I am back in Lawrence after a great trip to San Diego for the 2017 Department of the Navy Gold Coast Small Business Procurement Event. I gave a session at Gold Coast on the SBA’s new All Small Mentor-Protege Program, and enjoyed speaking with contractors, government representatives, and others on the trade show floor.
Thank you very much to the San Diego chapter of the National Defense Industrial Association for sponsoring this fantastic event and inviting me to speak. Thank you also to the fine folks of the San Diego Contracting Opportunities Center and American Indian Chamber Education Fund PTAC for sharing their booth. And a big thank you to the many contractors who attended the session and asked great questions–so many, in fact, that some people stuck around 30 minutes after the session ended to chat.
If you haven’t had the pleasure of attending Gold Coast, I strongly encourage you to put it on your radar screen for 2018. As for me, I’ll be hitting the road again soon: I will be in Norman, Oklahoma next week for the annual Indian Country Business Summit, one of my favorite procurement events each year. Hope to see you there!
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The SBA is considering making changes to improve its socioeconomic programs–particularly the 8(a) and HUBZone Programs.
In a talk yesterday at the 2017 Navy Gold Coast Procurement Conference, Robb Wong, the SBA’s recently-appointed Associate Administrator, Office of Government Contracting and Business Development, discussed some of the big changes the SBA is considering. And to my ears, at least, a lot of what Mr. Wong said makes good sense.
Mr. Wong made clear that few decisions have been made at this point; most of the potential changes are only in the discussion phase for now. That said, here are some of the changes the SBA is considering–and why.
First, SBA is considering how to better focus on what the VA would call “procurement readiness.” Mr. Wong pointed out that many small businesses think that getting a socioeconomic certification is the hard part, and that the contracts come easily once a company is certified.
Of course, that’s not the case. Many certified companies aren’t truly ready to do business with the government. That, in turn, can hurt the reputations of the socioeconomic certifications themselves. It may be unfair, but some procuring officials can become gun shy about using a socioeconomic class after a bad experience with an unready company.
So what can the SBA do about the “procurement readiness” problem? According to Mr. Wong, here are some ideas under consideration:
Require training before a company can be certified. This might include training on business development, capture, and execution. Business development is, of course, an integral part of the 8(a) program, but it’s not currently a required component of the SDVOSB, HUBZone, or WOSB programs.
Allow a remedial training period for unsuccessful 8(a) firms. I’ve probably heard it a hundred times in my career: an company gets 8(a)-certified, but has no clue what to do with that certification until four or five years into its program term. Finally,the company figures out how to win 8(a) contracts, but the nine-year program term is already halfway gone. To address this issue, the SBA is considering allowing active 8(a) participants to temporarily put the nine-year term on hold while the leadership gets remedial business development training.
Help companies win contracts and subcontracts. It shouldn’t be entirely up to socioeconomic firms to find contracts, Mr. Wong says–it’s not enough to say “here is a fishing pole, it’s a tool, go use it.” Instead, the SBA wants to be more active in assisting good, qualified small businesses in obtaining prime contracts and subcontracts.
Second, Mr. Wong acknowledges that the procurement world is trending in the direction of consolidation and larger contracts. While this may ultimately mean more total dollars are awarded, it also means that there may be fewer prime contract awards to go around. The SBA is considering ways to help small businesses navigate these macro-level changes in contracting. Some ideas under consideration include:
Calling on procuring agencies to reserve a certain percentage of contract awards (not just contract dollars) for small businesses.
Promoting ways for small businesses to work with one another, and with larger partners, including joint ventures and the new All Small Mentor-Protege Program.
Focusing more on working to obtain subcontracts for small businesses.
Mr. Wong also said that a few specific ideas are under consideration to improve the 8(a) and HUBZone Programs:
Increasing the 8(a) sole source threshold. This is one way, Mr. Wong said, that the SBA could “make 8(a) special again.”
Making HUBZone compliance easier. Mr. Wong lamented the fact that because of the HUBZone Program’s unique requirements (especially the 35% employee residency requirement), some HUBZones “spend more time maintaining compliance than pursuing new contracts.” The SBA is looking for ways to make ongoing compliance simpler.
Addressing HUBZone map changes. The SBA is concerned that HUBZone companies can end up with the short end of the stick when a HUBZone tract is redesignated as non-HUBZone. The SBA is considering how to address this problem.
Updating the 8(a) economic disadvantage rules. The 8(a) net worth threshold (currently $250,000 for initial admission) is old–and may need to be updated.
Only time will tell what becomes of these big picture thoughts, but it’s very heartening to see the SBA thinking about how to improve and modernize its programs–and encouraging to see the SBA discuss these ideas in public and solicit feedback from small businesses and other stakeholders.
I’ll keep you posted.
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The GAO lacks jurisdiction to consider a challenge to a contract awardee’s size status, including questions of whether the awardee is affiliated with its subcontractor under the ostensible subcontractor rule.
In a recent bid protest decision, the GAO confirmed that it will not adjudicate an allegation of ostensible subcontractor affiliation.
The GAO’s decision in Archimania, B-414653 (Aug. 3, 2017), involved a GSA solicitation seeking architect-engineer services for the design of a new courthouse in Greenville, Mississippi. The solicitation was issued as a small business set-aside.
After evaluating offerors under both stages of the two-phase competition, the GSA awarded the contract to Duvall Decker, which had teamed with Eskew+Demez+Ripple. Although Duvall Decker was a small business, EDR was not.
Archimania, an unsuccessful competitor, filed a GAO bid protest challenging the award to Duvall Decker. Among its arguments, Archimania contended that Duvall Decker was affiliated with EDR under the ostensible subcontractor affiliation rule, and therefore was ineligible for award.
GAO wrote that “[t]he Small Business Act . . . gives the SBA, not our Office, the conclusive authority to determine matters of small business size status for federal procurements.” GAO refused to consider the argument, writing, “[w]e therefore will not review a protester’s challenge to another company’s size status, or a decision by the SBA that a company is, or is not, a small business.”
The GAO denied the protest.
As the Archimania case demonstrates, the GAO lacks authority to adjudicate size protests, including protests under the ostensible subcontractor rule. Issues of small business size eligibility fall within the SBA’s exclusive jurisdiction, and protesters must use the SBA’s size protest process to challenge a competitor’s size.
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Subcontracting is a way of life for many federal government contractors; however, the identification and selection of such subcontractors is usually left up to the reasonable discretion of the prime contractor. So what happens when a solicitation prescribes that a particular subcontractor be retained, but that subcontractor won’t assist in bid preparation efforts?
Well, in one recent case, the prospective prime contractor was out of luck.
In Simplex Aerospace, B-414566.2 (Aug. 8, 2017), the Air Force sought firefighting modifications for seven demilitarized HC-130H transport aircraft formerly operated by the United States Coast Guard. Modifications included increasing the frame support within the aircraft and installing gravity fed drop tanks for fire retardant dispersal. Modifications were to be overseen by the United States Air Force. Once modifications were complete, the Air Force was to transfer the HC-130Hs to the Forest Service.
Among its technical specifications, the Solicitation required offerors to retain the Original Equipment Manufacturer as a subcontractor. According to GAO, the OEM was “to, among other things, perform and/or review analyses substantiating the contractor’s modification design, and validate that the analyses and processes used are appropriate, the results are accurate, and the design requirements set forth in the SOW are satisfied.”
Simplex had attempted to work with the OEM during the bid preparation phase of the procurement, but the OEM “refused [Simplex’s] requests to participate in the pre-award phase.” According to Simplex, “the lack of participation has hindered Simplex’s ability to properly evaluate schedule risk and/or limit the firm’s liability.”
Unable to obtain the desired level of cooperation from the OEM, Simplex protested the terms of the Solicitation, including the OEM component. Simplex argued that the requirement to use the OEM was “overly prescriptive and unduly restrictive.”
Simplex argued that a better structure for the procurement was for the Air Force to obtain a separate agreement with the OEM for its participation during the pre-award phase. According to Simplex, such an arrangement would assure the level of OEM participation the Air Force desired, while relieving contractors of the responsibility of directly negotiating with a disinterested manufacturer. The Air Force countered that its decision to require OEM participation through subcontracts rather than a separate agreement overseen by the Air Force was reasonable. Simplex also argued that problems could arise if the OEM ultimately declined to team with the awardee.
GAO felt the Air Force had the better of the argument. To GAO, Simplex’s protest was about risk allocation. As GAO explained, “the mere presence of risk in a solicitation does not make the solicitation inappropriate or improper. . . . Risk is inherent in most types of contracts, especially fixed-price contracts, and firms must use their professional expertise and business judgment in anticipating a variety of influences affecting performance costs.” Here, one of those risks was submitting a proposal without the OEM’s active participation.
The GAO also wasn’t persuaded by the argument that the OEM might not team with the eventual awardee. “The protester’s concern here is speculative,” the GAO wrote, adding “[f]urther, should such a situation arise, it would be a matter of contract administration” outside the GAO’s jurisdiction.
Accordingly, GAO found nothing unreasonable about the Air Force’s decision to require contractors to retain the OEM as a subcontractor rather than independently solicit the services.
The Simplex decision is an interesting one. In it, GAO said that, at least under the facts at issue, it was reasonable for the agency to require an OEM as a subcontractor. This places significant risk on prospective prime contractors in the event the OEM does not cooperate with bid preparation activities (or, as Simplex noted, if the OEM refuses to team with the ultimate awardee). Unfortunately, as GAO made clear in its Simplex decision, contractors may be forced to bear the burden of this risk.
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With what is being deemed “The Great American Eclipse” ready to hit the skies on Monday, there is a lot of excitement in the air here in Lawrence. We are just off the path of totality and are expecting 99.3% coverage. My colleagues and family will be outside (with protective eyewear of course) and witness this amazing moment. As for me, I’ll be in San Diego, speaking at the 2017 Department of the Navy Gold Coast Conference which will drop my near total eclipse view down to a partial eclipse of about 58% coverage–but it’s well worth it to be part of this great event.
Before I take off for the West Coast, it’s time for the latest SmallGovCon Week In Review. This week, two Senators have filed an amendment to the 2018 National Defense Authorization Act called the Modernizing Government Technology Act, an “Amazon-like” procurement system might not be too far off, a company is forced to repay millions of dollars amid allegations of overcharging the government, and much more.
The bipartisan Modernizing Government Technology Act is being attached as an amendment to the 2018 National Defense Authorization Act in hopes of improving its chances of being approved. [Federal News Radio]
With six weeks left in FY 2017, budget experts are warning federal contractors to begin planning for a possible government shutdown. [Federal News Radio]
A provision in the House version of the annual National Defense Authorization Act may soon make ordering office supplies, equipment, or even contract services as easy as placing an order on Amazon. [Government Executive]
A contractor will pay $9.2 million dollars to settle allegations of overbilling the U.S. Navy and Coast Guard for labor charges. [WLOX]
Government contracts sales guru Eileen Kent provides some pointers for businesses interested in cashing in on opportunities available at the end of the federal fiscal year. [Government Product News]
A lawsuit by the American Small Business League, heading for trial, alleges that some large defense contractors manipulate data to falsely claim they are meeting their small business subcontracting targets. [Forbes]
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You’ve poured precious time and resources into a proposal, only to lose out on the award. Making matters worse, the agency’s explanation of the award shows that it didn’t reasonably evaluate your proposal. What can you do?
Here are five things you should know about bid protests.
A bid protest can win a contract—or lose one.
A protest can help you win an award. In a pre-award protest, you can challenge any unclear or unfair terms in a solicitation. In a post-award protest, you can challenge any unreasonable or unequal aspects of the evaluation of your proposal. If successful, a pre-award or post-award protest can help you win a contract.
But just as you can protest an evaluation, your competitors can also protest a contract awarded to your business. If so, it’s a good idea to intervene in the protest to help protect your award—the government won’t necessarily look out for your interests.
You can file a bid protest with the agency, at the Government Accountability Office, or at the Court of Federal Claims.
Agency-level protests are the simplest and may be the least expensive option. Protesters simply file a written protest, and the agency itself provides its written decision.
GAO protests are perhaps the most common type of bid protest. After receiving the protest, the agency will file its response (and provide evaluation-related documentation, if the protester is represented by counsel). The protester then files a reply to the agency report (called “comments”) and, after briefing is completed, GAO will issue a written decision.
Going to court is a protester’s most forceful (and possibly the most expensive) option. But don’t anticipate a dramatic closing argument to convince a jury that the agency messed up the evaluation; much of the process is based on written briefing, the case will be heard by a judge instead of a jury, and oral arguments may be conducted by telephone.
Act fast: bid protests can be waived if not timely filed.
No matter where you file a bid protest, you must do so by the applicable deadline. The bid protest deadline can be very short—in some cases, only ten days after you know (or should know) of the basis for protest. So act fast: even the most boneheaded or prejudicial evaluation errors probably won’t be considered if you don’t timely file your protest.
You can represent yourself (but probably shouldn’t).
You don’t have to have counsel to file a protest with the agency or GAO. But you probably should, because procurement law is an intricate subject and self-represented protesters often struggle with technical nuances and substantive complexities. And if that’s not enough reason to seek representation, consider this: your counsel can get access to the confidential source selection information pertinent to the evaluation and award. In many cases, these documents hold the key to winning a protest.
A bid protest can win you a contract.
Yes, this fifth point is the same as the first. But after spending significant time and resources into a proposal, you should consider whether it makes sense to devote still more to a bid protest. In some cases, it won’t. But in others, filing a protest might help win your business a contract. In fact, according to GAO’s most recent report, protesters received a positive outcome (either through voluntary corrective action or a sustained protest) in 46% of the actions filed in 2016.
There you have it: five things you should know about bid protests. If you’re considering a protest, call me to discuss your options.
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Welcome to 5 Things You Should Know, a new SmallGovCon series aimed at providing foundational information on topics relevant to government contractors.
In the posts that follow, I’ll try to distill complex contracting topics to their very essence. Unsure about what, exactly, a claim or bid protest is? What is the All Small mentor protégé program? I’ll walk through each of these topics (and others) and explain why they matter.
These posts won’t be a treatise on each topic discussed, but hopefully they’ll help you navigate the complex world of federal contracts.
If there’s a particular topic you’d be interested in learning more about, please send it to me.
In the first post, we’ll tackle the basics of bid protests. Other posts will follow approximately every two weeks.
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An incumbent contractor won a protest at GAO recently where it argued that the awardee’s labor rates were too low, because they were lower than the rates the incumbent itself was paying the same people.
GAO faulted the agency for concluding that the awardee’s price was realistic without checking the proposed rates against the incumbent rates. In other words, GAO told the agency to start at the obvious place—the compensation of the current employees.
The decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2017) involved a price realism analysis of rates proposed for workers to provide engineering, program management, and administrative services at Eglin Air Force Base. (Steve Koprince blogged about the unequal evaluation component of this case here.)
The solicitation called for a fixed-price labor-hour contract and required offerors to submit a professional compensation plan. The Air Force said it would evaluate the plan pursuant to FAR 52.222-46, which includes a price realism component.
Price realism, for the uninitiated, is an evaluation of whether an offeror’s price is too low. In the context of a fixed-price labor hour contract like the Air Force solicitation, “this FAR provision anticipates an evaluation of whether an awardee understands the contract requirements, and has proposed a compensation plan appropriate for those requirements.”
The Air Force initially concluded that the price proposed by Engineering Research and Consulting Inc., or ERC, was too low, comparing the price to “Government estimates.” But after discussions and revisions, the agency decided that the revised salary ranges were acceptable. The Air Force awarded the contract to ERC.
The protester, SURVICE Engineering Company, LLC, as the incumbent, obviously knew what it was currently paying the employees who were doing the work. SURVICE figured that the only way ERC could have proposed such a low price was to slash compensation. In fact, ERC had proposed exactly that, but still said it would retain many of the incumbent personnel. (GAO has previously noted that proposing to capture incumbents but pay lower rates brings up obvious price realism concerns.)
SURVICE argued that the evaluation was unreasonable because the agency did not evaluate the complete plan, did not compare the plan to incumbent rates, and still found ERC’s proposal acceptable.
GAO agreed, stating that “the record is silent as to whether, in the end, any of ERC’s rates were lower than incumbent rates but nevertheless acceptable to the Air Force.”
It concluded, “the Air Force did not reasonably compare ERC’s salaries to incumbent salaries, a necessary step to determine whether the proposed salaries are lower than incumbent salaries. Accordingly, we find that the agency failed to reasonably evaluate whether ERC offered ‘lowered compensation for essentially the same professional work,’ as envisioned by FAR provision 52.222-46. We therefore sustain this aspect of [SURVICE]’s protest.”
SURVICE won this aspect of the protest because GAO faulted the Air Force for not taking an obvious step, but it is also a good reminder that seeking to underbid the competition by slashing incumbent pay rates can raise significant price realism concerns.
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I don’t know about you, but I am ready for the weekend. I’m looking forward to spending some time with the family before I turn into a bit of a road warrior. Next week, I’ll be at the 21st Government Procurement Conference in Texas; the following week I head to the West Coast for the Navy Gold Coast Small Business Procurement Event, and I’ll wrap up the month in Oklahoma at the Indian Country Business Summit.
If you’ll be at any of these events, please stop by to say hello and talk about the latest happenings in the world of government contracts. And speaking of latest happenings, it’s time for the SmallGovCon Week In Review. In this week’s edition, a look at what it takes for contractors to win at the end of the federal fiscal year, a defense contractor is caught billing Porsches, Bentleys and other luxury costs to the Pentagon, a former contractor will pay a $50,000 fine for SDVOSB fraud, and more.
Government procurement thought leader Jennifer Schaus offers a look at characteristics that will help contractors be successful in the highly competitive market of government contracting. [American City & Country]
The Navy is keeping a close eye on its current access card program for vendors and contractors to get on base. [Federal News Radio]
It’s good to think about worst case scenarios: four ways to avoid suspension or debarment on federal contracts. [Construction DIVE]
A defense contractor billed luxury cars, million-dollar salaries and secret guns to the Pentagon according to a recent audit. [Government Executive]
A a former contractor was sentenced to three years probation and is forced to pay a $50,000 fine stemming from a “straw man” scheme to obtain SDVOSB contracts. [Dayton Daily News]
A San Diego defense contractor pleased guilty to a conflict of interest charge for engaging in projects overseen by a Navy official who had given him and his company personal loans totaling more than $30,000. [Times of San Diego]
A Department of Labor investigation led to the discovery that a Minnesota company failed to pay prevailing wages to its employees working on a U.S. Housing and Urban Development project. [Business Management]
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The SBA’s All Small Mentor-Protege Program office has issued its annual evaluation forms for ASMPP participants. The purpose of the reports is to “determine whether the business is eligible to continue to participate in the All Small Business Mentor-Protege Program.”
The annual evaluation process requires participants to complete two forms: a nine-page protege evaluation report, and a separate five-page mentor evaluation addendum.
Some of the information covered in the reports is no surprise: the regulations governing the All Small Mentor-Protege Program call for participants to report such things as “[a]ll technical and/or management assistance provided by the mentor,” “[a]ll loans to and/or investments made by the mentor in the protege,” subcontracts awarded by the mentor to the protege, prime contracts awarded to any mentor-protege joint ventures, and more. The forms require participants to provide the information described in the regulations.
But some of the information requested in the forms goes beyond the black-and-white text of the regulations. For example, the protege evaluation report calls for a list of all “new business skills, knowledge or opportunities” received from the relationship,” all “process improvements” made during the program year, and all “joint venture agreements developed” during the program year (even if no contracts were awarded to the joint venture).
The protege evaluation form also asks for “all offers submitted as a mentor-protege team” and “all offers submitted by the Protege (independent of the Mentor-Protege relationship” during the program year. This information isn’t required by the regulations, and I wonder whether SBA will use it (at least in part) to evaluate whether the protege may be too dependent on its mentor. We’ll see.
The protege evaluation form also asks “How did you find your Mentor?” It’s a good question, because prospective proteges often wonder how best to connect with larger mentors. If the SBA makes some statistics available, it may help small businesses better target their efforts to locate qualified mentors.
The mentor addendum asks some of the same questions set forth in the protege evaluation form, such as information about all subcontracts awarded to the protege and all loans made. No doubt SBA will compare the protege’s report with the mentor’s to make sure that both companies are reporting the same facts.
Under the SBA’s regulations, the annual report is due “[w]ithin 30 days of the anniversary of SBA’s approval of the mentor-protege agreement.” The All Small Mentor-Protege program went online October 1, 2016, so no annual reports are due quite yet. But for participants admitted in the early days of the program, it won’t be long before the annual reports are due–and now’s a good time to review what information the SBA will require.
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Under the SBA’s ostensible subcontractor affiliation rule, hiring incumbent employees can be evidence of affiliation, but the importance of that staffing plan in an affiliation analysis depends on what role the incumbent contractor will play in the awardee’s performance of the contract.
In a recent size appeal decision, the awardee proposed to hire 85% of its personnel from the incumbent contractor, but the incumbent wasn’t proposed as a subcontractor–in fact, the incumbent was the company protesting the awardee’s small business size. Under these circumstances, the SBA Office of Hearings and Appeals held, the awardee’s hiring of incumbent employees did not establish ostensible subcontractor affiliation.
OHA’s decision in Size Appeal of Synergy Solutions, Inc., SBA No. SIZ-5843 (2017) involved a DOE solicitation to support the National Nuclear Security Administration’s Office of Personnel and Facility Clearances at Kirtland Air Force Base. The solicitation was issued as a small business set-aside under NAICS code 541690, with a corresponding $15 million size standard.
TUVA, LLC submitted a proposal. TUVA proposed to use two subcontractors: SAVA Workforce Solutions, LLC and Inquiries Inc. Of the 55 Full Time Equivalents who would work on the contract, TUVA and its subcontractors intended to hire 85% from the incumbent contractor, Synergy Solutions, Inc.
After evaluating competitive proposals, the agency awarded the contract to TUVA. Synergy filed a size protest, asserting that TUVA was affiliated with its subcontractors under the ostensible subcontractor affiliation rule.
The SBA Area Office issued a size determination finding TUVA to be a small business. With respect to TUVA’s proposed staffing, the SBA Area Office held that TUVA’s plan to hire 85% of the incumbent personnel was not indicative of ostensible subcontractor affiliation because the incumbent contractor–Synergy–was not proposed as TUVA’s subcontractor.
Synergy filed a size appeal with OHA. Among its arguments, Synergy asserted that TUVA’s staffing plan demonstrated that TUVA lacked relevant experience and expertise, and that “it is possible” that TUVA would rely on its subcontractors if it was unable to successfully recruit or retain the incumbent employees.
OHA noted that “TUVA proposes to hire a large portion of its workforce (85%) from the incumbent contractor.” In this case, however, “that concern is not one of TUVA’s proposed subcontractors; rather, the incumbent is [Synergy] itself.” OHA wrote that, in a previous case, it had held that “there was no ostensible subcontractor violation where the awardee had proposed to hire the incumbent workforce from a firm other than its proposed subcontractors. That fact pattern is present here.”
OHA denied Synergy’s size appeal.
As OHA has often written, ostensible subcontractor affiliation cases are intensely fact-specific, so Synergy Solutions doesn’t necessarily mean that hiring employees from a third party could never factor into an affiliation analysis. That said, OHA’s decision is logical: the question at the heart of the ostensible subcontractor rule is whether the awardee is unusually reliant on its subcontractors. Where, as in Synergy Solutions, the incumbent contractor isn’t proposed as a subcontractor, it may be quite difficult for a protester to show that the awardee’s hiring of incumbent staff demonstrates such unusual reliance.
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In its evaluation of proposals, a procuring agency gave a challenger a strength for proposing to recruit incumbent employees, but didn’t give the incumbent contractor a strength–even though the incumbent contractor proposed to retain the very same people.
Unsurprisingly, the GAO found that the evaluation was unequal, and sustained the incumbent’s protest.
The GAO’s decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2o17) involved an Air Force solicitation for engineering, program management, and administrative services at Eglin Air Force Base. The solicitation called for award to the offeror proposing the best value to the government, considering three factors: technical capability and risk, past performance, and cost/price. There were four technical subfactors, including a subfactor for technical workforce management.
SURVICE Engineering Company, LLC or SEC, was the incumbent contractor. SEC submitted a proposal, in which it proposed to retain its incumbent personnel. Engineering Research and Consulting, Inc., or ERC, also submitted a proposal. ERC proposed to recruit many of SEC’s incumbent personnel.
In its evaluation of the technical workforce management subfactor, the Air Force assigned a strength to ERC for proposing to recruit SEC’s “high-performing, highly-skilled senior staff.” However, the Air Force did not assign SEC a strength for proposing to retain its own incumbents. The Air Force awarded the contract to ERC.
SEC filed a GAO bid protest. SEC raised a number of allegations, including unequal treatment in the evaluation of the technical workforce management subfactor. SEC contended that it was improper for the Air Force to award ERC a strength for proposing to recruit SEC’s incumbents, while not assigning SEC a strength for proposing to retain the same people.
The GAO wrote that “t is a fundamental principal of federal procurement law that a contracting agency must treat all offerors equally and evaluate their proposals evenhandedly against the solicitation’s requirements and evaluation criteria.” Where an agency applies “a more exacting standard” to certain offerors’ proposals than others, “we have found such evaluation to involve disparate treatment.”
In this case, “SEC did not receive a strength for retaining its own employees by respecting seniority or for proposing the same staff.” And “[w]here the parties propose essentially the same workforce, and where the agency assessed strengths for the awardee’s efforts to retain the workforce and has not shown why it did not assign similar strengths to the protester’s proposal, we conclude that the agency applied the evaluation criteria unequally and therefore that the evaluation was unreasonable.”
The GAO sustained this aspect of SEC’s protest.
The Air Force undoubtedly thought that it would be easier for SEC to retain its own employees than for a challenger like ERC to recruit them. But that wasn’t a valid basis for assigning a strength only to ERC. Both companies proposed the same people, so ERC’s proposal didn’t offer a benefit to the government that was missing from SEC’s proposal.
The SURVICE Engineering Company case is a good reminder that an agency cannot hold an incumbent to a higher standard than other offerors, at least not unless there are unusual circumstances–which didn’t exist here.
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Coming off their World Series win last year, my Chicago Cubs are back atop the National League Central division in hopes of repeating as champions. While we still have few months of the regular season left, I’m hoping for a repeat of October 4, 1908, when a whopping 6,210 fans watched the Cubs successfully defend their 1907 title.
But enough baseball for now–this is a government contracts blog, after all. And since it’s Friday, here is the SmallGovCon Week in Review. In this edition, a contractor gets 60 months in jail for paying $3 million in bribes, the Federal Times takes a look at potential bid protest reforms, a commentator takes aim at no-bid contracts, and much more.
A former government contractor conspired with a contracting official to commit close to $3 million in bribery–and he’s now been sentenced to 60 months in prison. [United States Department of Justice]
When you get past the sky-is-falling headline, this article provides a surprisingly nuanced take on potential bid protest reforms. (See my own take right here). [Federal Times]
The House has voted to continue a seven-year-old moratorium on public-private competition to perform certain federal jobs under the long-standing Office of Management and Budget Circular A-76. [Government Executive]
NASA has launched a new program to help buyers using its governmentwide IT contract verify that the products they’re buying from are legitimate sources. [Nextgov]
With the “use it or lose it” philosophy many federal agencies adopt in Q4, the Federal Times offers some tips for businesses looking to bid on contracts at the end of the government’s fiscal year. [Federal Times]
President Trump’s first anti-regulation agenda is winning favor with federal contractors. [Federal News Radio]
One commentator calls no-bid contracts an “outrage,” and says that the government needs to renew its focus on competition. [The Hill]
A look at what vendors can do to capture year-end money, as well as set the stage for the new fiscal year head as Q4 winds down. [American City & County]
An appeal has been filed challenging a major Court of Federal Claims ruling in May, which held that SDVOSB preferences trump AbilityOne at the VA . [Winston-Salem Journal]
An ex-GSA contracting official and her husband both received prison sentences for a nepotism conspiracy scheme totaling more than $200,000. [Government Executive]
The Pentagon has detailed a plan to shake-up its Acquisition, Technology and Logistics office in the Office of Secretary of Defense with two main goals in mind. [Federal News Radio]
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To qualify for the 8(a) program, a disadvantaged individual must fall below certain personal net worth thresholds. Loans can reduce net worth–but not all loans are treated the same.
According to the SBA Office of Hearings and Appeals, if a disadvantaged individual intends to rely on a loan to reduce net worth, the loan better be bona fide.
In a recent decision, OHA held that it is the unconditional obligation to repay that is critical to determining whether a loan will reduce the net worth of an 8(a) applicant.
The 8(a) program has a net worth threshold of $250,000, which the socially and economically disadvantaged individual(s) must be below to initially qualify for the program. Once a company is admitted to the 8(a) program, the net worth threshold for ongoing participation rises to $750,000. Various assets are exempted from these thresholds, including equity in the 8(a) applicant/participant and equity in the disadvantaged individual’s primary residence. (A second “catch all” net worth threshold–$4 million for applicants and $6 million for participants– eliminates most of these exemptions.)
Net worth, of course, ordinarily means assets minus liabilities. Due to their status as liabilities, loans can offset an applicant’s net worth. But to do so, they must be bona fide, or legitimate liabilities, according to a recent OHA case.
OHA’s decision in ORB Solutions Inc., SBA No. BDPE-559 (2017) is a tale of two loans: one deemed bona fide, the other not.
In 2011, ORB Solutions Inc. loaned its owner, Ms. Seema Gupta, $132,858. At the time the loan was made, there were no “common indicia of a typical loan arrangement including a promissory note, repayment schedule, or provision for interest.” After Ms. Gupta used a portion of the loan for corporate investments, she kept the remainder in her personal bank account instead of returning it to the company.
In August 2015, ORB Solutions applied to the 8(a) program. In evaluating ORB Solutions’ application, the SBA determined that the 2011 loan was not bona fide; therefore, it was not a liability that would offset her net worth. As a consequence, Ms. Gupta’s net worth exceeded the $250,000 threshold. In May 2016, the SBA denied ORB Solutions’ initial application.
Around the same time, the situation reversed itself: Ms. Gupta loaned $27,226 to ORB Solutions. The 2016 loan, however, had a much different flavor. It had all of the hallmarks of a typical loan, including a repayment schedule and a promissory note.
In June 2016, ORB Solutions and Ms. Gupta executed a promissory note for the 2011 loan. In July 2016, ORB Solutions requested reconsideration of the SBA’s decision.
Although Ms. Gupta had now provided a promissory note for the 2011 loan, that promissory note had been executed “five years after the transfer of funds,” and the SBA found that there was “nothing else in the record” to establish that the loan was bona fide. The SBA determined, again, that the 2011 loan was not a liability that offset Ms. Gupta’s net worth. On the other hand, the 2016 loan was counted as an asset. The SBA denied ORB Solutions’ application for a second time.
ORB Solutions appealed to OHA. There, it argued the SBA had erred on its treatment of both loans.
With respect to the 2011 loan, ORB Solutions contended the loan was a true bona fide liability that Ms. Gupta was obligated to repay to ORB Solutions; therefore, it should offset some of Ms. Gupta’s net worth. OHA was not convinced.
As OHA explained, “t was reasonable for the SBA to conclude that the $132,858 transfer advance [from ORB to Ms. Gupta] was not a true, bona fide liability to Ms. Gupta but was, in effect, an asset that Ms. Gupta likely would not enforce against herself or her spouse.” OHA noted that the record was “void of any common indicia of a typical loan arrangement, including a promissory note, repayment schedule, or provision for interest.” The “obligation to pay was conditional rather than unconditional.” As a result, “such conditional liability should not be considered as a factor to reduce Ms. Gupta’s net worth because it was uncertain whether the loan would in fact be repaid.”
Stated differently, OHA found the loan was not bona fide because there was nothing to guarantee the company would be paid back as the loan’s debtor and enforcer are one and the same. Consequently, the SBA was correct to find that the 2011 loan was not a liability that reduced Ms. Gupta’s net worth.
Separately, ORB Solutions also argued the 2016 loan from Ms. Gupta to ORB Solutions should not count as an asset because it involved the same parties as the first loan, which was found not to be a bona fide loan. OHA was again not convinced.
Comparing the two loans, OHA explained “the set of circumstances surrounding the [second] loan poses a different scenario because the SBA made its asset determination based on a record that clearly demonstrated the existence of a loan arrangement that proves the clear intent to execute a repayment schedule for that loan and the intent that the loan continues to accrue interest payable to Ms. Gupta.” As such, ORB Solutions was unconditionally obligated to repay Ms. Gupta. Because Ms. Gupta was entitled to full repayment of her loan, OHA found it was properly counted as an asset.
As OHA explained, ORB Solution’s loans told two very different stories. The first loan from ORB Solutions to Ms. Gupta did not include an unconditional obligation to repay (at least not until five years later), whereas the second loan did include legally-binding repayment obligations from the outset. As a result, the first loan was not a liability and did not reduce Ms. Gupta’s net worth, while the second loan was an asset that counted toward Ms. Gupta’s net worth.
A situation like that seen in ORB Solutions is one that other 8(a) applicants can unintentionally find themselves facing. Oftentimes, small business owners receive loans from non-traditional sources, and these loans don’t always include the sort of binding requirements that SBA will look for to determine if the loan is bona fide. As ORB Solutions painfully discovered, for those businesses looking at the 8(a) program participation in the future, managing loans can be an important component of acceptance into the program.
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Federal contractors not so infrequently find themselves in a position where they are unable to complete performance of a contract by the agreed-upon deadline. So, what happens when the delay is neither party’s fault, but the government denies extension of the period of performance or provides inadequate extensions?
In IAP Worldwide Services, Inc. (ASBCA Nos. 59397, 59398, and 59399), the Armed Services Board of Contract Appeals found under the legal theory of “constructive acceleration” that the U.S. Army Corps of Engineers was liable for extra costs incurred by IAP due to the Corps insistence of timely contract delivery despite excusable delays.
Under the contract, IAP was to provide power plants and services at forward military bases in Afghanistan. IAP had historically shipped equipment for such procurements into Afghanistan by way of Pakistan.
IAP submitted proposals on at least three delivery orders under the contract. Within IAP’s proposals for each of the delivery orders, IAP explained that it would obtain generators from a distribution point in the United Arab Emirates and transport them via the Pakistan route. More specifically, IAP stated it would “ship their equipment 45-90 days prior to mobilization depending on the conditions at the border and shipping route” or “power equipment [would] be surface shipped to and then trucked to the site.” The government acknowledged that the proposals contemplated use of the Pakistan route.
IAP initially received three contract delivery orders, including one for a 10-megawatt generator set, one for a 15-megawatt power plant, and one for a 12.5-megawatt generator set, each with delivery at Forward Operating Bases in Afghanistan. The period of performance for delivery order of each order was 365 days. After receipt of the three contract delivery orders, Pakistan closed its border in response to a military attack by the United States and NATO. The border remained closed for seven months.
The day following closure of the Pakistan border, IAP notified the contracting officer that the closure was affecting IAP’s delivery schedule and requested guidance. IAP subsequently requested that the contracting officer issue a delivery schedule adjustment and suggested use of either air freight transportation (with an estimated $11.8 million cost increase) or delivery for two orders via the Northern Distribution Network (NDN) (through multiple other countries with over $1 million in increased costs). The contracting officer responded by simply stating the contract was fixed price and “FAR 52.247-34 (F.O.B. Destination) governed the transport of equipment.” During a subsequent telephone conversation, the contracting officer informed IAP that no extensions would be granted, and if IAP failed to meet its performance deadline, it would be in default. Based on these communications, IAP choose shipment through the NDN route.
A subsequent debate concerning the excusable nature of the delay arose, and the contracting officer continued to demand performance within the contract’s deadline with the threat of default. In this debate, the government may have overlooked that, under FAR 52.249-14, a delay is excusable “if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor.” Later recognizing this standard, the government changed its position and agreed the border closure was an excusable delay but still maintained that the delay was not compensable and that IAP was entitled only to an extension of time.
IAP subsequently submitted certified claims for each delivery order, totaling more than $11 million. The Corps denied the claims, and IAP timely appealed to the ASBCA. Among IAP’s arguments, IAP alleged the government constructively accelerated IAP’s performance of all three task orders by failing to timely grant its request for extension after Pakistan closed the border with Afghanistan.
The ASBCA wrote that “[c]onstructive acceleration often occurs when the government demands compliance with an original contract deadline, despite excusable delay by the contractor.” Under such a theory, recovery arises under the contract’s changes clause. The ASBCA continued:
To establish entitlement to compensation arising from an acceleration, the contractor must prove:
(1) [T]hat the contractor encountered a delay that is excusable under the contract; (2) that the contractor made a timely and sufficient request for an extension of the contract schedule; (3) that the government denied the contractor’s request for an extension or failed to act on it within a reasonable time; (4) that the government insisted on completion of the contract within a period shorter than the period to which the contractor would be entitled by taking into account the period of excusable delay, after which the contractor notified the government that it regarded the alleged order to accelerate as a constructive change in the contract; and (5) that the contractor was required to expend extra resources to compensate for the lost time and remain on schedule.
Here, the ASBCA held, IAP established each of these items. Specifically, by the government’s own admission, IAP experienced an excusable delay. IAP notified the contracting officer that the border closure was delaying the transportation of IAP’s power plant equipment into Afghanistan, and IAP expected a schedule adjustment. Despite this request, the contracting officer refused an extension citing to the firm-fixed nature of the contract and iterated that failure to meet the established deadlines would constitute default. The ASBCA noted that by the time the government allowed for a 75-day extension, IAP had taking extraordinary measures to ship its generators via the more expensive NDN route to remain on schedule.
The ASBCA held that “[t]he government accelerated performance when it failed to timely grant extensions to fully account for the delay.” Accordingly, “IAP is entitled to an equitable adjustment reimbursing it for expenses actually and reasonably incurred in complying with the acceleration orders.”
Federal government contractors may find themselves in situations where they are unable to perform within a specified timeframe – for a multitude of reasons. As IAP Worldwide demonstrates, however, a contractor may not have to foot the bill when an excusable delay arises and the government demands performance within the original time frame anyway.
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A contractor could not file a valid bid protest challenging an agency’s decision to terminate the contractor’s task order, according to the U.S. Court of Federal Claims.
In a recent decision, the Court agreed with the GAO, which also held that the contractor’s challenge involved a matter of contract administration–something outside the bid protest process.
The Court’s decision in Cotton & Company, LLP v. United States, No. 17-878C (2017) involved a Defense Finance and Accounting Services task order for auditing services. After DFAS awarded the task order to Cotton & Company, LLP, a competitor filed a bid protest at the GAO.
While the GAO was evaluating the protest (and Cotton’s work was suspended), DFAS determined that its requirements had changed. DFAS terminated the task order for convenience, and issued a new solicitation with different requirements. Cotton did not submit a proposal, and the new task order was awarded to Ernst & Young LLP.
Cotton then filed a protest with the GAO, challenging the termination of its task order. GAO, in an unpublished decision, “ruled that it had no jurisdiction over Cotton’s claims because those claims related to matters of contract administration.” Cotton then filed a protest with the Court, making the same allegations.
The Court wrote that, under the statute governing its bid protest jurisdiction, “a protester must . . . be an actual or prospective bidder.” In contrast, “once a bidder has won a contract, any disputes that arise with respect to administration of that contract fall under the Contract Disputes Act.” And while the Court has authority to hear CDA appeals, the contractor must first have “a valid claim in writing and the contracting officer’s final decision on that claim.” (The Court can also take jurisdiction of a CDA appeal if there is a “deemed denial”).
In this case, the Court held, “DFAS’s decision to terminate Cotton for convenience is a matter of contract administration, and therefore falls under the CDA rather than this Court’s bid protest jurisdiction.” The Court continued:
This Court cannot yet exercise jurisdiction under the CDA because it is undisputed that Cotton has not yet obtained a contracting officer’s final decision on its claim. Therefore, the Court lacks subject matter jurisdiction over Cotton’s claims that relate to its termination for convenience.
The Court dismissed Cotton’s protest.
The GAO and Court of Federal Claims aren’t always in agreement. But as the Cotton & Company decision demonstrates, the two forums agree that a bid protest isn’t the right vehicle to pursue an action related to the administration of a contract.
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For small businesses, 8(a)s, SDVOSBs, HUBZones and WOSBs, few legal requirements in the world of government contracts are as important as those surrounding ownership and control. I recently joined host Carroll Bernard of Govology for an in-depth podcast exploring these important requirements, including a discussion of common mistakes and misconceptions.
Follow this link to listen to or download the podcast. And don’t stop there–check out Govology’s other great podcasts with government contracting thought leaders, too.
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Past performance evaluations normally consider two aspects of an offeror’s prior work: whether that performance was recent and relevant. But in making its best value determination, must an agency also consider the duration of an offeror’s past performance?
A recent GAO bid protest decision answered this question, at least under the rules established in the solicitation at hand. In Technica LLC, B-413546.4 et al. (July 10, 2017), GAO denied a protest challenging the sufficiency of an awardee’s past performance even though the awardee’s past performance was much shorter than the protester’s.
At issue in the protest was a solicitation seeking logistics support services at the United States Military Academy at West Point from holders of the Enhanced Army Global Logistics Enterprise (EAGLE) basic ordering agreement. The Army would award a task order to the lowest-price offeror whose proposal was technically acceptable and whose past performance instilled substantial confidence.
The Army originally awarded the order to Technica, for almost $47 million. Akima Support Operations, LLC—whose total evaluated price was about $1.5 million less than Technica’s—protested the award, asserting that the Army erred by not considering Akima’s work under a task order at Fort Carson, Colorado in its past performance evaluation. The Army took corrective action in response to Akima’s protest.
After re-evaluating Akima’s proposal (and considering its work at Fort Carson), the Army assigned it a substantial confidence past performance rating and awarded it the contract.
Technica then filed its own protest, saying that the Army’s consideration of Akima’s Fort Carson work was unreasonable. It based this argument on the relatively short duration of that contract—Akima had been performing at Fort Carson for less than one year at the time it was awarded the West Point task order. According to Technica, this short duration meant that the Army should have given less weight to Akima’s work at Fort Carson.
GAO disagreed. In doing so, it noted that an agency has the discretion to consider the relevance and scope of an offeror’s past performance and, “[a]bsent a relevant solicitation provision, there is no minimum duration requirement that an offeror’s past performance reference must meet before performance of that requirement may be considered in the agency’s past performance evaluation.” Here, the GAO noted that “the RFP advised offerors that the past performance evaluation could consider the recency, relevancy, source, and context of the past performance information that the government evaluates,” and that the Army reserved the right to even consider information about past performance that occurred after proposals were due. “As such,” the GAO concluded, “the RFP contained no minimum duration requirement for an offeror’s past performance.”
Under this backdrop, GAO found the Army’s past performance evaluation to be reasonable. As required by the solicitation, the Army considered a past performance questionnaire for the Fort Carson project that rated Akima’s performance as very good. Moreover, the Army noted that Akima had completed deadlines sooner than required, “executed the schedule flawlessly, taken on additional work,” and performed in a manner that “reduced the government’s costs.”
Based on this feedback, the Army properly assigned Akima’s past performance a substantial confidence rating. The GAO denied Technica’s protest.
The Technica decision is interesting: in some cases, it means that an offeror with relatively little past performance (say, one or two projects of short duration) might be evaluated as instilling more confidence than an established contractor. Experienced and inexperienced contractors alike should keep this decision in mind when preparing their past performance proposals.
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July has flown by. Soon, my kids will be back in school, the leaves will start to turn, and the annual craziness at the end of the government fiscal year will be here. For now, I’m enjoying a few more weeks of summer. I hope you are too.
Before we head into the last July weekend of the year, it’s time for the SmallGovCon Week In Review. In this edition: the re-arrangement of personnel over at the GSA’s Federal Acquisition Service, a new measure attached to the annual defense authorization bill aims to prevent the DoD from spending more on service contracts, the purchase of some “unnecessary” uniforms has led to a criminal probe, and much more.
A big shakeup with the OASIS program personnel hasn’t settled down yet, as four more contracting officers are moving to the FedSIM program. [Federal News Radio]
NCMA Executive Director Michael Fischetti gives his opinion on what to do with recent data that indicates that contract protests are rising while contract awards are declining. [Federal Times]
Lawmakers are looking to reinstate a cap on the DoD’s service contract spending next year, amid concerns the Pentagon has unduly outsourced federal work. [Government Executive]
Two strategies have emerged on how change to government procurement, but will Congress go along with it? [Federal News Radio]
As the Senate proposes provisions in the defense authorization bill to reduce protests it seems as though they may have missed the point. [Washington Technology]
Up to $28 million was wasted on pricey forest-camouflage uniforms for Afghan troops who operate in a largely desert environment. Now a top U.S. oversight official is launching a criminal probe into why the Pentagon authorized the purchase. [McClatchy DC Bureau]
A former employee of the Army Corps of Engineers pleaded guilty to soliciting more than $320,000 in bribes from Afghan contractors. [Illinois Homepage.net]
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Last year, during consideration of the 2017 National Defense Authorization Act, the Senate proposed to “reform” the GAO bid protest process by forcing some unsuccessful protesters to pay the government’s costs, and (more controversially) by denying incumbent protesters profits on bridge contracts and extensions.
Congress ultimately chose not to implement these measures. Instead, Congress called for an independent report on the effect of bid protests at DoD–a wise move, considering that major reforms to the protest process shouldn’t be undertaken without first seeing whether hard data shows that protests are harming the procurement process.
But now, six months before that report is due, the Senate has re-introduced its flawed bid protest proposals as part of the 2018 NDAA.
Earlier this month, the Senate Armed Services Committee issued its report on the 2018 NDAA. The SASC report recommends that the 2018 NDAA include two major changes concerning GAO bid protests.
First, the bill states that when a “party with revenues in excess of $100.0 million during the previous year” files a GAO bid protest, that party will be required “to pay the Department of Defense costs incurred for processing [the] protest . . . where all elements of such protest are denied in an opinion” by the GAO.
Second, the bill would “require contractors who file a protest on a contract on which they are the incumbent to have all payments above incurred costs withheld on any bridge contracts or temporary contract extensions awarded to the contractor as a result of a delay in award resulting from the filing of such protest.” The bill would, however, allow the protester to recover its profits under two circumstances: if the solicitation in question is cancelled, or if the GAO “issues an opinion that upholds any of the protest grounds filed under the protest.”
There have been some minor tweaks, but these changes are nearly identical to the provisions that the Senate proposed during consideration of the 2017 NDAA. And in my opinion, the Senate has it wrong–again.
Presumably, the point of these “reforms” is to discourage losing offerors from filing bid protests, and in particular, to discourage frivolous bid protests by losing incumbents. But are bid protests rampant? Are frivolous bid protests rampant? And are major DoD acquisitions being unduly delayed by protests?
These are the sorts of important questions that the independent report is likely to address. Although the independent report isn’t due for a few more months, existing data casts doubt on the underlying presumption that protests are frequent, frivolous and causing undue delays.
On the frequency question, Dan Gordon–the former head of the OFPP–did the math, and concluded that, for the years he analyzed, “etween approximately 99.3 percent and 99.5 percent of procurements were not protested.” This fits with the raw data: in Fiscal Year 2016, only 2,789 bid protests were filed with GAO.
On the frivolity side, even though protesters have the burden of proof, the success rate of GAO protests in FY 2016 was 46%. This is not an anomaly: year after year, GAO protesters succeed more than 4 out of 10 times. That’s not to say, of course, that there are no frivolous protests whatsoever, but when almost half of protests succeed, it’s hard to believe that frivolity is a rampant problem.
And what about delays? Yes, when a GAO bid protest is filed within a certain time frame, it will initiate an automatic suspension of award or performance, as the case may be. But a procuring agency can override the stay if there is an urgent and compelling need to award the contract.
Even when the agency doesn’t override, the GAO issues its decisions within 100 days after a protest is filed. To GAO, the 100-day deadline is no mere guidepost–the GAO meets this deadline every single time (except in a few cases during the government shutdown of 2013). The agency can also request that the GAO resolve the protest even faster, using a 65-day express option or another accelerated schedule. The GAO bid protest process is designed to be relatively quick and efficient, and the GAO operates with that goal in mind.
But let’s put the statistics aside and assume for a moment that frequent frivolous protests are causing massive delays to DoD procurements. I don’t think the Senate’s proposal solves this hypothetical problem.
The portion of the legislation dealing with protest costs may save the government a few bucks, but it’s very unlikely to make a dent in the number of protests. The way I see it, companies generating $100 million or more in annual revenues already invest thousands upon thousands of dollars in legal fees and internal costs when they file protests. These larger companies are very unlikely to be dissuaded by the potential of an additional “internal costs” charge if the protest is unsuccessful.
The second item–the one involving bridge contracts and extensions–is much more troubling. Some (but not all) of my concerns:
Many GAO bid protests are resolved in the protester’s favor in ways other than a formal GAO “sustain” decision. Most frequently, this involves voluntary agency corrective action–something that happened nearly 24% of the time in FY 2016. As I read the Senate’s current version of the 2018 NDAA, the incumbent protester would still be required to forfeit all profits associated with any bridge contract or extension when the agency takes corrective action. A corrective action essentially is a win for the protester–so why should the protester be penalized?
Sometimes, large procurements draw multiple protests. If a losing incumbent is one of, say, five protesters, will the incumbent still be required to perform at cost? The bill isn’t clear, but it doesn’t seem to make sense to penalize the incumbent in this situation.
Many contracts are fixed-price; indeed, Congress recently affirmed its strong preference for DoD contracts to be awarded on a fixed-price basis. The Senate 2018 NDAA seems to require that any bridge contract or extension to the incumbent be awarded on a cost-reimbursement basis instead. Not only does this run against policy, but it’s likely to cause major headaches for contracting officials, who will be forced to fundamentally convert the contract type at the very moment the agency needs a quick and easy extension.
Speaking of the apparent requirement that the bridge or extension be a cost reimbursement contract, what if the contractor’s accounting system isn’t adequate for cost reimbursement contracts? Does everyone have to wait around for a DCAA audit? Good luck with that.
What if the underlying contract is for commercial items? FAR 16.301-3(b) provides that “[t]he use of cost-reimbursement contracts is prohibited for the acquisition of commercial items . . ..”
The GAO isn’t the only place a protest can be filed. If an incumbent is concerned about potentially coughing up its profits on a bridge contract or extension, it can protest at the Court of Federal Claims. There are no automatic stays at the Court, but a protester can seek a temporary injunction, and agencies sometimes voluntarily stay a procurement pending a Court protest. Court protests don’t appear to be affected by the legislation. So will the Senate bill just encourage forum shopping?
Nothing requires an incumbent to sign a bridge contract. Some incumbent protesters may simply say, “thanks, but no thanks,” to the possibility of performing work at cost. If this happens, the agency may be in a bind, needing important work to continue immediately but without the ability to bridge the incumbent to meet that need.
Beyond all that, I’m skeptical that the second item will do much to reduce bid protests. Sure, an incumbent takes the risk that it won’t profit from the bridge contract or extension if it loses the protest, but it won’t perform that work at a loss. On the other hand, if the incumbent wins the protest, it may get its contract back-and might even be awarded its attorneys’ fees and costs. Under these circumstances, it seems that the risk/reward analysis often will still favor a protest.
The Senate bill is a deeply flawed attempt to fix a problem that doesn’t necessarily exist. Hopefully this premature and ill-conceived language will be removed in subsequent versions of the 2018 NDAA. My colleagues and I will keep you posted.
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Joint ventures can be extremely powerful in helping small businesses capture larger government contracts. Yet, few small businesses know how they work, and even fewer understand the critical timeline and milestones required to have everything in place in time to capture those large opportunities.
In this article, we will discuss why understanding the timeline is so important if you want to leverage your JV for a big win.
Based on my years of working with hundreds of small businesses, I’d say that most of them don’t understand the competitive power of JVs. Seems like a no-brainer: if you lack certain assets or capabilities, find a business partner who has them. Together you’ll be a formidable competitor capable of taking on a larger project at a lower risk to the government. Needless to say, procuring agencies like that. Still, many small businesses can’t fathom how they can leverage “this JV thing.” Those small businesses who do buy into joint venturing, often face a different challenge. These businesses have the right mindset and commitment; however, when it comes to implementation, things go awry.
MISTAKE: Waiting until the solicitation is out before setting up your JV. It is common for businesses to wait until they see the solicitation before seriously considering teaming and joint venturing. This may seem like a reasonable way of doing things. After all shouldn’t you first establish whether you can even compete for and perform the work? The answer is “it depends.” Yes, if you are pursuing smaller opportunities that you can perform on your own. No, if you are targeting larger opportunities where you need a teaming partner to help you win and perform on the project.
Joint ventures are not formed overnight. It is a lengthy process that involves meetings, discussions, and legal work. Even though the time it takes to complete a JV may vary on a case by case basis, you should expect to spend significant amount of time…
Identifying an opportunity
Having multiple meetings with potential JV partners before getting the green light to proceed
Engaging your legal counsel
Creating a new JV entity
Establishing a joint bank account for the new JV
Registering the new entity with the IRS, Dun & Bradstreet and the System for Award Management
Obtaining SBA or VA approval for the JV if you are planning to pursue an 8(a) or VA SDVOSB/VOSB opportunity.
In addition, if you are trying to partner with a large business to pursue a set-aside opportunity, you must apply for and be accepted into the SBA’s 8(a) mentor-protege program or All Small mentor-protege program before the joint venture submits its initial proposal.
Clearly, by the time the solicitation is publicized, it is already late to start gearing up for a JV. Even if you already have a JV partner in mind, the likelihood of getting everything set up and ready to go by the bid or proposal due date is very low.
SOLUTION: Forecasting. Forecasting will give your firm advanced notice of upcoming opportunities and the time to plan accordingly.
Here are a few tactics your firm can employ to help you in forecasting:
Know your targets (i.e., the target agencies you want to do business with). This will help you focus your efforts, and get to know and connect with the buyers, small business specialist, and end users who can advise you on upcoming opportunities. You can find your target agency by doing some market research. If market research is not your forte, contact a representative at your local Procurement Technical Assistance Center. They can help you free of charge.
Once you know your top target agencies, start asking the agency’s small business specialist about any big opportunities (such as IDIQ contracts) which may be coming up for competition in the next year or two. This is by far the best practice if you want to get accurate and relevant information for your forecast. You can also ask them for a copy of their agency’s procurement forecast; however, this document is usually not 100% accurate. Still, you may find it useful in helping you identify upcoming opportunities.
Finally, you may have some luck in searching the Agency Recurring Forecast Site.
Once you know an estimated date that the next big opportunity you’d like to pursue will be competed, give yourself plenty of time. In fact, the more the better. It is quite common for a savvy contractor to plan a year or more in advance when putting all the pieces in place for their next big opportunity. I would strongly advise that you do the same.
Carroll Bernard, Govology Co-Founder
Carroll Bernard brings a unique 360 degree perspective to federal contracting, coaching, and training. For over a decade, Carroll worked as a buyer for the U.S. Navy, City of Vancouver Washington, and the U.S. Department of Veterans Affairs. He has also provided mentorship, counseling, coaching, and training to hundreds of small businesses seeking government contracts as a counselor in the Procurement Technical Assistance Program as well as the U.S. Small Business Administration, where he served as a Business Development Specialist for the 8(a) program, Veterans Business Development Officer, and Primary HUBZone Liaison. Carroll is also a co-founder of Govology.com, an online community providing education to help small businesses succeed in the government marketplace. Govology offers live webinars, on-demand courses, and a podcast featuring interviews with experienced government market professionals, successful contractors, and agency representatives.
Phone: 888-643-4276 Ext 1 Email: email@example.com Website: www.govology.com
GovCon Voices is a regular feature dedicated to providing SmallGovCon readers with candid news, insight and commentary from government contracting thought leaders. The opinions expressed in GovCon Voices are those of the individual authors, and do not necessarily reflect the opinions of Koprince Law LLC or its attorneys.
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The increase to DoD’s micro-purchase threshold mandated by the 2017 National Defense Authorization Act is now in effect.
A Class Deviation issued earlier this month provides, effective immediately, that the DoD micro-purchase threshold is $5,000 for many acquisitions.
The new micro-purchase threshold is $1,500 higher than the standard $3,500 micro-purchase threshold. But there are a few exceptions.
The micro-purchase threshold for certain DoD basic research programs and science and technology reinvention laboratories increases to a whopping $10,000. However, micro-purchase thresholds below $5,000 remain in effect for certain acquisitions described in the micro-purchase definition under FAR 2.101.
Many contracting officers and contractors have been awaiting the micro-purchase increase, which should increase the speed and efficiency of small DoD acquisitions. The wait is over.
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A government agency was liable for damaging leased space, even though the lease didn’t contain an explicit clause requiring the government to repair the space.
In a recent decision, the Civilian Board of Contract Appeals held that the VA was required to compensate the landlord for damage to the space, because every lease–including those entered by government tenants–contains an implied provision requiring the tenant not to damage the leased space, except for ordinary wear and tear.
The CBCA’s decision in Commerce Plaza Office Partners, LLC, CBCA Nos. 5220, 5260, 5313 (2017) involved two lease between Commerce Plaza Office Partners, LLC (the landord) and the VA (the tenant). The first lease called for the VA to lease space for a clinic; the second lease called for the VA to lease office space for administrative needs.
The parties later agreed that the clinic lease would terminate on October 12, 2015. Shortly before that date, the VA vacated most of the space.
After the VA vacated the space, the parties jointly inspected the premises. The inspection revealed damages in various areas, which the landlord asserted exceeded ordinary wear and tear.
The landlord filed a claim, seeking $109,172 in costs associated with repairs to the space. The contracting officer granted the claim, but only for $15,913.40. The landlord then appealed to the CBCA.
At the CBCA, the VA argued that the lease did not contain an “explicit restoration clause” requiring the VA to return the premises to the landlord in good condition. The CBCA rejected this theory, writing: “[w]hile there is no explicit restoration clause in the lease, every lease contains a provision, implied if no expressed, that a tenant will not commit waste by damaging the property, and therefore will, when it vacates leased space, return the space to the landlord in the same condition in which it received that space, reasonable wear and tear excepted.”
Because the lease contained this implied duty, the VA “had an obligation to repair [the premises] to the extent that any damage exceeded reasonable wear and tear.” The CBCA granted the landlord’s motion for summary judgment with respect to the VA’s liability for damages exceeding ordinary wear and tear.
Government leases tend to be a good deal more tenant-friendly than the typical commercial lease–which isn’t too surprising, given that the government has a good deal more bargaining power than the typical tenant. But as the Commerce Plaza Office Partners decision demonstrates, “tenant-friendly” only goes so far. The government has an obligation–whether express or implied–not to damage leased space, except for ordinary wear and tear. And the government, like any other tenant, will be liable if it breaches that obligation.
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Greetings from Fargo, North Dakota where I will present a luncheon seminar today on recent developments in government contracting. The seminar is sponsored by the SBA, North Dakota PTAC, and National Contract Management Association, and should be a great event. It’s wonderful being back in the state where I grew up. Even though I no longer have family here, I’m looking forward to catching up with an old friend (since elementary school!) this evening.
While I enjoy a trip down memory lane, it’s time for the SmallGovCon Week in Review. This week’s stories include a major change in NASA’s SEWP contract, proposed government contracting changes in the House’s version of the 2018 NDAA, Elon Musk offers his two cents on how to improve contracting, a former contractor pleads guilty to accepting kickbacks, and much more.
At the end of this month, NASA SEWP will add a tool for contracting officers who want to only get bids from contract holders who are authorized resellers of a product. [Washington Technology]
A Florida Republican is pushing for more federal contracts for small businesses owned by veterans, and it’s beginning to gain traction on Capitol Hill. [Sunshine State News]
The House Armed Services Committee’s version of the fiscal 2018 NDAA would require, among dozens of additional provisions affecting contractors, that the General Services Administration set up “more than one” Amazon-like online marketplace. [Bloomberg Government]
The Trump administration’s latest set of legislative proposals to Congress include several changes on contracting related policies. [FEDweek]
Elon Musk offered his advice on NASA’s costly contracting issues and how to bring back a stable incentive structure for contractors. [ars TECHNICA]
A former employee of a U.S. government contractor in Afghanistan pleaded guilty to accepting more than $250,000 in illegal kickbacks from a subcontractor, in exchange for assistance in obtaining government contracts. [UPI]
A contractor misrepresented its eligibility for government contracts and will now pay $1.1 million over allegations of submitting false claims. [Legal NewsLine]
The VA has requested that a judge hold off on proceeding with a ruling that negatively affects IFB SOlutions Inc.’s lab until another case is settled. [Winston-Salem Journal]
Two ex-defense contractors face five years imprisonment for lying to Air Force investigators about a contract awarded to their company. [Dayton Daily News]
Jane Dowgwillo, president of the national PTAC association, discusses strategies that work when trying to win government business as the federal fiscal year 2017 draws to a close on September 30, 2017. [Government Product News]
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To be eligible to participate in the 8(a) Business Development Program, an applicant firm must be a small business that is at least 51% owned and controlled by a socially- and economically-disadvantaged individual (or individuals) who are of good character and citizen(s) of the United States. The firm, moreover, must show a potential for success.
The Small Business Administration’s internal watchdog (the Office of Inspector General, or OIG) recently raised its continuing concerns regarding the admission of several entities to the 8(a) Program. The OIG’s report is worth reading, as it may lead to changes in the 8(a) Program’s eligibility criteria.
Before getting into the OIG’s recommendations, a bit of history is helpful. In April 2016, the OIG reviewed the eligibility of 48 different 8(a) firms and concluded that the Associate Administrator for Business Development (AA/BD) didn’t adequately address eligibility concerns for 30 of them (a whopping 62.5%). In July 2017, the OIG conducted an audit to determine whether the eligibility concerns for these 30 firms were adequately resolved.
Of these 30 firms, the OIG found that 20 of them had adequately resolved their eligibility concerns by providing sufficient documentation demonstrating their status. The AA/BD, moreover, provided written support for the firms’ 8(a) approval.
For 10 of these firms, however, the OIG found continuing concerns with eligibility. These concerns touched each of the 8(a) Program’s requirements, and all but 2 of the firms had issues under multiple eligibility requirements: 2 of the firms didn’t demonstrate they were small; 2 did not demonstrate control by a disadvantaged individual, and 2 more didn’t demonstrate ownership by a disadvantaged individual; 2 might not have had good character; and 7 didn’t demonstrate a potential for success. Because the AA/BD “is the final decision authority for the 8(a) program[,]” the OIG placed blame for these continuing concerns at the AA/BD’s feet, writing:
The additional information considered by the AA/BD did not sufficiently address that 10 of the 30 firms met eligibility requirements by either not fully documenting or addressing all concerns from lower-level reviewers or not obtaining sufficient assurance to prove eligibility.
Given the significant benefits that come from participating in the 8(a) Program, the OIG rightly noted these concerns with alarm. As the report noted, in its summary:
Absent adequate documentation to demonstrate that participants met all eligibility requirements, SBA lacks assurance that only eligible firms receive the benefits of the 8(a) program. Unqualified firms that receive Federal contracts jeopardize the integrity of the 8(a) program.
None of this would shock seasoned government contractors. Many 8(a) participants could probably share stories of other participants they think aren’t eligible, for one reason or another. So what’s to come of this report?
The OIG included three recommendations for the SBA’s 8(a) Program Office. First, OIG recommended the AA/BD conduct continuing eligibility reviews for the 10 firms specifically discussed in its report. Its second and third recommendations are of broader applicability: develop specific measurements to monitor the performance and compliance of 8(a) applicants when there are concerns about the applicant’s eligibility, and adjust eligibility requirements as needed.
These recommendations are modest steps to address some of the perceived issues with the 8(a) Program. Though the SBA has balked at implementing them, it has said that it will strengthen its evaluation procedures when there is concern expressed about eligibility. Going forward, it will be interesting to see how these strengthened procedures are implemented and what their impact might be. We’ll follow any developments, so check back for additional information.
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