Jump to content
The Wifcon Forums and Blogs

  • entries
  • comments
  • views

Entries in this blog

Koprince Law LLC

The Armed Services Board of Contract Appeals can order an agency to “speed up” its decision on a certified claim if the contracting officer’s anticipated time frame is unreasonably slow.

In a recent case, the ASBCA ordered a contracting officer to issue a decision approximately eight weeks earlier than the contracting officer planned to do so. The ASBCA’s decision highlights a little-known provision of the Contract Disputes Act, which entitles a contractor to request that an appropriate tribunal order an agency to hasten its decision on a claim.

In Volmar Construction, Inc., ASBCA No. 60710 (2016), the U.S. Army Corps of Engineers awarded Volmar a contract to renovate and repair buildings on Joint Base McGuire-Dix-Lakehurst in New Jersey. Volmar submitted eight certified claims to the  contracting officer via letter dated May 19, 2016, seeking money and extensions of time. The substance of the claims had all been previously submitted to the contracting officer in earlier written demands, the earliest of which dated back to January 29, 2016.

In July 2016, the contracting officer sent Volmar granting the relief sought in one of the certified claims. In a separate letter, the agency stated that final decisions on the remaining claims would be issued on or before March 31, 2017 – roughly 13 months after Volmar’s original claim submission.

Shortly after receiving the government’s notice, Volmar filed a petition with the ASBCA. Volmar sought an order compelling the contracting officer to issue a quicker decision on Volmar’s remaining certified claims.

The ASBCA noted that, under the Contract Disputes Act, when the agency receives a claim, the contracting officer must either issue a decision on the claim within 60 days or “notify the contractor of the time within which a decision will be issued.” Although there is no hard rule as to how far beyond 60 days the decision may be issued, the contracting officer’s decision “shall be issued within a reasonable time . . . taking into account the size and complexity of the claim and the adequacy of the information in support of the claim provided by the contractor.” Whether a contracting officer’s time frame is reasonable is determined on a case-by-case basis.

The Board stated that a contractor isn’t without recourse if the agency intends to unreasonably delay its decision. Instead, the CDA provides that “a contractor may request the tribunal concerned to direct a contracting officer to issue a decision in a specified period of time, as determined by the tribunal concerned . . ..”

In this case, Volmar argued that the March 31, 2017 date was unreasonable. The ASBCA agreed. It wrote that “[t]he government has had Volmar’s original submissions for well over seven months and has had Volmar’s claims for well over four months.” Although becoming familiar with Volmar’s claims could be time consuming for the assigned contracting officer, the ASBCA noted that “internal staffing matters are not one of the factors used to determine a reasonable time under the CDA.” The ASBCA ordered the contracting officer to issue a decision no later than January 13, 2017–approximately eight weeks earlier than the contracting officer had anticipated.

As Volmar Construction demonstrates, a contractor is not completely without recourse when an agency intends an unreasonable delay in its decision on a claim. Instead, as Volmar did here, the contractor can petition the appropriate tribunal for an order requiring the contracting officer to speed up his or her decision.

Justine Koehle, a law clerk with Koprince Law LLC, was the primary author of this post.

View the full article

Koprince Law LLC

The 2017 National Defense Authorization Act makes some important adjustments to the criteria for ownership and control of a service-disabled veteran-owned small business.

The 2017 NDAA modifies how the ownership criteria are applied in the case of an ESOP, specifies that a veteran with a permanent and severe disability need not personally manage the company on a day-to-day basis, and, under limited circumstances, permits a surviving spouse to continue to operate the company as an SDVOSB.

As I discussed in a separate blog post last week, the SBA and VA currently operate separate SDVOSB programs, and each agency has its own definition of who qualifies as an SDVOSB.  The 2017 NDAA consolidates these definitions by requiring the VA to use the SBA’s criteria for ownership and control.

In addition to consolidating the statutory definitions, the 2017 NDAA makes three important changes to the ownership and control criteria themselves.

First, the 2017 NDAA specifies that stock owned by an employee stock ownership plan, or ESOP, is not considered when the SBA or VA determines whether service-connected veterans own at least 51 percent of the company’s stock.  This portion of the 2017 NDAA essentially overturns a 2015 decision by the SBA Office of Hearings and Appeals, which held that a company was not an eligible SDVOSB because the service-disabled veteran did not own at least 51% of the company’s ESOP class of stock. (The Court of Federal Claims ultimately upheld OHA’s decision later that year).

Second, the 2017 NDAA continues to provide that “the management and daily business operations” of an eligible SDVOSB ordinarily must be controlled by service-disabled veterans.  However, the 2017 NDAA states that if a veteran has a “permanent and severe disability,” the “spouse or permanent caregiver of such veteran” may run the company.  This provision is very similar to the one currently used by the SBA in its regulations; the VA does not currently have a provision whereby a spouse or permanent caregiver may operate an SDVOSB.

But Congress goes a step beyond the SBA’s current regulations.  In a separate paragraph, the 2017 NDAA states that a company may qualify as an SDVOSB if it is owned by a veteran “with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability” and who is “unable to manage the daily business operations” of the company.  In such a case, the statute does not specify that the company must be run by the spouse or permanent caregiver.  In other words, for veterans with permanent and total disabilities, the statute appears to allow control by others, such as (perhaps) non-veteran minority owners.  Historically, the SBA and VA have been very skeptical of undue control by non-veteran minority owners, so it will be interesting to see how the agencies interpret and apply this new statutory provision.

Third, the 2017 NDAA states that a surviving spouse may continue to operate a company as an SDVOSB when a veteran dies, provided that: (1) the surviving spouse acquires the veteran’s ownership interest; (2) the veteran had a service connected disability “rated as 100 percent disabling” by the VA, or “died as a result of a service-connected disability” and (3) immediately prior to the veteran’s death, the company was verified in the VA’s VetBiz database.  When the three conditions apply, the surviving spouse may continue to operate the company as an SDVOSB for up to ten years, although SDVOSB status will be lost earlier if the surviving spouse remarries or relinquishes ownership in the company.

This provision is very similar to the one currently found in the VA’s regulations.  At present, the SBA does not have any provisions whereby a surviving spouse can continue to operate an SDVOSB.

That said, the statutory provision–just like the current VA regulation–is quite narrow.  In my experience, there is a common misconception that a surviving spouse is always entitled to continue running a company as an SDVOSB.  In fact, a surviving spouse is only able to do so when certain strict conditions are met.  In many cases, the veteran in question was not 100 percent disabled and didn’t die as a result of a service-connected disability (or the surviving spouse is unable to prove that the service-connected disability caused the veteran’s death).  And in those cases, the surviving spouse is unable to continue claiming SDVOSB status, both under the VA’s current rules and the 2017 NDAA.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.  

View the full article

Koprince Law LLC

I don’t know about your part of the country, but here in Lawrence, the temperatures have plunged and it has finally felt like winter for the first time.  When temps get cold, I prefer to stay inside with a hot beverage, but I have to hand it to all of the die hard Chiefs fans who scoffed at the single-digit temperatures and spent the evening watching their team defeat the Raiders at Arrowhead Stadium last night.

As we continue our wintry approach to the holidays, it’s been a big week in government contracting. Here on SmallGovCon, we’ve been focusing on the government contracting provisions of the 2017 NDAA, and this week’s SmallGovCon Week In Review has an additional update on the bill’s progress.  But that’s not all: our weekly roundup of government contracting news also includes a change to the FAR to reflect SBA regulations regarding multiple-award contracts, previews of contracting under President-elect Trump, and much more.

  • The 2017 NDAA conference bill has been approved by House and Senate, and is now on President Obama’s desk.  Will he sign it? [ExecutiveGov]
  • Speaking of the 2017 NDAA, it includes provisions restoring the GAO’s ability to hear protests of civilian task and delivery orders in excess of $10 million. [FCW]
  • Two men who executed “the largest disadvantaged business enterprise fraud in the nation’s history” will not have their sentences adjusted after a court denied a request for leniency. [Central Penn Business Journal]
  • Washington Technology takes a look at the incoming Trump administration and what is next for contractors. [Washington Technology]
  • Federal contracts played a factor in United Technologies’ decision to keep a Carrier plant in Indianapolis open at the request of President-elect Trump. [The Washington Post]
  • A bill protecting whistleblowers who expose what they think is wrongdoing in government contracts has been passed by the U.S. House of Representatives and is expected to be signed by President Obama. [St. Louis Post-Dispatch]
  • What will be the new administration’s acquisition priorities? Speculation opaquely says increased outsourcing of government activity, but what does that mean? Federal Times tries to answer these and other questions. [Federal Times]
  • President-elect Trump has nominated Linda McMahon, of World Wrestling Entertainment fame, to head the SBA. [ExecutiveGov]
  • The FAR Council has proposed important changes to implement regulatory changes made by the SBA, which provide Government-wide policy for partial set-asides and reserves, and set-aside orders for small business concerns under multiple-award contracts. [Federal Register]
  • The GSA has inked a government-wide deal for Adobe’s “data-centric” security and electronic signature software which the GSA believes could save American taxpayers $350 million. [fedscoop]
  • A commentator opines that improving government contracting should begin with “dumping the DUNS.” [The Hill]

View the full article

Koprince Law LLC

The 2017 National Defense Authorization Act will increase the DoD’s micro-purchase threshold to $5,000.

Under the conference bill recently approved by both House and Senate, the DoD’s micro-purchase threshold will be $1,500 greater than the standard micro-purchase threshold applicable to civilian agencies.

A micro-purchase is an acquisition by the government of supplies or services that, because the aggregate is below a certain price, allows the government to use simplified acquisition procedures without having to hold a competition, conduct market research, or set aside the procurement for small businesses. In other words, if the price is low enough, the agency can buy it at Wal-Mart using a government credit card, without running afoul of the law.

Although there are many different thresholds, the FAR puts the general micro-purchase threshold at $3,500. But Section 821 of the proposed 2017 NDAA will add a new section to chapter 137 of title 10 of the United States Code giving the DoD its own micro-purchase threshold of $5,000.

It may not sound like much, but that’s nearly a 43% increase from the current micro-purchase threshold (and the threshold that will remain applicable to most agencies). Although DoD procurement officials will undoubtedly enjoy their new flexibility, some small contractors may not be so pleased–after all, once the micro-purchase threshold applies, there is no mandate that the government use (or even consider) small businesses.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

View the full article

Koprince Law LLC

Good news for small business looking to break into Department of Defense contracting: the 2017 NDAA establishes a new prototyping pilot program for small businesses and nontraditional defense contractors to develop new and innovative technologies.

The DoD is putting its money where its mouth is: the new pilot program is funded with $250 million from the rapid prototyping fund established by last year’s NDAA.

The new pilot program is officially called the “Nontraditional and Small Contractor Innovation Prototyping Program.” Under the program, the authorized funds are to be used to “design, develop, and demonstrate innovative prototype military platforms of significant scope for the purpose of demonstrating new capabilities that could provide alternatives to existing acquisition programs and assets.”

Congress is relying on the DoD to develop many of the program’s parameters. The 2017 NDAA calls for the Secretary of Defense to submit, with its budget request for Fiscal Year 2018, “a plan to fund and carry out the pilot program in future years.”

In the meantime, Congress has authorized $50 million to be made available for the following projects in FY 2017:

(1) Swarming of multiple unmanned air vehicles.

(2) Unmanned, modular fixed-wing aircraft that can be rapidly adapted to multiple missions and serve as a fifth generation weapons augmentation platform.

(3) Vertical takeoff and landing tiltrotor aircraft.

(4) Integration of a directed energy weapon on an air, sea, or ground platform.

(5) Swarming of multiple unmanned underwater vehicles.

(6) Commercial small synthetic aperture radar (SAR) satellites with on-board machine learning for automated, real-time feature extraction and predictive analytics.

(7) Active protection system to defend against rocket-propelled grenades and anti-tank missiles.

(8) Defense against hypersonic weapons, including sensors.

(9) Other systems as designated by the Secretary.

In addition to sounding like something out of a science fiction movie, these categories provide insight into some of Congress’s (and DoD’s) prototyping priorities–particularly those in which small and nontraditional contractors are expected to be able to play an important role.

The 2017 NDAA authorizes the prototyping program through September 30, 2026. As the Secretary of Defense will not submit its implementation plan for the pilot program until its next budget request, it may take some time before the program hits full stride. In the interim, interested contractors can start positioning themselves to take advantage of this new opportunity.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 appears poised beneath the president’s pen for signing. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

View the full article

Koprince Law LLC

Coming as welcome news for collaborative R&D, the 2017 NDAA will extend the life of the Small Business Innovation Research and Small Business Technology Transfer programs.

The conference version of the bill, which seems likely to be on the President’s desk in short order, contains provisions extending both programs for five years.

SBIR and STTR are unique research, development, and commercialization programs overseen by the SBA. Each program calls for a three-phase process. In the first two phases, R&D is funded by the government; the third phase of each program involves commercialization. Although the programs have many similarities, there are also important differences. For example, in the SBIR program, a small business may collaborate with a non-profit research institution; in the SBIR program, such collaboration is required.

Both programs were scheduled to expire on September 30, 2017. The 2017 NDAA extends the lifespan of the programs through September 30, 2022. This extension will allow small businesses to continue their collaboration with research institutions to develop new technologies for a variety of applications—good news for businesses and universities doing research in cutting edge fields.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 appears poised beneath the President’s pen for signing. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next several days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.

View the full article

Koprince Law LLC

The 2017 NDAA is full of important changes that will affect federal contracting going forward. As Steve wrote about earlier this week, some of these changes relate to government contracting programs (like the SDVOSB program). Still others relate to how the government actually procures goods and services.

One of these important changes severely limits the use of lowest-price technically-acceptable (“LPTA”) evaluations in Department of Defense procurements. Following the change, “best value” tradeoffs will be prioritized for DoD acquisitions. This post will briefly examine when LPTA procurements will and won’t be allowed under the 2017 NDAA.

The 2017 NDAA sets a new DoD policy: to avoid using LPTA evaluations when doing so would deny DoD with the benefits of cost and technical tradeoffs. As a result, the 2017 NDAA limits the use of LPTA procurements to instances when the following six conditions are met:

  1. DoD is able to comprehensively and clearly describe the minimum requirements expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
  2. DoD would recognize no (or only minimal) value from a proposal that exceeded the minimum technical or performance requirements set forth in the solicitation;
  3. The proposed technical approaches will not require any (or much) subjective judgment by the source selection authority as to their respective desirability versus competitors;
  4. The source selection authority is confident that reviewing the bids from the non-lowest price offeror(s) would not result in the identification of factors that could provide value or benefit to the Government;
  5. The Contracting Officer includes written justification for use of the LPTA scheme in the contract file; and
  6. DoD determines that the lowest price reflects full life-cycle costs, including costs for maintenance and support.

By limiting DoD’s use of LPTA to procurements to instances in which these six criteria are met, the 2017 NDAA effectively mandates that for a majority of procurements, the DoD should use best value selection procedures.

But in addition to codifying a presumption against LPTA procurements, the NDAA goes so far as to caution DoD to not use LPTA procurements under three specific types of contracts:

  1. Contracts that predominately seek knowledge-based professional services (like information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, and audit or audit readiness services);
  2. Contracts seeking personal protective equipment; and
  3. Contracts for knowledge-based training or logistics services in contingency operations or other operations outside the United States (including Iraq and Afghanistan).

Finally, to verify compliance with this new requirement, the NDAA requires DoD to issue annual reports over the next four years that describe the instances in which LPTA procedures were used for a contract exceeding $10 million.

The 2017 NDAA makes clear Congress’s intent to rework DoD’s contracting programs and procedures. Going forward, Congress wants DoD to utilize best value source selection procedures as much as possible, by severely restricting use of LPTA procedures for DoD contracts.

The House approved the 2017 NDAA on December 2.  It now goes to the Senate, which is also expected to approve the measure, then send it to the President. We will keep you posted.

View the full article

Koprince Law LLC

As previously foreshadowed and discussed in depth, October 1, 2016, marked the date in which unsuccessful offerors lost the ability to challenge most task order awards issued by civilian agencies.

Although the GAO remains able to hear protests relating to DoD task orders exceeding $10 million, two recent GAO decisions impose an important limitation: GAO does not have jurisdiction to consider awards issued by DoD under a multiple-award contract operated by a civilian agency.

By way of background, for several years, a GAO protest challenging a task order award issued by a civilian agency was not permitted unless it fell under either of the following exceptions:

  1. The protest alleged that the order increases the scope, period, or maximum value of the contract under which the order was issued; or
  2. The protest challenged an order valued in excess of $10 million.

However, the statute included a sunset provision whereby the second basis of jurisdiction–protests involving task orders in excess of $10 milion–was no longer effective after September 30, 2016. Thus, after this date, an unsuccessful offeror’s ability to protest a task order issued by a civilian agency became limited to only protests alleging the order increased the scope, period, or maximum value of the contract. GAO’s recent decision in Ryan Consulting Group, Inc., B-414014 (Nov. 7, 2016), confirmed its lack of jurisdiction over task and delivery orders valued above $10 million issued under civilian agency multiple-award IDIQ contracts.

While unsuccessful offerors can still challenge task orders issued by the Department of Defense if the order exceeds the $10 million value, see 10 U.S.C. §2304c(3)(1), two recent GAO decisions limit its jurisdiction in this area by holding that when DoD places an order against a civilian IDIQ vehicle, the task order cannot be protested.

In Analytic Strategies LLC, B-413758.2 (Nov. 28, 2016), the DoD issued a solicitation under the GSA’s OASIS vehicle. The solicitation contemplated the award of a task order valued in excess of $125 million. After evaluating initial proposals, the DoD excluded the proposals of Analytic Strategies LLC and Gemini Industries, Inc. from the competitive range. Analytic Strategies filed a GAO bid protest on October 3, 2016; Gemini filed a protest on October 28.

The GAO dismissed both protests, finding that it lacked jurisdiction. The GAO held that because OASIS is a civilian IDIQ, orders issued under OASIS fall under the civilian provisions of 41 U.S.C., and cannot be protested unless the protest alleges that the order exceeds the scope, period, or maximum value of the IDIQ contract.  While the protesters contended that GAO had jurisdiction over its protest under 10 U.S.C., GAO found this argument misplaced. GAO stated that it saw “nothing in the relevant provisions of Titles 10 or 41 that authorize a different result because the agency that will benefit from the task order, fund the task order, or place the task order, is an agency covered by Title 10.”

GAO solidified this position shortly thereafter in HP Enterprise Services, LLC, B-413382.2 (Nov. 30, 2016), again finding it was without jurisdiction to hear a protest in connection with a  task order valued above $10 million issued under a civilian agency multiple-award IDIQ. In HP Enterprise Services, the GSA issued a solicitation to holders of the GSA ALLIANT IDIQ, seeking a contractor to provide various IT support services for the DoD. After receiving notice that it had not been selected, HP Enterprise Services, LLC filed a GAO bid protest challenging the award decision. HPES contended that GAO had jurisdiction over its protest pursuant to 10 U.S.C. § 2304c(e), rather than 41 U.S.C. § 4106(f), because the procurement was conducted “on behalf” of the DoD, that it was subject to DoD Regulations, and the performance was funded by the DoD. GAO, however, hung its proverbial hat on the fact that a civilian agency issued the IDIQ, writing that “there can be no doubt that the protested task order has been, or will be, issued under a civilian agency IDIQ contract.”

Interestingly, GAO’s recent decisions depart from its previous practice of citing 10 U.S.C.–the DoD statute, not the civilian statute–in cases like these. For example, in Odyssey Systems Consulting Group, Ltd., B-412519, B-412519.2 (Mar. 11, 2016), the Air Force issued a solicitation under the OASIS contract, and an unsuccessful offeror challenged the resulting award decision. In a footnote explaining why it had jurisdiction to hear the protest, the GAO said:

The awarded value of the task order exceeds $10 million. Accordingly, the procurement is within our jurisdiction to hear protests related to the issuance of orders under multiple-award indefinite-delivery, indefinite-quantity contracts. 10 U.S.C. § 2304c(e)(1)(B). 

Interestingly, even though the Odyssey Systems case involved the same IDIQ at issue in Analytic Strategies, the GAO did not explain its apparent shift in position.

These jurisdictional matters are very important, but the effect of these cases is likely to be short-lived. The U.S. House of Representatives has recently approved a conference version of the 2017 National Defense Authorization Act, and the Senate is expected to approve the same conference bill as early as this week. The conference version of the 2017 NDAA strikes the sunset provision of 41 U.S.C. § 4106(f), thereby reinstating GAO’s jurisdiction to hear task order awards valued above $10 million issued by civilian agencies. Thus, assuming the President signs the bill into law in its current form, unsuccessful offerors once again will be free to protest civilian task orders valued above $10 million. We will keep you posted.

View the full article

Koprince Law LLC

The 2017 National Defense Authorization Act will essentially prevent the VA from developing its own regulations to determine whether a company is a veteran-owned small business.

Yes, you heard me right.  If the President signs the current version of the 2017 NDAA into law, the VA will be prohibited from issuing regulations regarding the ownership, control, and size status of an SDVOSB or VOSB–which are, of course, the key components of SDVOSB and VOSB status.  Instead, the VA will be required to use regulations developed by the SBA, which will apply to both federal SDVOSB programs: the SBA’s self-certification program and the VA’s verification program.


In my experience, the typical SDVOSB believes that VA verification applies government-wide, and relies on that VetBiz “seal” as proof of SDVOSB eligibility for all agencies’ SDVOSB procurements.  But contrary to this common misconception, there are two separate and distinct SDVOSB programs.  The SBA’s self-certification program (which is the “original” SDVOSB set-aside program) is authorized by the Small Business Act, which is codified in Title 15 of the U.S. Code and implemented by the SBA in its regulations in Title 13 of the Code of Federal Regulations.  The VA’s separate program is codified in Title 38 of the U.S. Code and implemented by the VA in its regulations in Title 38 of the Code of Federal Regulations.

There are some important differences between the two programs.  For example, the VA requires that the service-disabled veteran holding the highest officer position manage the company on a full-time basis; the SBA’s regulations do not.  Following a 2013 Court of Federal Claims decision, the VA allows certain restrictions of a veteran’s ability to transfer his or her ownership, but that decision doesn’t necessarily apply to the SBA, which has held that “unconditional means unconditional,” as applied to transfer restrictions.  And of course, the VA’s regulations require formal verification; the SBA’s call for self-certification.

Despite these important differences, the two programs are largely similar in terms of their requirements.  However, last year, the VA proposed a major overhaul to its SDVOSB and VOSB regulations.  The VA’s proposed changes would, among other things, allow non-veteran minority owners to exercise “veto” power over certain extraordinary corporate decisions, like the decision to dissolve the company.  The SBA has not proposed corresponding changes.  In other words, were the VA to finalize its proposed regulations, the substantive differences between the two SDVOSB programs would significantly increase, likely leading to many more cases in which VA-verified SDVOSBs were found ineligible for non-VA contracts.

That brings us back to the 2017 NDAA.  Instead of allowing the VA and SBA to separately define who is (and is not) an SDVOSB, the 2017 NDAA establishes a consolidated definition, which will be set forth in the Small Business Act, not the VA’s governing statutes.  (The new statutory definition itself contains some important changes, which I will be blogging about separately).

The 2017 NDAA then amends the VA’s statutory authority to specify that “[t]he term ‘small business concern owned and controlled by veterans’ has the meaning given that term under . . . the Small Business Act.”  A similar provision applies to the term “small business concern owned and controlled by veterans with service-connected disabilities.”

Congress doesn’t stop there.  The 2017 NDAA further amends the VA’s statute to specify that companies included in the VA’s VetBiz database must be “verified, using regulations issued by the Administrator of the Small Business Administration with respect to the status of the concern as a small business concern and the ownership and control of such concern.”  At present, the relevant statutory section merely says that companies included in the database must be “verified.”  Finally, the 2017 NDAA states that “The Secretary [of the VA] may not issue regulations related to the status of a concern as a small business concern and the ownership and control of such small business concern.”

So there you have it: the 2017 NDAA consolidates the statutory definitions of veteran-owned companies, and calls for the SBA–not the VA–to issue regulations implementing the statutory definition.  The 2017 NDAA requires the VA to use the SBA’s regulations, and expressly prohibits the VA from adopting regulations governing the ownership and control of SDVOSBs.  These prohibitions, presumably, will ultimately wipe out the two regulations with which many SDVOSBs and VOSBs are very familiar–38 C.F.R. 74.3 (the VA’s ownership regulation) and 38 C.F.R. 74.4 (the VA’s control regulation).

Because both agencies will be using the SBA’s rules, the SBA Office of Hearings and Appeals will have authority to hear appeals from any small business denied verification by the VA.  This is an important development: under current VA rules and practice, there is no option to appeal to an impartial administrative forum like OHA.  Intriguingly, the 2017 NDAA also mentions that OHA will have jurisdiction “of an interested party challenges the inclusion in the database” of an SDVOSB or VOSB.  It’s not clear whether this authority will be limited to appeals of SDVOSB protests filed in connection with specific procurements, or whether competitors will be granted a broader right to protest the mere verification of a veteran-owned company.

So when will these major changes occur?  Not immediately.  The 2017 NDAA states that these rules will take effect “on the date on which the Administrator of the Small Business Administration and the Secretary of Veterans Affairs jointly issue regulations implementing such sections.”  But Congress hasn’t left the effective date entirely open-ended.  The 2017 NDAA provides that the SBA and VA “shall issue guidance” pertaining to these matters within 180 days of the enactment of the 2017 NDAA.  From there, public comment will be accepted and final rules eventually announced.  Given the speed at which things like these ordinarily play out, my best guess is that these changes will take effect sometime in 2018, or perhaps even the following year.

The House approved the 2017 NDAA on December 2.  It now goes to the Senate, which is also expected to approve the measure, then send it to the President.  In a matter of weeks, the 180-day clock for the joint SBA and VA proposal may start ticking–and the curtain may start to close on the VA’s authority to determine who owns or controls a veteran-owned company.


View the full article


Koprince Law LLC

I hope that all of our readers had a happy Thanksgiving.  The holiday season is in full swing here at Koprince Law LLC, where we have a festive tree in our lobby and holiday cookies in the kitchen.

But between holiday shopping and snacking, there is still plenty happening in the world of federal government contracts.  Today, we have a special SmallGovCon “Weeks” in Review, beginning with stories from November 21.  The latest news and commentary includes two different cases in which business owners were convicted procurement fraud, a potential end to the Fair Pay and Safe Workplaces regulations, and much more.

  • DBE fraud: an Illinois contractor pleaded guilty to conspiring to commit wire fraud after allegedly acting as a disadvantaged business for another company, resulting in fines over $200,000. [Construction Dive]
  • President Obama’s “Fair Pay and Safe Workplaces” rule for federal contractors appears to be headed for the chopping block once President-elect Trump takes office. [Government Executive]
  • A proposed rule by the FAR Council would amend the FAR to implement a section of the NDAA that will clarify that agency personnel are permitted and encouraged to engage in responsible constructive exchanges with industry. [Federal Register]
  • The GSA’s SAM database is under fire for the accuracy of its data and Members of Congress are questioning how GSA ensures tax delinquent vendors do not win federal contracts or grants. [Committee on Oversight and Government Reform]
  • The owner of a sham “veteran-owned” company has been ordered to forfeit $6.7 million for his part in recruiting veterans as figurehead owners of  a construction company in order to receive specialized government contracts. [The United States Attorney’s Office District of Massachusetts]
  • Court documents show that a former employee with the U.S. Department of State was guilty of steering sole-sourcing contracts worth $2 million to a company in which his son was a 50 percent interest. [KTVH]
  • The election of Donald Trump had a surprise impact on the November House-Senate conference meetings on the fiscal 2017 National Defense Authorization Act. [Government Executive]
  • Bloomberg Government data shows that federal information technology spending on government-wide acquisition contracts, or GWACs, topped $10 billion for the first time in fiscal 2016. [Bloomberg Government]

View the full article

Koprince Law LLC

A contractor did not file a proper certified claim because the purported “signature” on the mandatory certification was typewritten in Lucinda Handwriting font.

A recent decision of the Armed Services Board of Contract Appeals highlights the importance of providing a fully-compliant certification in connection with all claims over $100,000–which includes, according to the ASBCA, the requirement for a verifiable signature.

The ASBCA’s decision in ABS Development Corporation, ASBCA Nos. 60022 et al. (2016) involved a contract between the government and ABS Development Corporation, Inc. for construction work at a shipyard in Haifa, Israel.  During the course of performance, ABS presented seven claims to the Contracting Officer, five of which are at issue here.

In each of the five claims in question, ABS sought compensation of more than $100,000.  Each of the five claims contained a certification using the correct language from the Contract Disputes Act and FAR 52.233-1.  The “Name and Signature” line of each claim was written “in what appears to be Times New Roman font.”  Above the “Name and Signature” line of each claim the name “Yossi Carmely” was typed “in Lucinda Handwriting font, or something similar.”  Yossi Carmely was listed on the certifications as a Project Manager.

The government did not act on these claims.  A few months after the claims were filed, ABS appealed to the ASBCA, treating the government’s lack of response as “deemed denials” of the claims.

The government moved to dismiss the appeals for lack of jurisdiction.  The government argued that the certifications “were not signed by anyone, because electronically typed ‘signatures’ of Yossi Carmely are not signatures at all.”

The ASBCA noted that “[a] claim of more than $100,000 must be accompanied b y a signed certification by an individual authorized to bind the contractor with respect to the claim . . ..”  Further, “[t]he Board cannot entertain an appeal involving a claim of more than $100,000 unless the claim was the subject of a signed certification.”  An unsigned certification “is a defect that cannot be corrected.”

The Board explained that a signature “is a discrete, verifiable symbol that is sufficiently distinguishable to authenticate that the certification was issued with the purported author’s knowledge and consent or to establish his intent to certify, and therefore, cannot be easily disavowed by the purported author.”  The ASBCA continued:

Here, we are not confronted with an issue of “electronic signatures”; rather, we are confronted with several typewritings of a name (presumably typewritten by electronic means), purporting to be signatures.  However, a typewritten name, even one typewritten in Lucinda Handwriting font, cannot be authenticated, and therefore, it is not a signature.  That is, anyone can type a person’s name; there is no way to tell who did so from the typewriting itself.

The ASBCA granted the government’s motion to dismiss for lack of jurisdiction.

The FAR’s claim certification requirement appears to be simple and straightforward, but the ASBCA’s case law (and that of other Boards) is littered with examples of cases dismissed because the contractor omitted the certification or didn’t get it right.  As the ABS Development Corporation case demonstrates, even in our electronic age, a purely typewritten signature doesn’t suffice, notwithstanding the font selected.

One final, and rather ironic, note: the last page of the ASBCA’s decision contains a certification from the Board’s Recorder, attesting that the decision is a true copy.  The Recorder’s signature line is blank.

View the full article

Koprince Law LLC

Affiliation under the ostensible subcontractor rule is determined at the time of proposal submission–and can’t be “fixed” by later changes.

In a recent size appeal decision, the SBA Office of Hearing and Appeals confirmed that a contractor’s affiliation with its proposed subcontractor could not be mitigated by changes in subcontracting relationships after final proposals were submitted.

In Greener Construction Services, Inc., SBA No. SIZ-5782 (Oct. 12, 2016), the U.S. Army Contracting Command sought solid waste disposal and recycling services at its Blossom Point Research Facility. The solicitation was set aside for 8(a) Program participants under NAICS code 562111, Solid Waste Collection, with a size standard of $38.5 million.

Greener Construction, Inc. submitted its final proposal on September 15, 2015. The proposal included one subcontractor, EnviroSolutions, Inc. No other subcontractors were mentioned.

Under the teaming agreement between the parties, EnviroSolutions was to provide the solid waste collection bins, trucks, and drivers for the project. In addition, EnviroSolutions’ supervisory staff were to be on site during the first month of contract performance to assist with personnel training. In fact, of the five key employees identified in Greener Construction’s proposal, four were employed by EnviroSolutions. Greener Construction was also prohibited from adding another subcontractor without EnviroSolutions’ written consent.

Greener Construction was awarded the contract on September 25, 2015. An unsuccessful offeror challenged the award alleging that Greener Construction was other than small because it was affiliated with EnviroSolutions and its subsidiaries under the ostensible subcontractor affiliation rule.

On July 29, 2016, the SBA Area Office issued its size determination, which found Greener Construction to be “other than small.” The Area Office concluded Greener Construction and EnviroSolutions were affiliated under the ostensible subcontractor rule because EnviroSolutions was responsible for the primary and vital aspects of the solicitation—the collection and transportation of solid waste.

Greener Construction appealed the decision to OHA. Greener Construction argued EnviroSolutions would not be solely responsible for performing the primary and vital tasks because, after submitting its final proposal, Greener Construction had made arrangements with other companies to perform these functions. Greener Construction further argued it was actually going to provide the onsite waste receptacles, not EnviroSolutions.

OHA was not  convinced. OHA wrote that under the SBA’s size regulations, “compliance with the ostensible subcontractor rule is determined as of the date of final proposal revisions.” For that reason, “changes of approach occurring after the date of final proposals do not affect a firm’s compliance with the ostensible subcontractor rule . . ..”

In this case, Greener Construction submitted its initial proposal on September 15, 2015, “and there were no subsequent proposal revisions.” Greener Construction’s proposal “made no mention” of any other subcontractors but EnviroSolutions, and required EnviroSolutions’ consent to add any other subcontractors. Moreover, the proposal stated that EnviroSolutions “will provide front load containers as specified in the solicitation.” Therefore, the arguments advanced by Greener Construction on appeal “are inconsistent with, and contradicted by [Greener Construction’s] proposal and Teaming Agreement.” OHA denied Greener Construction’s size appeal.

Greener Construction demonstrates the importance of carefully considering ostensible subcontractor affiliation before submitting proposals. Because ostensible subcontractor affiliation is determined at the time final proposals are submitted, contractors must be mindful of the rule and make sure that the proposal, teaming agreement, and any other contemporaneous documentation reflects an absence of affiliation.

View the full article

Koprince Law LLC

Businesses controlled by brothers were presumed affiliated under the SBA’s affiliation rules.

In a recent size determination, the SBA Office of Hearings and Appeals held that a contractor was affiliated with companies controlled by its largest owners’ brother, even though the companies had only minimal business dealings.  OHA’s decision highlights the “familial relationships” affiliation rule, which can often trip up even sophisticated contractors–but the decision, which was based on a March 2016 size determination request, did not take into account changes to that regulation that went into effect a few months later.

OHA’s decision in Size Appeal of Quigg Bros., Inc., SBA No. SIZ-5786 (2016) arose from a HUBZone Program application submitted by Quigg Bros., Inc..  On March 30, 2016, the HUBZone Program office asked that the SBA Area Office conduct a size determination on Quigg Bros. to determine whether the company was a small business in its primary NAICS code, 237310 (Highway, Street, and Bridge Construction).

The SBA Area Office determined that Quigg Bros. was owned by six related individuals. The two largest shareholders were John Quigg and Patrick Quigg.  The SBA Area Office determined that all six of the owners, including John Quigg and Patrick Quigg, controlled Quigg Bros.

The SBA Area Office then proceeded to examine potential affiliation with various other entities.  As is relevant to this post, William Quigg–the brother of John Quigg and Patrick Quigg–controlled three companies: Root Construction Inc. (RC), Barrier West, Inc. (BW), and Cottonwood, Inc.  These companies were identified as “related parties” in Quigg Bros.’ financial statements.  When the SBA asked for an explanation, Quigg Bros. stated that “ecause we have loaned money to these entities our CPAs feel they are related.” However, Quigg Bros. pointed out, William Quigg was not an owner or officer of Quigg Bros., nor were John Quigg or Patrick Quigg involved as owners or officers of RC, BW, or Cottonwood.

The SBA Area Office issued a size determination finding Quigg Bros. to be affiliated with various other entities, including RC, BW and Cottonwood.  The SBA Area Office stated that companies controlled by close family members are presumed to be affiliated.  Although the presumption of affiliation may be rebutted, the SBA Area Office apparently found that the loans between Quigg Bros. and the other three companies (as well as other business dealings between the brothers) precluded Quigg Bros. from rebutting the presumption.  As a result of its affiliations, Quigg Bros. was found ineligible for admission to the HUBZone Program.

Quigg Bros. filed a size appeal with OHA.  Quigg Bros. highlighted the fact that none of its owners had any ownership interest in RC, BW or Cottonwood.  Quigg Bros. also pointed out that William Quigg was not an owner or officer of Quigg Bros.  Additionally, Quigg Bros. stated, the business dealings between the companies were minimal, and the companies did not share any officers, employees, facilities, or equipment.

OHA wrote that “SBA regulations create a rebuttable presumption that close family members have identical interests and must be treated as one person.”  The challenged firm “may rebut this presumption by demonstrating a clear line of fracture between family members.”

In this case, “the Area Office correctly presumed that William Quigg shares an identity of interest with his brothers, and afforded [Quigg Bros.] several opportunities to rebut this presumption.”  However, “the record reflects various business dealings between the brothers and their respective companies, including both contracts and loans, as well as join investments” in two other companies.  These circumstances “undermine [Quigg Bros.’] claim of clear fracture, as OHA has recognized that ‘where there is financial assistance, loans, or significant subcontracting between the firms,’ and ‘whether the family members participate in multiple businesses together’ are among the criteria to be considered in determining whether clear fracture exists.”

OHA also found that the SBA Area Office did not err by failing to undertake a company-by-company analysis to determine whether Quigg Bros. was affiliated with each of the individual companies controlled by William Quigg. Citing prior decisions, OHA wrote that “if a challenged firm does not rebut the presumption of identity of interest between family members, all of the family members’ investments are aggregated.” OHA upheld the SBA Area Office’s size determination, and denied the size appeal.

In Quigg Brothers, the size determination request came in March 2016, so OHA applied the SBA’s then-existing rules on family relationships.  It’s worth noting, however, that the SBA adjusted those rules in a rulemaking effective on June 30, 2016.  The SBA’s affiliation rule now states:

Firms owned or controlled by married couples, parties to a civil union, parents, children, and siblings are presumed to be affiliated with each other if they conduct business with each other, such as subcontracts or joint ventures or share or provide loans, resources, equipment, locations or employees with one another. This presumption may be overcome by showing a clear line of fracture between the concerns. Other types of familial relationships are not grounds for affiliation on family relationships. 

The plain text of the new rule suggests that–unlike in Quigg Bros. and prior OHA cases–the primary focus of the regulation may be on the businesses, not the family members.  In other words, the company-by-company analysis OHA rejected in Quigg Bros. might be required moving forward.  Additionally, unlike in prior cases, the new regulation suggests that the presumption doesn’t arise in the first place unless there is a close family relationship and the companies in question conduct business with one another.

Make no mistake: family relationships are still a viable basis of affiliation under the SBA’s revised regulations.  But it remains to be seen how the new regulation will affect OHA’s analysis in future cases.

View the full article

Koprince Law LLC

Picture this scenario: the government hires your company to do a job; you assign one of your best employees to lead the effort. He or she does such a good job that the government hires your employee away. The government then drags its feet on approving your proposed replacement and refuses to pay you for the time when the position was not staffed–even though the contract was fixed-price.

The scenario is exactly what happened to a company called Financial & Realty Services (FRS), and according to the Civilian Board of Contract Appeals, FRS wasn’t entitled to its entire fixed-price contract amount.

In Financial & Realty Services, LLC, CBCA No. 5354, 16-1 BCP ¶ 36472 (Aug. 18, 2016), FRS held a GSA Schedule contract for facilities maintenance and management services. The underlying Schedule contract included FAR 52.212-4 (Instructions to Offerors–Commercial Items).

In 2013, as part of that contract, GSA awarded FRS a task order to manage some federal buildings in the Dallas/Fort Worth [Texas] Service Center, Fort Worth Field Office. The task order, at its most basic, called for FRS to provide a property manager.

The task order was priced in firm fixed annual amounts, and GSA agreed that FRS could invoice in fixed monthly amounts.

Important to later events, the task order required that the property manager to be able to obtain a National Agency Check with Inquiries (NACI) clearance within three months of award and maintain it through the life of the contract. For the first year or so of performance, a FRS employee served in the property manager position. Then, in October 2014, the government solicited and hired the employee away, to do basically the same job he was doing for FRS.

A month later, FRS submitted a potential replacement to GSA, but that candidate took another job in the intervening time before the government gave FRS word that it had approved his/her NACI clearance. FRS then offered a second and a third option in January and February 2015. Finally, in March, the third potential replacement became the property manager.

FRS later submitted invoices for $49,280, seeking payment for the time between October 2014 and March 2015. GSA refused to pay, so FRS filed a claim with the contracting officer seeking payment of the disputed amount. The contracting officer denied the claim, so FRS appealed the denial to the CBCA, alleging that GSA “breached its contract with FRS by thwarting or precluding FRS' performance of the contract and by failing to pay the full contract price.”

GSA moved for the case to be dismissed. In its motion to dismiss, GSA argued there was no factual basis to determine that GSA had acted improperly.

FRS conceded that it did not actually provide a property manager during the relevant time frame. As one might expect, however, FRS argued that the task order was fixed-price (meaning, FRS said, that the government agreed to pay regardless of whether the position was staffed), and that the government actively prevented FRS from performing.

The CBCA disagreed. It pointed out that FAR 52.212-4(i) states that “[p]ayment shall be made for items accepted by the ordering activity that have been delivered to the delivery destinations set forth in this contract.” The CBCA continued:

Notwithstanding the task order’s “fixed price,” GSA was obligated to pay only for services that were delivered and accepted.  Whether GSA could “supervise” the FRS employees who performed the services is immaterial.  In light of the complaint’s allegations that FRS did not staff the task order during the months in dispute, the allegation that GSA “fail[ed] to pay the full Contract price” for that same period . . . does not state a claim on which the Board could grant relief.

As for the fact that the GSA hired FRS’s property manager, the CBCA wrote that FRS “identifies no factual basis to suspect that GSA did anything inconsistent with the normal federal hiring process.” The CBCA determined, “we do not see how an otherwise lawful recruiting or hiring action that an agency was not contractually barred from taking–which is all that has been plausibly alleged–could constitute undue interference entitling a contractor to be paid for work it did not perform.”

Finally, the Board held that GSA had not breached the contract by failing to timely approve a replacement property manager. The CBCA noted that the contract did not include “a contractual duty on GSA’s part to clear job candidates within a specified time . . . .” Under the circumstances, the CBCA found the delays in clearance to be reasonable.

The CBCA dismissed the appeal.

As an impartial observer, it is easy to have sympathy for FRS. It did nothing wrong. In fact, it seemingly did everything right. It staffed the position with someone so good that the government poached the worker away within a year. It suggested multiple replacements, at least one of which took a different job while the government was still in the process of authorizing clearance. It certainly would seem like FRS had reason to be upset, especially since the task order was fixed-price.

But let’s be real here. Fixed-price or not, the government isn’t too keen to pay for something it doesn’t receive from a contractor. As Financial & Realty Services demonstrates, that policy may apply even when the government itself causes the contractor to be unable to deliver.


View the full article


Koprince Law LLC

The year is flying by.  Believe it or not, Thanksgiving is next week.  While my colleagues and I prepare to overdose on turkey and stuffing (and my personal Thanksgiving favorite–copious amounts of pie), our focus today is on the top stories that made government contracting headlines this week.

In this edition of SmallGovCon Week In Review, all nine bid protests filed against the TRICARE award were denied, the FAR Council proposes a rule to clarify how Contracting Officers are to award 8(a) sole source contracts in excess of $22 million, Set-Aside ALERT offers an in depth look at HUBZone set-asides in 2016, the Obama Administration’s government contracting Executive Orders may be reversed by President-Elect Trump, and much more.

  • All nine bid protests filed by health insurers who came out on the losing end of the Defense Department’s TRICARE awards have been denied. [Federal News Radio]
  • The General Services Administration will launch a cloud-based shared service contract-writing system that will offer federal agencies a turnkey, comprehensive contract writing and administrative solution beginning next year. [Nextgov]
  • The FAR Council has issued a proposed rule to clarify the guidance for sole-source 8(a) contract awards exceeding $22 million. [Federal Register]
  • Writing in Bloomberg Government, Tom Skypek offers four steps on how to turn around a failing contract. [Bloomberg Government]
  • As 2016 draws to a close, Set-Aside ALERT provides an in-depth look at where things stand with the SBA’s HUBZone program. [Set-Aside ALERT]
  • Federal IT executives and industry experts say between the election, expected slow or non-existent budget growth and uncertainty in leadership, most of the change will happen below the surface. [Federal News Radio]
  • According to one commentator, Donald Trump’s election is likely to provide federal contractors with one of the biggest items on their wish list: the reversal of most if not all of the Executive Orders President Barack Obama has directed at them over the past eight years. [Bloomberg BNA]
  • Federal CIOs are asking Congress for the authority to stop major IT procurements if they have concerns about cyber security. [fedscoop]
  • The VA has issued a solicitation notice for a 10 year, $25 billion, professional services contract known as VECTOR, which will be set aside for service-disabled veteran-owned small businesses. [Bloomberg Government]

View the full article

Koprince Law LLC

Joint venture partner or subcontractor?  An offeror’s teaming agreement for the CIO-SP3 GWAC wasn’t clear about which tasks would be performed by joint venture partners and which would be performed by subcontractors–and the agency was within its discretion to eliminate the offeror as a result.

A recent GAO bid protest decision demonstrates that when a solicitation calls for information about teaming relationships, it is important to clearly establish which type of teaming relationship the offeror intends to establish, and draft the teaming agreement and proposal accordingly.

Here at SmallGovCon, my colleagues and I discuss teaming agreements and joint ventures frequently.  As important as teaming is for many contractors, one might think that the FAR would be overflowing with information about joint ventures and prime/subcontractor teams.  Not so.  Most of the legal guidance related to joint ventures and teams is found in the SBA’s regulations.  The FAR itself is much less detailed.  FAR 9.601 provides this definition of a “Contractor Team Arrangement”:

“Contractor team arrangement,” as used in this subpart, means an arrangement in which—

(1) Two or more companies form a partnership or joint venture to act as a potential prime contractor; or

(2) A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program.

So, under the FAR, a Contractor Team Arrangement, or CTA, may take two forms: a joint venture (or other partnership) under FAR 9.601(1), or a prime/subcontractor teaming arrangement under FAR 9.601(2).  The details of how to form each arrangement are left largely to guidance established by the SBA.

Let’s get back to the GAO protest at hand.  The protest, NextGen Consulting, Inc., B-413104.4 (Nov. 16, 2016) involved the “ramp on” solicitation for the NIH’s major CIO-SP3 small business GWAC IDIQ.  The solicitation included detailed instructions regarding CTAs.  Specifically, the solicitation provided that if an offeror wanted its teammates to be considered as part of the evaluation process, the offeror’s team needed to be in the form prescribed by FAR 9.601(1), that is, a joint venture or partnership.  In contrast, the solicitation provided that, for prime/subcontractor teams under FAR 9.601(2), only the prime offeror would be evaluated.

NextGen Consulting, Inc. submitted a proposal as a CTA.  NextGen identified three teammates: WhiteSpace Enterprise Corporation, Twin Imaging Technology Inc., and the University of Arizona.  The teaming agreement specified that NextGen and WhiteSpace were teaming under FAR 9.601(1), whereas Twin Imaging and the University were teaming with the parties under FAR 9.601(2).

The teaming agreement identified “primary delivery areas” for each teammate.  With respect to the 10 task areas required under the solicitation, NextGen was to handle overall contract management and related responsibilities for task areas 2 and 4-10, WhiteSpace was assigned task area 1, Twin Imaging was assigned task area 3, and the University was assigned task areas 1, 4, 5, and 10.  In its proposal, NextGen referred to the capabilities of “Team NextGen” for all 10 task areas.

The NIH found that because the teaming agreement distributed the task areas without regard for whether the teaming relationship fell under FAR 9.601(1) or FAR 9.601(2), it was impossible for the agency to distinguish between the two types of teammates.  The NIH concluded that the resulting confusion about the roles and responsibilities of the parties made it impossible for the NIH to evaluate the proposal in accordance with the solicitation’s requirements–which, of course, called for the evaluation only of FAR 9.601(1) teammates.  The NIH eliminated NextGen from the competition.

NextGen filed a bid protest with the GAO, challenging its exclusion.  NextGen argued that the NIH unreasonably excluded its proposal based upon a misintepretation of the teaming agreement.  NextGen contended that, taken as a whole, the teaming agreement was clear.  NextGen pointed out that the teaming agreement specifically identified itself and WhiteSpace as FAR 9.601(1) teammates, and specifically identified Twin Imaging and the University as FAR 9.601(2) teammates.

The GAO disagreed.  It noted that “the solicitation required that a CTA offeror submit a CTA document to clearly designate a team lead and identify specific duties and responsibilities.”  Contrary to NextGen’s contentions, “[t]he record shows that as a whole, NextGen’s CTA provided conflicting information as to who the team lead was, and failed to clearly identify the specific duties and responsibilities of the team members.”  GAO pointed out that NextGen’s proposal used the term “Team NextGen,” which “did not provide any indication as to what the specific duties and responsibilities of the team members were.”

Joint venture agreements and prime/subcontractor teams are very different arrangements.  As the NextGen Consulting protest demonstrates, it is important for an offeror to understand what type of teaming arrangements it is proposing, and draft its teaming documents and proposal accordingly.

View the full article

Koprince Law LLC

A solicitation’s evaluation criteria are tremendously important. Not only must offerors understand and comply with those criteria in order to have a chance at being awarded the contract, but the agency must abide by them too. Where an agency does not, it risks that a protest challenging the application of an unstated evaluation criteria will be sustained.

So it was in Phoenix Air Group, Inc., B-412796.2 et al. (Sept. 26, 2016), a recent GAO decision sustaining a protest where the protester’s proposal was unreasonably evaluated under evaluation criteria not specified in the solicitation.

At issue in Phoenix Air Group was a Department of the Interior solicitation seeking commercial electronic warfare aircraft test and evaluation services for the Department of the Navy, at various locations throughout the United States. Under the solicitation, the successful offeror was to provide the turbo-jet aircraft, flight and ground crews, and electronic technicians needed to conduct flight operations consistent with military standards in the form the electronic warfare testing missions under a single IDIQ contract.

Sections A and B of the solicitation provided detailed technical requirements for the scope of work. Together, these sections required offerors to propose at least five specifically-identified aircraft that would accommodate specific modifications to allow them to tow certain equipment behind them and meet several stated performance aspects.

Evaluations would be conducted under a two-step approach. First, proposals would be reviewed for acceptability—basically, to make sure that the offeror had assented to the solicitation’s terms, provided all information requested, had not taken exception to requirements, and proposed aircraft that met the minimum aircraft requirements. For those proposals deemed technically acceptable, Interior would then conduct a best value tradeoff evaluation of each offer’s capability and its total evaluated price.

The offeror capability evaluation was based on three subfactors, the most important of which (and the one pertinent for this post) was the aircraft operations capability subfactor. Under the solicitation, Interior was to assess this subfactor for “the performance risk associated with an offeror’s capability to perform the commercial aircraft services” described in Sections A and B.

Interior’s evaluators established a go/no-go checklist for assessing compliance with Sections A and B. The evaluators then assigned Phoenix Air Group several weaknesses and two deficiencies, relating to its failure to submit a property management plan and include weight and balance checks performed on its submitted aircraft information forms. Interior awarded the contract to one of Phoenix Air’s competitors.

Phoenix Air protested the evaluation and award, arguing (among other things) that the aircraft operations capability evaluation relied on unstated evaluation criteria. Phoenix Air said that the solicitation “instructed offerors to discuss general topics such as ‘overall management, maintenance, and pilot capabilities,’ ‘plans for conducting the flight services,’ and their ‘capability to provide the required storage and maintenance of Government furnished property.’” Phoenix Air’s proposal met all of these requirements by providing general narratives as to each. But instead of following this evaluation criteria, Interior graded proposals based on their “specific commitments to particular specifications, such as whether the proposal contained a property management plan, and whether the offeror responded to each of over 100 specification requirements in RFP Sections A and B.”

GAO wrote that “[a]n agency may properly evaluation considerations that are not expressly identified in the RFP if those considerations are reasonably and logically encompassed within the stated evaluation criteria, so long as there is a clear nexus linking them.” However, “an agency may not give importance to specific factors, subfactors or criteria beyond that which would reasonably be expected by offerors reviewing the stated evaluation criteria.”

GAO wrote that “[w]e do not think that a reasonable offeror should have understood from the stated evaluation criteria, or from the information requested in the offeror capability form, that specific responses to each of the specifications in RFP Sections A and B and a property management plan were important proposal elements.” Because Interior’s application of these unstated evaluation criteria significantly lowered Phoenix Air’s score, the GAO sustained Phoenix Air’s protest.

Complying with a solicitation’s stated evaluation criteria is critical, for both offerors and the agency. And as Phoenix Air Group shows, an agency’s unreasonable departure from those criteria can lead to a sustained protest.

View the full article

Koprince Law LLC

When an agency performs a cost realism evaluation under a solicitation involving significant labor costs, the agency must evaluate offerors’ proposed rates of employee compensation, not just offerors’ fully burdened labor rates.

In a recent bid protest decision, the GAO held that an agency erred by basing its realism evaluation on offerors’ fully burdened labor rates, without considering whether the direct rates of compensation were sufficient to recruit and retain qualified personnel.

The GAO’s decision in CALNET, Inc., B-413386.2, B-413386.3 (Oct. 28, 2016) involved a Navy task order solicitation for a range of technical services to be provided to the Naval Sea Systems Command Pacific Enterprise Data Center.  The solicitation was issued to holders of the Navy’s Seaport-e IDIQ contract, and contemplated the award of a cost-plus-fixed-fee task order.

Under the solicitation, offerors were to propose personnel in 13 labor categories.  For each labor category, offerors were to provide information on their direct labor rates, as well as the indirect rates to be applied to those direct rates.

In its cost evaluation, the Navy collected information about identical labor categories under 22 other contracts, including the incumbent contract.  Using this information, the Navy created a “range” of realistic fully-burdened hourly rates.  These ranges were, in some cases, quite broad.  For example, the Program Manager category ranged from a low of $69.44 per hour to a high of $228.93 per hour.

The Navy only found a rate to be unrealistic if it fell below the established ranges.  Of the 186 rates examined by the agency, only three fell below the ranges.  Unsurprisingly, the Navy made few cost adjustments to offerors’ proposals.  The Navy awarded the task order to Universal Consulting Services, Inc., which had the lowest evaluated cost.

CALNET, Inc., an unsuccessful competitor, filed a GAO bid protest.  CALNET argued, in part, that the Navy’s cost realism evaluation was inadequate.

The GAO wrote that “[w]here, as here, an agency evaluates proposals for the award of a cost-reimbursement type contract, the agency is required to perform a cost realism evaluation to determine the extent to which each offeror’s proposed costs represent what the contract costs are likely to be.”  Such an evaluation ordinarily involves consideration of “the realism of the various elements of each offeror’s proposed cost,” as well as whether each offeror’s proposal “reflects a clear understanding of the requirements to be performed.”

In this case, although “the cost of the contract is driven almost entirely by the cost of labor,” the Navy’s cost evaluation “was confined entirely to consideration of fully burdened hourly rates.”  However, “where, as here, a cost-reimbursement contract’s cost is driven in significant measure by labor costs, agencies are required to evaluate the offerors’ direct labor rates to ensure that they are realistic. ”  The policy behind this requirement is logical: “unless an agency evaluates the realism of the offerors’ proposed direct rates of compensation (as opposed to its fully-burdened rates), the agency has no basis to determine whether or not those rates are realistic to attract and retain the types of personnel to be hired.”

The GAO found that the Navy “has no basis to conclude whether or not the offerors’ proposed direct rates of compensation are realistic because no analysis of those rates was ever performed.”  The GAO sustained CALNET’s protest.

The underlying purpose of a cost realism evaluation is–as its name suggests–to determine whether an offeror’s proposed costs are realistic in light of the solicitation’s requirements.  As the CALNET protest demonstrates, where a cost-reimbursement solicitation includes significant labor costs, it is insufficient for an agency to limit its cost evaluation to fully-burdened labor rates.  Instead, the agency must evaluate each offeror’s direct rates of compensation for realism.

View the full article

Koprince Law LLC

It’s been quite the week!  We began with a Presidential election to remember and are ending the week with a celebration of the veterans who have served our country.  On behalf of the entire team here at Koprince Law LLC, thank you to the many veterans who read SmallGovCon.  Your sacrifice and dedication to our country is truly a debt that can never be repaid.

Election coverage dominated the headlines this week, but there was  no shortage of government contracts news.  In this week’s SmallGovCon Week In Review, the DoD has changed its policy on independent research and development, Washington Technology takes a first look at what the Trump Administration will mean for federal contractors, the Court of Federal Claims is hearing a case that could decide whether the Kingdomware decision applies to AbilityOne procurements, and much more.

  • Does the Kingdomware case apply to AbilityOne procurements?  That question may be resolved in a case pending at the Court of Federal Claims. [Winston-Salem Journal]
  • The Federal Acquisition Service undertook a strategic organizational realignment of the workforce and processes which has a goal for the government to act as one – but will also improve organizational efficiencies and effectiveness in the delivery of acquisition solutions and services.  [Federal News Radio]
  • The Defense Department changed its policy on independent research and development last week, requiring companies to consult with the Pentagon about research done party on the government’s dime. [Federal News Radio]
  • Washington Technology takes an early look at what a Trump presidency looks like for federal contractors. [Washington Technology]
  • The GAO upheld the protest of an incumbent vendor who lost a contract award in a case that points to the high level of complexity involved in IT and government contracting. [FCW]

View the full article

Koprince Law LLC

An agency did not act improperly by allowing for oral final proposal revisions, rather than permitting offerors to submit written FPRs following discussions.

In a recent bid protest decision, the GAO held that–at least in the context of a task order awarded under FAR 16.505–an agency could validly accept oral revisions to offerors’ proposals.

The GAO’s decision in SSI, B-413486, B-413486.2 (Nov. 3, 2016) involved an Air Force solicitation seeking a contractor to provide enterprise language, regional expertise, and cultural instruction to the 1st Special Forces Command and Special Operations Forces Language Office.  The solicitation was open to holders of the U.S. Special Operations Command Wide Mission Support Group B multiple-award IDIQ.  The Air Force intended to award two task orders to a single vendor.

The Air Force received initial proposals from 12 vendors, including Mid Atlantic Professionals, Inc. d/b/a SSI.  In its initial evaluation, the Air Force assigned SSI’s proposal “unacceptable” ratings under two non-price factors.

The Air Force elected to open discussions with offerors.  The Air Force sent SSI the results of its initial technical evaluation and invited SSI to meet with the Air Force to provide oral responses and discuss the government’s concerns.

After meeting with SSI, the Air Force reevaluated SSI’s proposal and assigned SSI “good” and “acceptable” ratings for the portions of the proposal that were initially rated “unacceptable.”  However, after evaluating the remaining proposals, the Air Force made award to Yorktown Systems Group, Inc., which received similar non-price scores but was lower-priced.

SSI filed a protest challenging the award to YSG.  SSI alleged, in part, that the Air Force had acted improperly by failing to allow offerors the opportunity to submit written FPRs, and to lower their prices as part of written FPRs.  SSI contended that the Air Force was not allowed to accept oral proposal revisions.

The GAO noted that this acquisition was conducted under FAR 16.505, not under FAR 15.3, which governs negotiated procurements.  The GAO wrote that, under FAR 16.505 and the provisions of SSI’s underlying IDIQ contract, an offeror must be given “a fair opportunity to compete.”  However, “[t]here is no requirement in the contract that the agency solicit and accept written FPRs after conducting discussions.”  Additionally, “there is no indication in the record that the agency conveyed or suggested through its course of dealings with offerors that it intended to solicit written FPRs after the close of discussions.”

The GAO denied SSI’s protest.

The notion of an oral proposal revision seems odd, and probably wouldn’t be allowed in a negotiated procurement conducted under FAR 15.3.  But as the SSI case demonstrates, when an agency is awarding a task order under FAR 16.505, the agency can, in fact, allow for oral FPRs.

View the full article

Koprince Law LLC

The GAO’s jurisdiction to hear most protests in connection with task and delivery order awards under civilian multiple award IDIQs has expired.

In a recent bid protest decision, the GAO confirmed that it no longer has jurisdiction to hear protests in connection with civilian task and delivery order awards valued over $10 million because the underlying statutory authority expired on September 30, 2016.

The Federal Acquisition Streamlining Act of 1994 established a bar on bid protests concerning military and civilian agency task and delivery orders under multiple-award IDIQs.  FASA, as it is known, allowed exceptions only where the protester alleged that an order improperly increased the scope, period, or maximum value of the underlying IDIQ.

The 2008 National Defense Authorization Act adopted another exception, which allowed the GAO to consider protests in connection with orders valued in excess of $10 million.  The 2008 authority was codified in two separate statutes–Title 10 of the U.S. Code for military agencies, and Title 41 of the U.S. Code for civilian agencies.

In 2011, the provision adopted by the 2008 NDAA expired.  However, because of the way that the sunset provision was drafted, the GAO held (and correctly so, based on the statutory language), that it had authority to consider all task order protests, regardless of the value of the order.

In the 2012 NDAA, Congress reinstated the GAO’s authority to hear bid protests over $10 million, and included a new sunset deadline–September 30, 2016.  This time, however, Congress changed the statutory language to ensure that if September 30 passed without reauthorization, the GAO would lose its authority to hear protests of orders valued over $10 million, rather than gaining authority to hear all task and delivery order protests.

That takes us to the GAO’s recent decision in Ryan Consulting Group, Inc., B-414014 (Nov. 7, 2016).  In that case, HUD awarded a task order valued over $10 million to 22nd Century Team, LLC, an IDIQ contract holder.  Ryan Consulting Group, Inc., another IDIQ holder, filed a GAO protest on October 14, 2016 challenging the award.

The GAO began its decision by walking through the statutory history, starting with FASA and ending with the  expiration of the 2012 NDAA protest authority.  GAO wrote that “our jurisdiction to resolve a protest in connection with a civilian task order, such as the one at issue, expired on September 30, 2016.”

In this case, GAO wrote, “it is clear that Ryan filed its protest after our specific authority to resolve protests in connection with civilian task and delivery orders in excess of $10 million had expired.”  While GAO retains the authority to consider a protest alleging that an order increases the scope, period, or maximum value of the underlying IDIQ contract, Ryan made no such allegations.  And although Ryan asked that the GAO “consider grandfathering” its protests, GAO wrote that “we have no authority to do so.”

GAO dismissed Ryan’s protest.

As my colleague Matt Schoonover recently discussed in depth, the expiration of GAO’s task order authority applies only to civilian agencies like HUD, and not to military agencies.  The GAO retains jurisdiction to consider protests of military task and delivery orders valued in excess of $10 million.

Matt also discussed a Congressional disagreement over whether, and to what extent, to reinstate GAO’s task and delivery order bid protest authority.  That issue will likely be resolved in the 2016 NDAA, which should be signed into law in the next couple months.  We’ll keep you posted.

View the full article

Koprince Law LLC

I am back in Lawrence after a great trip to Minneapolis last week for the 2016 National Veterans Small Business Engagement.  At the NVSBE, I presented four Learning Sessions: one on the nomanufacturer rule, the second on SDVOSB joint ventures, the third on best (and worst) practices in prime/subcontractor teaming agreements, and the fourth on common myths in the SBA’s size and socioeconomic set-aside programs (no, a contractor is not required to list a solicitation’s specific NAICS code in the contractor’s SAM profile).

It was great to see so many familiar faces and make so many new acquaintances.  A big thank you to the organizers for putting on this fantastic event and inviting me to speak.  Thank you, also, to all of the contractors, acquisition personnel and others who attended my Learning Sessions, asked insightful questions, and stuck around to chat afterwards.  Another “thank you” who those who stopped by the Koprince Law LLC booth on the trade show floor to talk about government contracts law and collect a spiffy Koprince Law pen.  And finally, thank you to all of the veterans who attended the NVSBE–and those who didn’t–for your service to our country.

View the full article

Koprince Law LLC

The SBA’s Office of Hearings and Appeals will have authority to hear petitions for reconsideration of SBA size standards under a proposed rule recently issued by the SBA.

Once the proposal becomes a final rule, anyone “adversely affected” by a new, revised or modified size standard would have 30 days to ask OHA to review the SBA’s size standard determination.

By way of background, when a federal agency issues a solicitation, it ordinarily is required to designate one–and only one–NAICS code based on the primary purpose of the contract. Each NAICS code carries a corresponding size standard, which is the upper perimeter a business must fall below to be considered as small under any solicitation designated with that NAICS code.

The size standard is measure by either average annual receipts or number of employees, and varies by industry. So, for example, under current law, NAICS code 236220 (Commercial and Institutional Building Construction) carries a $36.5 million receipts-based size standard. The SBA’s size standards are codified in 13 C.F.R. 121.201 and published in an easier-to-read format in the SBA’s Size Standards Table.

Importantly, size standards are not static. The SBA regularly reviews and adjusts size standards based on the “economic characteristics of the industry,” as well as “the impact of inflation on monetary-based size standards.” In 2014, for example, the SBA upwardly adjusted many receipts-based size standards based on inflation.

The size standards selected by the SBA can have major competitive repercussions. If the SBA chooses a lower size standard for a particular industry, many businesses won’t qualify as “small.” If the SBA selects a higher size standard, some smaller businesses will have trouble effectively competing with larger (but still “small”) competitors.

Despite the importance of size standards in the competitive landscape, there is not an SBA administrative mechanism for a business to challenge or appeal a size standard selected by the SBA (although judicial review is possible). Now, that is about to change. In the 2016 National Defense Authorization Act, Congress vested OHA with jurisdiction to hear petitions challenging the SBA’s size standard selection.

In response to the authority vested in OHA by the 2016 NDAA, the SBA’s proposed rule that sets out the procedural rules for OHA’s reconsideration of size standards petitions. While adhering closely to the procedural rules for SBA size challenges, the new rules for petitions for reconsideration of size standards lay out specific procedural regulations for filing a petition of reconsideration of size standards. The proposed rule addresses the issues of standing, public notification, intervention, filing documentation, finality, and effect on solicitations. The proposed rule also includes size standard petitions as part of SBA’s process for establishing size standards.

Here are some key proposed provisions worth noting:

  • Proposed Section 134.902(a) grants standing to any person “adversely affected” by a new, revised, or modified size standard. That section would also provide that the adversely affected person would have 30 calendar days from the date of the SBA’s final rule to file its petition with OHA. This section of the rule confirms that OHA’s review will be limited to cases in which the SBA actually adopts or modifies a size standard; petitioners will not have authority to challenge preexisting size standards.
  • Proposed Section 134.902(b) would provide that a business entity is not “adversely affected” unless it conducts business in the industry associated with the size standard being challenged and either qualified as a small business concern before the size standard was revised or modified or would be qualified as a small business concern under the size standard as revised or modified.
  • Proposed Section 134.904(a) outlines the technical requirements of filing a Petition. This includes things like including a copy of the final rule and a narrative about why SBA’s size standard is alleged to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with applicable law.
  • Proposed Section 134.906 would permit interested persons with a direct stake in the outcome of the case to intervene and obtain a copy of the Petition.
  • Proposed Section 134.909 sets forth the standard of review as “whether the process employed by SBA to arrive at the size standard ‘was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” As if that language wasn’t enough, the section clarifies that the petitioner bears the burden of proof.
  • Proposed Section 134.914 would require OHA to issue a decision within 45 days “as practicable.”
  • Proposed Section 134.917 would require SBA to rescind the challenged size standard if OHA grants a Petition. The size standard in effect prior to the final rule would be restored until a new final rule is issued.
  • Proposed Section 134.917 would state that “because Size Standard Petition proceedings are not required to be conducted by an Administrative Law Judge, attorneys’ fees are not available under the Equal Access to Justice Act.
  • Proposed Section 134.918 clarifies that filing a petition with OHA is optional; an adversely affected party may, if it prefers, go directly to federal court.

Given the importance of size standards in government contracting–and given the resources it often takes to pursue legal action in federal court–an internal SBA administrative process for hearing size standard challenges will be an important benefit for contractors. It is important to note that SBA’s proposed rule is merely proposed; OHA won’t hear size standard challenges until a final rule is in place.

Public comments on the rule are due December 6, 2016. To comment, follow the instructions on the first page of the proposed rule.

View the full article

Koprince Law LLC

Wow!  After 108 years, my Chicago Cubs are the World Series champions!  I was in Minneapolis for this year’s National Veterans Small Business Engagement (which was an amazing event), and split my Game 7 viewing between the hotel bar and my room.  I wish I could have been at Wrigley Field, and I wish that my grandfather (who really started the family on the whole Cubs thing) could have been alive to see it.  But I am sure somewhere he is smiling along with all the other Cubs fans who couldn’t see this moment.

While my week consisted mostly of convention halls and Cubs, there was no shortage of news in the world of government contracting.  In this week’s SmallGovCon Week In Review, a company was able to continue contracting with the VA even after it was indicted and convicted of fraud, a new report indicates that WOSBs are still being shut out of opportunities to earn major government contracts, a look ahead to the election and what changes may lie for federal contractors, a contractor gave a high-ranking government official free living space–and didn’t violate the ethics rules–and much more.

  • A company was convicted of falsely claiming SDVOSB status in order to obtain more than $100 million in government contracts–and the company continued to receive VA contract money even after it was convictred. [CBS Boston]
  • A new report released by Women Impacting Public Policy shows that women owned small businesses are still being shut out of major government contracts. [Forbes]
  • With the November 8 election just a few days away, a new report by data and analytics firm Govini shows how the outcome of highly-contested races in five key battleground states may affect federal spending in those states. [Government Executive]
  • A victory in the federal courts for California software company Palantir is either a win for just one company or a much broader decision that will impact how the government buys commercial technology. [Washington Technology]
  • The Pentagon’s gift rules allowed an Army National Guard General to accept rent-free living space from a defense contractor because the contractor is a personal friend. [Government Executive]
  • Contractors, take note: the Office of Government Ethics has published a final rule overhauling the ethics rules for executive branch employees. [Federal News Radio]
  • A government contracts consulting firm identifies 20 key opportunities–including many major recompetes–on the horizon in 2017. [Federal News Radio]

View the full article

Koprince Law LLC

An offeror’s proposal to hire incumbent personnel–but pay those personnel less than they are earning under the incumbent contract–presents an “obvious” price realism concern that an agency must address when price realism is a component of the evaluation.

In a bid protest decision, the GAO held that an agency’s price realism evaluation was inadequate where the agency failed to address the awardee’s proposal to hire incumbent personnel at discounted rates.

GAO’s decision Valor Healthcare, Inc., B-412960 et al. (July 15, 2016), involved a VA solicitation to perform outpatient clinic services including primary care and mental health to veterans in Beaver County, Pennsylvania. The solicitation envisioned awarding a fixed-price, indefinite-delivery/indefinite-quantity contract with a base period of one year and four option years.

The solicitation called for a “best value” tradeoff, considering price and non-price factors.  With respect to price, the solicitation required the VA to perform a price realism analysis, i.e., determine if the offeror’s price is unrealistically low, such as to reflect a potential lack of understanding of the work. The solicitation specified that in order for an offeror’s price to be considered realistic, “it must reflect what it would cost the offeror to perform the effort if the offeror operates with reasonable economy and efficiency.”

Two companies bid on the contract, Valor Healthcare, Inc. (the incumbent contractor) and Sterling Medical Associates. After evaluating competitive proposals, the VA determined that Sterling’s proposal was higher-rated and lower-priced. The VA awarded the contract to Sterling.

Valor filed a GAO bid protest challenging the award. Valor argued, among other things, that Sterling’s price was too low and that the agency failed to perform an adequate price realism analysis.

GAO explained that where, as in this case, a solicitation anticipates the award of a fixed-price contract, “there is no requirement that an agency conduct a price realism analysis.” An agency may, however, “at its discretion,” provide for the use of a price realism analysis “to assess the risk inherent in an offeror’s proposal.” When a solicitation specifies that the agency will conduct a price realism analysis, the agency must actually perform the analysis, and the resulting analysis must be reasonable.

In this case, the GAO found that the contemporaneous record did not include any documentation showing that the agency had evaluated Sterling’s price for realism. In the absence of any supporting documentation, the GAO determined that the VA had not demonstrated that it conducted the required analysis in the first place.

The GAO then noted that the majority of offerors’ costs of performance would be labor costs, and that “the majority” of Sterling’s proposed staffing candidates were the incumbent employees under Valor’s contract. However, Sterling’s pricing breakdown sheet showed that Sterling’s labor costs were lower than Valor’s (the amount of the difference was redacted from the GAO’s public decision). The GAO wrote that Sterling’s proposed pay cuts were an “obvious price realism concern” that should have been addressed in the agency’s evaluation. The GAO sustained this aspect of Valor’s protest.

As the Valor Healthcare case demonstrates, when an agency elects to perform a price realism analysis, it must actually perform the analysis, and the analysis must be reasonable. Where, as here, the awardee proposes to lower the salaries of incumbent employees, it is unreasonable for the agency not to consider this “obvious” concern in its evaluation.


View the full article