wait continues for a few more anniversaries.
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I Fought the Law, and the Law Won? Standing Issues Prevent Claim of Agency’s Rulebreaking

As we discussed in July 2017, Timberline Helicopters, Inc. has been involved in ongoing litigation regarding the Department of the Interior, Bureau of Land Management’s (a.k.a. “BLM”) procurement of helicopter flight services to aid in fire-fighting and fire-suppression missions, services essential now more than ever. Most recently, in Timberline Helicopters, Inc. v. United States, No. 18-1474C (Fed. Cl. Nov. 14, 2018), the Court of Federal Claims held that Timberline no longer had standing to bring its claims. To briefly recap, Timberline initially protested the terms of the BLM’s solicitation because the Bureau did not intend to ensure the Department of the Interior issued a public aircraft operation (or “PAO”) permit related to the transportation of firefighters, as required by Federal Aviation Administration regulations. Because it believed the BLM was not complying with the FAA rules, Timberline did not submit a bid, but protested the terms of the solicitation instead. GAO rejected Timberline’s initial protest, and a post award protest, concluding that the BLM reasonably relied on the advice of the Boise, Idaho FAA Flight Standards District Office when it issued its solicitation. In July 2018, however, long after the contract was awarded and performance started, the FAA’s Office of the Chief Counsel in Washington, D.C. confirmed Timberline’s allegations in a notice to the Department of the Interior: the opinion of the FAA District Office was incorrect. Rather than follow up with Timberline, the BLM ensured that the required PAO permit was granted to the contract’s awardee and sought to continue performance. Timberline, likely uttering “we told you so!”, then filed a protest at the Court of Federal Claims after the PAO permit was granted, arguing the Bureau should have recompeted the contract, giving Timberline an opportunity to bid, instead of simply granting the permit to the initial awardee. While Timberline was, in the end, correct in its allegations that the BLM was not complying with FAA regulations, the Court denied Timberline’s claim for lack of standing. First, the Court determined that because Timberline had never actually been a prospective offeror, it could not be an “interested party” as required by 28 U.S.C. § 1491(b)(1). The Court also pointed out that Timberline was too late to file a claim with the Court because it had been more than a year since GAO rendered its decision. If Timberline had filed immediately after losing at GAO, the Court stated, “the Justice Department would have likely immediately sought the views of the FAA’s Office of the Chief Counsel [and] Timberline potentially could have secured relief before [BLM] awarded the contract.” Finally, the Court determined that recompetition of the procurement was not necessary because Timberline had never offered a proposal on the underlying contract and was therefore not deprived of any opportunity to compete on the procurement. What can we learn from this case? First, don’t forget about standing rules. Even if your argument is sound, you still have to meet the threshold requirements to file. Additionally, don’t wait to file in the Court of Federal Claims after losing at GAO if you think you have a valid claim. Waiting may cost you your shot at success, so call us if you need a hand!
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SmallGovCon Week in Review: November 12-16, 2018

Happy Friday, everyone! I don’t know about you but, as Thanksgiving inches closer, I can practically smell the turkey and stuffing. I hope you’re gearing up for a nice, holiday-shortened week. Before the holiday, let’s take a look at the SmallGovCon Week In Review. In this week’s edition, we’ll discuss GSA intent to consolidate cybersecurity contract vehicles; a potential spending bonanza by the National Geospatial-Intelligence Agency; results from DoD’s first-ever audit (spoiler, it failed); and more. Have a great weekend! GSA proposes to consolidate cybersecurity vehicles into a single contract. [FedScoop] NGA forecasts over $800 million in FY19 contracts. [GovConWire] DoD fails its first-ever financial audit. [Federal News Network] Company agrees to pay $72,000 in back wages after compliance evaluation by U.S. Department of Labor. [U.S. Department of Labor] A reference for veteran-owned businesses and the challenges to accessing capital. [Federal Reserve Bank of New York] University and contractor agree to settle false claims allegations. [The News & Observer]
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GAO: DOD Should Clarify Criteria for Using LPTA

Over the last few years, SmallGovCon has covered the Congressionally-mandated march away from use of lowest-price technically-acceptable procurements at the Department of Defense. But although Congress has restricted when DOD might use LPTA criteria, the Department has not followed this mandate. A recent GAO report highlights DOD’s struggle. As of September 2018, DOD has not yet revised its regulations to reflect certain statutory restrictions against LPTA awards and, as a result, DOD contracting officers believe they are not yet required to follow these new requirements. Candidly, I’m not so sure. But in any event, GAO’s report issued a couple of recommendations to help DOD fully implement the restrictions against LPTA procurements. Let’s take a look. As our avid readers might recall, the 2017 National Defense Authorization Act sought to restrict DOD’s use of LPTA criteria to procurements where the following six criteria are met: DOD can clearly describe the minimum requirements in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers; DOD would realize no, or little, value from a proposal exceeding the solicitation’s minimum technical requirements; The proposed technical approaches can be evaluated with little or no subjectivity as to the desirability of one versus the other; There is a high degree of certainty that a review of technical proposals other than that of the lowest-price offeror would not identify factors that could provide other benefits to the government; The contracting officer has included a justification for the use of the LPTA process in the contract file; and The lowest price reflects full life-cycle costs, including for operations and support. The following year, Congress added two more criteria that must be satisfied before LPTA can be used: DOD would realize little or no additional innovation or future technological advantage by using a different methodology; and For the acquisition of goods, the goods being purchased are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Congress further required DOD amend its acquisition regulations (known in the industry as DFARS) to implement these regulations. But as GAO noted, DOD’s amendments are long overdue. Problematically, DOD contracting officials believe that, until DFARS is amended to reflect these requirements, they are not required to follow them. This belief is reflected in statistics. Based on a random sampling of DOD awards (valued at $5 million or greater) in 2017, GAO estimated that 25% of contracts and 29% of orders were issued under LPTA criteria. Notwithstanding this relatively high number of LPTA awards, DOD believes its personnel are largely following the noted restrictions. That is, DOD noted its personnel routinely consider the anticipated value in exceeding the stated requirements before deciding to issue a solicitation on an LPTA basis. For other criteria—like the requirement for a written justification and approval before using LPTA—DOD has not yet started complying. DOD officials acknowledged confusion about how to implement some of the new requirements. For example, contracting officials were confused about what it meant for goods to have “a short life expectancy,” and how to implement this requirement in their acquisitions. Still other officials were confused about whether the requirements applied to orders issued under multiple-award IDIQ contracts. To address this uncertainty, GAO issued two recommendations. First, GAO recommended that DOD clarify how contracting officials are to apply the LPTA criteria to goods that are expendable, nontechnical, or otherwise have a short shelf life. GAO suggests that these criteria should be further defined in DOD’s upcoming DFARS amendments. Second, GAO also suggests that DOD clarify how contracting officials should assess “full life-cycle costs” as part of an acquisition. GAO did not make any recommendation, however, as to the timing of the forthcoming DFARS amendments. Because this recommendation is already overdue, I have my doubts as to whether DOD will issue it any time soon. What’s the takeaway? Unfortunately, GAO’s report makes it appear that we’re a ways from DOD fully implementing the LPTA restriction. For offerors, this might mean that procurements that should, in reality, be issued on a best-value basis are nonetheless issued as LPTA. Even if DOD has not yet implemented these requirements, offerors who are adversely affected by the use of LPTA procedures might be able to file a pre-award protest challenging that solicitation term. I’m not convinced that, just because DOD has balked on implementing Congress’s requirement, doesn’t mean the clear import of that requirement shouldn’t be given effect. In other words, there might be a basis to challenge the use of an LPTA criteria through a pre-award GAO protest even before DOD formally changes its regulations. If you have any questions about these LPTA restrictions—or their impact on a potential bid—please give me a call.
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Under FAR Part 16 Task Order Solicitation, Agency Can Establish Competitive Range Without Notification

Under FAR Part 15 negotiated procurements, an agency must give notice and an opportunity to request a debriefing to offerors eliminated from the competitive range. But the notice requirement does not apply for task and delivery order procurements under FAR Part 16 where FAR Part 15 is inapplicable. A recent GAO decision highlights this distinction. The Department of Education issued multiple solicitations to meet IT requirements. One RFQ, the PIVOT H solicitation, was for hosting of applications, data, and IT systems services. The PIVOT H solicitation was issued for a task order pursuant to a multiple-award, IDIQ contract program. Under PIVOT H, NTT DATA Services Federal Government, Inc. protested issuance of a task order to IBM, and GAO considered this protest in NTT DATA Services Federal Government, Inc., B-416123 (Comp. Gen.  2018). The RFQ was a best-value tradeoff, considering price and several non-price evaluation factors. The evaluation factors, in descending order of importance, were:  technical approach, past performance, and price and subcontracting goals. NTT argued that the agency engaged  in improper additional rounds of discussions with IBM and Offeror A, but not with it. The agency erred, according to NTT, because it never made a formal competitive range announcement. GAO rejected this argument, noting that the requirement to notify firms of the competitive range is a FAR Part 15 requirement, which was inapplicable to this RFQ because it was conducted under FAR Part 16. The RFQ stated: Furthermore, “FAR § 16.505(b) states, among other things, that the requirements of FAR subpart 15.3 are inapplicable to task order competitions such as the instant acquisition.” GAO noted that “the record shows that the agency effectively established a competitive range comprised of the firms the agency determined had a reasonable chance for award.” The agency’s documentation stated that Based on this evaluation, GAO determined that eliminating NTT from the competitive range was reasonable. The notice requirements for the competitive range were inapplicable: Under FAR 16.505, then, an agency can effectively establish a competitive range without notifying an offeror or allowing the opportunity for a debriefing, because those are requirements found only under FAR Part 15.  As task and delivery order procurements become increasingly popular, offerors should remember that their notification and debriefing rights may be different than expected.
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Yes, Foreign-Owned Entities Can Be Small Businesses Under SBA Government Contracting Rules

Government contractors often assume that a foreign-owned company cannot qualify as a small business under the SBA’s government contracting size rules. Not so.  As demonstrated by a recent SBA Office of Hearings and Appeals size appeal decision, a foreign-owned entity can qualify as a small business, provided that it has a physical location in the United States and contributes to the U.S. economy. OHA’s decision in A&Y Government Services, LLC, SBA No. SIZ-5966 (2018) involved an Army solicitation for vehicles and spare parts.  The solicitation was issued as a small business set-aside under NAICS code 336112. After evaluating proposals, the Army announced that Bukkehave, Inc., or “BHI,” was the apparent successful offeror.  BHI is based in Florida, and is a wholly-owned subsidiary of a Danish company, Bukkehave Corporation.  An unsuccessful competitor, A&Y Government Services, LLC, then filed a size protest challenging BHI’s small business status. The SBA Area Office noted that BHI was affiliated with its parent company and several other entities.  However, when combined with its affiliates, BHI’s employee count still fell below the 1,500-employee threshold for NAICS code 336112.  The SBA Area Office issued a size determination finding BHI to be an eligible small business for purposes of the Army contract. A&Y filed an appeal with OHA.  A&Y’s appeal stated that BHI “is merely a sales office owned by a FOREIGN corporate entity.”  Awarding the work to BHI, A&Y argued, would mean that the money paid by the Army “will go to Denmark.” OHA wrote that, contrary to A&Y’s apparent misconception, “SBA regulations . . . do not bar a foreign owned concern from participating in a small business set-aside, provided that the concern is based in the U.S. and contributed to the U.S. economy through the payment of taxes or otherwise.”  In support, OHA cited 13 C.F.R. 121.105(a)(1), the SBA’s regulation defining a “business concern.” In this case, OHA wrote, “BHI is a corporation based in the state of Florida, and . . . BHI contributes to the U.S. economy by paying taxes.”  OHA denied A&Y’s size appeal, writing that there was “no basis to conclude that BHI is ineligible for this procurement.” In my experience, many government contractors believe that a foreign-owned entity can never qualify as a small business for purposes of the SBA’s government contracting rules.  But as the A&Y Government Services case demonstrates, the truth is more nuanced.  It’s not foreign ownership that is the test, but rather a U.S. location and contribution to the American economy.
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Section 809 Panel Achieves $1 Coin Clause Removal

If, like us, you spend your days reading through the FAR, you might suppose that there are opportunities to streamline the regulations. Congress agreed, at least for DOD acquisitions, and as part of the 2016 National Defense Authorization Act, created the Section 809 panel, an independent advisory panel on streamlining acquisition regulations. The panel is working to improve many aspects of acquisitions law, including, as we’ve written about, the definition of subcontract. A recent, small (but helpful) recommendation was the elimination of a FAR clause involving the $1 coin. The clause in question came out of The Presidential $1 Coin Act of 2005. This law “removed barriers to the circulation of $1 coins.” As part of that goal, the law: FAR clause 52.237-11 provided that “[a]ll business operations conducted under this contract that involve coins or currency, including vending machines, shall be fully capable of accepting and dispensing $1 coins in connection with such operations.” The Section 809 Panel took aim at this FAR clause as part of its review of FAR provisions. In order to remove the FAR clause, the statute underlying it had to be amended. The Section 809 panel recommended its amendment “because the intention of the Act was to increase circulation of the $1 coin, which is not directly related to agencies’ missions.” Congress listened and, as a result, the 2018 NDAA “provides an exception for business operations conducted by a contractor while performing under a Government contract from the requirements to accept and dispense $1 coins.” Although $1 coins were touted as an alternative to dollar bills in the mid-2000s, the coins never caught on with the public. The U.S. Mint stopped producing $1 coins for general circulation in 2011, making the requirement for contractors to accept those coins all the more unnecessary. FAR clause 52.237-11, along with all cross-references, has now been removed. The Section 809 panel has done its job for this clause, and we’ll continue to update our readers on their work as they streamline the acquisition system.
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SmallGovCon Week in Review: November 5-9, 2018

This week, Lawrence got its first taste of cold and snow for the season. I have to say, it was not a welcomed arrival. Hopefully it’s warmer in your neck of the woods. Let’s all warm our hearts with this week’s edition of SmallGovCon Week In Review. In today’s WIR, we’ll look at a joint VA/SBA partnership to benefit SDVOSBs, DoD’s effort to use its expanded “middle tier” contracting vehicles, and more government contractors behaving badly. Have a great weekend! A new partnership between the VA and the SBA creates workforce training to benefit veteran-owned small businesses. [WDSU 6 News] The Acquisition office at the Department of Defense plans to utilize “middle tier” acquisition. [Federal News Network] Jason Miller places odds on proposed FAR rules becoming final. [Federal News Network] Northrop Grumman agrees to pay $31.65 million to settle civil and criminal investigations into fraud. [U.S. Department of Justice] Granite Bay man pleads guilty wire fraud related to government-procurement fraud scheme. [U.S. Department of Justice] Two employees of corporation based in South Korea charged in scheme to defraud the United States. [U.S. Department of Justice]
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