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Trump: DoD Contracts Should Be Fixed-Price

We previously have written about the trending preference toward fixed-price contracts, and away from cost reimbursement contracts, in defense procurements.  The Defense Department’s supplement to the FAR (known as DFARS), in fact, already includes restrictions on using cost-reimbursement or time and materials contracts. Now the President has come out in favor of fixed-price defense contracting. In a Time Magazine article published today, President Trump signaled strong support for the fixed-price contracting preference, going so far as to “talk of his plans to renegotiate any future military contracts to make sure they have fixed prices.” The article, called “Donald Trump After Hours,” is wide-ranging and does not delve into specifics as to how President Trump might reshape defense contracting. But in language a bit too salty for this blog, he makes clear that time and materials contracts aren’t his favorite method of contracting. It’s unclear what the practical effect of President Trump’s preference for fixed-price contracts might be. Will the President push for more specific laws or regulations mandating his contract preferences? Will Secretary Mattis or other Trump appointees issue additional internal guidance? We don’t know, but will continue to follow this issue.
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Koprince Law LLC

Koprince Law LLC

 

Trump Won’t Repeal Obama’s Order Prohibiting Contractor LGBTQ Discrimination

President Donald Trump won’t repeal former President Obama’s 2014 Executive Order prohibiting federal contractors from discriminating on the basis of sexual orientation and gender identity. According to CNN and other news outlets, the new Administration will allow Executive Order 13672 to remain on the books.  The Executive Order, which was codified in the FAR in 2015, adds sexual orientation and gender identity to the list of protected categories under the FAR’s Equal Opportunity clause, FAR 52.222-26. In recent days, the new Administration had faced repeated questions about whether Executive Order 13672 would remain in place.  While this week’s announcement puts those questions to rest, the fate of other government contracts Executive Orders signed by President Obama, such as the so-called “mandatory sick leave” Executive Order, remains uncertain.  My colleagues and I will keep you posted.
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Koprince Law LLC

Koprince Law LLC

 

The VA’s SDVOSB JV Verification Assistance Brief Is Wrong

The VA’s Verification Assistance Brief for SDVOSB and VOSB joint ventures flat-out misstates the law regarding the manner in which joint venture profits must be split. SDVOSBs and VOSBs often rely on Verification Assistance Briefs to guide them through the CVE verification process, and CVE analysts sometimes use Verification Assistance Briefs, too.  Which begs the question: how many CVE-verified joint ventures are legally invalid? The VAAR provides that a joint venture can be eligible for a VA SDVOSB or VOSB set-aside contract so long as the joint venture (among other things) adopts a joint venture agreement meeting the requirements of the SBA’s SDVOSB regulations.  So far, so good–joint ventures are complex enough; the last thing we need is a separate, VA-specific list of SDVOSB joint venture requirements. Effective August 24, 2016, the SBA overhauled its requirements for SDVOSB joint ventures.  The SBA moved the regulations from 13 C.F.R. 125.15 to 13 C.F.R. 125.18, and made many substantive changes and additions. The SBA made a further correction, effective December 27, 2016, which governs how profits are split.  The current regulation on profits is codified at 13 C.F.R. 125.18(b)(2)(iv), which states that every SDVOSB joint venture agreement must contain a provision “tating that the SDVO SBC(s) must receive profits from the joint venture commensurate with the work performed by the SDVO SBC.”  (Here’s a link to the Federal Register, which officially adopted this formula as law). That brings us to the VA’s Verification Assistance Brief on joint ventures.  Now, to be fair, I’m a fan of the Verification Assistance Briefs as a general matter.  I like that the CVE has made the effort to put verification information in a user-friendly and accessible format.  But the Verification Assistance Briefs are only helpful if they contain accurate and up-to-date information.  As of the date of this post, the SDVOSB/VOSB joint venture regulation does not. According to the Verification Assistance Brief: 4. The joint venture agreement must contain a provision “tating that the SDVO SBC must receive profits from the joint venture…commensurate with their ownership interests in the joint venture…” 13 CFR § 125.18(b)(2)(iv). Later on the Brief reiterates: The SDVOSB or VOSB must receive a distribution of profits commensurate with its ownership interests in the joint venture. Wrong, wrong, wrong!  This hasn’t been accurate since December 2016. Far from being helpful, then, this Verification Assistance Brief is dangerous.  It invites SDVOSBs and VOSBs to submit legally deficient joint venture agreements.  It invites CVE analysts to approve legally deficient joint venture agreements.  And, to the extent that the CVE has approved deficient SDVOSB or VOSB joint ventures (and I’d bet a fair bit that it has), it exposes those joint ventures to the possibility of successful SDVOSB status protests. Has the CVE simply been slow to update its information to reflect the December 2016 change?  Well, the Verification Assistance Brief (which, by the way, is the “Featured” Brief on the VA OSDBU website) says that it was “Reviewed and Revised May 2017.”  Yikes.  It needs a re-review, and fast. One more thing: if the CVE has approved any JVs containing the wrong profit-splitting provision, the CVE ought to unilaterally contact those companies and ask them to revise their JV agreements now.  It would be a horrible thing if a well-meaning JV were to lose an SDVOSB eligibility protest–and a contract–simply because it followed an incorrect Verification Assistance Brief.
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Veterans!

I am back in Lawrence after a great trip to Minneapolis last week for the 2016 National Veterans Small Business Engagement.  At the NVSBE, I presented four Learning Sessions: one on the nomanufacturer rule, the second on SDVOSB joint ventures, the third on best (and worst) practices in prime/subcontractor teaming agreements, and the fourth on common myths in the SBA’s size and socioeconomic set-aside programs (no, a contractor is not required to list a solicitation’s specific NAICS code in the contractor’s SAM profile). It was great to see so many familiar faces and make so many new acquaintances.  A big thank you to the organizers for putting on this fantastic event and inviting me to speak.  Thank you, also, to all of the contractors, acquisition personnel and others who attended my Learning Sessions, asked insightful questions, and stuck around to chat afterwards.  Another “thank you” who those who stopped by the Koprince Law LLC booth on the trade show floor to talk about government contracts law and collect a spiffy Koprince Law pen.  And finally, thank you to all of the veterans who attended the NVSBE–and those who didn’t–for your service to our country.
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Utah!

I am back from a great trip to Salt Lake City, where I spoke at the Utah PTAC Symposium.  My talk at the symposium centered on prime/subcontractor teams and joint ventures–topics of ever-increasing interest for small and large contractors alike. It was wonderful to see so many clients and old friends at the Symposium and meet so many new people, too.  A big “thank you” to Chuck Spence and his team at the Utah PTAC for organizing this event and inviting me to speak.  And thank you, also, to everyone who attended my seminar and stopped by the Koprince Law LLC booth to talk about government contracts. I’ll be sticking around Kansas for a few weeks, although I’ll be making a short trip down to Wichita on Tuesday to give a half-day session on the SBA’s All Small Mentor-Protege Program, sponsored by the Kansas PTAC.  If you’re a Kansas contractor, I hope to see you there.
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Koprince Law LLC

Koprince Law LLC

 

Thank You, San Diego NDIA!

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

Koprince Law LLC

 

Thank You, SAME Seattle Post!

I am back in Lawrence after a great trip to the Pacific Northwest for the SAME 2017 Small Business Symposium, hosted by the SAME Seattle Post.  I gave two talks at the Symposium: the first focused on the legal requirements for joint ventures and prime/subcontractor teaming arrangements, and the second on the SBA’s new All Small Mentor-Protege Program. A big “thank you” to Julie Erickson for organizing the event and inviting me to speak, and thanks also to Thomas Nichols for his kind introductions at both talks.  And of course, thank you to all of the contractors, government officials and clients who attended the sessions and asked such insightful questions. I’ll be sticking around Kansas for the next several weeks, but that doesn’t mean that I’ll be taking a break from speaking about government contracts.  Please join me and the Kansas PTAC for in-depth sessions on the government’s four major socioeconomic programs: 8(a), SDVOSB, HUBZone, and WOSB.  These sessions will be held in Wichita and Overland Park; click here for details and to register.  Hope to see you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, SAME Omaha Post!

I am back in Lawrence after a great trip to Omaha, where I spoke at the SAME Omaha Post Industry Day.  My talk focused on recent legal changes in federal contracting, including pieces of the 2017 National Defense Authorization Act and the SBA’s implementation of the All Small Mentor-Protege Program. Thank you very much to Anita Larson and the rest of the Planning Committee for organizing this great event and inviting me to speak.  Thank you also to all of the clients, contractors, and government representatives who stopped by my “booth” in the Exhibit Hall to ask questions and chat about the nuances of government contracts law.  As much as I enjoy speaking to large groups, it’s these one-on-one discussions that make for a truly outstanding conference. Next up for me: the Department of Energy Small Business Conference, which will be right in my backyard (Kansas City) next week.  Hope to see you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Philadelphia!

I am back in Lawrence after a great trip to Philadelphia, where I spoke at the  11th Annual Veterans Business Training and Outreach Conference.  My presentation focused on recent legal changes important to SDVOSBs and VOSBs, including major changes to the SDVOSB joint venture requirements and the new “all small” mentor-protege program. Many thanks to Clyde Stoltzfus and his team at the Southeast Pennsylvania PTAC for organizing this great event and inviting me to speak.  And of course, a big “thank you” as well to everyone who attended the presentation, asked great questions, and followed up after the event. Next on my travel agenda, I’ll be at the National Veterans Small Business Engagement in Minneapolis from November 1-3.  I will present four Learning Sessions at the NVSBE, and will spend my “spare” time manning the Koprince Law LLC booth on the tradeshow floor.  If you’ll be attending the 2016 NVSBE, I look forward to seeing you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Nebraska!

I am back in Lawrence after a great trip late last week to Omaha, where I gave a half-day seminar on joint venturing, teaming and subcontracting for federal government small business contracts. Thank you very much to Veronica Doga and her team at the Nebraska PTAC for organizing the event and making sure everything ran smoothly.  Thanks also to the other sponsors for contributing their time, expertise and meals (like many things in life, in-depth seminars on government contracts always go over better on a full stomach).  And of course, thank you to all of the attendees who spent a sunny Friday morning talking about mentor-protege agreements, teaming agreements, and similar topics.  It was great to meet so many new people. I’ll be sticking around for the next couple weeks before catching a flight to Salt Lake City for the 2017 Utah PTAC Procurement Symposium on October 11.  If you’ll be at the Symposium, please stop by the Koprince Law LLC booth to say hello.  Hope to see you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, NACA!

I am back in Lawrence after a great trip to Washington, DC where I attended the Native American Contractors Association 2017 Federal Contracting Policy and Advocacy Conference.  I was part of a great panel yesterday on the future of federal contracting.  The panel spoke about GAO bid protests, the move away from lowest-price technically-acceptable procurements, the need to improve the HUBZone program, and other important topics facing the contracting community in the years to come. A huge “thank you” to Mike Anderson, Chelsea Fish, and the entire NACA leadership team for organizing this fantastic event and inviting me to participate.  And a big thanks also to everyone who attended the panel and stopped by the Koprince Law LLC booth.  It was wonderful to see so many old friends and make plenty of new ones. Next on my travel agenda: the National Veterans Small Business Engagement.  If you will be attending the NVSBE, I look forward to seeing you in St. Louis.
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Michigan!

I am back in Lawrence after a great trip to Flint, Michigan on Friday for the Region 6 PTAC’s Meet the Buyer event.  My luncheon keynote covered some of the most important recent developments for government contractors, including the SAM “hack,” some major pieces of the 2018 National Defense Authorization Act, and much more. A big thank you to Jasmine McKenney, Maureen Miller and their colleagues for inviting me to speak.  And thank you, as well, to everyone I met at the event–particularly those who stuck around after the keynote to ask such great questions. Next up on the travel agenda: a flight south to Houston, where I’ll be presenting next week at the 17th Annual DOE Small Business Forum & Expo.  Hope to see you there!
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Thank You, Iowa And Indian Country!

I am back in Lawrence after a great Midwestern driving trip last week, where I spoke at two fantastic government contracting events. On Tuesday, I was in Des Moines for the Iowa Vendor Conference.  My presentation focused on debunking common myths surrounding the SBA’s size and socioeconomic programs (think that VetBiz verification applies to all agencies?  Think again!)  Many thanks to the Iowa State University Center for Industrial Research and Service for organizing this great event and inviting me to speak.  Special thanks to Pam Russenberger and Jodi Essex for all their work planning and coordinating the event, and a big “thank you” to the featured keynoter–the one and only Guy Timberlake–for everything he did to make the conference such a great success. After I spoke at the Iowa Vendor Conference, I hit the road for Norman, Oklahoma for the annual Indian Country Business Summit.  My talk at the ICBS touched on several recent, major changes to the small business contracting regulations, including the new rules for the limitations on subcontracting and universal mentor-protege program.  The ICBS has always been a great event, but it seems to get bigger and better each year.  A big “thank you” to Victoria Armstrong for her amazing work planning the event, as well as the Oklahoma Bid Assistance Network and Tribal Government Institute for hosting. I’ll be sticking around home for a few weeks, but more travel is on the agenda–I’m excited to be speaking at the Redstone Edge conference in Huntsville, Alabama on September 22.  Hope to see you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Indian Country!

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

Koprince Law LLC

 

Thank You, Huntsville!

I am back in Lawrence after a great trip to Huntsville, Alabama, where I spoke at the Redstone Edge Conference.  My presentation focused on the recent major developments in small business contracting, including the changes to the limitations on subcontracting and the new universal mentor-protege program. Many thanks to Courtney Edmonson, Scott Butler, Michael Steen, and the rest of the team at Redstone Government Consulting for putting together this impressive event and inviting me to participate.  A big “thank you” as well to everyone who attended the presentation, asked great questions, and followed up after the event. Next on my travel agenda, I’ll be in Wichita this Friday for a comprehensive half-day session on joint venturing and teaming for federal government contracts, sponsored by the Kansas PTAC.  Hope to see you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank you, El Paso!

I recently had the pleasure to discuss important government contracting legal updates and their effects on small businesses, at the 11th Annual Veterans Business Conference at Fort Bliss (in El Paso). The Contract Opportunities Center did a fantastic job organizing the conference, which brought together small businesses and government agencies for a wide-ranging discussion on government contracting. My presentation discussed many of the topics we’ve been following at SmallGovCon, including the SBA’s new small business mentor-protégé program, changes to the limitation on subcontracting, and, of course, the Supreme Court’s Kingdomware decision. I also enjoyed meeting many of the small business owners and government representatives who attended the event. If you attended the conference, it would be great to hear from you. Thanks to the COC for a great event—I hope to see you again next year!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, DOE Small Businesses!

I am back in Lawrence after a great trip to Houston, where I spoke at the DOE 17th Annual Small  Business Forum & Expo.  My breakout session on the Top 10 Legal Issues for Small Contractors covered a range of topics from enhanced debriefings to joint ventures. A big thank you to Earl Morgan, Anita Anderson, and all the other organizers of this outstanding event.  And thank you, also, to everyone who attended my session and stuck around afterward to ask questions. I’ll be in Wichita on June 5 to present a much longer version (a half-day!) of the Top 10 Legal Issues seminar.  To register, visit the Kansas PTAC website.  I hope to see you there!
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Thank you, Boise!

Last week I had the fantastic opportunity to travel to Boise to speak at the Idaho Small Business Contracting Symposium.  My talk focused on recent updates in the law relating to contracting with the Federal government. It was a broad topic I hope was valuable to all who attended. The symposium provided a wonderful opportunity to meet some clients face-to-face after having established a relationship over email and the phone and also to make some great new contacts. Huge thanks to Gary Moore and Lee Velton and the Idaho PTAC for organizing and inviting Koprince Law LLC to speak. Thanks to all who stopped by the table (and if you asked me where to get a copy of the Joint Ventures handbook, here’s a handy dandy link.) Next stop: Kansas SBDC Cybersecurity Forum in Manhattan, Kan., April 25, where I’ll be on the Identify, Protect, Detect, Respond, Recover panel. The event is sponsored by the Washburn Kansas Small Business Development Center. Registration is open. Hope to see you there.
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Thank You, APTAC!

I am on my way home from San Diego, where I spent yesterday at the APTAC Spring Conference.  My presentation focused on recent major legal updates in government contracting, including key provisions of the 2017 National Defense Authorization Act, implementation of the All Small Mentor-Protege Program, and more. APTAC is a wonderful organization and it is always such an honor to speak at an APTAC national conference.  Thank you to Becky Peterson, Teri Bennett, Tiffany Scroggs, and all of the APTAC leadership for inviting me to be part of this spring’s event.  And thank you to all the PTAC counselors who asked great questions and had kind words about the presentation (and a few lighthearted jests about KU’s tournament woes, too). I say it all the time, but it’s worth saying again: if you are a small business in government contracting, you owe it to yourself to see what your local PTAC can do for you.  Visit the ATPAC website to get started.
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Koprince Law LLC

Koprince Law LLC

 

Thank You, Alliance NW & National RES!

I am back in Lawrence after two fantastic trips to the West Coast, in very rapid succession. Last Thursday, I was in Puyallup, Washington for the annual Alliance Northwest conference.  As always, the conference was one of the best events of its type nationwide.  Thank you to Tiffany Scroggs and her colleagues at the Washington PTAC for sponsoring this great event and inviting me to participate.  If you missed Alliance Northwest (and my presentation on the SBA’s All Small Mentor-Protege Program), the presentations are all posted on the conference website.  Check it out, and circle your calendar for next year’s Alliance NW. Yesterday, I was in Las Vegas for the National Reservation Economic Summit conference.  It was my first time at National RES, and I was very impressed with this outstanding event.  If it weren’t for a very lengthy to-do list back here at the office, I’d happily be enjoying the remaining days of the conference.  A big “thank you” to the National Center for American Indian Enterprise Development for sponsoring National RES and inviting me to speak. After logging quite a few frequent flyer miles, I’m happy to be closer to home for the next several weeks.  But just because I’ll be in Kansas doesn’t mean that I won’t be engaging in one of my favorite pastimes: speaking at length about government contracting legal issues.  Join me on Thursday for “Obtaining and Maintaining the SBA’s HUBZone Certification,” an online seminar sponsored by my good friends at GOVOLOGY.
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Koprince Law LLC

Koprince Law LLC

 

Thank You, 8(a)s!

I am back in Kansas, where it is a balmy 39 degrees, after a great trip to Orlando for the National 8(a) Association Small Business Conference. The weather in Florida was “for real” balmy, as my kids might say–but as tempting as the sunny outdoors was, the convention hall was packed with representatives from 8(a) companies, large primes, government agencies, and others.  You know a conference has great content–and great networking–when attendees voluntarily choose the lecture hall over a nearby sun-drenched pool. At the Small Business Conference, I was part of a panel focusing on joint venturing and teaming issues.  Thank you to my fellow panelists, Shawn Ralston of AECOM and Jesse Binnall of Harvey & Binnall PLLC, for offering some great information and perspectives.  Thank you, also, to Ron Perry and the National 8(a) Association leadership for putting together this incredible event and inviting me to participate.  And thank you most of all to all those who attended the panel or stopped by the Koprince Law LLC booth.  It was wonderful to see so many familiar faces and make so many new connections. Next on my travel calendar: the Alliance Northwest conference on March 9, where I’ll be speaking in-depth about the legal aspects of the SBA’s new All Small Mentor-Protege Program.  If you’re in the Pacific Northwest (or just love a fantastic government contracts conference), I hope to see you there!
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Koprince Law LLC

Koprince Law LLC

 

Thank You, 8(a)s!

I am back in Lawrence after a wonderful three days at the National 8(a) Association 2018 Small Business Conference in Nashville.  I was part of a great panel on Wednesday on the SBA’s All Small Mentor-Protege Program, and spent a lot of time on the trade show floor talking about government contracts with 8(a)s, government leaders, and large businesses. A big “thank you” to Ron Perry, Paula Arevalo, and the rest of the National 8(a) Association for inviting me to participate in this fantastic event.  Thank you, also, to everyone who attended my panel or stopped by the Koprince Law LLC booth to say hello.  It was great to see so many familiar faces and make many new connections. I’ll be sticking close to home in February, but head to sunny Florida in early March for the APTAC Spring Conference.  PTAC counselors, I look forward to seeing you there!
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Thank You, APTAC!

I am back in Kansas after a fantastic trip to Jacksonville, Florida, where I spent yesterday at the Association of Procurement Technical Assistance Centers Spring Conference. My morning general session focused on important recent developments in government contracting–everything from key provisions of the 2018 National Defense Authorization Act to the impact of the RAND Corporation’s bid protest report. It was great to see so many familiar faces.  Thank you to all of the wonderful PTAC counselors who attended the session and asked great questions during the presentation and after.  A big thanks to Scott Knapp of our local Kansas PTAC, who provided a warm introduction.  And a special thank you to the attendees who took my advice and really did “live Tweet” about the great pink tie my daughter gave me last Father’s Day! Spending time with the PTACers is always one of the highlights of my professional year.  If you’re a government contractor who hasn’t yet connected with your local PTAC, you’re missing out.  Visit the APTAC homepage to find out more.
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Termination For Default: The “No Reasonable Likelihood” Standard

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

Koprince Law LLC

 

Tax Extensions Don’t Impact Small Business Size, SBA OHA Confirms

Contrary to common misconception, a contractor’s small business status under a receipts-based size standard ordinarily is based on the contractor’s last three completed fiscal years–not the last three completed fiscal years for which the contractor has filed a tax return. In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that a contractor cannot change the relevant three-year period by delaying filing a tax return for the most recently completed fiscal year. OHA’s decision in Teracore, Inc., SBA No. SIZ-5830 (2017) involved the major DHS PACTS II solicitation for IT support services.  The solicitation was set aside for SDVOSBs and contemplated the award of numerous IDIQ contracts.  Functional Category 1, which pertained to program management and technical services, was assigned NAICS code 541611 (Administrative Management and General Management Consulting Services), with a corresponding $14 million size standard. On July 11, 2014, Teracore, Inc. submitted a proposal, self-certifying as an SDVOSB.  At that time, Teracore’s 2013 fiscal year had ended, but Teracore had not yet filed its 2013 tax return. In February 2017–about two-and-a-half years after Teracore submitted its proposal–the DHS announced that Teracore would be awarded a contract under Functional Category 1. Two competitors subsequently filed protests challenging Teracore’s size under the $14 million size standard. The SBA Area Office asked Teracore to produce its 2013 tax return, even though that tax return had not yet been filed on July 11, 2014.  The SBA Area Office then calculated Teracore’s size using Teracore’s 2011, 2012, and 2013 tax returns.  The SBA Area Office determined that Teracore exceeded the $14 million size standard, and was ineligible for award. Teracore filed a size appeal with OHA.  Teracore argued that the 2013 tax return was not available until October 2014, several months after Teracore self-certified as small for the PACTS II solicitation.  Teracore argued that the SBA Area Office should have calculated Teracore’s receipts using the company’s 2010, 2011, and 2012 tax returns. Under the SBA’s regulations at 13 C.F.R. 121.104(b)(1), “[a]nnual receipts of a concern that has been in business for three or more completed fiscal years means the total receipts of the concern over its most recently completed three fiscal years divided by three.”  Further, 13 C.F.R. 121.104(a)(2) specifies that where a company has not yet filed a tax return for a particular year, “SBA will calculate the concern’s annual receipts for that year using any other available information,” such as books of account, financial statements, or even “information contained in an affidavit by a person with knowledge of the facts.” In this case, OHA wrote that because Teracore self-certified as small in July 2014, “the proper period of measurement for computing [Teracore’s] receipts is from 2011 to 2013–‘the most recently completed three fiscal years’ immediately preceding self-certification.”  Although Teracore’s 2013 tax return had not yet been filed when Teracore submitted its proposal, “the unavailability of a tax return does not alter the period of measurement, but instead requires the consideration of ‘other available information.'” Of course, by the time the SBA evaluated Teracore’s size in 2017, Teracore had filed its 2013 tax return.  OHA held that it was appropriate for the SBA Area Office to consider the tax return, even though it had been filed after the July 2014 self-certification.  “At a minimum,” OHA wrote, “the Area Office could properly consider a tax return filed after the date of self-certification to be ‘other available information’ which can be used to calculate size.” OHA denied Teracore’s size appeal, and affirmed the SBA Area Office’s size determination. In my experience, contractors who are approaching a size standard ceiling often think–like Teracore–that they can affect the relevant three-year period by delaying filing a tax return.  Nope.  As the Teracore size appeal demonstrates, the SBA doesn’t decide which three-year period to use based on whether tax returns have been filed, but rather based on whether the fiscal year has been completed.
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