A common misconception in government contracting is that to be eligible under a particular solicitation, a small business must have the solicitation’s assigned NAICS code listed under its SBA System for Award Management (“SAM”) profile.
Not so. GAO, in a recent decision, affirmed this misconception to be false—it found that an awardee’s failure to list the assigned NAICS code under its SAM profile did not make its proposal technically unacceptable.
Veterans Electric, LLC, B-413198 (Aug. 26, 2016) involved a VA solicitation seeking electrical upgrades at the Wood National Cemetery. The solicitation was set-aside for service-disabled veteran-owned small businesses. The VA issued the solicitation under NAICS code 238210 (Electrical Contractors and Other Wiring Installation Contractors), which carries a size standard of $15 million.
Before getting to the merits of the protest, a brief primer on NAICS codes might be helpful. NAICS codes—short for North American Industry Classification System codes—are simply industry classification codes assigned by the procuring agency for the purpose of collecting, analyzing, and publishing statistical data relating to government contracts. A contracting officer is required to assign the NAICS code that “best describes the principal nature of the product or service being acquired,” and identify and specify the operative size standard for the procurement. FAR 19.102(b). The SBA, moreover, assigns pertinent size standards (either in terms of annual receipts or number of employees) for the different NAICS codes, on an industry-by-industry basis. The codes, then, are particularly relevant in small business set-aside solicitations: if a company exceeds the corresponding size standard, it is “other than small,” and not an eligible offeror.
In Veterans Electric, two offerors—Veterans Electric and Architectural Consulting Group (“ASG”)—submitted offers. After evaluating proposals, the VA awarded the contract to ASG.
Veterans Electric protested the award, challenging ASG’s technical acceptability on two related grounds: first, that ASG’s failure to include NAICS code 238210 in its SAM profile demonstrated that it lacked the requisite technical experience and, second, that ASG’s failure to certify that it met the relevant size standard rendered its proposal unawardable.
GAO rejected Veterans Electric’s arguments. Taking Veterans Electric’s second allegation first, GAO acknowledged that ASG’s proposal and its SAM profile did not list NAICS code 238210. But GAO found convincing the contracting officer’s determination that, because ASG listed several other NAICS codes at or below the relevant the $15 million size standard, ASG obviously certified that it complied with the size standard for this procurement. Veterans Electric did not present any evidence to show otherwise. The contracting officer’s determination was therefore reasonable.
This finding also compelled GAO to deny Veterans Electric’s first allegation. A technical evaluation is within the agency’s discretion, and GAO found no basis to question ASG’s level of technical experience simply because it did not identify the primary NAICS code in its proposal or its SAM profile. GAO wrote:
So long as a company meets the applicable size standard, we are aware of no statutory or regulatory requirement that it have the particular NAICS code identified in the solicitation as its primary code.
GAO denied Veterans Electric’s protest.
Small business contractors are allowed to identify in their SAM profiles their areas of experience, by NAICS codes. And as a matter of practice, companies often list all codes in which they hope to perform work. But as Veterans Electric confirms, whether a small business lists any particular NAICS code under its SAM profile is not conclusive evidence as to its technical experience or acceptability—that evaluation is instead made by the procuring agency after its review of the offeror’s proposal as a whole. So long as that evaluation was reasonable, GAO will not sustain a protest challenging the awardee’s failure to list a NAICS code.
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Federal contractors frequently find themselves in the position of needing to establish their past performance credentials to secure future contracts – the government’s form of a reference check. The government often performs these reference checks by requesting completed past performance questionnaires, or PPQs, which the government uses as an indicator of the offeror’s ability to perform a future contract.
But what happens when a contractor’s government point of contact fails to return a completed PPQ? As a recent GAO decision demonstrates, if the solicitation requires offerors to return completed PPQs, the agency need not independently reach out to government officials who fail to complete those PPQs.
By way of background, FAR 15.304(c)(3)(i) requires a procuring agency to evaluate past performance in all source selections for negotiated competitive acquisitions expected to exceed the simplified acquisition threshold. The government has many means at its disposal to gather past performance information, such as by considering information provided by the offeror in its proposal, and checking the Contractor Performance Assessment Reports System, commonly known as CPARS.
PPQs are one popular means of obtaining past performance information. A PPQ is a form given to a contracting officer or other official familiar with a particular offeror’s performance on a prior project. The official in question is supposed to complete the PPQ and return it–either to the offeror (for inclusion in the proposal) or directly to the procuring agency. Among other advantages, completed PPQs can allow the agency to solicit candid feedback on aspects of the offeror’s performance that may not be covered in CPARS.
But the potential downside of PPQs is striking: the FAR contains no requirement that a contracting official respond to an offeror’s request for completion of a PPQ or similar document within a specific period (or at all). Contracting officials are busy people, and PPQ requests can easily fall to the bottom of a particular official’s “to-do” list. And procuring agencies sometimes contribute to the problem by developing lengthy PPQs that can be quite time-consuming to complete. For example, in a Google search for “past performance questionnaire,” the first result (as of the date of this blog post) is a NASA PPQ clocking in at 45 questions over 11 pages. A lengthy, complex PPQ like that one almost begs the busy recipient to ignore it.
That brings us to the recent GAO bid protest, Genesis Design and Development, Inc., B-414254 (Feb. 28, 2017). In Genesis Design, GAO denied a protest challenging the rejection of an offeror’s proposal where the offeror failed to adhere to the terms of the solicitation requiring offerors to submit three PPQs completed by previous customers.
The protest involved the National Park Service’s request for the design and construction of an accessible parking area and ramp at the Alamo Canyon Campground in Ajo, Arizona. The solicitation required offerors to provide three completed PPQs from previous customers to demonstrate that the offerors had successfully completed all tasks related to the solicitation requirements. The solicitation provided the Park Service with discretion to eliminate proposals lacking sufficient information for a meaningful review. The Park Service was to award the contract to the lowest-priced, technically acceptable offeror.
Genesis Design and Development, Inc. submitted a proposal. However, the PPQs Genesis provided with its proposal had not been completed by Genesis’ prior customers. Instead, the PPQs merely provided the contact information of the prior customers, so that the Park Service could contact those customers directly.
The Park Service found Genesis’ proposal was technically unacceptable, because Genesis failed to include completed PPQs. The Park Service eliminated Genesis from the competition and awarded the contract to a competitor.
Genesis filed a GAO bid protest challenging its elimination. Genesis conceded that the PPQs had not been completed by its past customers, but stated that it “reasonably anticipated that the agency would seek the required information directly from its clients.” Genesis contended that it “is often difficult to obtain such information from its clients because they are often too busy to respond in the absence of an inquiry directly from the acquiring activity.”
GAO wrote that “an offeror is responsible for submitting an adequately written proposal and bears the risk that the agency will find its proposal unacceptable where it fails to demonstrate compliance with all of a solicitation’s requirements.” Here, “the RFP specifically required offerors to submit completed PPQs,” but “Genesis did not comply with the solicitation’s express requirements.” Accordingly, “the agency reasonably rejected Genesis’ proposal.” GAO denied Genesis’ protest.
GAO’s decision in Genesis Design should serve as an important warning for offerors: where the terms of a solicitation require an offeror to return completed PPQs from its previous customers, the offeror cannot assume the procuring agency will contact the customers on the offeror’s behalf. Instead, it is up to the offeror to obtain completed PPQs.
In our view here at SmallGovCon, the Genesis Design decision, and other cases like it, reflect a need for a FAR update. After all, Genesis was exactly right: contracting officers are sometimes too busy to prioritize responding to PPQs. It doesn’t make good policy sense for the results of a competitive acquisition to hinge on whether a particular offeror is lucky enough to have its customers return its PPQs, instead of on the merits of that offeror’s underlying past performance.
Policymakers could address this problem in several ways, such as by imposing a regulatory requirement for contracting officials to respond to PPQ requests in a timely fashion, or by prohibiting procuring officials from requiring that offerors be responsible for obtaining completed PPQs. Hopefully cases like Genesis Design will spur a regulatory change sometime down the road. For now, offerors bidding on solicitations requiring the completion of PPQs must live with the uncertainty of whether the government will reject the offeror’s proposal as technically unacceptable due to the government’s failure to complete a PPQ in a timely manner.
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You’ve hit send on that electronic proposal, hours before the deadline and now you can sit back and feel confident that you’ve done everything in your power – at least it won’t be rejected as untimely – right?
Not so fast. If an electronically submitted proposal gets delayed, the proposal may be rejected–even if the delay could have been caused by malfunctioning government equipment. In a recent bid protest decision, the GAO continued a recent pattern of ruling against protesters whose electronic proposals are delayed. And in this case, the GAO ruled against the protester even though the protester contended that an agency server malfunction had caused the delay.
Western Star Hospital Authority, B-414216.2 (May 18, 2017) involved an Army RFP for emergency medical services. The RFP required that proposals be submitted no later than 4:00 pm., EST on January 30, 2017, to the Contracting Officer’s email address.
The RFP incorporated FAR 52.212-1 (Instructions to Offerors-Commercial Items). Paragraph (f)(2) of that clause provides that any “offer, modification, revision, or withdrawal of an offer received at the Government office designated in the solicitation after the exact time specified for receipt of offers is ‘late’ and will not be considered.”
On the date the proposals were due, Western Star emailed four proposal documents to the CO’s email address. The emails were sent at 2:43 p.m., 2:57 p.m., 3:01 p.m. and 3:06 p.m., well before the 4:00 p.m. deadline. For reasons unknown, the emails did not arrive at the initial point of entry to the Government infrastructure until after 6:00 p.m., well after the deadline. The Army rejected the proposal as late.
Western filed a GAO bid protest challenging the Army’s decision. Western argued that it was “guilty of no fault” and that it was “completely unfair and unreasonable to reject its bid because of factors beyond its control.”
Western argued that the agency’s servers were “not accessible,” and furnished a mail log from its service provider supporting its position. The Army disputed Western’s position. The Army provided a statement from its Information Assurance Manager, who said that the emails were “delayed by the protester’s servers” and that the delay “was not the fault or responsibility of the Government, which has no control over commercial providers used by the Protester.”
The GAO declined to resolve the question of whose servers had malfunctioned. Instead, the GAO indicated that Western’s proposal would be considered late regardless of whose equipment had malfunctioned. Citing its own prior authority, the GAO wrote, “[w] have repeatedly found that it is an offeror’s responsibility to ensure that an electronically submitted proposal is received by–not just submitted to–the appropriate agency email address prior to the time set for closing.” Because Western’s proposal “was not received at the agency’s servers until after the deadline for receipt of proposals,” the proposal was late.
The GAO also cited FAR 52.212-1(f)(2)(i)(A), which states that a late proposal, received before award, may be accepted if it was transmitted electronically and received at the initial point of entry to the Government infrastructure no later than 5:00 p.m. one working day prior to the due date. But Western did not submit its proposal by 5:00 one working day prior to the due date, so it could not avail itself of that exception.
The GAO declined to discuss any of the other exceptions to FAR 52.212-1(f)(2), such as the important “government control” exception, stating that the exceptions were “not pertinent” to the issue in Western. As we’ve written before, the Court of Federal Claims disagrees with the GAO when it comes to the question of whether these exceptions apply to electronic proposals, and we think the Court has the better position.
For now, though, Western Star Hospital Authority stands as an important warning to contractors who submit proposals electronically. Under the GAO’s current precedent, a late-submitted electronic proposal is late–even if the lateness was due to malfunctioning government equipment. The only exception recognized by the GAO under FAR 52.212-1 is the “5:00 p.m. one working day prior” exception, and contractors would be wise to take that into account when determining when to submit electronic proposals.
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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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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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The government can terminate a contract when the Department of Labor has made a preliminary finding of non-compliance with the Service Contract Act, even if the contractor has not exhausted its remedies fighting or appealing the finding.
The 3-0 (unanimous) decision by the Armed Services Board of Contract Appeals in Puget Sound Environmental Corp., ASBCA No. 58828 (July 12, 2016) is troubling because it could result in other contractors losing their contracts based on preliminary DOL findings–perhaps even if those preliminary findings are later overturned.
The Puget Sound decision involved two contracts under which Puget Sound Environmental Corporation was to provide qualified personnel to accomplish general labor tasks aboard Navy vessels or at naval shore leave facilities. Both contracts included the FAR’s Service Contract Act clauses.
Under that first contract, PSE ran into SCA issues. DOL investigated and PSE entered into a payment plan to remedy the alleged violations.
The Navy, knowing about the payment plan, nevertheless entered into another contract with PSE to provide similar services. The second contract, like the first, was subject to the SCA.
Early into the performance of the second contract (referred to as Task Order 9) during the summer of 2011, DOL began a new investigation into PSE. DOL’s investigation ultimately concluded that PSE owed its workers over $1.4 million on both contracts for failure to pay prevailing wage rates, and failing to provide appropriate health and welfare benefits and holidays to its covered employees. DOL made some harsh claims, including that PSE had classified skilled maintenance and environmental technicians as laborers and had issued health insurance cards to employees who were stuck with large medical bills after they found the cards were not valid.
During the investigation, on September 1, 2011, DOL wrote to the Navy contracting officer and informed the contracting officer of DOL’s preliminary findings. A week later, the contracting officer emailed PSE and told it that the Navy “no longer has need for the firewatch/laborer services provided under task order” 9, and that the Navy was terminating the contract for convenience. That same day, as would eventually come out in discovery, the contracting officer had written an internal email stating that he was concerned about awarding PSE another task order because of the supposed likelihood that PSE would “commit Fraud against [its] employees[.]”
Five days later, PSE agreed to allow the Navy to transfer funds due on Task Order 9 to DOL to be disbursed as back wages. Shortly thereafter, on September 15, PSE and the Navy mutually agreed to terminate the contract for convenience. The Navy issued no further task orders, but awarded a bridge contract for the same services to another contractor in October of that year.
Just under two years later, on May 17, 2013, PSE submitted a certified claim under the Contract Disputes Act, claiming lost revenue of $82.4 million (based on five years worth of revenue on the contract) and asked for 4% of that number, or $3.3 million in damages. The contracting officer never issued a final decision on the claim, so PSE treated this as a deemed denial and on August 9, 2013, appealed the decision to the ASBCA.
On May 12, 2014, DOL’s Office of Administrative Law Judges reviewed the findings of the DOL investigation and concluded that DOL was right to assess the $1.4 million in back pay. The Office of Administrative Law Judges determined that PSE should be debarred for three years. PSE appealed the decision to the Administrative Review Board, which affirmed the ALJ. PSE indicated that it would appeal the ruling in federal court, although it had not done so by the time the ASBCA ruled on PSE’s appeal.
At the ASBCA, both PSE and the Navy moved for summary judgment. PSE primarily argued that the Navy terminated the contract in bad faith. PSE said that the contracting officer rushed to judgment and that the termination for convenience was effectively a termination for default, relying on the use of the word “fraud” in the contracting officer’s internal email as evidence of animus.
The ASBCA said: “Whether fraud was the best word choice is not the issue before us; the undisputed facts show that the contracting officer had a good faith basis for concluding that PSE failed to pay its employees in accordance with the contracts and that it had deceived those employees by leading them to believe that they had health insurance when, in fact, they did not.” The ASBCA denied PSE’s motion for summary judgment, and granted the Navy’s motion.
While the facts of the case are interesting, they’re not all that unique; DOL investigates and prosecutes alleged SCA violations with some frequency. What’s troubling about the Puget Sound case is that the Navy unceremoniously terminated a contractor well before any of the new allegations were fully adjudicated and before PSE had the opportunity to contest DOL’s preliminary findings.
Although PSE could still prevail in federal court, the preliminary findings were confirmed by DOL’s ALJ and Administrative Review Board. But preliminary findings are just that–preliminary–and sometimes are overturned. The ASBCA’s decision therefore begs the question: what if a future contractor is terminated based on a preliminary DOL finding that is later overturned? Does Puget Sound Environmental mean that that contractor would have no remedy?
It’s certainly a possibility. That said, some there may be ways for other contractors to distinguish Puget Sound Environmental.
For one thing, PSE had already agreed to pay back wages on an earlier contract, of which the contracting officer was aware. That earlier settlement likely influenced the contracting officer’s decision; had the DOL’s preliminary findings on task order 9 stood in a vacuum, the contracting officer might have allowed things to play out.
Additionally, in reaching its conclusion, the ASBCA wrote that “PSE has not provided us with any evidence that DOL is wrong (and that the contracting officer’s reliance on DOL is actionable.” For example, the ASBCA said, “with respect to the allegation that PSE failed to pay health and welfare benefits, if DOL was wrong and PSE had paid for those benefits, it would have been relatively simple to establish this. But, PSE has failed to provide any such evidence.” In a case where DOL’s preliminary findings were overturned, the contractor would have strong evidence that those preliminary findings were wrong–and hopefully, that it was unreasonable for the contracting officer to rely on those findings.
There is an old legal adage that “hard cases make bad law,” which means that when judges allow themselves to be persuaded by sympathy, they make bad decisions. The same can be true when the parties involved elicit little sympathy, as may have been the case here–by not providing evidence that it had actually complied with the SCA, PSE wasn’t likely to win many points with the ASBCA’s judges.
That said, the next appellant who comes before the ASBCA with a similar issue may be able to demonstrate that it did, in fact, comply with the SCA, and that DOL’s preliminary findings were wrong. If so, it remains to be seen how the ASBCA will view the termination of that appellant’s contract.
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Picture this scenario: the government hires your company to do a job; you assign one of your best employees to lead the effort. He or she does such a good job that the government hires your employee away. The government then drags its feet on approving your proposed replacement and refuses to pay you for the time when the position was not staffed–even though the contract was fixed-price.
The scenario is exactly what happened to a company called Financial & Realty Services (FRS), and according to the Civilian Board of Contract Appeals, FRS wasn’t entitled to its entire fixed-price contract amount.
In Financial & Realty Services, LLC, CBCA No. 5354, 16-1 BCP ¶ 36472 (Aug. 18, 2016), FRS held a GSA Schedule contract for facilities maintenance and management services. The underlying Schedule contract included FAR 52.212-4 (Instructions to Offerors–Commercial Items).
In 2013, as part of that contract, GSA awarded FRS a task order to manage some federal buildings in the Dallas/Fort Worth [Texas] Service Center, Fort Worth Field Office. The task order, at its most basic, called for FRS to provide a property manager.
The task order was priced in firm fixed annual amounts, and GSA agreed that FRS could invoice in fixed monthly amounts.
Important to later events, the task order required that the property manager to be able to obtain a National Agency Check with Inquiries (NACI) clearance within three months of award and maintain it through the life of the contract. For the first year or so of performance, a FRS employee served in the property manager position. Then, in October 2014, the government solicited and hired the employee away, to do basically the same job he was doing for FRS.
A month later, FRS submitted a potential replacement to GSA, but that candidate took another job in the intervening time before the government gave FRS word that it had approved his/her NACI clearance. FRS then offered a second and a third option in January and February 2015. Finally, in March, the third potential replacement became the property manager.
FRS later submitted invoices for $49,280, seeking payment for the time between October 2014 and March 2015. GSA refused to pay, so FRS filed a claim with the contracting officer seeking payment of the disputed amount. The contracting officer denied the claim, so FRS appealed the denial to the CBCA, alleging that GSA “breached its contract with FRS by thwarting or precluding FRS' performance of the contract and by failing to pay the full contract price.”
GSA moved for the case to be dismissed. In its motion to dismiss, GSA argued there was no factual basis to determine that GSA had acted improperly.
FRS conceded that it did not actually provide a property manager during the relevant time frame. As one might expect, however, FRS argued that the task order was fixed-price (meaning, FRS said, that the government agreed to pay regardless of whether the position was staffed), and that the government actively prevented FRS from performing.
The CBCA disagreed. It pointed out that FAR 52.212-4(i) states that “[p]ayment shall be made for items accepted by the ordering activity that have been delivered to the delivery destinations set forth in this contract.” The CBCA continued:
Notwithstanding the task order’s “fixed price,” GSA was obligated to pay only for services that were delivered and accepted. Whether GSA could “supervise” the FRS employees who performed the services is immaterial. In light of the complaint’s allegations that FRS did not staff the task order during the months in dispute, the allegation that GSA “fail[ed] to pay the full Contract price” for that same period . . . does not state a claim on which the Board could grant relief.
As for the fact that the GSA hired FRS’s property manager, the CBCA wrote that FRS “identifies no factual basis to suspect that GSA did anything inconsistent with the normal federal hiring process.” The CBCA determined, “we do not see how an otherwise lawful recruiting or hiring action that an agency was not contractually barred from taking–which is all that has been plausibly alleged–could constitute undue interference entitling a contractor to be paid for work it did not perform.”
Finally, the Board held that GSA had not breached the contract by failing to timely approve a replacement property manager. The CBCA noted that the contract did not include “a contractual duty on GSA’s part to clear job candidates within a specified time . . . .” Under the circumstances, the CBCA found the delays in clearance to be reasonable.
The CBCA dismissed the appeal.
As an impartial observer, it is easy to have sympathy for FRS. It did nothing wrong. In fact, it seemingly did everything right. It staffed the position with someone so good that the government poached the worker away within a year. It suggested multiple replacements, at least one of which took a different job while the government was still in the process of authorizing clearance. It certainly would seem like FRS had reason to be upset, especially since the task order was fixed-price.
But let’s be real here. Fixed-price or not, the government isn’t too keen to pay for something it doesn’t receive from a contractor. As Financial & Realty Services demonstrates, that policy may apply even when the government itself causes the contractor to be unable to deliver.
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President Obama signed the 2017 National Defense Authorization Act into law on December 23, 2016. As is often the case, the NDAA included many changes affecting government contractors.
Here at SmallGovCon, my colleagues and I have been following the 2017 NDAA closely. Here’s a roundup of all 16 posts we’ve written about the government contracting provisions of the 2017 NDAA.
SDVOSB Programs: 2017 NDAA Sharply Curtails VA’s Authority. (Dec. 5, 2016).
2017 NDAA Restricts DoD’s Use of LPTA Procedures. (Dec. 7, 2016).
2017 NDAA Extends SBIR & STTR Programs For Five Years. (Dec. 8, 2016).
2017 NDAA Authorizes $250 Million For New Small Business Prototyping Program. (Dec. 8, 2016).
2017 NDAA Increases DoD’s Micro-Purchase Threshold To $5,000. (Dec. 9, 2016).
SDVOSB Programs: 2017 NDAA Modifies Ownership & Control Criteria. (Dec. 12, 2016).
2017 NDAA Strengthens Subcontracting Plan Enforcement. (Dec. 13, 2016).
2017 NDAA Requires GAO Report On Minority And WOSB Contract Awards. (Dec. 13, 2016).
2017 NDAA Requires Report On Bid Protest Impact At DoD. (Dec. 14, 2016).
2017 NDAA Restores GAO’s Task Order Jurisdiction – But Ups DoD Threshold. (Dec. 14, 2016).
2017 NDAA Requires “Brand Name Or Equivalent” Justifications. (Dec. 19, 2016).
2017 NDAA Establishes Preference For DoD Fixed-Price Contracts. (Dec. 21, 2016).
2017 NDAA Creates Pilot Program For Subcontractors To Receive Past Performance Ratings. (Dec. 21, 2016).
2017 NDAA Reiterates GAO Bid Protest Reporting Requirements. (Dec. 30, 2016).
2017 NDAA Requires Report on Indefinite Delivery Contracts. (Jan. 4, 2017).
That’s a wrap of our coverage for now, but we’ll keep you posted as various provisions of the 2017 NDAA begin to be implemented. And of course, it won’t be long until we start covering the upcoming 2018 NDAA.
Happy New Year!
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The SBA is processing the typical “All Small” Mentor-Protege Program application in a lightning-fast eight days.
Speaking at the National 8(a) Association 2017 Small Business Conference, John Klein, the SBA’s Associate General Counsel for Procurement Law, confirmed that All Small mentor-protege agreements are being processed very quickly. I was in the audience this morning for Mr. Klein’s comments, which also included many other interesting nuggets on the SBA’s new All Small Mentor-Protege Program.
Mr. Klein’s comments included the following:
Specificity of Mentor-Protege Agreements. When it comes to processing All Small mentor-protege agreements, the SBA is looking for specificity in terms of the assistance that the mentor will provide the protege. The SBA wants to see the sort of detail that can be tracked and evaluated to determine whether it was actually provided (and, if so, whether it was successful). Mr. Klein provided an example: a mentor committing to perform a certain type of training for a specific number of hours.
Focus on Protege. The mentor-protege agreement should focus on the benefits that the arrangement will provide to the protege. The SBA knows that joint venturing is an important reason why mentors and proteges alike pursue mentor-protege arrangements (and joint venturing should be mentioned in the agreement if the parties will pursue it), but joint venturing can’t be the primary focus of a successful mentor-protege agreement.
Equity Interest in Protege. Mr. Klein acknowledged that the regulations allow the mentor to obtain up to a 40% interest in the protege, but he cautioned small businesses to think carefully before giving up a large equity stake in the company. If the parties do agree to allow the mentor to take an equity interest, the mentor-protege agreement must demonstrate that doing so was beneficial to the protege. The equity interest cannot appear to primarily benefit the mentor. Although the mentor is not required to divest its equity interest upon the expiration of the mentor-protege agreement, the parties should be very careful that the equity interest doesn’t result in an affiliation once the mentor-protege agreement expires.
Secondary NAICS Codes. Mr. Klein confirmed that a company looking to be mentored in a second NAICS code must demonstrate that it has previously done work in that NAICS code. The All Small Mentor-Protege Program allows a company to receive mentoring in a secondary NAICS code, but is not intended for a company that has outgrown its primary NAICS code and is merely search for any NAICS code in which it is still small.
Second Protege. If a mentor wants a second (or third) concurrent protege, it is up to the mentor and protege–in the second or third application, if possible–to demonstrate that the additional protege is not a competitor of the first. Mr. Klein suggested that there are various ways to do this, such as showing that the second protege is in a different geographic area, industry, or niche than the first.
The All Small Mentor-Protege Program continues to draw a great deal of interest from large and small contractors alike. It’s very helpful to hear from SBA officials like Mr. Klein exactly what the SBA is looking for when it processes applications. And of course, it’s wonderful that processing is currently going so quickly. Here’s hoping that’s one contracting trend that continues.
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The VA cannot buy products or services using the AbilityOne List without first applying the “rule of two” and determining whether qualified SDVOSBs and VOSBs are available to bid.
Today’s decision of the U.S. Court of Federal Claims in PDS Consultants, Inc. v. United States, No. 16-1063C (2017) resolves–in favor of veteran-owned businesses–an important question that has been lingering since Kingdomware was decided nearly one year ago. The Court’s decision in PDS Consultants makes clear that at VA, SDVOSBs and VOSBs trump AbilityOne.
The Court’s decision involved an apparent conflict between two statutes: the Javits-Wagner-O’Day Act, or JWOD, and the Veterans Benefits, Health Care, and Information Technology Act of 2006, or VBA.
As SmallGovCon readers know, the VBA states that (with very limited exceptions), the VA must procure goods and services from SDVOSBs and VOSBs when the Contracting Officer has a reasonable expectation of receiving offers from two or more qualified veteran-owned companies at fair market prices. Last year, the Supreme Court unanimously confirmed, in Kingdomware, that the statutory rule of two broadly applies.
The JWOD predates the VBA. It provides that government agencies, including the VA, must purpose certain products and services from designated non-profits that employ blond and otherwise severely disabled people. The products and services subject to the JWOD’s requirements appear on a list known as the “AbilityOne List.” An entity called the “AbilityOne Commission” is responsible for placing goods and services on the AbilityOne list.
But which preference takes priority at VA? In other words, when a product or service is on the AbilityOne list, does the rule of two still apply? That’s where PDS Consultants, Inc. enters the picture.
The AbilityOne Commission added certain eyewear products and services for four Veterans Integrated Service Networks to the AbilityOne List. VISNs 2 and 7 had been added to the AbilityOne List before 2010. VISNs 2 and 8 were added to the AbilityOne list more recently.
PDS filed a bid protest at the Court, arguing that it was improper for the VA to obtain eyewear in all four VISNs without first applying the rule of two. The VA initially defended the protest by arguing that AbilityOne was a “mandatory source,” and that when items were on the AbilityOne List, the VA could (and should) buy them from AbilityOne non-profits instead of SDVOSBs and VOSBs.
But in February 2017, just two days before oral argument was to be held at the Court, the VA switched its position. The VA now stated that it would apply the rule of two before procuring an item from the AbilityOne list “if the item was added to the List on or after January 7, 2010,” the date the VA issued its initial regulations implementing the VBA. For items added to the AbilityOne List beforehand, however, no rule of two analysis would be performed.
(As an aside–the VA seems to be making a habit of switching its positions in these major cases).
The parties agreed that the VA’s new position mooted PDS’s challenges to VISNs 6 and 8, which would now be subject to the rule of two. But what about VISNs 2 and 7? PDS pushed forward, challenging the VA’s position that it could issue new contracts in those VISNs without performing a rule of two analysis. PDS argued, in effect, that nothing in the VBA allowed products added to the AbilityOne List before 2010 to somehow be “grandfathered” around the rule of two.
Judge Nancy Firestone agreed with PDS:
The court finds that the VBA requires the VA 19 to perform the Rule of Two analysis for all new procurements for eyewear, whether or not the product or service appears on the AbilityOne List, because the preference for veterans is the VA’s first priority. If the Rule of Two analysis does not demonstrate that there are two qualified veteran-owned small businesses willing to perform the contract, the VA is then required to use the AbilityOne List as a mandatory source.
Judge Firestone pointed out that under the VBA, “the VA must perform a Rule of Two inquiry that favors veteran-owned small businesses and service-disabled veteran-owned small businesses ‘in all contracting before using competitive procedures’ and limit competition to veteran-owned small businesses when the Rule of Two is satisfied.” Citing Kingdomware, Judge Firestone wrote that “like the [GSA Schedule], the VBA also does not contain an exception for obtaining goods and services under the AbilityOne program.” Judge Firestone concluded:
[T]he VA has a legal obligation to perform a Rule of Two analysis under the VBA when it seeks to procure eyewear in 2017 for VISNs 2 and 7 that have not gone through such analysis – even though the items were placed on the AbilityOne List before enactment of the VBA. The VA’s position that items added to the List prior to 2010 are forever excepted from the VBA’s requirements is contrary to the VBA statute no matter how many contracts are issued or renewed.
Judge Firestone granted PDS’s motion for judgment and ordered the VA not to enter into any new contracts for eyewear in VISNs 2 and 7 from the AbilityOne List “unless it first performs a Rule of Two analysis and determines that there are not two or more qualified veteran-owned small businesses capable of performing the contracts at a fair price.”
The apparent conflict between JWOD, on the one hand, and the VBA, on the other, was one of the major legal issues left unresolved by Kingdomware. Now, as we approach the one-year anniversary of that landmark decision, the Court of Federal Claims has delivered another big win for SDVOSBs and VOSBs.
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A contractor was awarded more than $31,000 in attorneys’ fees and costs after a government agency unjustifiably refused to pay the contractor’s $6,000 claim–forcing the contractor to go through lengthy legal processes to get reimbursed.
A recent decision of the Civilian Board of Contract Appeals is a cautionary tale for government contracting officials, a few of whom seem inclined to play hardball with low-dollar claims, even when those claims are entirely justified.
The CBCA’s decision in Kirk Ringgold, CBCA 5772-C (2017) involved a contract between Kirk Ringgold, an individual, and the USDA. Under the contract, the agency rented Mr. Ringgold’s property to use as a helipad during a forest fire. Afterward, the agency “refused, for two weeks, to take responsibility for restoring the Ringgolds’ property to its original condition.”
Mr. Ringgold submitted an invoice for 15 days of holdover rent, in the amount of $6,000. The USDA refused to pay. Mr. Ringgold eventually filed an appeal with the CBCA.
The USDA initially filed briefs defending the appeal. But finally, about 11 months after the dispute arose (and three months after Mr. Ringgold filed his appeal), the USDA agreed to settle for the full amount claimed–$6,000.
Mr. Ringgold then filed a request for attorneys’ fees and expenses under the Equal Access to Justice Act. Mr. Ringgold sought fees for more than 200 hours of work performed by his four attorneys, as well as legal work performed by a summer law clerk.
The CBCA wrote that the initial denial of Mr. Ringgold’s invoice was “unreasonable and unjustified.” Further, once the appeal was filed, the USDA made “substantially unjustified objections to jurisdiction and liability,” thereby “forc[ing] Mr. Ringgold’s lawyers to brief these points.” Although the USDA ultimately agreed to settle for the full amount, this didn’t eliminate the costs Mr. Ringgold had already incurred because of the agency’s unreasonable conduct.
The CBCA noted that “the specific purpose of the EAJA is to eliminate for the average person the financial disincentive to challenge unreasonable governmental actions of this kind.” The CBCA granted Mr. Ringgold’s request and awarded him $31,230.35 in attorneys’ fees and costs.
In my experience, most government officials go out of their way to treat contractors fairly. Every now and then, though, my colleagues and I run into a contracting official who seems to have an unfortunate mindset when it comes to a small-dollar claim: “this one will be too expensive for the contractor to litigate–so let’s just see if they’ll eat it.”
As the Kirk Ringgold case shows, this can be a risky way for the government to do business. Under EAJA, a contractor may be entitled to recover its attorneys’ fees and costs, even if those fees and costs far outstrip the value of the original claim. Here, the USDA’s unjustified failure to simply pay Mr. Ringgold’s invoice ultimately cost the agency more than five times the value of that invoice. Contracting officials, take note.
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The 2018 National Defense Authorization Act (NDAA) has generated lots of headlines regarding the so-called “Amazon amendment” and the Act’s prohibition on the Russian IT company Kaspersky Labs products. But gone under reported is a huge change to how the government makes small purchases.
The 2018 NDAA, signed by President Donald Trump on December 12, increases the standard micro-purchase threshold applicable to civilian agencies from $3,000 to $10,000. Last year, the NDAA increased the Department of Defense (DoD) micro-purchase threshold to $5,000. This larger jump for civilian agencies is likely to have large impact on government purchasing.
A micro-purchase is one for goods or services that, due to its relatively low value, does not require the government to abide by many of its ordinary competitive procedures, including small business set asides. Because the contract is, theoretically, such a low amount, the contracting officer can pick virtually whatever company and product he or she wants to satisfy the procurement, so long as the price is reasonable.
Now the civilian micro-purchase threshold is increasing—a lot.
Specifically, Section 806 of the NDAA, titled “Requirements Related to the Micro-Purchase Threshold” states the following: “INCREASE IN THRESHOLD.—Section 1902(a)(1) of title 41, United States Code, is amended by striking ‘$3,000’ and inserting ‘$10,000’.”
Title 41 of the Code generally refers to public contracts between Federal civilian agencies such as the Department of Agriculture, the Department of Education, the Department of State, the Department of Labor, and so on. Title 10, on the other hand, generally refers to the Department of Defense components, such as the Army, Navy, and Air Force, but also a number of smaller components such as the Defense Logistics Agency and the Missile Defense Agency.
Following the change, Section 1902(a)(1) shall read: “Definition.–(1) Except as provided in sections 2338 and 2339 of title 10 . . . for purposes of this section, the micro-purchase threshold is $10,000.”
The NDAA therefore, specifically exempts (or at least does not change) the sections of Title 10 relating to the DoD micro-purchase threshold (sections 2338 and 2339) which will therefore hold steady at $5,000—for 2018 at least (more on that later).
Section 1902 specifies in paragraph (f) that the section shall be implemented by the FAR. The NDAA changes the U.S. Code, but it does not change the FAR. The FAR, meanwhile, currently sets the civilian micro-purchase threshold at $3,500, because it is occasionally adjusted to keep pace with inflation. Although the law has now officially been changed, it’s not clear that civilian contracting officers will begin using the new authority until the corresponding FAR provisions are amended.
Our guess is that, in practice, this change will take some time to implement. We believe most contracting officers will stick to what the FAR says until they are told otherwise. It is just a guess, but it is logical because unlike the U.S. Code, procurement officials rely on the FAR every day. Congress may have said that civilian procurement officials have the authority to treat anything below $10,000 as a micro-purchase, but contracting officers often wait until the FAR Council implements statutory authority before using that authority. As such, until the FAR, or the specific agency the procurement officials work for, recognize the change, our guess is that most COs will follow the FAR until it catches up with the U.S. Code.
Nevertheless, whether it happens today or a year from now, this change is likely to have a big impact on some federal procurements. The 233% increase in the threshold for civilian agencies (a 186% increase if you count from $3,500) will open the door for many more products to be purchased without competition: FAR 13.203 specifies that “[m]icro-purchases may be awarded without soliciting competitive quotations” so long as the contracting officer (or similar authority) considers the price to be reasonable. Just think about the different types of things you can buy with $10,000 as opposed to $3,000, or $3,500.
This change to the micro-purchase threshold, plus the “Amazon amendment” which sets up an online marketplace for sellers, and the fact that the FAR encourages the use of a Governmentwide commercial purchase card to make micro-purchases (FAR 13.301) means that procurement officials will simply be able to swipe, or click for relatively significant buys. Altogether, it could be bad news for some small businesses, particularly those that engage in a lot of “rule of two” set-aside simplified acquisitions under FAR 19.502-2(a). When this change is implemented, and presuming FAR Part 19 is updated accordingly, a chunk of those simplified acquisitions will no longer be reserved for small businesses.
With this change to the civilian threshold, it is hard not to wonder whether the DoD threshold will soon grow to meet it. DoD procurement officials sometimes enjoy greater freedom in purchasing than their civilian counterparts. It would not be shocking to hear DoD voices begin lobbying for the same change on their end soon.
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The number of 8(a) sole source contracts over $20 million awarded by the DoD has been “steadily declining since 2011,” when a new requirement was adopted requiring agencies to prepare written justifications of such awards.
According to a recent GAO report, such awards have dropped more than 86% compared to the period before the justification requirement took effect. The report states that much of the work that was previously awarded on a sole source basis has now been competed.
8(a) Program participants owned by Alaska Native Corporations or Indian Tribes (which the GAO collectively refers to as “tribal 8(a) firms”) are eligible to receive 8(a) sole source contracts for any dollar amount. In contrast, as the GAO writes, other 8(a) firms “generally must compete for contracts valued above certain thresholds: $4 million or $7 million, depending on what is being purchased.”
Section 811 of the 2010 National Defense Authorization Act did not eliminate the special sole source authority for tribal 8(a) firms, but required a contracting officer to issue a written justification and approval for any sole source 8(a) award over $20 million. This portion of the 2010 NDAA was incorporated in the FAR in March 2011. A regulatory update in late 2015 increased the threshold to $22 million, where it remains today.
In 2015, Congress directed the SBA to assess the impact of the justification requirement. The GAO’s recent report responds to that Congressional directive. The report demonstrates that large DoD 8(a) sole source awards have dropped dramatically since 2011. The GAO writes:
From fiscal years 2006 through 2015, the number of sole-source 8(a) contracts started to decline in 2011 and remained low through 2015, while the number of competitive contract awards over $20 million increased in recent years. Consistent with findings from our past reports, we found that sole-source contracts generally declined both number and value since 2011, when the 8(a) justification requirement went into effect. DOD awarded 22 of these contracts from fiscal years 2011 through 2015, compared to 163 such contracts in the prior 5-year period (fiscal years 2006 through 2010).
In my eyes, this isn’t just a decline–it’s a dramatic drop in 8(a) sole source awards of 86.5% from one five-year period to the next.
The GAO stated that there is a variety of reasons for the drop, including “a renewed agency-wide emphasis on competition” at DoD, as well as budget declines and declines in the sizes of requirements. DoD officials “had varying opinions about whether the 8(a) justification was a deterrent to awarding large sole-source 8(a) contracts.” Some of the officials GAO interviewed “noted that the 8(a) justification review process would deter them, while others said they would award a sole-source contract over $20 million if they found that only one vendor could meet the requirement.”
The report wasn’t all bad news for tribal 8(a) firms. The GAO wrote that competitive awards to tribal 8(a) firms have increased even as sole source awards have fallen:
Since 2011, tribal 8(a) firms have won an increasing number of competitively awarded 8(a) contracts over $20 million at DOD. Although these firms represent less than 10 percent of the overall pool of 8(a) contractors, the number of competitively awarded DOD contracts over $20 million to tribal 8(a) firms grew from 26 in fiscal year 2011–or 20 percent–to 48 contracts in fiscal year 2015–or 32 percent of the total. In addition, since 2011, tribal 8(a) firms have consistently won higher value awards than other 8(a) firms for competitive 8(a) contracts over $20 million. In fiscal year 2015, the average award size of a competed 8(a) contract to a tribal 8(a) firm was $98 million, while other 8(a) firms had an average award of $48 million.
Despite the good news on the competitive front, tribal advocates are likely to see the GAO report as confirmation of what many have already assumed: that Section 811 of the 2010 NDAA has had a significant negative effect on sole source awards to 8(a) firms owned by ANCs and Indian tribes. Alaska Congressman Don Young has included language in the 2017 NDAA to repeal Section 811. Congressman Young included similar language in the 2016 NDAA, but it was removed from the final bill. We’ll see what happens this year.
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SBA’s regulations provide that an 8(a) program participant that no longer is owned or controlled by socially and economically disadvantaged person can be terminated from the 8(a) program. But the decision to terminate is not one to be made lightly: SBA must make sure that it not only has evidence in support of its termination decision, it must also explain how that evidence demonstrates its conclusions.
This requirement was at issue in a recent court decision that found an SBA 8(a) program termination decision to be based on “numerous erroneous assumptions” and “unsupported conclusions, not substantial evidence.”
The 8(a) program serves an important policy objective: to assist socially and economically disadvantaged small businesses to compete for (and perform) government contracts as a means of business development. To qualify for the 8(a) program, a company must be “a small business which is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States, and which demonstrates potential for success.” 13 C.F.R. 124.101.
With respect to control, the SBA’s regulations require that a business be managed full-time by at least one capable disadvantaged individual. But certain business relationships may jeopardize that control: the regulations caution that non-disadvantaged persons may be found to control (or have the power to control) the 8(a) company when business relationships with such non-disadvantaged persons “cause such dependence that the [8(a) Program] applicant or Participant cannot exercise independent business judgment without great economic risk.” Id. § 124.106(g)(4).
In The Desa Group, Inc. v. U.S. Small Business Administration, Civ. No. 15-0411 (RC) (May 26, 2016), the United States District Court for the District of Columbia analyzed the issue of control, when it considered The Desa Group’s (“TDG”) argument that SBA had arbitrarily terminated it from the 8(a) program. The SBA had based its termination on a finding that TDG was supposedly controlled by DESA, Inc., a former 8(a) participant controlled by the mother of TDG’s 8(a) participant owner, Dionne Fleshman.
As part of its application for the 8(a) program, TDG disclosed its relation to DESA, noting that DESA was run by Ms. Fleshman’s mother, but asserted that TDG was not dependent on DESA other than the fact that DESA was a TDG customer. SBA approved TDG’s 8(a) application on September 30, 2010.
A little more than two years later, SBA received information that cast doubt on these statements. A tipster informed SBA that Ms. Fleshman actually worked at both TDG and DESA, and that her mother (DESA’s owner) actually managed TDG. The SBA initiated an investigation of the allegations. Following its investigation, SBA advised TDG that it intended to terminate its participation in the 8(a) program.
After receiving its notice of termination, TDG appealed to the SBA’s Office for Hearings and Appeals. OHA rejected SBA’s claim that Ms. Fleshman’s mother actually controlled TDG. Even still, OHA found “significant interconnectedness” between TDG and DESA that demonstrated DESA’s control. Specifically, OHA noted that TDG and DESA acted as subcontractors for each other; that TDG maintained an office in DESA’s headquarters; that the building where TDG housed its own headquarters was owned by Ms. Fleshman’s mother, who “plays a critical role” in TDG’s success; that DESA was responsible for nearly 40% of TDG’s revenues in 2010; and that DESA was paying TDG between $7,000 and $10,000 per month from 2010 to 2012. As a result, OHA determined that TDG could not exercise independent business judgment apart from DESA without great economic risk. As a result, DESA controlled TDG. TDG’s appeal was denied.
Usually, 8(a) termination appeals end at OHA. But TDG wasn’t done fighting. TDG sued the SBA in federal court, arguing that SBA’s termination decision was arbitrary and capricious. The U.S. District Court for the District of Columbia, after considering the parties’ evidence and arguments, agreed with TDG.
The Court noted that several of the SBA’s reasons for termination appeared unsupported by evidence, and that much of the evidence that was offered by SBA in support of its decision was disputed. Additionally, the Court concluded that neither SBA nor OHA had explained how TDG’s connections with DESA demonstrated such a high level of dependence that TDG could not exercise independent business judgment without great economic risk.
As an example, the Court agreed with SBA that, as a general matter, the level of revenue that TDG received from DESA “might support a finding of dependence that prohibited TDG from exercising its own independent business judgment without great economic risk[.]” But the Court faulted SBA for not explaining how the facts supported its conclusion:
[T]he mere fact that DESA pays for TDG’s services does not necessarily indicate that it is able to assert control over how TDG runs its business or the business judgment TDG or Ms. Fleschman make in doing so.
The “implicit, unexplained assumption” in the SBA’s argument was that any contractual relationship between the companies indicated that Ms. Fleshman has ceded control over TDG to DESA. This was simply a bridge too far.
The Court concluded:
The agency has identified several contacts or connections between TDG and DESA. But under the regulation the SBA has invoked here, mere contacts or business relationships alone are insufficient to show control; the agency must establish that those relationships cause such dependence that TDG cannot exercise independent business judgment without great economic risk. The SBA has done no more than conclusorily state that the contracts here equate to the level of dependence necessary to show that Ms. Sumpter or DESA controls TDG.
The Court thus found that SBA had not met its burden to terminate TDG from the 8(a) program. It therefore remanded the issue back to SBA for additional investigation or explanation.
The Desa Group demonstrates that 8(a) termination decisions cannot be made lightly. In order to properly terminate an 8(a) program participant, SBA must back its decision with evidence, explanation, and analysis. Mere conclusory statements don’t do the trick.
And The Desa Group is also a good reminder that an 8(a) Program participant need not simply accept an SBA final termination decision–instead, like TDG, a terminated 8(a) program participant may fight SBA in federal court after exhausting its internal SBA remedies.
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An offeror’s apparent attempt to engage in a little proposal gamesmanship has resulted in a sustained GAO bid protest.
In a recent case, an offeror attempted to evade a solicitation requirement that proposals be no more than 10 single-spaced pages, by cramming its proposal into less than single-spacing. The GAO wasn’t having it, sustaining a competitor’s protest and holding that the “spacing gamesmanship” had given the offeror an unfair advantage.
The GAO’s decision in DKW Communications, Inc., B-412652.3, B-412652.6 (May 6, 2016) involved a Department of Energy RFQ seeking three fixed-price task orders for various support services. The task orders were to be awarded under a RFQ issued to blanket purchase agreement holders under multiple federal supply schedules, including Schedule 70.
The RFQ stated that quotations should be submitted in three volumes: technical, past performance, and price. With respect to the technical volume, the RFQ informed vendors that quotations would be limited to 10 pages and that material in excess of 10 pages would not be evaluated. The RFQ further provided that “the text shall be 12 point (or larger) single-spaced, using Times New Roman Courier, Geneva, Arial or Universal font type.”
After evaluating competitive quotations, the agency awarded the task orders to Criterion Systems, Inc. DKW Communications, Inc., an unsuccessful competitor, then filed a GAO bid protest challenging the award to Criterion.
During the course of the protest, DKW apparently received Criterion’s technical proposal (I assume, although it is not stated in the decision, that the proposal was provided only to DKW’s outside counsel, under a GAO protective order). DKW then filed a supplemental protest arguing that Criterion had violated the 10-page limit by compressing the line spacing of its technical proposal to be less than the single-spacing required by the RFQ.
The GAO wrote that “[a]s a general matter, firms competing for government contracts must prepare their submissions in a manner consistent with the format limitations established by the agency’s solicitation, including any applicable page limits.” Consideration of submissions that exceed established page limitations “is improper in that it provides an unfair competitive advantage to a competitor that fails to adhere to the stated requirements.”
The GAO noted that Criterion “used different spacing for both volumes 1 and 3, which had no page limitations, than it did for the technical volume, which had a 10 page limit.” In volumes 1 and 3, “Criterion used spacing that yielded approximately 44 lines per page.” However, for the technical volume, Criterion “used dramatically smaller line-spacing for each of the 10 pages, resulting in approximately 66 lines per page.” (The GAO’s PDF decision provides a visual comparison of the spacing differences between the volumes). The GAO continued:
Accordingly, it appears that Criterion implemented compressed line-spacing in a deliberate and intentional effort to evade the page limitation imposed by the RFQ, especially when compared to the other parts of its quotation. Criterion’s significant deviation from the other two volumes of its quotation effectively added approximately three to four pages to the 10-page limitation. In our view, this was a material change from the RFQ’s instructions that gave Criterion a competitive advantage.
The GAO sustained DKW’s protest.
Offerors faced with tight page limitations can be tempted to try to fit as much in those pages as possible. But as the DKW Communications protest shows, attempting to evade a page limit can have serious (and negative) repercussions.
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Women-owned small businesses are increasingly seeking to become certified through one of four SBA-approved third-party WOSB certifiers. But which third-party certifier to use?
There doesn’t seem to be any single resource summarizing the basics about the four SBA-approved certifiers, such as the application fees, processing time, and documents required by each certifier. So here it is–a roundup of the key information for three of the four SBA-approved WOSB certifiers (as you’ll see, we’ve had some problems reaching the fourth).
First things first: why should WOSBs and EDWOSBs consider third-party certification?
As part of the 2015 National Defense Authorization Act, Congress eliminated self-certification for WOSB set-asides and sole sources. Despite the statutory change, the SBA continues to insist that WOSB remains a viable option indefinitely while the SBA figures out how to address Congress’s action. But can the SBA legally allow WOSBs to do the very thing that Congress specifically prohibited? I certainly have my doubts, particularly since the SBA has never explained the legal rationale for its position.
For WOSBs and EDWOSBs, third-party certification (which is still allowed following the 2015 NDAA) may be the safest option. There are currently four entities that the SBA has approved as third-party certifiers: the National Women’s Business Owners Corporation (NWBOC), Women’s Enterprise National Council (WBENC), the U.S. Women’s Chamber of Commerce (USWCC), and the El Paso Hispanic Chamber of Commerce (EPHCC). This post summarizes the cost, time, and application fees associated with three of those organizations.
After researching and speaking with three of the WOSB certifiers, we found that all three require a written application, and that the required supporting documents are largely similar. Anticipated processing times vary (and probably should be taken with a grain of salt, as no certifier wants to admit that it is slow). For all certifiers, the anticipated processing time from application to certification begins when a completed application is received. This point was reiterated time and again at each of the three certifiers we were able to reach. To facilitate the prompt consideration of an application, prospective WOSBs should make sure to submit all of the required documents and information the first time around; and to respond promptly if additional information is requested during the application process.
National Women’s Business Owners Corporation (NWBOC)
The NWBOC offers third-party certification to both WOSBs and EDWOSBs. All application information and documents needed are listed in the NWBOC’s application form, which is available on its website. The NWBOC also offer the option for potential WOSBs and EDWOSBs to purchase a tailored application kit to guide applicants through the process of applying. The fee to apply for certification is $400 at a minimum, and an applicant may be charged more if requests for more information are not met in a timely fashion. According to the NWBOC, the current processing time for certification is between 6-8 weeks. A completed application and all required documents must be mailed into the NWBOC before processing will begin.
Women’s Business Enterprise National Council (WBENC)
WOSB Certification through WBENC is free and very quick—for WBENC members. For companies that are already members of WBENC—especially those that are already certified as Women’s Business Enterprises (WBEs)—this option could be both the quickest and cheapest. For companies that are not members of WBENC, the cost for WBENC Membership starts at $350, and can go up based off of the applying company’s revenue. And although WBENC says that WOSB certification for its members is “virtually instant,” the process of becoming a member can take up to 90 days—which means that if a non-member elects to use WBENC, the application process could take 90 days or more. WBENC offers a WOSB application checklist on its website to aid in document production, as well as a guide to completing the application. WBENC suggests that the application be completed after document production, as it is done online and has a 90-day deadline from start to finish—and once it is submitted, no changes can be made. All documents required for the application, including the fee, must be provided before the application will be processed. WBENC only offers WOSB certification, not EDWOSB certification. Prospective EDWOSBs will need to look at another option.
The U.S. Women’s Chamber of Commerce
The USWCC offers WOSB and EDWOSB third-party certification, to both its members and non-members. According to the USCWCC’s website, certification takes between 15-30 days and costs $275 for Business and Supplier members and $350 for non-members. A possible bonus (or deterrent, for some) is that the entire application and document submission is completed online. The USWCC offers both a certification and document checklist and sample application on its website to aid applicants in document production and prepare them to answer the questions on the application, but it cannot be submitted in lieu of the online form. The USWCC also requires the application be completed in one sitting—it cannot be completed partially and saved to be completed later. This means that the applicant should be completely ready to apply prior to starting, or else risk getting almost done and being interrupted and then having to restart from the beginning.
The El Paso Hispanic Chamber of Commerce (EPHCC)
Unfortunately, we found that the EPHCC was difficult to contact, and we were unable to speak with any staffer regarding the EPHCC’s WOSB certification process. If we obtain information about the EPHCC, we will update this post to include it.
These four entities are currently the only ones approved by the SBA for third-party WOSB/EDWOB certification. While the SBA remains adamant that third-party certification remains viable indefinitely, women-owned businesses should decide for themselves whether they are comfortable with the SBA’s position. For women-owned businesses that decide to play it safe while the SBA addresses the 2015 NDAA, third-party certification is the way to go.
Molly Schemm of Koprince Law LLC was the primary author of this post.
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June seems to have crept up on us, but here we sit enjoying warm temperatures and sunshine. Hopefully you are making plans for some summer rest and relaxation. While you kick back this weekend by the pool, we are happy to bring to you some weekend reading material in this edition of SmallGovCon Week In Review.
This week’s top governing contracting stories include an inquiry on DoD Buy American Act waivers, the continued push to “dump the DUNS,” False Claims Act allegations regarding pricing, a construction company settles a SDB fraud claim for $5.4 million, and more.
NASA has proposed a new rule that would require vendors to make their company’s greenhouse emissions data available through the Systems for Award Management. [FCW]
Over the past 10 years the U.S. DoD has granted more than 300,000 lawful waivers to the Buy American Act and while some of the exceptions make sense, many of them do not. [Journal Inquirer]
The summer of 2016 will be known from this point forward as “the summer of the billion dollar IT contract” with 26 protests of an $11.5 billion training contract. [Federal News Radio]
Back in 2012 the GAO said that the costs and technical challenges of moving away from the DUNS to another system for identifying and tracking contractors would simply be too great. One industry group says that, four years, later the time is ripe to dump the DUNS. [Federal News Radio]
One of the largest federal consulting practices has agreed to settle a False Claims Act brought by the General Services Administration for allegations the vendor failed to lower prices on its IT services contracts. [Federal Times]
The Department of Energy is examining what it would take to overhaul the IT behind its business operations, possibly resulting in a contract that could be worth up to $850 million. [fedscoop]
The charges against a former Hayner Hoyt employee have been dismissed after alleging the company had fired him for refusing to go along with a scheme to defraud a government program that provided contracts to small business owned by disabled veterans. [Syracuse.com]
Federal Times offers seven highlights form the General Services Administration’s Office of Inspector General semiannual report. [Federal Times]
Allegations that Harper Construction, Inc., knowingly used sham small disadvantaged businesses and then falsely certified to the government that it used legitimate small disadvantaged businesses has led to the company paying $5.4 million to the United States. [Oceanside Camp Pendleton Patch]
Washington Technology takes a look at the 100 largest government contractors over the past two decades to determine the changing government market over the years and where 2016 is heading. [Washington Technology]
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The nonmanufacturer rule will not apply to small business set-aside contracts valued between $3,000 and $150,000, according to the SBA.
In its recent major rulemaking, the SBA exempts these small business set-aside contracts from the nonmanufacturer rule, meaning that small businesses will be able to supply the products of large manufacturers for these contracts without violating the limitations on subcontracting.
In its rulemaking, the SBA explains its new exemption as a way to increase small business awards:
SBA believes that not applying the nonmanufacturer rule to small business set-asides valued between $3,500 and $150,000 will spur small business competition by making it more likely that a contracting officer will set aside an acquisition for small business concerns because the agency will not have to request a waiver from SBA where there are no small business manufacturers available.
The SBA points out that it can take “several weeks” for the SBA to process a nonmanufacturer rule waiver request, and suggests that contracting officers are unlikely to pursue waivers for lower-dollar procurements, choosing instead to simply release such solicitations as unrestricted. The new rule will expand current authority, which allows an exemption for simplified acquisitions below $25,000.
The SBA’s new rulemaking also includes several other important changes related to the nonmanufacturer rule:
The SBA clarifies that procurements for rental services should be classified as acquisitions for services, not acquisitions for supplies. The SBA notes that “renting an item is not the same thing as buying a item.” This clarification means that offerors for solicitations for rented products shouldn’t need to worry about the nonmanufacturer rule (although they will need to comply with the applicable limitation on subcontracting).
In some cases, a single procurement seeks multiple items, and only some of them are subject to nonmanfacturer rule waivers. In such a case, the new rule provides, “more than 50% of the value of the products to be supplied by the nonmanufacturer that are not subject to a waiver must be the products of one or more domestic small business manufacturers or processors.” The new regulations includes an example of how this concept should work in practice.
The SBA has adopted a requirement that a contracting officer notify potential offerors of any nonmanufacturer rule waivers (whether class waivers or contract-specific waivers) that will be applied to the procurement. The SBA writes that “[w]ithout notification that a waiver is being applied by the contracting officer, potential offerors cannot reasonably anticipate what if any requirements they must meet in order to perform the procurement in accordance with SBA’s regulations.” The notification “must be provided at the time a solicitation is issued.”
The SBA has expanded its authority to grant nonmanufacturer rule waivers. Under current law, waivers must be granted before a solicitation is issued. The new rule allows the SBA to grant waivers after a solicitation has been issued so long as “the contracting officer provides all potential offerors additional time to respond.” In an even bigger change, the new rule allows the SBA to grant nonmanufacturer rule waivers after award, if the agency makes a modification for which a waiver is appropriate.
The SBA has clarified that the nonmanufacturer rule (including waivers) applies to certain types of software. The SBA writes that “where the government buys certain types of unmodified software that is generally available to both the public and the government . . . the contracting officer should classify the requirement as a commodity or supply.” However, “if the software being acquired requires any custom modifications in order to meet the needs of the government, it is not eligible for a waiver of the NMR because the contractor is performing a service, not providing a supply.”
The SBA’s changes to the nonmanufacturer rule take effect on June 30, 2016.
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GAO ordinarily will not hear any argument that is based on a company’s small business status, even if the alleged large company is only a proposed subcontractor.
In a recent decision, GAO declined to hear a protester’s argument that the awardee’s supposedly-small subcontractors were affiliated with other entities, holding that such a determination is reserved solely for the SBA.
The case, URS Federal Services, Inc., B-412580 et al. (Mar. 31, 2016), involved an Army task order request seeking proposals to perform maintenance, repair, overhaul, modification and upgrade of various military vehicles and equipment. The solicitation was issued on an unrestricted basis, but contained a requirement that 25 percent of the labor value for each performance period be proposed for performance by small businesses.
After evaluating competitive proposals, the Army awarded the task order to VSE Corporation. URS Federal Services, Inc., the incumbent, then filed a GAO bid protest challenging various aspects of the award decision. Among its challenges, URS contended that the agency should have excluded VSE’s proposal for failing to meet the 25% small business requirement. URS contended that two of VSE’s proposed small business subcontractors were affiliated with each other, causing both to exceed the relevant size standard.
The GAO wrote that the Small Business Act “gives the Small Business Administration (SBA) not our office, conclusive authority to determine matters of small business size for federal procurements.” Accordingly, GAO’s bid protest regulations provide that challenges to an entity’s size status “may be reviewed solely by the Small Business Administration.” GAO dismissed this aspect of URS’s protest, writing “[w]e will not consider any allegation that is based on URS’s assertions regarding the size status of particular firms, since such matters are solely for the SBA’s consideration.”
What’s interesting to consider, however, is what if URS was right? For argument’s sake, let’s say that the awardee’s subcontractors were affiliated and therefore too large to satisfy the small business participation requirements. What should URS have done?
The SBA’s size protest regulations allow “interested parties” to file protests with respect to “SBA’s Subcontracting Program.” (See 13 C.F.R. 121.1001(a)(3)). In a 2013 case, IAP World Services, Inc., SBA No. SIZ-5480 (June 24, 2013), the SBA Office of Hearings and Appeals held that an unsuccessful offeror could file a size protest based on whether the successful offeror–itself a large business–would improperly count work performed by a certain entity toward its subcontracting goals. In reaching this conclusion, OHA wrote that 13 C.F.R. 121.1001 “contemplates that there will be protests of the small business size status of subcontractors under [SBA’s] Subcontracting Program and that these may be filed by ‘other interested parties,'” including “an unsuccessful offeror for the prime contract.”
Thus, it seems that URS should have taken the matter to the SBA. As the GAO made clear in URS Federal Services, it will not decide such challenges as part of the bid protest process.
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Small businesses will be able to joint venture with one another more often under a new SBA rule.
As part of a recent major rulemaking, the SBA will allow two or more small businesses to joint venture for any procurement without being affiliated with regard to the performance of that requirement.
Under the current regulation, two or more small businesses may be affiliated with one another if they joint venture for a particular procurement, depending on that procurement’s value. In fact, the underlying rule provides that joint venture partners are affiliated for purposes of that procurement. However, an exception states that the businesses can avoid affiliation if the procurement exceeds half of the size standard corresponding to the NAICS code assigned to the contract (for revenue-based size standards) or $10 million (for employee-based size standards).
That’s a mouthful, so here is a quick example. Let’s say Company A is a $5 million dollar business, and Company B is a $6 million dollar business. Companies A and B want to joint venture for a contract carrying a $7 million size standard. Can they do so? It depends on the value of the procurement. If the value of the procurement exceeds $3.5 million (half of $7 million), then the joint venture would be eligible, because both companies are smaller than $7 million. But if the value of the procurement is less than $3.5 million, Companies A and B cannot joint venture, because they are considered affiliates–and their aggregated revenues exceed $7 million.
Last year, the SBA proposed to do away with this complexity and simply allow small businesses to joint venture together, without regard to affiliation, so long as all joint venture partners qualify as small under the NAICS code. Now, the SBA has finalized that rule.
The SBA writes that public comments on the proposal were “overwhelmingly positive,” and that the SBA believes that “the proposed change [will] encourage more small business joint venturing, in furtherance of the government-wide goals for small business participation in federal contracting.” The SBA concludes:
This final rule clarifies that a joint venture of two or more business concerns may submit an offer as a small business for a Federal procurement, subcontract or sale so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract.
The final rule takes effect on June 30, 2016. But the final rule may not be the only important change to the SBA’s joint venture rules this year. As part of a separate proposed regulation, the SBA has suggested other major changes, such as doing away with the concept of a “populated” joint venture. A final version of that rule has yet to be released, so stay tuned.
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The SBA has changed its affiliation regulations to clarify when a presumption of affiliation exists due to family relationships or economic dependence.
In its major final rulemaking published today, the SBA clears up some longstanding confusion regarding affiliation based on a so-called “identity of interest.”
The SBA’s current “identity of interest” affiliation rule states that businesses controlled by family members may be deemed affiliated–but does not explain how close the family relationship must be in order for the rule to apply. The SBA’s final rule eliminates this confusion. It states:
Firms owned or controlled by married couples, parties to a civil union, parents, children, and siblings are presumed to be affiliated with each other if they conduct business with each other, such as subcontracts or joint ventures or share or provide loans, resources, equipment, locations or employees with one another. This presumption may be overcome by showing a clear line of fracture between the concerns. Other types of familial relationships are not grounds for affiliation on family relationships.
By limiting the application of the rule to certain types of close family relationships, the SBA essentially codifies SBA Office of Hearings and Appeals case law, which has long interpreted the rule to apply only to close family relationships. It’s a good thing to have the types of relationships at issue spelled out in the regulation, rather than buried in a series of administrative decisions.
More interesting to me is the fact that the final rule suggests that the presumption of affiliation doesn’t apply unless the firms in question “conduct business with each other.” I wonder whether this regulation essentially overturns OHA’s recent decision in W&T Travel Services, LLC. In that case, OHA held that two firms were affiliated because the family members in question were jointly involved in a third business–even though the two firms in question had no meaningful business relationships. I will be curious to see how OHA addresses this component of the final rule when cases begin to arise under it.
The SBA’s final rule also codifies OHA case law regarding so-called “economic dependence” affiliation. As my colleague Matt Schoonover recently wrote, OHA has long held that a small business ordinarily will be deemed affiliated with another entity where the small business receives 70% or more of its revenues from that entity. The final rule provides:
(2) SBA may presume an identity of interest based upon economic dependence if the concern in question derived 70% or more of its receipts from another concern over the previous three fiscal years.
(i) This presumption may be rebutted by a showing that despite the contractual relations with another concern, the concern at issue is not solely dependent on that other concern, such as where the concern has been in business for a short amount of time and has only been able to secure a limited number of contracts.
As with the rule on family relationships, the codification of the “70% rule” will help small businesses better understand their affiliation risks, without having to delve into OHA’s case law. In that regard, it’s a positive change.
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A small business cannot file a viable SBA size protest if the small business has been excluded from the competitive range, or if its proposal has otherwise found to be non-responsive or technically unacceptable.
In its recent final rule addressing the limitations on subcontracting, the SBA also clarifies when small businesses can–and cannot–file viable size protests.
Under the SBA’s current regulation, a size protest may be filed by “[a]ny offeror whom the contracting officer has not eliminated for reasons unrelated to size.” Many small businesses and contracting officers have found this regulation confusing, both because it contains a double negative and because it is unclear when an offeror has (or has not) been “eliminated” from a competition.
In its new final rule, the SBA states that its intent “is to provide standing to any offeror that is in line or [under] consideration for award, but not to provide standing for an offeror that has been found to be non-responsive, technically unacceptable, or outside of the competitive range.” The SBA points out that, while such offerors cannot file viable size protests of their own, “SBA and the contracting officer may file a size protest at any time, so any firm, including those that do not have standing, may bring information pertaining to the size of the apparent successful offeror to the attention of SBA and/or the contracting officer for their consideration.”
The new rule provides that a size protest can be filed by “[a]ny offeror that the contracting officer has not eliminated from consideration for any procurement-related reason, such as non-responsiveness, technical unacceptability or outside of the competitive range.” The rule takes effect June 30, 2016.
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While we patiently await the Supreme Court’s pending decision in Kingdowmware Technologies, Inc. v. United States, there is still plenty happening in the world of government contracting.
This week’s edition of SmallGovCon Week In Review is packed with important news and commentary, including stories on the Army looking to end its ‘use it or lose it’ budgeting, the continued push for category management, a sneaker company looking to nix an exemption in the Berry Amendment, allegations of SDVOSB fraud, and much more.
The VA’s chief acquisition officer says that a new acquisition program management framework will be rolled out this summer. [Federal News Radio]
The GAO is warning that CIOs in various agencies are undercutting the usefulness of the federal IT dashboard that is meant to offer feds and the public alike a way to keep tabs on how investments are likely to proceed. [FCW]
As part of a directive set to take effect July 1, the Army is telling all of its major commands that they cannot cut a program’s funding just because it didn’t spend all of its money the year before. Will this directive help address the persistent “use it or lose it” problem associated with federal contracting? [Federal News Radio]
Large and small companies alike are facing the loss of their GSA Schedule 75 contracts, as the GSA doesn’t plan on accepting new offers or renewing current Schedule holders’ contracts for at lease another nine months. [Federal News Radio]
In the ongoing debate over category management, one commentator argues that category management is “good news for American taxpayers.” [FCW]
President Obama has threatened to veto the 2017 NDAA, in part because of the bill’s acquisition reforms, many of which have support in the contracting community. [Government Executive]
Who says sneaker wars only happen in basketball? New Balance is looking to become the sneaker brand of the U.S. Military by lobbying to remove a Berry Amendment exception. [Government Executive]
An SDVOSB that was awarded a $3 million contract in the wake of the Joplin, Missouri May 2011 tornado has been indicted for allegedly passing-through the work to a non-SDVOSB and splitting the profits with that company. [KZRG]
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I am pleased to announce that SmallGovCon is now being republished on what I think is the nation’s best and most venerable government contracting legal website: WIFCON.com. You can find us on WIFCON.com’s blogs page from now on (and, of course, right here at SmallGovCon.com).
I was probably less than a month into my first government contracts job (summer associate at a law firm based in Tysons Corner) when a more senior attorney recommended that I check out WIFCON.com. I’ve been following it religiously ever since.
Packed with information about statutes, regulations, bid protests, audits, enforcement actions, and more, WIFCON.com is a government contracting lawyer’s dream come true. And best of all, it’s updated almost daily, so the information is always up-to-date.
It’s an honor to be able to contribute to such an incredible resource. If you’re not familiar with WIFCON.com, I encourage you to check it out. And of course, keep checking back here at SmallGovCon for more legal news and notes for small government contractors.
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GAO sustained a protest recently where an agency had given higher past performance scores to a proposal with two relevant examples of past performance than a proposal with five relevant examples.
In Patricio Enterprises, Inc., B-412740 et al. (Comp. Gen. May 26, 2016), GAO said that an agency cannot mechanically apply an evaluation formula that produces an unreasonable result, such as allowing a proposal with fewer examples of relevant past performance to somehow earn a higher score than a proposal with more examples.
The Patricio Enterprises case had to do with an SDVOSB set-aside procurement for the U.S. Marine Corps, Marine Corps Systems Command for program and financial management support services for the Marines’ Program Manager, Infantry Weapons Systems program. The solicitation called for a best value evaluation encompassing three factors: management and staffing capability, past performance, and price.
With respect to the past performance factor, the solicitation instructed offerors to provide summaries of up to five contracts that were recent and similar in size and scope to the project. The evaluation scheme would involve assigning each example a relevancy and quality of performance rating, which would lead to an overall past performance confidence rating.
Among the offerors were Patricio Enterprises, Inc. of Stafford, Va., and Get It Done Solutions, LLC, of Fredricksburg, Va. Get It Done submitted a proposal with three past performance examples. Two of them received ratings of very relevant/exceptional while the third was determined to not be relevant. Patricio meanwhile, proposed five examples of past performance. The agency rated two of the proposals very relevant/exceptional (the same as Get It Done), one very relevant/very good, and two relevant/exceptional.
Based on this, one might assume that Patricio earned the higher past performance rating. Not so. The agency determined that a proposal would earn a substantial confidence rating only when all relevant past performance was rated very relevant, with exceptional performance. Get It Done, with two relevant contracts, met this standard and received a substantial confidence rating. But in Patricio’s case, even though Patricio also had three very relevant/exceptional projects, Patricio’s other three projects scored lower (though no worse than relevant/very good). Because the three additional examples did not receive perfect scores, the agency gave Patricio’s proposal a lower “substantial confidence” rating.
The agency awarded the contract to Get It Done, based in part on Get It Done’s higher past performance score. Patricio then filed a GAO bid protest.
GAO s wrote that the agency had used an unreasonable methodology in evaluating past performance. It explained:”n our view, the agency’s mechanical evaluation of past performance was unreasonable where the result was that the additional relevant past performance references with exceptional and very good quality resulted in a downgraded past performance rating.” GAO sustained the protest and recommended that the agency re-evaluate offerors’ past performance.
Agencies have fairly broad discretion in their evaluations, but an evaluation scheme must be reasonable and logical. In sustaining Patricio’s protest, GAO basically told the agency to use some common sense. In other words, two is not greater than five.
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