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Koprince Law LLC

Sometimes you may find yourself running late. It happens to the best of us for a multitude of reasons. But what happens to federal contractors when they are running late in performing under a contract and there is “no reasonable likelihood” of timely performance?

Unfortunately for contractors in this position, as illustrated by a recent Civilian Board of Contract Appeals (CBCA) decision, the result may be a default termination.

In Affiliated Western, Inc. v. Department of Veterans Affairs, CBCA No. 4078 (2017), the VA awarded AWI a contract to renovate the surgical unit at a VA Medical Center in Iron Mountain, Michigan. Following mounting issues in contractual performance, the Contracting Officer issued a default termination.

The contractual issues giving rise to the default termination began early on in contract performance. Specifically, the Solicitation “warned potential bidders, that the schedule for the project ‘is very aggressive’ and involves ‘a very important department to the facility.’” AWI, as the awardee, was to provide renovations in five phases within a 400-day deadline. Contract performance started off strained due to architecture and engineering errors and omissions in the contract specifications for which the VA required AWI to perform several changes. All the while the VA and AWI continued debate over schedule submissions, which the VA found inadequate and refused to approve.

The relationship between the parties became further strained. Six months into contract performance, the VA issued its first cure notice. After, AWI failed to complete phase 1 on time, and the VA denied AWI’s requests for contract modification for compensation and time extensions.

Performance issues came to a head when AWI’s subcontractor, one of only two contractors in the remote area of contract performance that held the medical gas certification necessary to perform the project, reported AWI’s failure to make prompt payment despite AWI receiving payment from the VA. Afterwards, the subcontractor walked off the job. Then, less than a year into contract performance, the contracting officer issued a show cause notice citing AWI’s failure to complete phases 1 and 2 within the time required by the modified contract and ultimately issued a default termination in accordance with FAR 52.249-10, Default (Fixed-Price Construction).

AWI appealed the VA’s default termination to the CBCA and sought conversion to a termination for convenience. The CBCA sustained the VA’s default termination finding and denied AWI’s appeal.

In making its decision, the CBCA noted that default termination is “a drastic sanction which should be imposed (or sustained) only for good grounds and on solid evidence.” When a default is based on the contractor’s failure to prosecute the work, the contracting officer must have a reasonable belief that there was “no reasonable likelihood” that the contractor could perform the entire contract effort within the time remaining for contract performance. A termination for failure to make progress “usually occurs where the contractor has fallen so far behind schedule that timely completion becomes unlikely.”

In this case, since the VA established reasonable grounds to believe that AWI may not be able to perform the contract on a timely basis in issuing a cure notice as a precursor to possible default termination, and since AWI had failed to respond to the cure notice with adequate assurances, the VA had met its initial burden of proving that there were good grounds and solid evidence to support the termination.

The burden then shifted to AWI to prove that “there were excusable delays under the terms of the default provision of the contract that render[ed] the termination inappropriate, or that it was making sufficient progress on the contract such that timely contract completion was not endangered.” To recover under this theory of excusable delay, AWI also needed to show: “(1) the delay is of an ‘unreasonable length of time,’ (2) the delay was proximately caused by the Government’s actions, and (3) the delay resulted in some injury to the contractor.”

Applying a critical path schedule analysis to these requirements, the CBCA rejected AWI’s argument that extension of time for part of the project should automatically extend the total performance date. Thus, AWI could not rely on the VA contract modifications to excuse its delay where AWI could not prove it affected AWI’s critical path schedule. Accordingly, the CBCA found that “AWI failed to provide any evidence that it had fulfilled the contract requirement to provide the contracting officer with a schedule identifying the critical path and demonstrating how the schedule would be impacted by the VA’s alleged actions.” The CBCA concluded the VA to have properly terminated AWI for default, and denied AWI’s appeal.

Undoubtedly, federal contractors seek to perform contracts on time and within budget. However, the facts present in AWI demonstrate that when there is “no reasonable likelihood” that the contractor could perform the entire contract effort within the time remaining for contract performance, the end result may be a default termination.


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Koprince Law LLC

I am pleased to announce that Shane McCall has joined our team of government contracts attorney-authors here at SmallGovCon.  Shane is an associate attorney with Koprince Law LLC, where his practice focuses on federal government contracts law.

Before joining our team,  Shane was an attorney with Lentz Clark Deines PA, where he advised individuals and small businesses alike on complex legal matters.  Check out Shane’s full biography to learn more about our newest author, and don’t miss his first SmallGovCon post on how “fair and reasonable pricing” is evaluated under solicitations requiring line-item prices.


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Koprince Law LLC

When I went out for pizza with my family the other night, the only number that mattered to me when I got the check was the bottom-line price. It didn’t matter to me what the price for each pizza or each lemonade was, as long as the total price was within my budget.

For an agency evaluating a proposal for reasonableness in a fixed-price setting, the same holds true: it is the bottom-line price that matters, not the individual items that add up to the bottom-line price. The GAO recently had the opportunity to review this concept in a bid protest decision.

The question of whether a contractor’s price is “fair and reasonable” (that is, not too high) is a cornerstone of federal contracting. This holds true for simplified acquisitions under FAR Part 13, for which FAR 13.106-3(a) requires the contracting officer to determine that the prospective awardee’s price is fair and reasonable.

But when an agency requests prospective offerors to provide pricing for multiple line items, does the price for each line item have to meet the “fair and reasonable” standard? The GAO’s recent decision in David Jones, CPA PC, B-414701 (August 25, 2017) provides some answers.

The David Jones case concerned an RFQ issued by the VA under FAR Part 13. The VA sought a contractor to provide investigations into Equal Employment Opportunity claims for the VA. Each of the bidders was required to submit prices for conducting EEO claims investigations for five different line items, corresponding to five different types of EEO cases for five different years, for a total of 25 line items.

David Jones, CPA PC submitted a bid. In its evaluation, the VA determined that the price for one of DJCPA’s 25 line items was not fair and reasonable. The VA excluded DJCPA from the competition.

DJCPA protested, arguing that the VA’s price reasonableness determination was improper. DJCPA contended that the VA failed to consider “the relationship between CLINs” and “the fact that DJCPA’s prices for all but one CLIN were lower than the agency’s benchmarks.”

The GAO agreed with DJCPA. It found that the VA was required to consider whether the high price on one of the 25 line items in the proposal “would result in an unreasonably high price overall.” Because the VA “engaged in no analysis whatsoever to assess whether there was a risk that the the protester’s h igh price on the single line item in question would result in the government paying an unreasonably high price” overall, the GAO sustained the protest.

Getting back to my pizza example, if I complained to my family that one item (say, the cheese pizza) on the receipt was too expensive, but that I was fine with the overall cost, they would think I was being silly. It is the overall price that I have to pay for, so that is the price that truly matters. The same holds true for a contract evaluated under price reasonableness.  If the bottom-line price is reasonable, it may not matter whether one of the individual line items is priced too high.


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Koprince Law LLC

Football season is back, and the Chiefs certainly gave those in our neck of the woods something to cheer for last night. I wish I could say I felt sorry for our SmallGovCon Patriots fans, but those five Super Bowl Rings ought to take the sting out of an opening-week loss.

I’ll be watching my share of football on Sunday, but before the weekend starts, it’s time for the SmallGovCon Week In Review.  In this edition, two Arkansas men are headed to trial on procurement fraud charges, GSA awarded a $700 billion contract, a company vying for a piece of the border wall contract was previously investigated for alleged mentor-protege improprieties, and much more.

  • Despite what many said was an unfriendly environment for federal contractors, fiscal 2016 was a pretty darn good year for vendors. [Federal News Radio]
  • A Pennsylvania husband and wife have been charged with making bribes in an attempt to expedite their DOT DBE application. [Department of Justice]
  • Two Arkansas men are headed to trial to face accusations of defrauding the federal government out of millions of dollars worth of contracts. [Arkansas Online]
  • One of the four companies picked to provide border wall prototypes has paid more than $3 million to settle a Justice Department criminal investigation into whether it defrauded the U.S. government through the mentor-protege program aimed at helping disadvantaged small business contractors. [Politico]
  • Two American banks have been announced as winners of a $700 billion federal charge card program contract through the GSA. [Government Executive]
  • The pick to lead the General Services Administration is popular but she is going to face some tough questions from Congress before she moves on to the challenges of running a large and complex agency. [FCW]
  • Guy Timberlake suggests that “NAICS Code Amnesia” could be a good thing for federal contractors. [LinkedIn]

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Koprince Law LLC

The VA has officially withdrawn its November 2015 proposal to overhaul its SDVOSB and VOSB regulations.

The VA’s action isn’t surprising, given that the 2017 National Defense Authorization Act requires the VA to work with the SBA to prepare a consolidated set of SDVOSB regulations, which will then apply to both VA and non-VA procurements.  What’s interesting, though, is that the VA doesn’t say that it’s withdrawing the 2015 proposal because of the 2017 NDAA, but rather because of numerous objections to the proposal–including objections from the SBA.

By way of quick background, the VA’s 2015 proposal would have significantly overhauled its SDVOSB and VOSB regulations with the goal of finding “an appropriate balance between preventing fraud in the Veterans First Contracting Program and providing a process that would make it easier for more VOSBs to become verified.”  The VA accepted comments on the proposal until January 2016.

As it turns out, those comments were largely negative.  According to the notice of withdrawal published in the September 1, 2017 Federal Register, of the 203 comments received, “134 of these comments were adverse to the proposed rule and VA’s verification program in general.”

Several of the adverse comments came from the SBA.  The SBA wrote, among other things, that the VA did “not provide any indication of the number of small businesses that may be impacted by the proposed change,” and that the proposed rule “failed to provide statutory or other legal authority following each cited substantive provision.”

Not all of the SBA’s objections concerned the rulemaking process.  SBA also objected to the VA’s proposal to remove an SDVOSB or VOSB from the database if the veteran in question was formally accused of a crime involving business integrity.  SBA (correctly, I think), said that this proposal “would seem to deny an applicant due process of law” because an accusation is not the same as a finding of guilt.

Other commentators also objected to various portions of the rule, including the VA’s proposal to make a firm wait 12 months, instead of six, to reapply after an application is denied.

After summarizing the reaction to its proposal, VA simply states: “ecause of the adverse comments received during the comment period, VA is withdrawing the proposed rule.”

What comes next for the SDVOSB and VOSB regulations?  Well, the 2017 NDAA directed the SBA and VA to issue a joint proposal within 180 days of the final enactment of the statute.  Former President Obama signed the bill into law on December 23, 2016, so the joint proposal is overdue–although I understand that the two agencies are working on it.


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Koprince Law LLC

In May 2017, SDVOSBs and VOSBs lodged another big win in their battle to enforce the statutory preferences for veteran-owned companies: the Court of Federal Claims held that the VA cannot buy products or services using the AbilityOne list without first applying the “rule of two” and determining whether qualified SDVOSBs or VOSBs are likely to bid.

But the AbilityOne vendor in question isn’t going down without a fight.  It’s taking the case to the United States Court of Appeals for the Federal Circuit–and the Court of Federal Claims just issued a ruling staying its May decision pending the results of the appeal.

The COFC’s decision in PDS Consultants, Inc. v. United States, No. 16-1063C (2017) was a major victory for SDVOSBs and VOSBs.  In that case, the COFC resolved an apparent conflict between the statutes underlying the AbilityOne program and the VA’s SDVOSB/VOSB preference program.  The COFC held that “the preference for veterans is the VA’s first priority” and trumps the requirement to use AbilityOne as a mandatory source.

But Winston Salem Industries for the Blind Inc., known as IFB Solutions, has appealed the COFC’s decision to the Federal Circuit.  And in a ruling issued on September 1, the COFC held that its original decision would be suspended pending the resolution of IFB’s appeal.

The COFC wrote that there are four factors it will consider when deciding whether to suspend a ruling pending an appeal: “(1) whether the movant has made a strong showing that it is likely to succeed on the merits; (2) whether the movant will be irreparably injured absent an injunction; (3) whether the issuance of the injunction will substantially injure the other interested parties; and (4) where the public interest lies.” These factors are “not necessarily entitled to equal weight,” and the court may be “flexible” in its application of the factors.

Here, all parties agreed that “whether the court properly interpreted the interplay between [the two statutes] is a question of first impression” that “has not been decided by any prior court.”  Thus, “while the court rejected IFB’s argument, it is not possible to determine the likelihood of success on appeal.”

Turning to the second factor, irreparable harm, IFB argued that, if the COFC decision stood, it would lose “62% of its revenue from optical services or 15.5% of its total revenue” by January 1, 2018.  The COFC wrote that “the loss of these contracts would have a severe impact on not only IFB’s optical business but also IFB’s mission as a nonprofit to provide employment, training, and services to persons who are blind.”  Therefore, the COFC found that IFB had established irreparable harm.

Under the third factor, balancing of the harms, PDS argued that a stay would substantially injure PDS and other SDVOSBs because they would not be able to compete for the contracts in question during the pendency of the appeal.  The COFC wasn’t persuaded, writing that the harm PDS identified “is hypothetical” because “t is based on the hope that it would be able to compete for the subject work . . ..”  The COFC “weighed the concrete harm IFB has identified against the hypothetical harm PDS has identified” and found that IFB’s harm outweighed PDS’s.

Finally, with respect to the public interest factor, the COFC wrote that both statutes (AbilityOne and the VA’s veteran preference rules) “serve important public purposes.”  But because IFB had identified concrete harm under the third factor, “the public interest tips in favor of allowing IFB to continue its work of employing blind and severely handicapped individuals under its contracts for VISNs 2 and 7 until the appeal is resolved.”

For these reasons, the COFC granted IFB’s motion for a stay pending appeal.  Under the stay, the VA will be permitted to continue procuring the products in question from IFB until the appeal is resolved.

Interestingly, the VA didn’t take a position on whether the COFC’s ruling should be stayed.  It’s not clear from the public documents why the VA stayed out of the fight, but perhaps the VA is having second thoughts about getting into another long-running legal (and P.R.) battle with veterans.

In any event, the COFC’s ruling is a big disappointment for SDVOSBs and VOSBs, many of whom hoped that the COFC’s May decision would put an end to the question about how the “rule of two” intersects with the AbilityOne program.  Stay tuned.


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Koprince Law LLC

Debriefings are a fundamental part of many government competitions. So it’s important for government contractors to understand what debriefings are, what they are not, and why they’re important. Here are five things you should know about debriefings:

  1. Debriefings are sometimes required (but sometimes not).

After spending a lot of time (and money) on a bid, it’s only natural that a contractor would want to know why its proposal was evaluated the way it was. But agencies aren’t always required to give a debriefing—they’re only required under competitive procurements (FAR Part 15) and for the award of task or delivery orders valued at more than $5.5 million (FAR 16.505(b)(6)). Debriefings aren’t required for any other type of acquisition.

But just because a debriefing is required doesn’t mean it’s automatic. You have to ask for one. When you receive the notice of award, it’s important to immediately ask (in writing) for a debriefing.  If a debriefing isn’t requested within three days, you may be out of luck.

  1. A debriefing can be provided pre-award or post-award.

There are two types of debriefings: pre-award and post-award. Pre-award debriefings are for offerors eliminated from competition before an award is made, while a post-award debriefing explains the agency’s award decision.

  1. A debriefing will give you basic information about the evaluation.

The FAR tells contracting officers and offerors the information that should be included in a debriefing. Naturally, the information provided in a pre-award debriefing will be less than that under a post-award debriefing. But in general, the debriefing must provide a summary of the evaluation of your proposal (and, for post-award debriefings, basic information about the awardee).

  1. You can (and should) ask questions.

A debriefing is, at its core, an opportunity to learn more about the evaluation process. An important goal is to allow offerors to strengthen their offers under future procurements. In addition to the basic information required to be provided, the contracting officer must give you the opportunity to ask relevant questions about the evaluation.

Before your debriefing, give serious thought as to the type of information that would be helpful to know under future solicitations. Re-familiarize yourself with the solicitation’s statement of work, instructions, and evaluation criteria; if you have any questions as to whether the selection criteria was followed, the debriefing is your time to ask.

  1. A debriefing might affect your protest deadline.

The Government Accountability Office has strict deadlines to file bid protests. For pre-award protests, the protest must be filed before the proposal submission deadline. But be careful: following a competitive range exclusion, agencies will sometimes allow offerors to defer their pre-award debriefing until after the award is made. Doing so might inadvertently waive protest arguments. Instead, it’s usually best to request a pre-award debriefing if you were excluded from competition.

Post-award protests can be due as soon as ten days from when you first learned (or should have learned) of the basis of protest. But if a debriefing is required and timely requested, the post-award protest deadline is extended until ten days after you received the debriefing, regardless of when the protest ground was learned.

(Note that this is a discussion of timeliness deadlines; a different standard applies to obtain the automatic stay under the Competition in Contracting Act).

***

So what’s the gist? If you’re given the chance to request a debriefing, do so! And be an active participant in the process: the information learned may help you win the next solicitation (or even successfully challenge the award).

If you have any questions about debriefings—or if you’d like to know 5 things about a different topic of interest—please contact me at mschoonover@koprince.com.


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Koprince Law LLC

I am back from a great trip to Sooner Country (Norman, Oklahoma), where it was an honor to be part of the annual Indian Country Business Summit.  I gave two talks at ICBS: one on recent developments in government contracting, and another on crafting effective and compliant teaming agreements and subcontracts.

It was great to see so many familiar faces, including my longtime friend Guy Timberlake, who gave a fantastic presentation on competitive market intelligence.  A big thank you to the Tribal Government Institute and Oklahoma Bid Assistance Network for sponsoring this wonderful event, and Victoria Armstrong and everyone who worked with her to organize it.  And, of course, thank you to all of the clients, old friends, and new faces I met and spoke with at the conference.

I’ve been a road warrior recently, but will be sticking around town for the next few weeks.  Next up on my travel schedule: a half-day, in-depth session on teaming agreements, joint venturing, and mentor-protege programs, sponsored by the Nebraska PTAC.  Hope to see you in Omaha on September 22!


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Koprince Law LLC

I have just returned from Indian Country Business Summit in Norman, Oklahoma, where I enjoyed catching up some old friends and making some new ones.  This conference continues to grow every year–if you haven’t been yet, get it on your calendar for next year.  You won’t regret it.

Of course, like all of us, my thoughts this week have been with the citizens of Houston and elsewhere in Texas as they battle the horrible effects of Harvey. While Harvey dominated the news this week, there was still plenty happening in the world of government contracts.  This edition of SmallGovCon Week In Review brings articles on the end-of-the-year rush to nab contracting dollars, pending legislation to encourage agencies to “Buy American,” a look at the top 10 acquisition trends of FY 2017 and more.

Enjoy the Labor Day weekend and stay safe, Houston.

  • As the clock ticks down on FY 2017, an estimated $98 billion in federal agency contract obligations remains unspent. [Bloomberg Government]
  • A family-owned paper manufacturer might have had the best government contract of all time that has lasted over 240 years, but could it be coming to an end? [Energy & Capital]
  • A U.S. Senator has hopes of making it easier for domestic manufacturers to find out when federal agencies pick a foreign company to make a part that they say isn’t available domestically. [theday]
  • The GAO has upheld a bid protest finding that the Labor Department had given an unfair advantage to one of the companies bidding on their nearly $100 million contract. [Federal News Radio]
  • Federal Times takes a step back and assesses the contracting environmental trends that have emerged over the past year. [Federal Times]
  • DHS is adding more rigor to vendor supply chains for a governmentwide cybersecurity initiative. [Federal News Radio]
  • Bloomberg Government is reporting an 8% increase in total contract spending in FY2016 from FY2015. [Bloomberg Government]

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Koprince Law LLC

When my nephew started kindergarten, his vocabulary expanded to include a new phrase: “Rules are rules, and you have to follow the rules!” For my nephew (who, if I’m being honest, can be a bit mischievous), this newfound respect for following rules was adorable.

Government contractors should commit this lesson to heart: you have to follow the rules! As one government contractor recently learned, this includes GAO’s bid protest filing rules. Where a protester doesn’t follow the rules, its protest is likely to be dismissed.

By way of background, GAO’s regulations include strict deadlines relating to protest filings: after a disappointed offeror files its protest, an agency has 30 days to file its response to the protest (called an “agency report”). The protester then must file its reply (or “comments”) to the protest within 10 days from the date it receives the agency report. The importance of complying with this deadline is unambiguous: “The protest shall be dismissed unless the protester files comments within the 10-day period, except where GAO has granted an extension or established a shorter period” for doing so.

That takes us to the case in question, PennaGroup, LLC, B-414840.2, B-414841.2 (Aug. 25, 2017). PennaGroup submitted a bid on the two-phase border wall solicitation and was excluded for not acknowledging several amendments to the solicitation (as required by the agency).

PennaGroup protested at the GAO, and the agency filed its agency report on July 26. PennaGroup’s comments were due by August 7. PennaGroup failed, however, to submit its comments by the deadline.

On August 8, GAO asked PennaGroup to confirm whether it filed comments. It responded by saying that it didn’t think comments were necessary, as its “legal team has reviewed the [agency’s] response and finds no new or factual arguments not fully set forth in length in our Bid Protest.” Essentially, because PennaGroup didn’t think there was anything worth responding to, it just didn’t respond.

The agency then moved to dismiss PennaGroup’s protest. Agreeing with the agency, GAO wrote that its bid protest deadlines are designed to facilitate the expeditious resolution of protests:

To avoid delay in the resolution of protests, our Bid Protest Regulations provide that a protester’s failure to file comments within 10 calendar days “shall” result in dismissal of the protest except where GAO has granted an extension or established a shorter period. But for this provision, a protester could idly await receipt of the report for an indefinite time, to the detriment of the protest system and our ability to resolve the protest expeditiously.

GAO dismissed the protest.

GAO’s logic makes sense—given the short deadline to resolve protests and the potential disruption to the procurement system, parties should abide by the deadlines. PennaGroup’s excuse for not doing so, however, highlights a tension in this requirement (especially from the perspective of protesters wanting to keep legal costs low): should a protester be required to comment on a protest just for the sake of doing so, even if its comments won’t necessarily add any new facts or legal justification? GAO’s decision in PennaGroup confirms that, notwithstanding this tension, protesters must abide by all applicable filing deadlines–including by filing comments within the appropriate time frame.


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Koprince Law LLC

Generally speaking, government contractors know that part of the cost of doing business with the federal government is some loss of autonomy. The government writes the rules. It is the 500 lb. gorilla. What it says usually goes.

When contractors try to do things their own way–even in an relatively informal medium such as email–they can sometimes get into trouble, as evidenced by a recent GAO protest decision: Bluehorse Corp., B-414809 (Aug. 18, 2017).

The protest involved a procurement for diesel fuel as part of a highway construction project near Polacca, Arizona, by the Department of Interior, Bureau of Indian Affairs.

The solicitation said that the fuel would be delivered as needed by the construction project. During a question-and-answer session, the contracting officer said that BIA had two 5,000 gallon tanks for storage, and that the agency “typically” orders 4,000 gallons at a time.

Bluehorse Corp., a Reno, Nevada, Indian Small Business Economic Enterprise, provided a quotation that said it had the ability to supply 7,500 gallons per delivery.

The contracting officer selected Bluehorse for award. On June 13, it sent it a purchase order which specified that each delivery would be 4,000 gallons. The purchase order incorrectly stated that the capacity of the tanks was 4,000 gallons each.

In response, Bluehorse and the contracting officer spent the day emailing each other back and forth about the parameters of the deal. Bluehorse was insistent that it should be allowed to deliver 7,500 gallons at a time. The emails escalated in fervor from a polite request that the government clarify the capacity of its tanks to a threat that “f you don’t amend we will simply protest.” Importantly, in one of the emails, Bluehorse said “our offer was made on the ability to make a 7500 [gallon] drop . . . .”

The contracting officer responded that Bluehorse was attempting to provide its own terms by “determining the amount you want to deliver and not what the government is requesting[.]”

When Bluehorse did not respond, the contracting officer rescinded the offer. In the span of a day, the deal had completely fallen apart. Bluehorse protested, saying that the agency relied on unstated evaluation criteria and “inexplicably” limited deliveries to 4,000 gallons.

GAO sided with the 500 lb. gorilla. It said that although the offer initially conformed to the terms of the solicitation (because the initial reference to 7,500 gallon deliveries was a “statement of capability”) when Bluehorse told the contracting officer in its email that the offer was dependent on the ability to deliver 7,500 gallons at a time, Bluehorse had placed a condition on the acceptance of its quotation.

GAO said, “the record supports the agency’s conclusion the protester subsequently conditioned its quotation upon the ability to deliver a minimum of 7,500 gallons of fuel at a time.”

In other words, the contractor tried to change the rules. It did not matter whether the government had the capacity to hold the amount Bluehorse wanted to provide. All that mattered was that the government wanted one thing, and Bluehorse insisted on providing another.

GAO denied the protest.

The government may have been throwing its weight around. But it can. Whether it is diesel fuel, destroyers, or donuts, when the government says it wants X, the contractor typically has to provide X.


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Koprince Law LLC

It has been a busy week that kicked off with a total solar eclipse.  I was on an airline heading to San Diego for 2017 Department of the Navy Gold Coast Small Business Procurement Event, so I missed the spectacle.  I didn’t get to wear eclipse glasses, but was well worth it to be part of that great annual procurement conference.  My travels aren’t over: next week, I’m off to Norman, Oklahoma to speak at the annual Indian County Business Summit.

While travel has me occasionally wondering which day of the week it is, I haven’t forgotten that it is time for your weekly dose of SmallGovCon Week In Review. This edition includes a tale of Davis-Bacon Act violations, a no-bid contract is now coming under fire (and protests), a new list of the top federal contractors has hit the shelves and much more.

  • DHS’s migration to a unified workforce training and performance management system has been dubbed a “textbook definition of waste.” [Federal News Radio]
  • Workers were kept in the dark about compensation they were owed under the Davis-Bacon Act after performing jobs involving hazardous material that resulted in them making $9.63 less per hour than required by the law. [NBC News]
  • Alliant 2 remains on schedule for award prior to winter of 2017; with GSA asking bidders to extend their offers through December 31. [Federal News Radio]
  • A bid protest has been filed against the VA for allegedly awarding Cerner a contract for its new EHR without conducting a competitive bidding process. [Healthcare IT News]
  • A recent report from the Office of Management and Budget on the DATA Act’s two-part Section 5 pilot, which covers federal grants and federal contracts, recommends three steps to help expedite the process. [Federal News Radio]
  • The 6th annual BGOV200 study was released this week, ranking the top 200 federal government contractors by value of prime, unclassified contracts awarded by U.S. government agencies in FY 2016. [Bloomberg Government]
  • National Defense Magazine takes a look at the importance of a written code of business ethics and conduct, which will help demonstrate a company’s intent to operate as a presently responsible contractor and help bolster ones reputation. [National Defense]

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Koprince Law LLC

I am back in Lawrence after a great trip to San Diego for the 2017 Department of the Navy Gold Coast Small Business Procurement Event.  I gave a session at Gold Coast on the SBA’s new All Small Mentor-Protege Program, and enjoyed speaking with contractors, government representatives, and others on the trade show floor.

Thank you very much to the San Diego chapter of the National Defense Industrial Association for sponsoring this fantastic event and inviting me to speak.  Thank you also to the fine folks of the San Diego Contracting Opportunities Center and American Indian Chamber Education Fund PTAC for sharing their booth.  And a big thank you to the many contractors who attended the session and asked great questions–so many, in fact, that some people stuck around 30 minutes after the session ended to chat.

If you haven’t had the pleasure of attending Gold Coast, I strongly encourage you to put it on your radar screen for 2018.  As for me, I’ll be hitting the road again soon: I will be in Norman, Oklahoma next week for the annual Indian Country Business Summit, one of my favorite procurement events each year.  Hope to see you there!


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Koprince Law LLC

The SBA is considering making changes to improve its socioeconomic programs–particularly the 8(a) and HUBZone Programs.

In a talk yesterday at the 2017 Navy Gold Coast Procurement Conference, Robb Wong, the SBA’s recently-appointed Associate Administrator, Office of Government Contracting and Business Development, discussed some of the big changes the SBA is considering.  And to my ears, at least, a lot of what Mr. Wong said makes good sense.

Mr. Wong made clear that few decisions have been made at this point; most of the potential changes are only in the discussion phase for now.  That said, here are some of the changes the SBA is considering–and why.

First, SBA is considering how to better focus on what the VA would call “procurement readiness.”  Mr. Wong pointed out that many small businesses think that getting a socioeconomic certification is the hard part, and that the contracts come easily once a company is certified.

Of course, that’s not the case.  Many certified companies aren’t truly ready to do business with the government.  That, in turn, can hurt the reputations of the socioeconomic certifications themselves.  It may be unfair, but some procuring officials can become gun shy about using a socioeconomic class after a bad experience with an unready company.

So what can the SBA do about the “procurement readiness” problem?  According to Mr. Wong, here are some ideas under consideration:

  • Require training before a company can be certified.  This might include training on business development, capture, and execution.  Business development is, of course, an integral part of the 8(a) program, but it’s not currently a required component of the SDVOSB, HUBZone, or WOSB programs.
  • Allow a remedial training period for unsuccessful 8(a) firms.  I’ve probably heard it a hundred times in my career: an company gets 8(a)-certified, but has no clue what to do with that certification until four or five years into its program term.  Finally,the company figures out how to win 8(a) contracts, but the nine-year program term is already halfway gone.  To address this issue, the SBA is considering allowing active 8(a) participants to temporarily put the nine-year term on hold while the leadership gets remedial business development training.
  • Help companies win contracts and subcontracts.  It shouldn’t be entirely up to socioeconomic firms to find contracts, Mr. Wong says–it’s not enough to say “here is a fishing pole, it’s a tool, go use it.”  Instead, the SBA wants to be more active in assisting good, qualified small businesses in obtaining prime contracts and subcontracts.

Second, Mr. Wong acknowledges that the procurement world is trending in the direction of consolidation and larger contracts.  While this may ultimately mean more total dollars are awarded, it also means that there may be fewer prime contract awards to go around.  The SBA is considering ways to help small businesses navigate these macro-level changes in contracting.  Some ideas under consideration include:

  • Calling on procuring agencies to reserve a certain percentage of contract awards (not just contract dollars) for small businesses.
  • Promoting ways for small businesses to work with one another, and with larger partners, including joint ventures and the new All Small Mentor-Protege Program.
  • Focusing more on working to obtain subcontracts for small businesses.

Mr.  Wong also said that a few specific ideas are under consideration to improve the 8(a) and HUBZone Programs:

  • Increasing the 8(a) sole source threshold.  This is one way, Mr. Wong said, that the SBA could “make 8(a) special again.”
  • Making HUBZone compliance easier.  Mr. Wong lamented the fact that because of the HUBZone Program’s unique requirements (especially the 35% employee residency requirement), some HUBZones “spend more time maintaining compliance than pursuing new contracts.”  The SBA is looking for ways to make ongoing compliance simpler.
  • Addressing HUBZone map changes.  The SBA is concerned that HUBZone companies can end up with the short end of the stick when a HUBZone tract is redesignated as non-HUBZone.  The SBA is considering how to address this problem.
  • Updating the 8(a) economic disadvantage rules.  The 8(a) net worth threshold (currently $250,000 for initial admission) is old–and may need to be updated.

Only time will tell what becomes of these big picture thoughts, but it’s very heartening to see the SBA thinking about how to improve and modernize its programs–and encouraging to see the SBA discuss these ideas in public and solicit feedback from small businesses and other stakeholders.

I’ll keep you posted.


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The GAO lacks jurisdiction to consider a challenge to a contract awardee’s size status, including questions of whether the awardee is affiliated with its subcontractor under the ostensible subcontractor rule.

In a recent bid protest decision, the GAO confirmed that it will not adjudicate an allegation of ostensible subcontractor affiliation.

The GAO’s decision in Archimania, B-414653 (Aug. 3, 2017), involved a GSA solicitation seeking architect-engineer services for the design of a new courthouse in Greenville, Mississippi.  The solicitation was issued as a small business set-aside.

After evaluating offerors under both stages of the two-phase competition, the GSA awarded the contract to Duvall Decker, which had teamed with Eskew+Demez+Ripple.  Although Duvall Decker was a small business, EDR was not.

Archimania, an unsuccessful competitor, filed a GAO bid protest challenging the award to Duvall Decker.  Among its arguments, Archimania contended that Duvall Decker was affiliated with EDR under the ostensible subcontractor affiliation rule, and therefore was ineligible for award.

GAO wrote that “[t]he Small Business Act . . . gives the SBA, not our Office, the conclusive authority to determine matters of small business size status for federal procurements.”  GAO refused to consider the argument, writing, “[w]e therefore will not review a protester’s challenge to another company’s size status, or a decision by the SBA that a company is, or is not, a small business.”

The GAO denied the protest.

As the Archimania case demonstrates, the GAO lacks authority to adjudicate size protests, including protests under the ostensible subcontractor rule.  Issues of small business size eligibility fall within the SBA’s exclusive jurisdiction, and protesters must use the SBA’s size protest process to challenge a competitor’s size.


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Subcontracting is a way of life for many federal government contractors; however, the identification and selection of such subcontractors is usually left up to the reasonable discretion of the prime contractor. So what happens when a solicitation prescribes that a particular subcontractor be retained, but that subcontractor won’t assist in bid preparation efforts?

Well, in one recent case, the prospective prime contractor was out of luck.

In Simplex Aerospace, B-414566.2 (Aug. 8, 2017), the Air Force sought firefighting modifications for seven demilitarized HC-130H transport aircraft formerly operated by the United States Coast Guard. Modifications included increasing the frame support within the aircraft and installing gravity fed drop tanks for fire retardant dispersal. Modifications were to be overseen by the United States Air Force. Once modifications were complete, the Air Force was to transfer the HC-130Hs to the Forest Service.

Among its technical specifications, the Solicitation required offerors to retain the Original Equipment Manufacturer as a subcontractor. According to GAO, the OEM was “to, among other things, perform and/or review analyses substantiating the contractor’s modification design, and validate that the analyses and processes used are appropriate, the results are accurate, and the design requirements set forth in the SOW are satisfied.”

Simplex had attempted to work with the OEM during the bid preparation phase of the procurement, but the OEM “refused [Simplex’s] requests to participate in the pre-award phase.” According to Simplex, “the lack of participation has hindered Simplex’s ability to properly evaluate schedule risk and/or limit the firm’s liability.”

Unable to obtain the desired level of cooperation from the OEM, Simplex protested the terms of the Solicitation, including the OEM component. Simplex argued that the requirement to use the OEM was “overly prescriptive and unduly restrictive.”

Simplex argued that a better structure for the procurement was for the Air Force to obtain a separate agreement with the OEM for its participation during the pre-award phase. According to Simplex, such an arrangement would assure the level of OEM participation the Air Force desired, while relieving contractors of the responsibility of directly negotiating with a disinterested manufacturer. The Air Force countered that its decision to require OEM participation through subcontracts rather than a separate agreement overseen by the Air Force was reasonable. Simplex also argued that problems could arise if the OEM ultimately declined to team with the awardee.

GAO felt the Air Force had the better of the argument. To GAO, Simplex’s protest was about risk allocation. As GAO explained, “the mere presence of risk in a solicitation does not make the solicitation inappropriate or improper. . . . Risk is inherent in most types of contracts, especially fixed-price contracts, and firms must use their professional expertise and business judgment in anticipating a variety of influences affecting performance costs.” Here, one of those risks was submitting a proposal without the OEM’s active participation.

The GAO also wasn’t persuaded by the argument that the OEM might not team with the eventual awardee. “The protester’s concern here is speculative,” the GAO wrote, adding “[f]urther, should such a situation arise, it would be a matter of contract administration” outside the GAO’s jurisdiction.

Accordingly, GAO found nothing unreasonable about the Air Force’s decision to require contractors to retain the OEM as a subcontractor rather than independently solicit the services.

The Simplex decision is an interesting one. In it, GAO said that, at least under the facts at issue, it was reasonable for the agency to require an OEM as a subcontractor. This places significant risk on prospective prime contractors in the event the OEM does not cooperate with bid preparation activities (or, as Simplex noted, if the OEM refuses to team with the ultimate awardee). Unfortunately, as GAO made clear in its Simplex decision, contractors may be forced to bear the burden of this risk.


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With what is being deemed “The Great American Eclipse” ready to hit the skies on Monday, there is a lot of excitement in the air here in Lawrence. We are just off the path of totality and are expecting 99.3% coverage. My colleagues and family will be outside (with protective eyewear of course) and witness this amazing moment. As for me, I’ll be in San Diego, speaking at the 2017 Department of the Navy Gold Coast Conference which will drop my near total eclipse view down to a partial eclipse of about 58% coverage–but it’s well worth it to be part of this great event.

Before I take off for the West Coast, it’s time for the latest SmallGovCon Week In Review. This week, two Senators have filed an amendment to the 2018 National Defense Authorization Act called the Modernizing Government Technology Act, an “Amazon-like” procurement system might not be too far off, a company is forced to repay millions of dollars amid allegations of overcharging the government, and much more.

  • The bipartisan Modernizing Government Technology Act is being attached as an amendment to the 2018 National Defense Authorization Act in hopes of improving its chances of being approved. [Federal News Radio]
  • With six weeks left in FY 2017, budget experts are warning federal contractors to begin planning for a possible government shutdown. [Federal News Radio]
  • A provision in the House version of the annual National Defense Authorization Act may soon make ordering office supplies, equipment, or even contract services as easy as placing an order on Amazon. [Government Executive]
  • A contractor will pay $9.2 million dollars to settle allegations of overbilling the U.S. Navy and Coast Guard for labor charges. [WLOX]
  • Government contracts sales guru Eileen Kent provides some pointers for businesses interested in cashing in on opportunities available at the end of the federal fiscal year. [Government Product News]
  • A lawsuit by the American Small Business League, heading for trial, alleges that some large defense contractors manipulate data to falsely claim they are meeting their small business subcontracting targets. [Forbes]

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You’ve poured precious time and resources into a proposal, only to lose out on the award. Making matters worse, the agency’s explanation of the award shows that it didn’t reasonably evaluate your proposal. What can you do?

Here are five things you should know about bid protests.

  1. A bid protest can win a contract—or lose one.

A protest can help you win an award. In a pre-award protest, you can challenge any unclear or unfair terms in a solicitation. In a post-award protest, you can challenge any unreasonable or unequal aspects of the evaluation of your proposal. If successful, a pre-award or post-award protest can help you win a contract.

But just as you can protest an evaluation, your competitors can also protest a contract awarded to your business. If so, it’s a good idea to intervene in the protest to help protect your award—the government won’t necessarily look out for your interests.

  1. You can file a bid protest with the agency, at the Government Accountability Office, or at the Court of Federal Claims.

Agency-level protests are the simplest and may be the least expensive option. Protesters simply file a written protest, and the agency itself provides its written decision.

GAO protests are perhaps the most common type of bid protest. After receiving the protest, the agency will file its response (and provide evaluation-related documentation, if the protester is represented by counsel). The protester then files a reply to the agency report (called “comments”) and, after briefing is completed, GAO will issue a written decision.

Going to court is a protester’s most forceful (and possibly the most expensive) option. But don’t anticipate a dramatic closing argument to convince a jury that the agency messed up the evaluation; much of the process is based on written briefing, the case will be heard by a judge instead of a jury, and oral arguments may be conducted by telephone.

  1. Act fast: bid protests can be waived if not timely filed.

No matter where you file a bid protest, you must do so by the applicable deadline. The bid protest deadline can be very short—in some cases, only ten days after you know (or should know) of the basis for protest. So act fast: even the most boneheaded or prejudicial evaluation errors probably won’t be considered if you don’t timely file your protest.

  1. You can represent yourself (but probably shouldn’t).

You don’t have to have counsel to file a protest with the agency or GAO. But you probably should, because procurement law is an intricate subject and self-represented protesters often struggle with technical nuances and substantive complexities. And if that’s not enough reason to seek representation, consider this: your counsel can get access to the confidential source selection information pertinent to the evaluation and award. In many cases, these documents hold the key to winning a protest.

  1. A bid protest can win you a contract.

Yes, this fifth point is the same as the first. But after spending significant time and resources into a proposal, you should consider whether it makes sense to devote still more to a bid protest. In some cases, it won’t. But in others, filing a protest might help win your business a contract. In fact, according to GAO’s most recent report, protesters received a positive outcome (either through voluntary corrective action or a sustained protest) in 46% of the actions filed in 2016.

***

There you have it: five things you should know about bid protests. If you’re considering a protest, call me to discuss your options.


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Welcome to 5 Things You Should Know, a new SmallGovCon series aimed at providing foundational information on topics relevant to government contractors.

In the posts that follow, I’ll try to distill complex contracting topics to their very essence. Unsure about what, exactly, a claim or bid protest is? What is the All Small mentor protégé  program? I’ll walk through each of these topics (and others) and explain why they matter.

These posts won’t be a treatise on each topic discussed, but hopefully they’ll help you navigate the complex world of federal contracts.

If there’s a particular topic you’d be interested in learning more about, please send it to me.

In the first post, we’ll tackle the basics of bid protests. Other posts will follow approximately every two weeks.

Enjoy!


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An incumbent contractor won a protest at GAO recently where it argued that the awardee’s labor rates were too low, because they were lower than the rates the incumbent itself was paying the same people.

GAO faulted the agency for concluding that the awardee’s price was realistic without checking the proposed rates against the incumbent rates. In other words, GAO told the agency to start at the obvious place—the compensation of the current employees.

The decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2017) involved a price realism analysis of rates proposed for workers to provide engineering, program management, and administrative services at Eglin Air Force Base. (Steve Koprince blogged about the unequal evaluation component of this case here.)

The solicitation called for a fixed-price labor-hour contract and required offerors to submit a professional compensation plan. The Air Force said it would evaluate the plan pursuant to FAR 52.222-46, which includes a price realism component.

Price realism, for the uninitiated, is an evaluation of whether an offeror’s price is too low. In the context of a fixed-price labor hour contract like the Air Force solicitation, “this FAR provision anticipates an evaluation of whether an awardee understands the contract requirements, and has proposed a compensation plan appropriate for those requirements.”

The Air Force initially concluded that the price proposed by Engineering Research and Consulting Inc., or ERC, was too low, comparing the price to “Government estimates.” But after discussions and revisions, the agency decided that the revised salary ranges were acceptable. The Air Force awarded the contract to ERC.

The protester, SURVICE Engineering Company, LLC, as the incumbent, obviously knew what it was currently paying the employees who were doing the work. SURVICE figured that the only way ERC could have proposed such a low price was to slash compensation. In fact, ERC had proposed exactly that, but still said it would retain many of the incumbent personnel. (GAO has previously noted that proposing to capture incumbents but pay lower rates brings up obvious price realism concerns.)

SURVICE argued that the evaluation was unreasonable because the agency did not evaluate the complete plan, did not compare the plan to incumbent rates, and still found ERC’s proposal acceptable.

GAO agreed, stating that “the record is silent as to whether, in the end, any of ERC’s rates were lower than incumbent rates but nevertheless acceptable to the Air Force.”

It concluded, “the Air Force did not reasonably compare ERC’s salaries to incumbent salaries, a necessary step to determine whether the proposed salaries are lower than incumbent salaries. Accordingly, we find that the agency failed to reasonably evaluate whether ERC offered ‘lowered compensation for essentially the same professional work,’ as envisioned by FAR provision 52.222-46. We therefore sustain this aspect of [SURVICE]’s protest.”

SURVICE won this aspect of the protest because GAO faulted the Air Force for not taking an obvious step, but it is also a good reminder that seeking to underbid the competition by slashing incumbent pay rates can raise significant price realism concerns.


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I don’t know about you, but I am ready for the weekend.  I’m looking forward to spending some time with the family before I turn into a bit of a road warrior.  Next week, I’ll be at the 21st Government Procurement Conference in Texas; the following week I head to the West Coast for the Navy Gold Coast Small Business Procurement Event, and I’ll wrap up the month in Oklahoma at the Indian Country Business Summit.

If you’ll be at any of these events, please stop by to say hello and talk about the latest happenings in the world of government contracts.  And speaking of latest happenings, it’s time for the SmallGovCon Week In Review. In this week’s edition, a look at what it takes for contractors to win at the end of the federal fiscal year, a defense contractor is caught billing Porsches, Bentleys and other luxury costs to the Pentagon, a former contractor will pay a $50,000 fine for SDVOSB fraud, and more.

  • Government procurement thought leader Jennifer Schaus offers a look at characteristics that will help contractors be successful in the highly competitive market of government contracting. [American City & Country]
  • The Navy is keeping a close eye on its current access card program for vendors and contractors to get on base. [Federal News Radio]
  • It’s good to think about worst case scenarios: four ways to avoid suspension or debarment on federal contracts. [Construction DIVE]
  • A defense contractor billed luxury cars, million-dollar salaries and secret guns to the Pentagon according to a recent audit. [Government Executive]
  • A a former contractor was sentenced to three years probation and is forced to pay a $50,000 fine stemming from a “straw man” scheme to obtain SDVOSB contracts. [Dayton Daily News]
  • A San Diego defense contractor pleased guilty to a conflict of interest charge for engaging in projects overseen by a Navy official who had given him and his company personal loans totaling more than $30,000. [Times of San Diego]
  • A Department of Labor investigation led to the discovery that a Minnesota company failed to pay prevailing wages to its employees working on a U.S. Housing and Urban Development project. [Business Management]

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The SBA’s All Small Mentor-Protege Program office has issued its annual evaluation forms for ASMPP participants.  The purpose of the reports is to “determine whether the business is eligible to continue to participate in the All Small Business Mentor-Protege Program.”

The annual evaluation process requires participants to complete two forms: a nine-page protege evaluation report, and a separate five-page mentor evaluation addendum.

Some of the information covered in the reports is no surprise: the regulations governing the All Small Mentor-Protege Program call for participants to report such things as “[a]ll technical and/or management assistance provided by the mentor,” “[a]ll loans to and/or investments made by the mentor in the protege,” subcontracts awarded by the mentor to the protege, prime contracts awarded to any mentor-protege joint ventures, and more.  The forms require participants to provide the information described in the regulations.

But some of the information requested in the forms goes beyond the black-and-white text of the regulations.  For example, the protege evaluation report calls for a list of all “new business skills, knowledge or opportunities” received from the relationship,” all “process improvements” made during the program year, and all “joint venture agreements developed” during the program year (even if no contracts were awarded to the joint venture).

The protege evaluation form also asks for “all offers submitted as a mentor-protege team” and “all offers submitted by the Protege (independent of the Mentor-Protege relationship” during the program year.  This information isn’t required by the regulations, and I wonder whether SBA will use it (at least in part) to evaluate whether the protege may be too dependent on its mentor.  We’ll see.

The protege evaluation form also asks “How did you find your Mentor?”  It’s a good question, because prospective proteges often wonder how best to connect with larger mentors.  If the SBA makes some statistics available, it may help small businesses better target their efforts to locate qualified mentors.

The mentor addendum asks some of the same questions set forth in the protege evaluation form, such as information about all subcontracts awarded to the protege and all loans made.  No doubt SBA will compare the protege’s report with the mentor’s to make sure that both companies are reporting the same facts.

Under the SBA’s regulations, the annual report is due “[w]ithin 30 days of the anniversary of SBA’s approval of the mentor-protege agreement.”  The All Small Mentor-Protege program went online October 1, 2016, so no annual reports are due quite yet.  But for participants admitted in the early days of the program, it won’t be long before the annual reports are due–and now’s a good time to review what information the SBA will require.


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Under the SBA’s ostensible subcontractor affiliation rule, hiring incumbent employees can be evidence of affiliation, but the importance of that staffing plan in an affiliation analysis depends on what role the incumbent contractor will play in the awardee’s performance of the contract.

In a recent size appeal decision, the awardee proposed to hire 85% of its personnel from the incumbent contractor, but the incumbent wasn’t proposed as a subcontractor–in fact, the incumbent was the company protesting the awardee’s small business size.  Under these circumstances, the SBA Office of Hearings and Appeals held, the awardee’s hiring of incumbent employees did not establish ostensible subcontractor affiliation.

OHA’s decision in Size Appeal of Synergy Solutions, Inc., SBA No. SIZ-5843 (2017) involved a DOE solicitation to support the National Nuclear Security Administration’s Office of Personnel and Facility Clearances at Kirtland Air Force Base.  The solicitation was issued as a small business set-aside under NAICS code 541690, with a corresponding $15 million size standard.

TUVA, LLC submitted a proposal.  TUVA proposed to use two subcontractors: SAVA Workforce Solutions, LLC and Inquiries Inc.  Of the 55 Full Time Equivalents who would work on the contract, TUVA and its subcontractors intended to hire 85% from the incumbent contractor, Synergy Solutions, Inc.

After evaluating competitive proposals, the agency awarded the contract to TUVA.  Synergy filed a size protest, asserting that TUVA was affiliated with its subcontractors under the ostensible subcontractor affiliation rule.

The SBA Area Office issued a size determination finding TUVA to be a small business.  With respect to TUVA’s proposed staffing, the SBA Area Office held that TUVA’s plan to hire 85% of the incumbent personnel was not indicative of ostensible subcontractor affiliation because the incumbent contractor–Synergy–was not proposed as TUVA’s subcontractor.

Synergy filed a size appeal with OHA.  Among its arguments, Synergy asserted that TUVA’s staffing plan demonstrated that TUVA lacked relevant experience and expertise, and that “it is possible” that TUVA would rely on its subcontractors if it was unable to successfully recruit or retain the incumbent employees.

OHA noted that “TUVA proposes to hire a large portion of its workforce (85%) from the incumbent contractor.”  In this case, however, “that concern is not one of TUVA’s proposed subcontractors; rather, the incumbent is [Synergy] itself.”  OHA wrote that, in a previous case, it had held that “there was no ostensible subcontractor violation where the awardee had proposed to hire the incumbent workforce from a firm other than its proposed subcontractors.  That fact pattern is present here.”

OHA denied Synergy’s size appeal.

As OHA has often written, ostensible subcontractor affiliation cases are intensely fact-specific, so Synergy Solutions doesn’t necessarily mean that hiring employees from a third party could never factor into an affiliation analysis.  That said, OHA’s decision is logical: the question at the heart of the ostensible subcontractor rule is whether the awardee is unusually reliant on its subcontractors.  Where, as in Synergy Solutions, the incumbent contractor isn’t proposed as a subcontractor, it may be quite difficult for a protester to show that the awardee’s hiring of incumbent staff demonstrates such unusual reliance.


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In its evaluation of proposals, a procuring agency gave a challenger a strength for proposing to recruit incumbent employees, but didn’t give the incumbent contractor a strength–even though the incumbent contractor proposed to retain the very same people.

Unsurprisingly, the GAO found that the evaluation was unequal, and sustained the incumbent’s protest.

The GAO’s decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2o17) involved an Air Force solicitation for engineering, program management, and administrative services at Eglin Air Force Base.  The solicitation called for award to the offeror proposing the best value to the government, considering three factors: technical capability and risk, past performance, and cost/price.  There were four technical subfactors, including a subfactor for technical workforce management.

SURVICE Engineering Company, LLC or SEC, was the incumbent contractor.  SEC submitted a proposal, in which it proposed to retain its incumbent personnel.  Engineering Research and Consulting, Inc., or ERC, also submitted a proposal.  ERC proposed to recruit many of SEC’s incumbent personnel.

In its evaluation of the technical workforce management subfactor, the Air Force assigned a strength to ERC for proposing to recruit SEC’s “high-performing, highly-skilled senior staff.”  However, the Air Force did not assign SEC a strength for proposing to retain its own incumbents.  The Air Force awarded the contract to ERC.

SEC filed a GAO bid protest.  SEC raised a number of allegations, including unequal treatment in the evaluation of the technical workforce management subfactor.  SEC contended that it was improper for the Air Force to award ERC a strength for proposing to recruit SEC’s incumbents, while not assigning SEC a strength for proposing to retain the same people.

The GAO wrote that “t is a fundamental principal of federal procurement law that a contracting agency must treat all offerors equally and evaluate their proposals evenhandedly against the solicitation’s requirements and evaluation criteria.”  Where an agency applies “a more exacting standard” to certain offerors’ proposals than others, “we have found such evaluation to involve disparate treatment.”

In this case, “SEC did not receive a strength for retaining its own employees by respecting seniority or for proposing the same staff.”  And “[w]here the parties propose essentially the same workforce, and where the agency assessed strengths for the awardee’s efforts to retain the workforce and has not shown why it did not assign similar strengths to the protester’s proposal, we conclude that the agency applied the evaluation criteria unequally and therefore that the evaluation was unreasonable.”

The GAO sustained this aspect of SEC’s protest.

The Air Force undoubtedly thought that it would be easier for SEC to retain its own employees than for a challenger like ERC to recruit them.  But that wasn’t a valid basis for assigning a strength only to ERC.  Both companies proposed the same people, so ERC’s proposal didn’t offer a benefit to the government that was missing from SEC’s proposal.

The SURVICE Engineering Company case is a good reminder that an agency cannot hold an incumbent to a higher standard than other offerors, at least not unless there are unusual circumstances–which didn’t exist here.


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Coming off their World Series win last year, my Chicago Cubs are back atop the National League Central division in hopes of repeating as champions.  While we still have few months of the regular season left, I’m hoping for a repeat of October 4, 1908, when a whopping 6,210 fans watched the Cubs successfully defend their 1907 title.

But enough baseball for now–this is a government contracts blog, after all.  And since it’s Friday, here is the SmallGovCon Week in Review.  In this edition, a contractor gets 60 months in jail for paying $3 million in bribes, the Federal Times takes a look at potential bid protest reforms, a commentator takes aim at no-bid contracts, and much more.

  • A former government contractor conspired with a contracting official to commit close to $3 million in bribery–and he’s now been sentenced to 60 months in prison. [United States Department of Justice]
  • When you get past the sky-is-falling headline, this article provides a surprisingly nuanced take on potential bid protest reforms.  (See my own take right here).  [Federal Times]
  • The House has voted to continue a seven-year-old moratorium on public-private competition to perform certain federal jobs under the long-standing Office of Management and Budget Circular A-76. [Government Executive]
  • NASA has launched a new program to help buyers using its governmentwide IT contract verify that the products they’re buying from are legitimate sources. [Nextgov]
  • With the “use it or lose it” philosophy many federal agencies adopt in Q4, the Federal Times offers some tips for businesses looking to bid on contracts at the end of the government’s fiscal year. [Federal Times]
  • President Trump’s first anti-regulation agenda is winning favor with federal contractors. [Federal News Radio]
  • One commentator calls no-bid contracts an “outrage,” and says that the government needs to renew its focus on competition. [The Hill]
  • A look at what vendors can do to capture year-end money, as well as set the stage for the new fiscal year head as Q4 winds down. [American City & County]
  • An appeal has been filed challenging a major Court of Federal Claims ruling in May, which held that SDVOSB preferences trump AbilityOne at the VA . [Winston-Salem Journal]
  • An ex-GSA contracting official and her husband both received prison sentences for a nepotism conspiracy scheme totaling more than $200,000. [Government Executive]
  • The Pentagon has detailed a plan to shake-up its Acquisition, Technology and Logistics office in the Office of Secretary of Defense with two main goals in mind. [Federal News Radio]

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