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Koprince Law LLC

The baseball playoffs are back, and tonight I’ll be watching my Cubs begin their quest for back-to-back titles.  (If you’re not a lifelong Cubs fan, you may not realize how strange it feels to write that previous sentence).

Before the games begin, it’s time for our weekly dose of government contracting news.  In this week’s edition of the SmallGovCon Week in Review, the DOJ charges four men with participating in a bribery and kickback conspiracy, the GAO publishes a report finding that many contracts weren’t closed on time, a court reverses a contractor’s debarment, and more.

  • You don’t see this every day: four men are charged in a bribery and kickback conspiracy scheme–involving a DoD Office of Inspector General contract.  If true, that’s pretty brazen.  [U.S. Department of Justice]
  • The SBA has adopted the 2017 NAICS code revision as the basis of its small business size standards. [Federal Register]
  • The GAO published a report showing that contracts were not closed on time at several agencies. [U.S. Government Accountability Office]
  • A federal court ruled the GSA unfairly debarred a government contractor because GSA did not give the contractor notice of all grounds prior to the agency’s final debarment determination. [Federal News Radio]
  • Several defendants in a New York SDVOSB False Claims Act case have agreed to pay $3 million to resolve allegations that they improperly obtained SDVOSB contracts. [U.S. Department of Justice]
  • A retired Army colonel whose business company reportedly was used to commit bribery to obtain more than $20 million in government contracts has been charged with conspiracy. [The Augusta Chronicle]
  • A new website consolidates federal Inspector General reports in one place. [Oversight.gov]
  • Reverse auction provider FedBid has been acquired but will continue to operate under its own brand. [Compusearch]

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Koprince Law LLC

Ah, joint ventures.  Few topics in government contracting these days seem to cause as much confusion.  And that’s due, in large part, to some common misunderstandings I hear repeated over and over.

Recently, I joined host Michael LeJeune on the “Game Changers” podcast to talk about some of the most common areas of confusion regarding joint ventures.  What is the relationship between joint ventures and the SBA’s new All-Small Mentor-Protege Program?  How do the rules for joint venture work share operate?  What are some frequent mistakes companies make when they draft joint venture agreements?  And so on.

My podcast is available now on the Federal Access website.  Click here to give it a listen, and while you’re there, check out the many other great podcasts featuring a range of government contracts thought leaders.


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Koprince Law LLC

Like many, I enjoy a good meal out on the town. I tend to order strictly from the menu without any additions or substitutions. Perhaps, it is from all my years of waitressing prior to attending law school. In a recent GAO decision, however, the Navy attempted to order items not on the vendor’s menu only to have GAO determine that the order was beyond the scope of that menu.

In Bluewater Management Group, LLC, B-414785, Bluewater protested the Navy’s award of lodging and transportation services to DMC Management Services, LLC, alleging the award was improper because DMC’s GSA Schedule contract did not include transportation services.

By way of background, the Department of Navy, Military Sealift Command, issued an RFQ to small business holders of GSA Schedule 48 for lodging and transportation services. The RFQ was issued pursuant to FAR Subpart 8.4, Federal Supply Schedules, whereby GSA directs and manages the FSS program and federal agencies can utilize a simplified process for obtaining commercial supplies and services at bulk prices.

Key to the RFQ’s scope of work, offerors were to not only provide an average of 120 extended-stay hotel rooms within 25 miles of the naval base, but daily round trip transportation to the naval base. The RFQ identified the lodging and transportation services as separate CLINs and instructed vendors that all products and services were to be included in their current GSA Schedule contract.

While DMC was a holder of a Schedule 48 contract, its contract only listed pricing for lodging and housekeeping services. It did not disclose transportation or corresponding pricing for transportation as an additional service. Nevertheless, the Navy awarded DMC the task order for an evaluated price of $38,009,781.

Bluewater protested, arguing that the award was improper because the Navy was procuring transportation services from DMC that were outside the scope of its Schedule 48 contract. The Navy counter-argued that the transportation services were ancillary to complete the task order lodging requirement.

In rejecting the Navy’s argument, GAO wrote, “[t]he Navy provides no legal authority for this assertion, nor does it provide any evidence that DMC’s schedule contract listed these services or otherwise explain why the transportation services are not required to be listed and priced on the FSS contractor’s schedule.” Similarly, GAO found unavailing the Navy’s argument that the transportation services were “other direct costs,” because DMC did not offer a description or established price for transportation services.

GAO explained that “[n]on-FSS products and services may not be purchased using FSS procedures; instead, their purchase requires compliance with the applicable procurement laws and regulations, including those requiring the use of competitive procedures. GAO sustained the protest, affirming that “[w]here an agency orders from an existing FSS, all items quoted and ordered are required to be on the vendor’s schedule contract as a precondition to receiving an order.”

Bluewater is a good reminder that for Schedule contracts, the government is not permitted to order items not listed or priced on the vendor’s menu. Doing so could result in not obtaining any of the items on the menu.


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Koprince Law LLC

Thank You, Utah!

I am back from a great trip to Salt Lake City, where I spoke at the Utah PTAC Symposium.  My talk at the symposium centered on prime/subcontractor teams and joint ventures–topics of ever-increasing interest for small and large contractors alike.

It was wonderful to see so many clients and old friends at the Symposium and meet so many new people, too.  A big “thank you” to Chuck Spence and his team at the Utah PTAC for organizing this event and inviting me to speak.  And thank you, also, to everyone who attended my seminar and stopped by the Koprince Law LLC booth to talk about government contracts.

I’ll be sticking around Kansas for a few weeks, although I’ll be making a short trip down to Wichita on Tuesday to give a half-day session on the SBA’s All Small Mentor-Protege Program, sponsored by the Kansas PTAC.  If you’re a Kansas contractor, I hope to see you there.


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Koprince Law LLC

Patent ambiguities present in the solicitation for an Indefinite Delivery/Indefinite Quantity procurement must be protested prior to the close of proposal submission for the base contract—waiting to protest at the task order level may be too late.

A recent GAO decision shows that when an IDIQ solicitation contains an obvious ambiguity, the rule is “speak now or forever hold your peace.” By the time task order competitions get rolling, the chance to protest will likely be gone.

In Draeger, Inc., B-414938, __ CPD ¶ __ (Comp. Gen. Sept. 21, 2017), the Defense Logistics Agency was conducting an IDIQ procurement for various medical monitoring devises, including anesthesia monitoring systems. The base contract was originally awarded in 2007, but provided an open season at the end of each contract period where DLA would consider products from new offerors.

Draeger was awarded a base contract during the 2013 open season. Before submitting its proposal, Draeger expressed uncertainty as to whether it had the capacity to provide anesthesia equipment to meet the agency’s needs due to ambiguities in the RFP. Nevertheless, Draeger was awarded a base contract and later received task order awards.

On July 12, 2016, DLA issued a new task order to offerors for anesthesia machines. After reviewing proposals from offerors, including GE and Draegar, DLA awarded the task order to GE. Draeger filed a GAO bid protest challenging the award.

Draeger alleged the task order was outside the scope of the IDIQ Base Contract. According to Draeger, an anesthesia monitor is different from an anesthesia machine. Since the base contract did not expressly mention anesthesia machines, Draeger alleged that the DLA could not order those machines off the Base Contract.

GAO dismissed Draeger’s protest as untimely. Under 4 C.F.R. § 21.2(a), “[p]rotests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals shall be filed prior to bid opening or the time set for receipt of initial proposals.” In the unique context of open season contracts that reopen based on contract amendments, GAO explained that “a protest based upon alleged improprieties apparent on the face of the solicitation must be filed no later than the time set for receipt of proposals under the amendment.”

According to GAO, Draeger identified ambiguities regarding the anesthesia equipment in the RFP for the Base Contract; therefore, it should have protested the alleged ambiguities prior to the close of proposals for the Base Contract. GAO was particularly unimpressed with Draeger’s arguments because Draeger had previously received task order awards under the RFP for anesthesia machines. Accordingly, GAO concluded that “Draeger should have protested any apparent ambiguity regarding the type of anesthesia equipment contemplated under the ID/IQ RFP, prior to the January 6, 2014, deadline . . . for submission of proposals for the 2013 open season.”

GAO’s decision in Draeger is a cautionary tale to offerors—if there are ambiguities apparent on the face of an IDIQ RFP, the proper time to challenge those ambiguities is prior to proposal submission for the base contract. Challenges at the task order level regarding patent ambiguities present in the RFP for the base contract will likely be untimely.


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Koprince Law LLC

My heart rate has finally come down after the exciting finish to Game Five of the Cubs-Nationals playoff series last night.  I caught the first few innings waiting for my flight in Salt Lake City, and the game (which clocked in at more than 4 1/2 hours) was still going when I landed in Kansas City a couple hours later.  Thanks in part to the magic of instant replay, my Cubs were victorious, and will continue their World Series title defense against the Dodgers this weekend.

Clearly, my mind is on sports–but I’m also closely watching developments in government contracts.  In this week’s SmallGovCon Week In Review, the GAO reminds agencies that they have the power to override the automatic stay, the SBA updates the WOSB/EDWOSB NAICS codes, a bill to improve the SBIR and STTR programs passes the House unanimously, and much more.

  • Can one contract change the way the government buys IT? How EIS will spur federal IT modernization. [FedTech]
  • The Centers for Medicare and Medicaid Services signed a memorandum of understanding to use the GSA’s OASIS vehicle. [fedscoop]
  • The government may soon buy based more on best value considerations, and less often using lowest price as its main, or sometimes only, focus. [Bloomberg Government]
  • An Ohio senator has asked the Treasury Department to review whether the Equifax breach could constitute grounds for debarment, which would prevent the company from winning or renewing contracts with the government. [Washington Examiner]
  • The GAO released a statement rebuking comments by the IRS, which had stated that it was forced award a bridge contract to Equifax during the course of a bid protest. The GAO noted that agencies have the power to override the automatic stay in appropriate circumstances. [Nextgov]
  • The SBA has updated the NAICS codes authorized for use in the WOSB program; the updates apply to all solicitations issued on or after October 1, 2017. [Federal Register]
  • Language in the 2018 NDAA would make it more difficult for companies to protest contract awards, particularly those made by defense and military agencies. [Nextgov]  (And click here for my take on why this is a really bad idea).
  • It was with unanimous support this week that H.R. 2763, The Small Business Innovation Research and Small Business Technology Transfer Improvement Act of 2017, passed the House of Representatives. [scvtv]

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Koprince Law LLC

Ahh, fall. A time for football, hay rides, and returning to campus. Being in a college town, we are always reminded that students are back on campus due to the increased traffic, the homecoming parade, and the increased buzz (no pun intended) around the town. The onset of fall sometimes dredges up unwanted memories about turning in term papers and meeting all the inane requirements insisted upon by the professor.

A recent GAO opinion also brought me back to my college days. Specifically, what happens when the government (kind of like a college professor) sets a requirement for a certain type of file format for a solicitation, but the offeror submits a proposal in a different file format?  A recent GAO opinion answers that question in the contractor’s favor–although GAO’s ruling isn’t a blanket permission slip for contractors to ignore file format requirements.

In McCann-Erickson USA, Inc., B-414787 (Comp. Gen. Sept. 18, 2017), McCann-Erickson USA, Inc. had submitted a proposal to provide advertising services to the Army on an IDIQ basis for a potential 10-year contract worth up to $4 billion. The Army would evaluate proposals “on a best-value basis, considering cost/price, along with several non-cost/price evaluation criteria.”

The solicitation set up a two-phase evaluation process. Phase one would be based on written proposals while phase two would involve an oral presentation for all proposals that were deemed acceptable. Phase one involved “a substantive evaluation of written proposals considering cost/price and the non-cost/price evaluation factors with a focus on the adequacy of the offerors’ response–and the feasibility of their approach–to fulfilling the requirements of the RFP.” But instead of following the two-phase review process, the Army conducted what it termed a “compliance review” of proposals, consisting of reviewing and eliminating proposals based on “informational deficiencies” in what GAO described as a “superficial, perfunctory review of the ME proposal to identify instances where ME allegedly did not fully comply with the instructions for proposal preparation.”

What were these “information deficiencies” identified by GAO?  The wrong file format was one of them. The Army rejected ME’s proposal, in part, “for submitting its cost/price proposal as a portable document file (pdf) rather than as a Microsoft Excel spreadsheet.” Per the GAO, “[t]he record shows that the agency did not substantively evaluate the ME cost/price proposal, choosing not to calculate the firm’s total evaluated cost/price; performing no meaningful cost realism evaluation; and not evaluating the proposal for balance, fairness or reasonableness, as specifically contemplated by the solicitation’s cost/price evaluation factor. The agency also did not afford ME an opportunity to submit its cost proposal as a Microsoft Excel file.”

GAO rejected the Army’s interpretation of its submission requirements because

the solicitation’s evaluation criteria did not place offerors on notice that the agency simply would reject proposals without first performing a substantive evaluation. In addition, the record does not establish why the Army is unable to evaluate ME’s cost/price proposal using the pdf version of the proposal that it submitted, as opposed to a Microsoft Excel version of the cost/price proposal. Although a Microsoft Excel version of the proposal would include the underlying formulae used to arrive at the cost/price proposed by ME, the agency has not explained how the lack of such information would necessarily lead to its inability to evaluate the MS cost/price proposal.

In addition, GAO held that allowing ME to submit an Excel version of its cost/price proposal would be prudent, as long as no changes were made in the pricing, because this would amount to a mere clarification of the proposal. In the end, GAO sustained the protest and advised the Army to reevaluate ME’s proposal and awarded costs to ME.

It’s important to note that the GAO’s decision was based on the specific circumstances of the case. GAO did not hold that it is always okay for an offeror to submit its proposal in the wrong electronic file format. In fact, in a case decided a few years back, the GAO reached the opposite conclusion–holding that an offeror was properly excluded from award when it submitted its proposal in PDF instead of Excel.  The difference?  In the prior case, the agency argued that it needed to manipulate offerors’ cost data to complete the price evaluation, and the GAO agreed that doing so would be “unduly burdensome” without an Excel file.

Perhaps a college student may come across this blog after turning in a paper in the wrong format and be able to argue that, if it’s good enough for the GAO, it should be good enough for you, professor. Regardless, this decision is noteworthy because it points to limits on an agency’s discretion in rejecting a proposal based on the file format of the submission.


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Koprince Law LLC

An agency was allowed to assign a Native Hawaiian-owned prime contractor a weakness for its experience because the NHO prime lacked relevant experience–even though the prime’s proposal indicated that it would rely in part on the resources of an experienced NHO sister company.

A recent GAO bid decision demonstrates that while a procuring agency is entitled to consider the experience and past performance of a prime contractor’s affiliates under certain circumstances, the agency is not precluded from considering the prime’s own experience (or lack thereof).

The GAO’s decision in Dawson Enterprises, LLC, B-414591.2 (July 24, 2017) involved a Navy solicitation for construction projects on Guam.  The solicitation, which was set aside for small businesses, was issued under the two-step design-build procedures of FAR 36.3.

The phase 1 evaluation called for the consideration of four factors: technical approach, experience, past performance, and safety.  With respect to the experience factor, offerors were to provide between three and five relevant construction projects that were similar in size, scope and complexity, as well as three to five relevant design projects for the lead design firm.  The past performance evaluation was to consider how well the offeror performed on the relevant contracts submitted under the experience factor.

Dawson Enterprises, LLC submitted a proposal.  In its proposal, Dawson Enterprises explained that it was a subsidiary of Hawaiian Native Corporation, an NHO.  Dawson Enterprises’ proposal stated that HNC owned several other subsidiaries, including Dawson Technical LLC and Dawson Federal Inc.

The proposal stated that Dawson Enterprises would be the general contractor and would perform the work using several subcontractors, including Dawson Technical and Dawson Federal.  The proposal included teaming agreements between Dawson Enterprises, on the one hand, and Dawson Technical and Dawson Federal, on the other.

Dawson Enterprises submitted five construction projects.  Of the five projects, all five were performed by subcontractors: Dawson Technical and another (non-NHO) entity.  The Navy assigned Dawson Enterprises a significant weakness for its experience, because of the prime’s lack of experience.  On the past performance factor, the Navy assigned Dawson Enterprises a middle-of-the-road “satisfactory confidence” rating.

After learning that its proposal had been excluded from phase 2, Dawson Enterprises filed a GAO bid protest.  Dawson Enterprises primarily challenged the agency’s evaluation under the experience and past performance factors.

Dawson Enterprises contended that it was unreasonable for the Navy to assign a significant weakness under the experience factor because, “as a wholly owned subsidiary of an NHO, the firm may rely on the experience of its parent or affiliated companies”.  Dawson Enterprises pointed out that, as discussed in prior GAO bid protest decisions, an agency may attribute the past performance of an affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the affiliate will affect performance.  Here, of course, the proposal indicated that Dawson Technical and Dawson Federal would be meaningfully involved as subcontractors.

GAO acknowledged that, in a case like this, an agency may consider the past performance of affiliated companies.  But, “the protester points to no statute, regulations or prior precedent that precludes the agency from considering an [NHO] prime contractor’s lack of experience merely because the prime contractor has proposed to use affiliates with relevant experience.”

In this regard, the GAO, “has recognized that the weight to be assigned to a prime contractor’s experience–or lack thereof–is a matter of contracting agency discretion.”  The GAO denied the protest, writing, “[c]onsequently, we find nothing improper about the agency’s assignment of a significant weakness for Dawson’s lack of experience because the firm proposed to perform the contract using affiliated companies with relevant experience.”

When it comes to past performance and experience, contractors often focus on whether the agency will consider projects performed by a teammate or affiliate.  It’s an important question. But the question of what weight the agency will assign those projects can be just as important.  And, as the Dawson Enterprises case demonstrates, the contracting agency typically has the discretion to downgrade an offeror based on the offeror’s own lack of experience–even if the offeror proposes experienced teammates.


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Koprince Law LLC

In a big victory for proponents of the 8(a) program, the Supreme Court of the United States has denied the Petition for Certiorari filed by Rothe Development, Inc.

Consequently, the decision of the Court of Appeals for the D.C. Circuit finding the statutes establishing 8(a) program to be constitutional will be allowed to stand.

For those of you who are new to the Rothe Development case, it is a long-running constitutional challenge to the SBA’s 8(a) Business Development program. Rothe argued that the statutes implementing the 8(a) program establish a racial classification in violation of the equal protect rights afforded by the Due Process clause of the Fifth Amendment. Rothe contended the statute should be struck down as unconstitutional, which would mean the end of the 8(a) program–or at least the 8(a) program as we know it.

Rothe Development has been making its way through the federal court system since 2015. In an earlier decision, the District Court for the District of Columbia upheld the 8(a) program despite subjecting the statutes to the Supreme Court’s most intense level of legal scrutiny.

Rothe subsequently appealed the decision of the Court of Appeals for the D.C. Circuit. As we covered, the D.C. Circuit concluded that a less demanding level of scrutiny applied, which the 8(a) statutes comfortably passed. Accordingly, the 8(a) statutes were allowed to stand.

After its loss at the D.C. Circuit, Rothe development filed a petition for Certiorari, which we also covered. A Petition for Certiorari is the formal process by which a party not entitled to an appeal as a matter of right may nevertheless request the Supreme Court decide its case. The Supreme Court, however, grants a very limited number of petitions each year.

Rothe Development’s Petition for Certiorari was not granted by the Supreme Court. As a result, the decision reached by the D.C. Circuit finding the 8(a) program to be constitutional will stand.

While Rothe Development ends with the 8(a) program’s survival, the decisions do leave the program open to further legal challenge. Most notably, the difference in legal scrutiny applied between the District Court and the Court of Appeals indicates that there may be more than one reasonable interpretation of the 8(a) programs statutes, which could result in further litigation down the road. Additionally, Rothe (apparently for strategic reasons), challenged only the underlying statutes–not the SBA’s regulations implementing them. A separate constitutional challenge to the regulations remains a possibility.

For now, however, the 8(a) program stands unscathed–and 8(a) supporters can breathe a big sigh of relief.


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Koprince Law LLC

If you’re a small business owner interested in government contracts, you’ve probably heard about the SBA’s 8(a) Business Development Program. The 8(a) Program itself is complex, but its potential benefits are tremendous. In this post, I’ll break down some of the very basics about the 8(a) Program, leaving some of its complexities for upcoming posts.

Let’s get to it: here are five things you should know about the 8(a) Program.

  1. What is the 8(a) Program?

Like SBA’s other contracting programs, the 8(a) Program is a business development program—its purpose is to assist eligible disadvantaged small businesses compete in the American economy through business development.

  1. What are the benefits to participating?

Participating in the 8(a) Program opens several doors to success. Each year, the federal government’s goal is to award at least 5% of all prime contracts to small disadvantaged businesses, which include 8(a) Program participants. To meet this goal, the government issues billions of dollars of awards annually to 8(a) Program participants through sole-source awards and set-asides. Participants are also allowed to join in mentor/protégé and joint venture relationships to further increase their ability to participate in the American economy. Additionally, the SBA provides targeted business development counseling to 8(a) participants.

  1. Is your business eligible to participate?

Given these incentives, the desire to participate in the 8(a) Program is obvious. But can your business participate?

SBA has laid out detailed eligibility requirements. A future post will discuss them in greater detail but, in general, a business typically must be small under its primary NAICS code, and be unconditionally owned and controlled by one or more socially- and economically-disadvantaged individuals who are of good character. (There are some separate requirements for businesses owned by Indian Tribes, Alaska Native Corporations, Native Hawaiian Organizations, and Community Development Corporations.) The business, moreover, must maintain its eligibility throughout the course of its participation.

One more thing: 8(a) Program participation is a one-time thing. So if your business has previously participated in the 8(a) Program, or if you’re a disadvantaged individual that has already participated, the SBA won’t allow you to participate again—although Tribes, ANCs, NHOs and CDCs have some different rules.

  1. How long can your business participate in the 8(a) Program?

The presumptive term is 9 years. But this term can be shortened by the participant or the SBA—if, for example, the concern is successful enough to graduate from the Program or fails to maintain its eligibility. The term cannot be lengthened, although it can be temporarily suspended in rare instances.

  1. How can your business apply?

Applications must be submitted electronically to the SBA and must include any supporting information requested by the SBA (like corporate organization documents and personal and business tax returns). Your local SBA office should be able to provide a list of all required documents.

***

Participating in the 8(a) Program can be a great way to grow your small business. Look for additional 5 Things posts discussing its requirements and benefits in greater detail. In the meantime, please call me if you have any questions about eligibility or applying for the Program.


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