Happy Friday, everybody! It’s that time of year: federal contractors are rushing to submit bids, with the hope of awards before the end of the fiscal year. So we hope that you’re all gearing up for a relaxing weekend.
Let’s get the weekend started off right with the SmallGovCon Week in Review. This week’s edition discusses the rush of contract awards at the end of the fiscal year, DOL’s renewed focus on disability hiring practices, federal contractors behaving badly, and more.
Have a great weekend!
As we near the end of the fiscal year, analysts believe the federal market will see a monumental effort among procurement officials to spend as much on contracts as possible. [NextGov]
Focused reviews of contractors to ensure they are attempting to meet 7 percent employment disability hiring to begin in early 2019. [Bloomberg BNA]
Other Transaction Authorities (OTAs) have recently surged in use, but also criticized. [Washington Technology]
A recent study has shown that DoD waivers are allowing banned contractors to obtain defense contracts. [Bloomberg Government]
GAO audit reveals NNSA field offices are not using a key Energy Department IT system and warns could cost NNSA millions. [FCW]
Two marine maintenance companies will pay the government more than $2.8 million to settle claims they improperly billed the Navy for rental equipment. [U.S. Department of Justice]
Small business advocate wins agreement to have his legal fees paid for litigation forcing the government to release confidential contracting data. [Government Executive]
A contractor’s president and CEO was recently sentenced to serve 41 months in federal prison for his role in a wire fraud conspiracy. [U.S. Department of Justice]
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I am back in the Midwest after a great trip to San Diego for the 2018 Department of the Navy Gold Coast Small Business Procurement Event. I was part of a PTAC-sponsored legal panel on small business issues, and enjoyed speaking with contractors, government representatives, and others on the trade show floor.
Thank you very much to the San Diego chapter of the National Defense Industrial Association for sponsoring this fantastic event and inviting me to speak. And a big thank you to the many contractors who attended the session and asked great questions.
If you haven’t had the pleasure of attending Gold Coast, I strongly encourage you to put it on your radar screen for 2019. It’s hard to beat a great conference in a great city. As for me, I’ll be hitting the road again soon: I will be in Norman, Oklahoma on August 21 and 22 for the annual Indian Country Business Summit. Hope to see you there!
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One of the first things a prospective government contractor (including a joint venture) must do to be eligible for an award is to create a business profile in the System for Award Management (or “SAM”). Before making an award, in fact, the contracting officer is obligated to verify the prospective contractor is registered in SAM.
Not only must a business be registered in SAM, but its registration should be up-to-date. It’s an enduring myth of government contracting that a business’s SAM profile only has to be updated annually. But as FAR 4.1201(b)(1) instructs, an offeror’s SAM profile has to be updated as necessary to ensure that it is “kept current, accurate, and complete.”
What happens if a prospective awardee fails to update its SAM profile? Can a disappointed bidder challenge the basis of the award? The answer, according to GAO, is “it depends.”
GAO recently considered the question of an outdated SAM profile in Cyber Protection Technologies, LLC, B-416297.2 et al. (July 30, 2018). That protest involved an Air Force procurement for cyber realization, integration, and operational support services. After conducting a best value tradeoff, the Air Force named Cyber Systems & Services Solutions (“CS3”)—a joint venture—as the awardee. Cyber Protection Technologies protested the award determination.
According to Cyber Protection, CS3 should have been found ineligible for award because its SAM profile did not disclose its status as a joint venture or otherwise identify its corporate parents. Because joint ventures are required to disclose this information in their SAM registrations, Cyber Protection argued that this deficient registration should have kept CS3 from being named the awardee.
Analyzing this argument, GAO noted that it “has generally recognized that minor informalities related to SAM (or its predecessor systems) registration generally do not undermine the validity of the award and are waivable by the agency without prejudice to the other offerors.” GAO will often not find competitive prejudice from an awardee’s deficient SAM registration because the registration status does not implicate the terms of its proposal “and there is nothing to suggest that another offeror would have altered its proposal to its competitive advantage in response to a relaxed SAM registration requirement.”
Under this standard, GAO denied Cyber Protection’s protest. Doing so, it noted that Cyber Protection did not establish any prejudice from CS3’s deficient registration: Cyber Protection “has not, for example, demonstrated that CS3’s SAM registration provided the intervenor with any competitive advantage, or explained how CPT would have amended its proposal had it known that the agency would not strictly enforce the SAM registration requirements.” In a nutshell, because Cyber Protection didn’t show any prejudice from CS3’s deficient registration, its protest was denied.
As Cyber Protection demonstrates, it is difficult for a protester to argue that a SAM registration problem should upend an evaluation decision. But don’t read GAO’s decision as giving contractors a free pass at having an outdated SAM profile—offerors are still required to keep their SAM profile current, accurate and complete. If a profile isn’t updated, a contracting officer might rely on the outdated profile to find an offeror ineligible for award.
In my opinion, the best practice is to simply do what the FAR requires: keep your SAM profile “current, accurate, and complete.”
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Happy Friday! We hope your August is off to a great start. Before we head out for the weekend, let’s review the week that was in government contracting.
In this week’s edition of SmallGovCon Week In Review, we’ll consider federal contract procurement reforms, USDA modernization efforts, and more.
Have a great weekend!
Federal acquisition reforms offer new opportunities for small businesses. [National Defense]
Fiscal Year 2019 NDAA provisions continue to reform the federal procurement process. [Federal News Radio]
Provisions in this year’s Defense Authorization Bill could make an impact on changes to federal procurement. [Federal News Radio]
GSA moves forward with pilot SBIR program, encouraging research and development between small businesses and government contractors. [Federal Times]
GAO suggests DoD improve its information sharing system in order to more quickly determine whether products are commercial and reasonably priced. [GAO]
USDA seeks to further IT updates by issuing RFQs for phase II of its IT Modernization Centers of Excellence initiative. [FedScoop]
Federal Acquisition Supply Chain Security Act of 2018 seeks to boost IoT security through the procurement process. [AEIdeas]
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A small business “can have no more than two [SBA] mentors over the life of the business,” according to the SBA’s All Small Mentor-Protege Program website.
The SBA’s clarification of the lifetime limit provides important guidance for proteges, especially because the SBA’s mentor-protege regulations aren’t exactly crystal clear when it comes to this point. The SBA’s limit ensures that small businesses don’t become permanent proteges–but is “two per lifetime” the best way to carry out that policy?
The SBA’s All Small Mentor-Protege Program regulations are rather ambiguous when it comes to the number of mentors a protege may have in its lifetime. Here’s what the regulations say:
(2) A protégé firm may generally have only one mentor at a time. SBA may approve a second mentor for a particular protégé firm where the second relationship will not compete or otherwise conflict with the assistance set forth in the first mentor-protégé relationship and:
(i) The second relationship pertains to an unrelated NAICS code; or
(ii) The protégé firm is seeking to acquire a specific expertise that the first mentor does not possess.
From this text, one might believe that the only restriction is on having more than one mentor “at a time,” and that the SBA permits a small business to have an indefinite number of mentors in the small business’s lifetime. Instead, the SBA has consistently interpreted its regulations as permitting only two mentors over the protege’s lifetime, regardless of whether those mentor-protege agreements run concurrently or consecutively.
The SBA’s All Small Mentor-Protege Program website now informs readers of the lifetime limit:
A protégé may have two mentors at the same time — as long at those relationships don’t conflict or compete with each other. However, a protégé can have no more than two mentors over the life of the businesses.
No doubt, that’s a lot clearer than the regulations when it comes to this important restriction.
I understand SBA’s interest in limiting the amount of time a small business can spend as a protege. The purpose of the All Small Mentor-Protege Program is to enhance the capabilities of protege firms through business development assistance. Allowing a company to spend an indefinite amount of time as a protege could undermine this purpose by encouraging companies to become permanent proteges, offering their size and socioeconomic statuses to benefit a revolving cast of mentors.
But is the “two per lifetime” limit the best way to achieve this goal? I don’t think so.
A mentor-protege relationship can fail for any number of reasons–many of which are beyond the protege’s sole control. The mentor might fail to provide the assistance it promised. The companies’ leadership teams might have personality differences. The companies’ respective lines of business may diverge over time. The mentor’s leadership may change its mind about participating in the All Small Mentor-Protege Program. And so on.
The SBA’s regulations and template All Small Mentor-Protege agreement permit each party–mentor and protege–to terminate a mentor-protege agreement, with or without cause, upon 30 days’ notice to the other party and the SBA. If the mentor wants out of the relationship, it can get out. Easily.
Now think how these policies, combined with the lifetime limit, could negatively impact a protege. Let’s say a small business–“Protege A”–enters a mentor-protege agreement with a large company, “Mentor X.” Four months into the agreement, Mentor X’s CEO unexpectedly dies, and a new CEO is appointed. The new CEO wants to move Mentor X in a different direction, focusing on commercial contracts instead of federal government business. So, she notifies Protege A and the SBA that Mentor X is terminating the mentor-protege agreement.
In this scenario, Protege A is now down to one potential mentor–even though Protege A received only four months of mentoring from Mentor X. Because the SBA’s regulations allow a single mentor-protege agreement to last up to six years, Protege A, through no fault of its own, has lost up to 68 months of mentoring.
Situations like Protege A’s aren’t limited to unusual events like the death of a CEO. Mentor X could have terminated the agreement for any reason, or no reason at all, leaving Protege A with very little to show for one of its two lifetime mentor-protege opportunities.
In my view, there’s a better way to meet the SBA’s policy goal while preventing unfair results like these. Instead of limiting a protege by the number of mentors, the SBA should limit a protege by the number of years spent in as a protege in the All Small Mentor-Protege Program.
As I mentioned above, the SBA allows each mentor-protege agreement to last up to six years, so long as everyone (mentor, protege, and SBA) agrees. And each protege is entitled to two mentors. Hence, a protege can receive up to 12 years of mentoring under the All Small Mentor-Protege Program.
So why not make that the limit? Each protege could participate in the All Small Mentor-Protege Program for up to 12 years, but those 12 years could be divided in different ways. Some proteges might have two mentors for six years each. Others, three mentors for four years each. And so on. Limiting participation by years, instead of by number of mentors, would solve the inherent unfairness of situations like Protege A’s, while still achieving SBA’s goal of ensuring that small businesses don’t serve as proteges indefinitely.
SBA, if you’re reading (and I know a few of you SBA types do read SmallGovCon–it’s okay to admit it!), I hope you give it some thought. In the meantime, though, proteges and prospective proteges ought to take note of the lifetime limit. The SBA’s approval of your first mentor-protege agreement effectively uses up 50% of your lifetime opportunity to participate in the All Small Mentor-Protege Program, no matter how long the mentor-protege agreement lasts.
Choose your mentor wisely. And cross your fingers.
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Big news broke this week as the Department of Defense released its massive (and somewhat controversial) JEDI cloud computing solicitation. But there were plenty of other developments affecting government contractors, too. Let’s take a look at some of these developments, in this week’s SmallGovCon Week in Review.
This edition highlights opportunities for small businesses under OASIS, potential changes to the acquisition process, and more.
Have a great weekend!
Federal contracting method, OASIS, could present an increase in opportunities for small businesses to land government contracts. [The Telegraph]
NASA’s SBIR and STTR programs award 43 new small innovation and technology research proposals [CISION PR Newswire]
National Defense Authorization Act seeks to streamline Pentagon contract acquisition process. [Government Executive]
Acquisition Policy Survey shows improvements to the federal acquisition process, despite recurring challenges. [Nextgov]
DoD notes 51% of its contract dollars in fiscal year 2017 went toward goods verses services. [Clearance Jobs]
DoD turns to OTAs to help quicken the pace for cyber-technology contracts. [Fifth Domain]
DoD, GSA, and NASA seek input from government contractors to assess the potential benefits of voluntary feedback surveys. [Federal Register]
GSA looks to move toward performance based contracting. [Federal News Radio]
Pentagon integrates the Coast Guard and increases its Health Records contract ceiling $1 billion. [Nextgov]
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A contractor has many requirements when submitting a claim against the federal government. But the government must also abide by some of the same rules.
Case in point, a recent Civilian Board of Contractor Appeals case affirms that the government is bound by the same six-year time limit to file a claim against a contractor that a contractor has to file a claim against the government.
The case is JBG/Federal Center, L.L.C. v. GSA, 18-1 B.C.A. ¶ 37019 (2018). To understand how the government became time-barred on its claim against the JBG, a little background is necessary.
The dispute arose out of a lease under which JBG rented out space to GSA to house the Department of Transportation headquarters. The property included the building and a parking garage. As a part of the lease, JBG would provide 145 parking spaces to DOT. DOT was also permitted to use an additional 1060 spaces on the property for its employees, pursuant to a follow-on parking management services agreement (PMSA) between JBG and DOT.
GSA would reimburse JBG for all of the real estate taxes on the property. The lease language provided that GSA would reimburse JBG for real estate taxes “applicable to the Leased Premises.” It also stated that GSA would not reimburse for real estate taxes on any “parking areas or structures, except for the 145 parking spaces directly leased by the Government.”
The fixed-price PMSA contained the Commercial Items clause, FAR 52.212-4, which provides in part that “[t]he contract price includes all applicable Federal, State, and local taxes and duties.”
This full reimbursement of property taxes by GSA to JSB went on for eight years. In 2015, GSA began to withhold a portion of the tax reimbursement because it realized a provision in the lease designated GSA was only responsible for property taxes assessed against the 145 parking spaces in the lease, not the remaining parking spaces DOT used as part of the PMSA.
JBG did not appreciate this change of course, and made a claim. In response, GSA demanded repayment of the excess property taxes for which it had been reimbursing JBG for all those years. In March 2016, JBG submitted a claim to GSA asserting its entitlement to reimbursement of 100% of the real estate taxes and other taxes since the inception of the lease. In September 2016, GSA denied JBG’s claim and demanded $3,506,456.03 from JBG for the overpayment of taxes. JBG then appealed this decision to the CBCA.
In February 2017, JBG submitted a claim to DOT asserting that DOT should pay the amounts demanded by GSA because, if GSA “overpaid for real estate taxes under the lease, JBG is entitled to receive those same amounts under the PMSA because of DOT’s breach of the duty of good faith and fair dealing and superior knowledge in the negotiation of the PMSA.” DOT denied this claim, stating that it was JBG’s error, not DOT’s error, and JBG appealed this denial to the CBCA as well.
CBCA interpreted the lease to mean that “GSA would reimburse JBG for the real estate taxes assessed against the 145 spaces, but not for any other real estate taxes assessed on the parking garage.” CBCA went on to note that “t is the parties’ failure or decision not to include the cost of the real estate taxes in the PMSA price, not the execution of the agreement itself, that limits JBG’s recoupment of these taxes.”
However, important for purposes of this blog post, the CBCA went on to consider JBG’s argument that GSA’s claim for reimbursement is barred by the statute of limitations because it arose in 2007. Under the Contracts Disputes Act (CDA), “[e]ach claim by a contractor against the Federal Government relating to a contract . . . shall be submitted within 6 years after accrual of the claim.” 41 U.S.C. § 7103(a)(4) (2012). These “time limits are equally applicable to claims by the Government against a contractor.”
In order to determine when the six-year period is up, the CBCA will look at the date the claim accrued– that is, “the date when all events that fix the alleged liability on either the Government or the contractor and permit assertion of the claim, were known or should have been known.”
Applying this rule, GSA’s claim accrued in 2007, when it began reimbursing JBG for 100% of the real estate taxes for the property, in spite of the lease provision that property tax reimbursements should only cover the 145 parking spaces mentioned in the lease. CBCA held that GSA knew or should have known it was paying for more than its required share of the real estate taxes at that time, because JBG sent over the property tax bills for the entire property, including the whole parking garage, not just the 145 spaces.
There is one additional wrinkle on the six-year claim limit in this case. GSA did not have just one claim for overpayment of taxes, stretching from 2007 up to when the error was discovered. Rather, each overpayment was a new claim for purposes of the six-year limit, because it was “susceptible to being broken down into a series of independent and distinct events or wrongs, each having its own associated damages.”
The end result of the six-year limitation? GSA could not claim for overpaid amounts before September 2010, but it could claim for amounts after that date, because GSA had first demanded repayment, and thereby made a claim against JSB, in September 2016.
This CBCA decision highlights that the government is sometimes bound by the same rules as any contractor. In particular, the government and contractor must both abide by the same six-year statute of limitations for asserting a claim.
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NAICS code appeals can be powerful tools. A change in a solicitation’s NAICS code–and corresponding change in the small business size standard–can significantly broaden or narrow the competitive playing field. And statistically speaking, NAICS code appeals are often successful.
But NAICS code appeals are subject to strict rules. As a recent SBA Office of Hearings and Appeals case confirms, NAICS code appeals cannot be lodged against presolicitations.
OHA’s decision in NAICS Appeal of Willowheart, LLC, SBA No. NAICS-5938 (2018) involved a National Geospatial-Intelligence Agency RFI for a forthcoming procurement. The RFI indicated that the pending solicitation would be assigned NAICS code 561210 (Facilities Support Services).
Willowheart, LLC filed a NAICS code appeal with the SBA Office of Hearings and Appeals. Willowheart argued that the appropriate NAICS code was 561612 (Security Guards and Patrol Services).
OHA wrote that “[a] presolicitation notice,” such as an RFI, “does not constitute a NAICS code designation within the meaning of” the SBA’s NAICS code appeal regulations. This is because “mere publication of a presolicitation notice does not guarantee that the procuring agency will issue a solicitation or that it will assign the NAICS code anticipated in the presolicitation notice.” Accordingly, “a NAICS code appeal based on a presolicitation notice is premature, and must be dismissed.”
OHA dismissed Willowheart’s NAICS code appeal.
Just because it is too early to file a NAICS code appeal during the presolicitation stage, that doesn’t mean a prospective offeror must wait until the solicitation is issued to take action. An RFI or other presolicitation notice offers an opportunity for a prospective offeror to lobby the Contracting Officer to change the NAICS code. My colleagues and I have been part of many of these lobbying efforts–and sometimes, those efforts work. But if the Contracting Officer refuses to budge, a formal NAICS code appeal can be filed once the solicitation is issued.
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I am excited to announce the publication of SBA Small Business Size and Affiliation Rules, the second volume in our series of new government contracting guides called “Koprince Law LLC GovCon Handbooks.”
Written in plain English and packed with easy-to-understand examples, this GovCon Handbook demystifies the SBA’s rules regarding small business status for government contracts.
Inside SBA Small Business Size and Affiliation Rules, you’ll find detailed chapters on:
SBA Size Rules 101
Calculating Small Business Size
The Affiliation Problem
Ostensible Subcontractor Affiliation
SBA Small Business Size and Affiliation Rules is available on Amazon for only $9.99 in paperback or $6.99 on Kindle. If you’re an active Koprince Law LLC client in good standing, please email us and we’ll send you a free copy.
On behalf of my co-author Matthew Schoonover, and all of my colleagues here at Koprince Law, I hope you enjoy SBA Small Business Size and Affiliation Rules. And stay tuned–we’ll be publishing more GovCon Handbooks on other important government contracting topics in the months to come.
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Happy Friday! Before we sign out for the weekend, let’s take a look at the government contracting highlights for the past week.
In this edition of SmallGovCon Week in Review, we’ll check in with our friend Guy Timberlake for the latest on GSA FSS spending, consider GAO’s recommendations for DOD award time frames, look at NASA’s increases in small business spending, and more.
Have a great weekend!
Spending on GSA Federal Supply Schedules declines. [GovConChannel]
Study by the Federal Treasury’s Data Lab finds that 6-8 percent of federal contract spending happens in the final week of the fiscal year. [Nextgov]
DoD increases spending on OTA contracts in light of easing federal regulations. [Federal News Radio]
NASA continues to increase its contracting with small businesses. [WOUB Digital]
GAO recommends DoD begin developing a strategy for assessing contract award time frames. [GAO]
Richard C. Davis, founder of Second Chance Body Armor, agrees to resolve False Claims Act regarding defective bullet proof vests. [US Department of Justice]
Federal spending on advertising contract awards increases for small disadvantaged businesses, including WOSBs. [GAO]
Congressman Will Hurd helps to explain the importance of federal IT procurement. [Nextgov]
Former government contracting officer and owner of TCC Services, Unlimited, LLC plead guilty for bribery and conspiracy regarding government contracts. [US Department of Justice]
OFPP clarifies the exemption for contracts or subcontracts for the acquisition of commercial items. [Federal Register]
Study by PSC and Grant Thornton Public Sector suggests positive outlook for federal acquisition. [Professional Services Council]
GAO study finds reverse auctions may save the federal government money on bidding process. [GAO]
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So, the GAO sustained your bid protest? Perhaps surprisingly, a sustained protest doesn’t necessary mean GAO will recommend that the agency cancel the award and re-open the solicitation. You may just walk away with your bid preparation and protest costs.
In Savannah Cleaning Systems, Inc., B 415817.2 (Comp. Gen. Apr. 23, 2018), GAO addressed whether it must recommend a fairly standard remedy—such as, cancelling the award and reissuing the solicitation—when it sustains a bid protest. Under certain scenarios, the answer is no.
In a previous, related decision, Savannah Cleaning Systems, Inc., B-415817 (Comp. Gen. Mar. 27, 2018), GAO addressed the substance of Savannah Cleaning Systems, Inc.’s bid protest, which arose from an RFQ issued by the Navy, for five pressure washers, under the FSS. The awardee, Border Construction Specialists, LLC submitted the lowest priced quote but offered an alternative pressure washer. Savannah’s bid was the second lowest price and offered the brand-name pressure washer.
GAO sustained Savannah’s protest because 1) instead of awarding the contract to BCS, “the agency should have instead amended the requirements of the solicitation when it determined that the pressure washer offered by BCS—which was less powerful with fewer features—was capable of meeting its needs;” and 2) “the pressure washer was not listed on BSC’s schedule contract and the applicable GSA guidance did not allow for the agency to order a different pressure washer than the model listed on a vendor’s schedule contract as an ancillary service.”
But because the Navy had already accepted delivery of the pressure washers from BCS, GAO refused to unwind the award and merely recommended that the agency reimburse Savannah “its quotation preparation costs and its costs for filing and pursuing the protest.”
Unsurprisingly, Savannah requested that GAO modify the remedy in hopes that it might ultimately become the awardee. But GAO held firm. It noted that normally, where an agency’s improper actions preclude a protester from competing and the protester had a substantial chance for award, GAO would issue a fairly standard corrective action recommendation: terminating the purchase order and amending the solicitation to reflect the agency’s actual requirements. But this substantive remedy, according to GAO, is not feasible once an agency accepts delivery of the purchased goods. So, it must rely on remedies that are procedurally compensatory—i.e., quote preparation and bid protest costs—to acknowledge the protester’s meritorious protest.
This case is a good reminder that a potential protester must consider practicality. Neither an agency nor GAO wants to unravel a procurement in which the contractor’s performance is essentially complete. So even when a protest oozes merit, the GAO may only nod approvingly and compensate you for your involvement in the solicitation and protest processes.
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Unless an agency designates different business hours, the FAR says that a government agency is deemed to close at 4:30 p.m. local time–not 5:00 p.m., as it would be easy to assume.
In a recent case, the 4:30 p.m. closing time cost an unsuccessful offeror a chance at a GAO protest because the offeror’s debriefing request, sent to the agency at 4:59 p.m., was deemed untimely.
The GAO’s decision in Exceptional Software Strategies, Inc., B-416232 (July 12, 2018) involved an NSA solicitation seeking to award up to six IDIQ contracts for the definition, prototyping, development, and production of visualization and presentation tools. Thirteen offerors, including Exceptional Software Strategies, Inc., submitted initial proposals.
The evaluation panel determined that ESS’s proposal was unacceptable under one of the non-price factors. On Thursday, March 15, 2018, NSA informed ESS that its proposal had been excluded from the competitive range. The letter explained that ESS had been found unacceptable, and the reasons why.
On Monday March 19, 2018, ESS sent NSA an email requesting a debriefing. The email was sent at 4:59 p.m.
NSA gave ESS a written debriefing on April 2, 2018. The debriefing “included nearly verbatim information from the competitive range notice explaining the basis for the unacceptable rating.” Four days later, on April 6, ESS filed a GAO bid protest challenging its exclusion from the competitive range.
NSA argued that the protest should be dismissed under GAO’s Bid Protest Regulations. NSA’s argument requires a little following-the-bouncing-ball among a few timeliness regulations. Here goes.
For most protests, the GAO’s Regulations say that the protest must be filed within 10 days of the date the protester knew, or should have known, the basis of protest. But there is an exception extending the time frame when a debriefing “is requested, and when requested, is required.” The FAR, in turn, says that a debriefing is required when an offeror is excluded from the competitive range if the offeror submits a written debriefing request “within 3 days after receipt of the notice of exclusion from the competition.” “Days” is defined as calendar days, except that if the last day falls on a weekend or federal holiday, the time frame is extended to the next business day.
Here, ESS received its written notice of exclusion on Thursday, March 15. The third day, March 18, fell on a weekend. So ESS had until Monday, March 19 to submit a written debriefing request triggering a “required” debriefing. Without a required debriefing, the ordinary 10-day protest clock applied, and ESS’s protest would have been due on March 26.
ESS did submit a written request on March 19, but its request was emailed at 4:59 p.m. NSA argued that the request was late, because it was submitted after 4:30 p.m. NSA said that while it gave ESS a debriefing, it did so only as a courtesy, not because a debriefing was required.
The GAO wrote that “the FAR defines ‘filed’ as the ‘complete receipt of any document by an agency before its close of business.'” The FAR further provides that “unless otherwise stated, ‘close of business is presumed to be 4:30 p.m., local time.'”
Although an agency can adopt different business hours, there was no evidence that NSA had done so. Therefore, “absent any alternate official business hours for NSA in the record, we adopt the FAR’s default 4:30 p.m., local time, close of business for the agency.” GAO concluded: “ESS had to file its request for a debriefing by 4:30 p.m. on Monday, March 19. Because it did not–ESS’s request is deemed filed on the next business day–the debriefing was not a required debriefing and did not toll our Office’s timeliness rules.”
The GAO dismissed ESS’s protest.
The Exceptional Software Strategies case is a reminder that, unless an agency provides otherwise, its official closing time under the FAR is 4:30 p.m. local time, not 5:00 p.m. or some other, later, time. When a filing is due at a federal agency on a particular day, it’s important to be aware of the official closing time–something ESS learned the hard way.
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When it comes to timely filing a bid protest, government contractors should keep one overriding principle in mind: late is late, and it probably won’t matter why the protest wasn’t timely received.
GAO recently reaffirmed this principle when it dismissed a bid protest that wasn’t timely received by its new, mandatory Electronic Protest Docketing System.
As avid SmallGovCon readers know, GAO’s regulations include strict deadlines: protests must be filed within 10 days from the date the protester knew or should have known of the protest grounds (or, if a debriefing is required and timely-requested, within 10 days from the date of the debriefing). Protests, moreover, ordinarily must be received at GAO’s office no later than 5:30 p.m. Eastern on the due date. If a protest is received after 5:30 p.m. on the 10th day, GAO will dismiss it as untimely.
Our readers also know that, earlier this year, GAO released the EPDS system. So as of May 1, 2018, almost all new GAO bid protests must be filed through EPDS. The same 5:30 p.m. cutoff applies—so if a protest is received at 5:31 p.m. on Monday, it’s deemed filed when GAO opens on Tuesday.
GAO’s decision in CWIS, Inc., B-416544 (July 12, 2018) shows these timeliness rules in practice. At 5:29 p.m. on its 10th (and final) day to protest perceived flaws in a procurement, CWIS tried to upload its protest to EPDS. It received an error message, and the filing was rejected.
At 5:31, CWIS emailed GAO to notify it of the error. Fifteen minutes later—at 5:46—CWIS then emailed its protest to the GAO inbox.
Because the protest wasn’t received until after 5:30, GAO considered it to be filed on the following business day. Notwithstanding the EPDS error and its effort to timely file the protest, CWIS’s protest was dismissed as untimely.
At first blush, this dismissal seems fairly harsh. After all, CWIS’s protest was received only 16 minutes after GAO’s deadline. But GAO’s timeliness regulations are strict—and may be overlooked only in the (rare) instance that GAO decides a protest raises significant issues affecting the procurement system. To meet the “dual requirements of giving parties a fair opportunity to present their cases and resolving protests without unduly disrupting or delaying the procurement process,” GAO dismissed CWIS’s protest.
We’ve previously written about our favorable impressions of the EPDS system. Though it’s an improvement, would-be protesters should keep in mind that EPDS’s requirements will add a few minutes to the protest-filing process. Not only must protesters be registered users on the EPDS system, but they must also provide certain solicitation-specific information to the system and upload the protest itself. Before a filing is processed, protesters must also separately pay the $350 filing fee. Though these tasks aren’t onerous, they can add several minutes to the filing process—minutes that can seem like an eternity if you’re facing a hard 5:30 p.m. deadline.
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When an agency reevaluates proposals in response to a protest, the reevaluation must be thorough and reasonable.
In a recent GAO bid protest decision, GAO sustained a protest because the agency’s reevaluation of proposals, undertaken after a protest was sustained, did not reasonably address “widespread discrepancies” in the awardee’s proposal.
Earlier this year, we blogged on GAO’s decision in Immersion Consulting, LLC, B-415155 et al. (Dec. 4, 2017) where the SSA had unilaterally revised the SSEB’s evaluation prior to making an award decision. GAO sustained the protest, and instructed the agency to reevaluate proposals. Following the reevaluation, GAO was once again called on to review this troubled procurement, and determined the agency’s evaluation was still flawed, despite corrective action.
As more fully discussed in the earlier post, Immersion Consulting involved a procurement of program management support services by the Department of Defense’s Defense Human Resources Activity. Proposals were to be evaluated on three factors: technical, past performance, and price. Technical approach was the most important factor, followed by past performance, then price. Award was to be made on a best value basis. Notably, vendors were also specifically instructed to demonstrate how their proposed staffing would support the Solicitation’s technical requirements.
Immersion and NetImpact Strategies, Inc. were the only vendors to timely submit proposals in response to the Solicitation. NetImpact was subsequently named the awardee. Immersion Consulting protested, in part, because the SSA had unilaterally revised the strengths and weaknesses the SSEB had assigned to offerors. GAO sustained the protest because “the record did not meaningfully explain the SSA’s rationale for removing the weaknesses assessed by the SSEB in NetImpact’s quotation or for removing a strength assessed by the SSEB in Immersion’s quotation under the staffing plan subfactor.” GAO recommended the agency reevaluate proposals under the technical factor.
Responding to GAO’s decision, the agency elected to reevaluate proposals, but limited its reevaluation to the technical factor. It also performed a new trade off analysis. During the reevaluation, the SSA performed a second independent evaluation of both Immersion and NetImpact’s proposals. This time, however, the SSA now agreed with the strengths and weaknesses SSEB had originally assigned.
As relevant to Immersion’s second protest, the SSA’s reevaluation found NetImpact’s proposal contained “inconsistencies in the [vendor]’s staffing plan matrix.” As GAO later explained, the staffing inconsistencies were wide spread:
Despite this pervasive issue, the SSA nevertheless concluded a weakness (nothing more) was appropriate because “[t]he [g]overnment believes these inconsistencies are minor, correctable and can be addressed at [the post award conference].” The agency’s conclusion that the inconsistencies were minor was largely based on general language in NetImpact’s proposal stating that it would work with the agency during incumbent capture and that “NetImpact’s staffing approach thoughtfully considers skills and experience, as well as a match of personality and fit with the client organizational culture, and the demands of the role.”
Notwithstanding the reevaluation, the SSA concluded that both Immersion and NetImpact’s proposals were “Acceptable” under the technical factor. During its revised best value trade off, the SSA concluded that despite having two additional strengths over NetImpact, Immersion Consulting’s roughly $3.5 million price premium did not represent the best value to the government. NetImpact was again named the apparent successful offeror.
Immersion Consulting again protested NetImpact’s awarded before GAO in Immersion Consulting, LLC, B-415155.4 et al. (May 18, 2018) (hereinafter Immersion Consulting 2) . Among other things, Immersion Consulting challenged the assessment of only a weakness for NetImpact’s staffing ambiguities. According to Immersion Consulting, the SSA failed to sufficiently investigate the pervasive staffing errors in NetImpact’s proposal, which should have resulted in a score even lower than a weakness. The agency, however, responded that its evaluation was proper, and Immersion Consulting was merely disagreeing with the agency’s documented findings.
GAO concluded Immersion Consulting had the better of the argument. After reviewing the list of various staffing inconsistencies within the proposal, GAO explained “we agree with the protester that the agency unreasonably failed to acknowledge and meaningfully evaluate widespread discrepancies in NetImpact’s quotation with regard to staffing and sustain this protest ground.” Additionally, GAO explained “[t]he agency’s reliance on these general representations by NetImpact, however, is inconsistent with the specific terms of the solicitation[,]” which “required vendors to demonstrate how their staffing plan supported the technical approach.” As such, NetImpact’s assurances that it would provide a “flexible” approach to staffing were insufficient to overcome the blatant contradictions within its proposal.
GAO’s decision in Immersion Consulting 2 highlights the need for agencies to take thorough corrective action following a sustained protest. Here, the agency elected to take the bare minimum action to correct the flaw that GAO sustained in the first protest by reinstating the strengths and weaknesses the SSA had unilaterally altered. As GAO explained, however, merely reinstating the weakness for NetImpact’s proposed staffing without more thoroughly investigating the underlying issue was nevertheless still insufficient, as the record demonstrated there were pervasive problems with its staffing approach.
According to GAO, “[t]he overriding concern for our Office’s review is not whether the evaluation results are consistent with the earlier evaluation results, but whether they reasonably reflect the relative merit of the offers.” While corrective actions often do adequately address all of the issues with a particular procurement, Immersion Consulting 2 makes clear GAO will send flawed evaluations back to the agency for a second review.
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It’s Friday, which means it’s time for the SmallGovCon Week in Review. This week’s edition includes a look at federal spending on 8(a) contracts, GAO’s response to a discussion about a much-publicized OTA decision, and the SBA’s new effort to modernize its IT systems. There’s a lot to cover, so let’s get to it!
Have a great weekend!
Federal spending on competitively awarded 8(a) contracts exceeds that spent on sole-source 8(a) contracts. [Bloomberg Government]
GAO offers a response to critique on its protest decision concerning the Army’s use of Other Transaction Authority (OTA). [Breaking Defense]
SBA OCIO looks to award $40 million to 8(a) small businesses for services supporting its IT modernization goals. [FedScoop]
North American Power Group (NAPG) and its owner, Michael Ruffatto, agree to pay a $14.4 million civic settlement for fraudulent use of DOE funds. [U.S. Department of Justice]
Owner and CEO of Texas construction company, HERC Solutions, convicted of conspiring to defraud $1.37 million from the U.S. Department of State. [U.S. Department of Justice]
MEP Sales and Service owner pleads guilty to using business partner’s service-disabled veteran status to commit $1.6 million bidding fraud against the VA. [Chron]
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The SBA takes its SDVOSB joint venture requirements very seriously, and even a relatively minor deviation or omission can be enough to render a joint venture ineligible.
Time and time again, the SBA’s Office of Hearing and Appeals has shown that it will strictly enforce the rules governing SDVOSB status. OHA’s stance on SDVOSB joint venture agreements is no different. A recent OHA ruling reinforces that SDVOSB joint venture agreements must abide by the letter of the regulation when it comes to required items in the agreement.
In ASIRTek Federal Services, LLC, SBA No. VET-269 (2018), OHA considered a protest by Cyber Protection Technologies, LLC that challenged the size and SDVOSB status of ASIRTek Federal Services, LLC, the awardee of an Air Force contract for engineering, management, and technical support services. Proposals under the procurement, which was set aside for SDVOSBs, were due July 20, 2016.
ASIRTek was a joint venture consisting of ITI Solutions, Inc. and FEDITC, LLC. The joint venture agreement (JVA) was dated April 1, 2015. It identified ITI as “Managing Venturer” and FEDITC as “Partner Venturer.” The agreement stated that it was set up to compete for a certain Air Force 8(a) procurement, and that additional awards would be added to the agreement through addendums with approval by the SBA.
Section 8.2 of the JVA specified that:
The JVA also stated that “The Venturers shall receive profits from the Joint Venture commensurate with the work performed by the Venturers.”
After creating the joint venture to bid on an 8(a) contract in 2015, ITI and FEDITC decided to use the joint venture to pursue the Air Force SDVOSB contract a year later. ITI and FEDITC created a “First Addendum” to the joint venture, referencing the Air Force contract, but only ITI signed the First Addendum. The First Addendum did not provide specific details regarding the responsibilities of the parties, with respect to the Air Force contract, for performance, source of labor, and contract negotiations.
The Air Force took a long time evaluating proposals. On December 13, 2017, the Air Force finally announced that ASIRTek was the apparent successful offeror.
A competitor filed an SDVOSB status protest, which was forwarded to the SBA Office of Government Contracting for review. The SBA determined that ASIRTek was ineligible because the JVA did not meet all of the regulatory requirements. The SBA declined to consider the First Addendum because FEDITC had not signed it before the proposal was submitted.
ASIRTek appealed to OHA.
OHA, in reviewing the JVA, reiterated that SBA regulations contain required provisions for SDVOSB joint venture agreements between an SDVOSB business and a non-SDVOSB small business. In particular, the 2016 version of the regulation in effect on the bid date stated that a joint venture agreement must include a provision “pecifying the responsibilities of the parties with regard to contract performance, source of labor and negotiation of the SDVO contract.”
The JVA did not sufficiently address how the parties would split up the responsibilities under the contract. “The principal problem for Appellant is that its JVA did not address the instant procurement at all, or indeed any SDVO SBC procurement. Rather, the JVA was dated April 1, 2015, more than a year before the instant RFP was issued.”
ASIRTek argued that it was unable to provide the required level of detail because the underlying contract was indefinite in nature. OHA rejected this argument, noting that “the RFP also provided detailed appendices, including technical requirements and labor estimates, which Appellant might have utilized to describe the types of work each joint venture partner would perform, and the labor each partner would contribute. Appellant therefore has not demonstrated that it would have been impossible for Appellant’s JVA to provide the information required by 13 C.F.R. § 125.15(b)(2)(iv) (2016).”
The joint venture agreement was also missing the section, as required by 13 C.F.R. § 125.15(b)(2)(iii) (as in effect for purposes of the size determination), stating that at least 51% of profits must go to the SDVOSB venturer. Instead, the JVA stated that profits would be split commensurate with contract performance–which was the requirement for some 8(a) joint ventures in July 2016 but not SDVOSB joint ventures. OHA reiterated that there were “no exceptions” to the requirement for certain terms in a joint venture agreement.
The regulation, as of August 24, 2016, now includes a similar but more detailed version of the requirement concerning description of how the parties will split up contract performance. Under the current version of the regulation, found at 13 C.F.R. 125.18(b)(2)(vii), there is now additional language addressing indefinite contracts:
Because of the date proposals were submitted, this language was not in effect at the relevant time. The August 2016 regulatory changes also conformed the SDVOSB joint venture profit-splitting rule with the regulation for 8(a) joint ventures. Both regulations now call for profits to be split commensurate with work share. Had these changes been effective, it might have resulted in a different outcome for ASIRTek.
As the opinion makes clear, the SBA strictly enforces its joint venture rules that are in effect at the relevant time. When it comes to an SDVOSB joint venture agreement, the requirements must all be met, or the SBA will find an SDVOSB joint venture ineligible for a contract. You’ve been warned!
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Thinking about hiring an employee of the incumbent contractor for your next bid? If so, make sure to protect yourself from disqualification based on an organizational conflict of interest (“OCI”).
In a recent bid protest by Archimedes’ Global, Inc., (“Archimedes”), the GAO reversed the Government’s decision to exclude Archimedes from consideration for a bid when an alleged OCI was based on mere innuendo and supposition instead of hard facts supported by the record.
Pursuant to FAR 9.505, certain businesses may be disqualified from the bid process if they have an “unequal access” OCI, which exists where an offeror obtains non-public information that may be competitively useful. In challenging an agency’s identification of a disqualifying conflict of interest, a protester must demonstrate that the agency’s determination, “did not rely on hard facts, but instead was based on mere inference or supposition of an actual conflict of interest, or is otherwise unreasonable.”
Archimedes Global, Inc., B-415886.2 (June 1, 2018) concerned a request for proposal from the Department of Homeland Security to perform management and support services. Archimedes was eliminated from consideration based upon an alleged “unequal access” OCI. The GAO sustained the protest because the Government’s decision to exclude Archimedes was not based on hard facts but instead relied on mere innuendo and supposition unsupported by the record.
The Department of Homeland Security, United States Citizenship and Immigration Services, issued a task order to perform management and support services. Archimedes submitted a bid and was found to be technically superior to all other offerors but was disqualified from award consideration because the agency found that Archimedes had an apparent OCI. With Archimedes out of the running, the agency issued the task order to another business.
The agency determined that Archimedes’ had an OCI because it proposed to hire the senior and intermediate program managers currently working for the incumbent contractor, Ambit Group, LLC (“Ambit”). Ambit had access to procurement sensitive information, and the task order permitted the agency to disqualify Ambit for competing for any follow-on requirements. The agency found that Archimedes had an “unequal access” OCI because the proposed Ambit employees could have provided Archimedes with “unequal access to non-public, competitively useful information.”
Archimedes filed a protest with the GAO arguing the agency unreasonably eliminated it from consideration based on Archimedes’ proposed inclusion of two current Ambit employees as key employees to perform the roles of senior program manager and intermediate program manager.
The central question in this case concerns the Government’s basis for disqualifying a business from consideration based on a conflict of interest. In Archimedes case, the GAO found that the agency’s decision to disqualify Archimedes was not based on hard facts, but, rather, on innuendo and supposition concerning the activities of Ambit employees.
Chief among the GAO’s concerns was the fact that the contracting officer, without any underlying evidence, concluded that the information was provided to Archimedes because there was a “possibility that the individuals in question may have had access to competitively useful, non-public information”. The GAO disagreed noting “the record shows that neither individual is currently employed by AGI, and there is no evidence to show that the individuals provided AGI with competitively useful, non-public information, or otherwise participated in preparing the AGI proposal.” In light of those concerns, the GAO sustained Archimedes’ protest and sent it back to the agency for reconsideration.
Companies that want include employees of the incumbent contractor in their proposal must take precautions to guard against even the appearance of an OCI.
In Archimedes’ case, it paid off big time.
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Here’s a situation my colleagues and I see with some frequency: a contractor, in the course of working on a government contract, submits a request of some sort to the agency. Then waits for a response. And waits some more. Meanwhile, the government’s delay in responding prevents the contractor from moving forward with some aspect of the project, causing the contractor to incur costs.
For contractors faced with this type of government inaction, a recent decision by the Armed Services Board of Contract Appeals is welcome news. In that case, the ASBCA held that the government breached its implied duty of good faith and fair dealing by waiting more than three months to respond to the contractor’s request to amend the Statement of Work–allowing the contractor to “twist in the wind” during that period.
The ASBCA’s decision in Relyant, LLC, ASBCA No. 59809 (2018) involved an Army contract for the acquisition of pre-fabricated relocatable buildings (abbreviated “RLBs” in the decision) for use at two different sites in Afghanistan.
The solicitation’s Statement of Work included certain specifications for the RLBs. Among those specifications, the SOW required the installation of gypsum interior drywall to the interior of the shipping containers that would cover fiberglass insulation. But in its proposal, Relyant, LLC proposed a different configuration: the use of a “sandwich panel,” including Styrofoam as the insulator instead of separate insulation and drywall.
The Army awarded the contract to Relyant, but did not adopt the SOW change Relyant had proposed. In November 2008, Relyant submitted a written request to the Contracting Officer asking for permission to substitute the sandwich panel for the walls and ceilings. However, this request was apparently lost due to government computer crashes.
Relyant resubmitted its request in April 2009. Relyant then repeatedly followed up with the government about its request, while two Relyant employees in Afghanistan were on standby, awaiting the Army’s decision whether to allow the SOW change. In August 2009, the Army finally rejected the proposed change, insisting that Relyant perform in accordance with the original SOW.
Relyant filed a claim with the Contracting Officer seeking damages for a variety of reasons. In its claim, Relyant sought (among other things) labor costs and unabsorbed overhead associated with the Army’s delay in responding to Relyant’s request to change the SOW. The Contracting Officer denied the claim, and Relyant appealed to the ASBCA.
The ASBCA held that the Army was within its rights to reject the sandwich panel and insist that Relyant perform in accordance with the original SOW. Nevertheless, the ASBCA found that the government had breached the contract by waiting more than three months to respond to Relyant’s request.
The ASBCA wrote that “every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.” The duty “prevents a party’s acts or omissions that, though not proscribed by the contract expressly, are inconsistent with the contract’s purpose and deprive the other party of the contemplated value.”
In this case, the ASBCA wrote that the Army was “familiar” with Relyant’s proposed change, was “aware that Relyant was awaiting its answer for several months in the spring and summer of 2009, while Relyant continually prompted it to act,” and “was aware that its delay in decision-making was potentially to the detriment of Relyant in terms of its incurring additional costs during the waiting period.” Moreover, “there were no circumstances that justified an extended wait on the part of the government before deciding whether to permit the change in the SOW.” Indeed, “the government’s decision-making appears to have been accomplished within a matter of days once it turned its attention to the matter.”
The ASBCA held that the Army had breached the implied duty of good faith and fair dealing by waiting more than three months to respond to Relyant’s request, allowing Relyant to “twist in the wind.” It awarded Relyant $151,816 in delay damages.
The ASBCA emphasized that its holding in Relyant was “very fact-specific.” The ASBCA wrote that “we do not hold here that every unreasonable government action necessarily constitutes a breach” of the implied duty. “For example,” the ASBCA explained, “in the event that a contractor requested a change to the SOW for which it had no realistic chance of approval, we might be less likely to find a breach of the duty if the government took an extensive period of time to resolve it.”
For contractors, the ASBCA’s caution is important: the holding in Relyant does not mean that every delay in the government’s response will be considered a breach. But that said, as Relyant makes clear, some government delays are breaches. For contractors who feel that an important request has disappeared into the proverbial black hole, Relyant may offer some helpful legal leverage to get things moving.
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While the SBA’s Office of Hearings and Appeals hears appeals for many of the SBA’s programs, there are certain decisions that remain outside of its purview.
As one protester was surprised to learn, among those items outside of OHA’s jurisdiction are appeals of the HUBZone status determinations.
In JEQ & Co., LLC, SBA No. SIZ-5932 (June 7, 2018), the Defense Logistics Agency issued a solicitation for castellated nuts, a type of machine part. The Solicitation was entirely set-aside for HUBZone concerns under NAICS 332722 (Bolt, Nut, Screw, Rivet and Washer Manufacturing), which had a corresponding size standard of 500 employees.
After reviewing proposals, the agency awarded the contract to ATF Aerospace. The following day, JEQ filed a protest challenging ATF’s size and HUBZone status. JEQ’s protest contained one assertion: “Per the Small Business Administration’s (SBA) Dynamic Small Business Search (DSBS) [database], [ATF] is not a HUBZone Certified Concern. [ATF] is not even a small business.” JEQ did not include any other documents or details in its protest.
The Area Office subsequently dismissed JEQ’s protest as non-specific. According to the Area Office, JEQ’s protest did not furnish any information to impugn ATF’s status as a small business. To the contrary, the Area Office specifically noted ATF’s DSBS profile does list that it is small under the Solicitation’s size standard.
From OHA’s summary of the decision, the Area Office did not appear to address JEQ’s allegations that ATF was not a HUBZone. While not expressly explained in the decision, the Area Office’s silence on this issue is likely due to the fact that Area Offices are not responsible for investigating HUBZone status protests. Instead, HUBZone status protests are to be forwarded to SBA’s HUBZone Director, or “D/HUB”. As such, the Area Office lacked jurisdiction to even consider the HUBZone challenges JEQ raised.
Nevertheless, JEQ appealed the dismissal to OHA. Interestingly, JEQ abandoned its protest of ATF’s size, and instead renewed its allegation that ATF was not an eligible HUBZone concern.
Unlike status protests of woman-owned or service-disabled veteran-owned small businesses, appeals of HUBZone status determinations are heard by the SBA Associate Administrator, Office of Government Contracting & Business Development (or “AA/GC&BD” in SBA parlance). OHA has interpreted this regulation to mean HUBZone status determination appeals are outside of its authority. Citing a number of its earlier decisions on this point, OHA explained that it “lacks jurisdiction to decide HUBZone status protests or appeals of HUBZone status determinations.” Accordingly, OHA denied JEQ’s appeal.
As JEQ discovered, OHA does not have jurisdiction to resolve appeals of status determinations for all of the SBA’s socioeconomic programs; HUBZone status determinations being a notable exception.
Whether this exception makes sense is an open question. OHA has a well-developed set of procedures for handling appeals, and has considerable experience with various SBA programs. OHA also publishes its decisions, which offers the public considerable insight into how the SBA applies its rules, and helps ensure consistency among similar cases.
It certainly stands to reason OHA would be an ideal choice for hearing HUBZone status appeals. The SBA’s regulations, however, have not taken this approach. As such, businesses interested in appealing HUBZone status determinations should not file with OHA.
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When an incumbent contractor’s general manager got sick and had to quit, the contractor promptly found a replacement, which the agency approved. But there was still one problem: the incumbent had already proposed to use the same general manager for the next contract.
According to GAO, the agency was right to eliminate the contractor from the competition, even though the agency knew that the contractor had a new general manager and had, in fact, approved the replacement.
In Chenega Healthcare Services, LLC, B-416158 (2018), The contractor, Chenega Healthcare Services, LLC, a San Antonio, Texas, 8(a) program participant small business, was the incumbent contractor on an 8(a) indefinite delivery, indefinite quantity services contract to the Department of Energy in support of the National Training Center at Kirtland Air Force Base in Albuquerque, New Mexico.
Chenega, a subsidiary of Chenega Corp., an Alaska Native Corporation, was in the last year of its performance on the incumbent contract when the agency issued a request for proposals to re-compete the procurement. In August 2017, Chenega submitted a proposal, which included the resume and commitment letter of the general manager currently performing.
In December 2017, while proposals were still being evaluated, the general manager informed Chenega that he could not continue work due to medical reasons. Chenega notified DOE that he left and that it had hired a replacement general manager, who DOE subsequently approved. Chenega also contacted two contracting officials working on the re-compete and told them that it would propose a substitute manager for the upcoming contract.
DOE did not allow Chenega to substitute a new general manager. Instead, in January, the contract specialist emailed Chenega to ask whether the proposed general manager’s commitment letter was still valid. Chenega replied that it was not.
Despite Chenega offering a less expensive proposal, the evaluators found Chenega’s proposal “unsatisfactory” because Chenega suposedly had failed “to propose a General Manager” and eliminated it from the competition.
Chenega protested to GAO, arguing that the agency was obligated to consider the replacement general manager, who, after all, the agency knew about and had approved on the incumbent contract. Chenega argued that the “too close at hand” doctrine—stemming from a line of cases in which GAO has held that past performance information of which the agency is aware is too close at hand to ignore—required the agency to consider this known replacement.
GAO declined to extend this doctrine beyond past performance, reiterating that “too close at hand” does not extend to “situation where the information in question relates to technical requirements of the solicitation, including the qualifications of proposed key personnel.” GAO added that the doctrine is “not intended to remedy an offeror’s failure to submit an adequate and acceptable proposal.”
Chenega also argued that the agency should have held discussions and given it the opportunity to update its proposal and substitute the new general manager. GAO said “the unavailability of a key person identified in a proposal renders a proposal technically unacceptable, and the agency has the discretion whether to evaluate the technically unacceptable proposal or to conduct discussions under such circumstances.” Here, because “an agency need not conduct discussions with a technically unacceptable offeror,” the agency acted within its discretion by rejecting Chenega’s proposal instead of opening discussions.
GAO denied the protest.
We do not normally opine on whether GAO’s decisions are correctly decided, and we recognize that generally it is GAO’s job to apply the law, not make broader policy judgments. That said, GAO’s decision in this case (and in similar cases) puts contractors in a very tough spot.
In complex procurements, the evaluation of proposals can take months. In a few cases, we’ve seen the time frame from proposal submission to award take years. During that time, a lot can happen to a key employee: the employee can become sick, as happened in Chenega Healthcare Services. The employee could die. The employee could retire. All these things are outside the offeror’s control.
Chenega did the right thing and told the contracting officer that the letter of intent was no longer valid. But there is no mechanism that, after the proposal deadline, allows a contractor to pull back its proposal once submitted and change it to reflect a new reality. In such circumstances, the contractor has to rely on the procurement officials to be reasonable and use their discretion to reach a fair result.
To that end, GAO did not need to necessarily extend its “too close at hand” doctrine to sustain this protest. There is a far more fundamental legal principle that it could have relied on. According to FAR 1.602-2, contracting officers have a duty to ensure “that contractors receive impartial, fair, and equitable treatment[.]” The Court of Federal Claims has cited FAR 1.602-2 in holding, for example, that an agency may abuse its discretion by refusing to allow clarification of an obvious clerical error in an offeror’s proposal.
Here, the fair and equitable thing to do would have been to give Chenega the opportunity to revise its proposal to include the new general manager. That likely would have involved opening discussions with all offerors, but this need not have been unduly burdensome to DOE; agencies have reasonable discretion to limit the scope of discussions.
The GAO should have applied the basic principles of justice and fair dealing, which are already encompassed by the FAR, and sustained the protest based on the unreasonable actions of the agency in failing to open discussions to allow Chenega to substitute its general manager. But that didn’t happen. Unless Chenega or another contractor can persuade the Court of Federal Claims to adopt a different position, offerors are on notice: if something happens to one of your proposed key personnel, you could be in a tough spot.
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We hope you had a wonderful Fourth of July. Next week promises to be busy, with vacations ending and preparations for the 4th quarter rush. In the meantime, let’s dive into this week’s edition of the SmallGovCon Week in Review!
This week, we highlight IT draft requests from the DOT, an update to the DHS EAGLE II program, a proposed amendment to the DFARS, and more.
Have a great weekend!
DOT continues to modernize its IT infrastructure by issuing two draft requests for proposals on its EITSS contract. [fedscoop.com]
DHS looks into redeveloping FLASH in its successor to the EAGLE II program. [washingtontechnology.com
DoD proposes an amendment to the DFARS seeking to streamline the SSR submission process. [federalregister.gov]
Alaska’s Congressional Delegation, SBA chairman, and small business owners meet to highlight the importance of the 8(a) Business Development Program. [ktuu.com]
David Drabkin, highlights some of the key recommendations the 809 Panel is making for DoD reorganization. [federalnewsradio.com]
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GAO’s outcome prediction alternative dispute resolution (“ADR”) can be a tempting option for all parties to a protest, as it provides a preview of sorts for GAO’s written decision. A recent GAO decision, however, underscores that despite its relative informality, outcome prediction ADR can have significant repercussions on future protest developments.
In Will Technology, Inc; Paragon TEC, Inc., B-413139.4 et al., __ CPD ¶ __ (Comp. Gen. June 11, 2018), NASA issued a procurement for acquisition and business support services. Twenty companies submitted proposals in response to the Solicitation. After evaluating the submissions, NASA determined discussions would be necessary and endeavored to establish a competitive range comprised of 5 bidders. As relevant to this blog, Will Technology (“WTI”), Paragon, and Canvas were all included within the competitive range and received discussions. Following discussions, all three companies submitted revised proposals.
NASA evaluated the revised proposals and announced Paragon as the awardee, due in part to the strengths assigned to its proposed Project Manager. NASA provided WTI with a written debriefing of its award decision on August 3, 2017. In response, WTI filed a timely GAO protest, challenging the evaluation of its past performance and proposed experience.
GAO subsequently conducted outcome prediction ADR with WTI and NASA. Outcome prediction ADR is a process where, after the protest record has been developed and the parties have submitted written briefing, the GAO attorney will advise the parties of the likely outcome of the case if GAO issued a written decision. Following outcome prediction ADR, the parties are encouraged to take appropriate action to resolve the protest (i.e. the protester withdraw the protest or the agency take corrective action, as the case may be) before GAO issues a written opinion.
WTI was advised during outcome prediction ADR that GAO would likely deny its protest. After ADR, WTI notified GAO and NASA of its intent to file a protest before the Court of Federal Claims. Importantly, at this time, WTI also voluntarily withdrew its GAO protest.
Before filing its complaint with the Court of Federal Claims, however, WTI provided NASA with additional information regarding alleged improprieties in NASA’s evaluation of proposals. As a result, NASA suspended contract performance and reconvened the Source Evaluation Board to conduct an investigation. As NASA had concluded it was necessary to conduct a reevaluation, WTI never filed a protest before the Court of Federal Claims.
During the investigation, NASA determined it had improperly credited Paragon’s project manager with experience the project manager did not actually possess. As such, NASA revised Paragon’s evaluation. This, in turn, resulted in Paragon’s proposal no longer representing the best value to NASA. Accordingly, NASA revised its source selection decision and announced award would now be made to Canvas.
On March 1, 2018, Paragon, WTI, and Canvas each received debriefings explaining the basis for the revised award decision. WTI timely submitted a second protest. Among other things, WTI again challenged NASA’s evaluation of its past performance and proposed experience. These arguments essentially renewed the same allegations WTI raised in its first protest that GAO predicted it would deny during ADR.
At this point, the Army and NASA became enthralled in a battle over timeliness. Accordingly, a little background on GAO’s bid protest regulations is helpful at this juncture. In order to be considered timely, a protest after award must be filed within 10 days of when the protester knew or should have known the basis for protest. 4 C.F.R. § 21.2(a)(2). The sole exception to this rule occurs for protests where a debriefing is both requested and required. Under such circumstances, a protest is timely if it is filed with GAO within 10 days of the debriefing’s conclusion.
Responding to WTI’s protest, NASA argued the renewed challenges were untimely. According to NASA, since WTI’s renewed grounds concerned evaluation issues of which WTI was aware following its first debriefing on August 3, 2017, it was now untimely to challenge those same protest grounds after the second debriefing on March 1, 2018.
WTI countered that its protest was timely as it was filed within 10 days of the March 1, 2018, debriefing, which also resulted in a new awardee. According to WTI, since NASA had reconvened the Source Selection Board and conducted a reevaluation, it could timely raise the same protest grounds.
GAO concluded that NASA had the better of the argument. As GAO explained, “[t]he record demonstrates that WTI knew the basis for the agency’s evaluation of its proposal more than 10 days before WTI filed its March 5, 2018 protest.” As such, WTI’s protest was untimely.
GAO did not stop there, however. Instead, it turned to WTI’s argument that its renewed challenges were nevertheless timely because they were filed within 10 days of the second debriefing. GAO similarly rejected this line of argument and explained as follows:
GAO also made a point to note that WTI’s prior protest had been voluntarily withdrawn after GAO conducted outcome prediction ADR. According to GAO, “we see no reason to provide the protester here with a second opportunity to re-file protest allegations that it chose to withdraw from our forum after being notified that they would be denied.” Thus, GAO dismissed WTI’s renewed protest of NASA’s evaluation of its past performance and proposed experience.
Will Technology serves as a cautionary tale for protesters confronted with the opportunity of conducting outcome prediction ADR. While the factual circumstances of Will Technology are unique, the fact remains that in the eye of the GAO, by voluntarily withdrawing its protest following outcome prediction ADR, WTI conceded its ability to continue challenging its past performance and proposed experience evaluations. While voluntary withdrawal of its protest seemed like a reasonable action at the time, it ultimately doomed any future attempts to raise the same issues with GAO.
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When companies seek to join forces under an 8(a) joint venture agreement, they often focus on meeting the SBA’s specific joint venture requirements. In doing so, however, they might overlook the threshold goal of an 8(a) joint venture: to allow an 8(a) to develop the necessary capacity to perform a contract.
As a recent Court of Federal Claims decision shows, overlooking this requirement can cause an 8(a) joint venture agreement to be rejected by SBA—and lead to the joint venture being found ineligible for an award.
The pertinent facts of CR/ZWS LLC v. United States, No. 18-271C (Fed. Cir. 2018) are fairly straightforward. Charitar Realty (an 8(a) participant) and Zero Waste Solutions (a graduated 8(a) participant) formed an SBA-approved joint venture under the 8(a) program in 2016. In 2017, the United States Army issued a solicitation for refuse and recycling services at Fort Riley, and the joint venture wanted to submit a proposal for this work. The companies executed a written amendment to their joint venture agreement (the fifth since that agreement’s approval) that would allow them to bid on the work at Fort Riley.
The parties’ proposed effort under Amendment 5 was impacted heavily by Zero Waste Solutions’ status as the incumbent contractor. For example, ZWS pledged to provide nearly $650,000 worth of equipment to perform the work, while Charitar would provide “equipment to administer the contract valued at $50,000.” Charitar, moreover, would largely provide managerial services, while ZWS would perform much of the labor required. And for the work that Charitar would perform, its personnel would simply roll-over from ZWS’s incumbent contract.
After CR/ZWS was awarded the contract, it sought approval for Amendment 5. The SBA Area Office denied this approval, saying that the amendment raised questions of control and technical requirements. In this regard, the Area Office cited SBA’s 8(a) joint venture regulations, which state:
A joint venture agreement is permissible only where an 8(a) concern lacks the necessary capacity to perform the contract on its own, and the agreement is fair and equitable and will be of substantial benefit to the 8(a) concern. However, where SBA concludes that an 8(a) concern brings very little to the joint venture relationship in terms of resources and expertise other than its 8(a) status, SBA will not approve the joint venture arrangement.
13 C.F.R. § 124.513(a)(2). Quite simply, the Area Office reviewed the joint venture agreement (as amended) and concluded that Charitar was “wholly dependent on ZMS for performance” and thus brought very little to the relationship other than its 8(a) status.
CR/ZWS then challenged the SBA’s decision in federal court, alleging that the denial of its joint venture agreement was arbitrary and capricious and violated SBA’s regulations. The Court of Federal Claims rejected this challenge, writing:
In the end, what is ultimately at issue here is whether the amendment to the joint venture agreement between Charitar and ZWS promotes the underlying purposes of the Business Development Program[.] That regulation authorizes an 8(a) concern that would otherwise lack the capacity to perform a contract to partner with a more experienced, non-8(a) concern through a “fair and equitable” joint venture agreement, and authorizes an agency to award the contract to the joint venture. But in order for the joint venture to be eligible for a contract set aside for 8(a) concerns, the joint venture arrangement must provide a “substantial benefit” to the 8(a) concern—i.e., it must enhance the 8(a) concern’s future capacity to win and perform similar contracts on its own. At the same time, to ensure that the 8(a) concern will provide more than window dressing, which would allow the non-8(a) concern to qualify for a contract award that it would not otherwise be eligible to receive, the SBA requires the 8(a) concern to bring more to the table than its 8(a) status.
Because the joint venture agreement did not adequately show that the relationship was in Charitar’s interest, it was properly denied.
Interestingly, the justification to deny CR/ZWS’s joint venture agreement amendment sounded like an ostensible subcontractor analysis: because ZWS is the ineligible incumbent, and because Charitar was largely dependent on ZWS for the needed personnel and equipment, the SBA concluded that it would not benefit under the proposed relationship. In any event, CR/ZWS serves to remind 8(a) joint venture participants that their joint venture agreement must explain how the relationship will benefit the 8(a) participant.
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I hope everyone has a safe and happy 4th of July as we celebrate our nation’s independence. If you’re still struggling to think of top-notch grilling ideas for Independence Day, might I suggest this delicious recipe from the fine folks at the Big Green Egg?
But before firing up the grill, let’s take a look at the latest and greatest in government contracting news. In this week’s star-spangled edition of the SmallGovCon Week in Review, a former government employee pleads guilty to criminal charges related to using her position to benefit her husband’s company, Alaska Native Corporations celebrate as three military branches agree to reinterpret a limit on high-dollar sole source 8(a) contracts, and much more.
A Virginia woman pleaded guilty to using her federal employment to personally benefit herself and her husband’s company. [U.S. Department of Justice]
Three military branches have agreed to reinterpret a law that limited Alaska Native corporations’ access to high-dollar sole source 8(a) contracts. [Anchorage Daily News]
SAM scheduled to be fixed starting June 29, 2018. [Federal News Radio]
GSA is continuing with plans to create e-commerce portal for federal procurement. [FedScoop]
A New York man pleaded guilty to government contracting fraud and faces a maximum penalty of 20 years in prison. [U.S. Department of Justice]
The SBA’s watchdog found that contracting officers did not comply with self-certified women-owned companies program requirements. [Government Executive] (and see my commentary here).
The federal government may have met its goal of awarding prime contract dollars to small businesses, but those dollars are going to just a handful of firms. [Washington Examiner]
A North Carolina man pleaded guilty to a charge of conspiracy to defraud the United States and commit wire fraud under contract awarded by the U.S. Army. [Fox45 News]
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At least a couple times a month, I’m asked when the FAR’s limitations on subcontracting provisions will be updated to correspond with SBA regulations adopted in 2016, and underlying statutory changes adopted way back in the 2013 National Defense Authorization Act.
Well, now it seems that the FAR updates may take longer than I’d hoped. In its most recent “Open Cases” update, the FAR Council says that it’s made a switch in the procedure that will be used to implement the changes to the limitations on subcontracting–and that switch will likely delay the implementation of those changes by several months.
By way of quick background, way back in January 2013, President Obama signed the 2013 National Defense Authorization Act into law. The 2013 NDAA made major changes to the limitations on subcontracting. The law changed the way that compliance with the limitations on subcontracting is calculated for service and supply contracts–from formulas based on “cost of personnel” and “cost of manufacturing,” to formulas based on the amount paid by the government. And, importantly, the 2013 NDAA allowed small primes to claim performance credit for “similarly situated entities.”
Interestingly, about a year later–well before either the SBA or the FAR Council had amended the corresponding regulations–the GAO issued a decision suggesting (although not directly holding) that the similarly situated entity concept was currently effective. But most contractors and contracting officers continued to apply the “old” rules under the FAR and SBA regulations.
On May 31, 2016–about three and a half years after the 2013 NDAA was signed into law–the SBA published a final rule implementing the changes. The SBA’s regulation took effect on June 30, 2016. Less than a month later, the VA issued a Class Deviation, incorporating by reference the new SBA regulations for VA SDVOSB and VOSB acquisitions. But for many other procurements, contracting officers continued to include FAR 52.219-14, which uses the old formulas and makes no mention of similarly situated entities. (FAR 52.219-14 applies to small business, 8(a) and WOSB contracts. For HUBZone and non-VA SDVOSB procurements, the subcontracting limits are implemented by other clauses, which use the old formulas but allow the use of similarly situated entities).
This, of course, has led to a lot of confusion. Does a contractor comply with the SBA regulation? The FAR clause? Both? Some Contracting Officers have taken the position that the FAR clauses govern until they’re amended. But the SBA, of course, wants contractors to follow the SBA regulations. Indeed, a joint venture formed under the SBA’s regulations must pledge to comply with 13 C.F.R. 125.6.
Contractors want to comply with the law, but the delay in changing the FAR makes it difficult to determine which law to follow. I’m often asked when the FAR will be amended to conform with the 2013 NDAA and SBA regulation. Unfortunately, because of a recent change in the process that the FAR Council will use to update the limitations on subcontracting rules, I’m guessing that the FAR won’t change until sometime in 2019.
The good news is that the FAR Council is working on a rule to amend the FAR. Until recently, the FAR Council said that, after internal government review, it intended to publish the rule as an “interim final” rule. An interim final rule becomes effective immediately upon publication. Usually, the public is invited to comment and the agency then decides whether the interim final rule should be altered. But the rule is in effect while the public comment period plays out.
In its most recent “Open Cases Report,” issued on June 22, the FAR Council says that the interim final rule was “Converted to proposed rule.” Unlike an interim final rule, a proposed rule does not take effect when it is issued. Instead, the agency accepts public comments on the proposed rule, usually for a period of 30 to 60 days, but sometimes significantly longer. Once public comments are received, the agency reviews the comments and then develops a final rule. Only after the final rule is published do the changes go into effect.
The bottom line is that using a proposed rule instead of an interim final rule means that it will take significantly longer for the FAR changes to go into effect. This procedural change will probably add several months to the process. At this point, my best guess is that the FAR’s limitations on subcontracting provisions won’t take effect until sometime next year.
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