So you’ve teamed with an ineligible incumbent contractor to bid on some government work and, to try and maintain continuity, the incumbent would like to retain project management functions. “No big deal,” you think, “I’ll just create a management position to oversee the project manager.”
Actually, it could be a big deal if you’re trying to avoid ostensible subcontractor affiliation. Among the four key factors for determining ostensible subcontractor affiliation is whether the management previously served with the subcontractor under the incumbent contract. And according to a recent SBA Office of Hearings and Appeals decision, creating a figurehead management position to oversee the project manager won’t negate this indicia of ostensible subcontractor affiliation.
By way of background, ostensible subcontractor affiliation exists when a prime contractor relies on a subcontractor to perform the contract’s primary and vital requirements or if the prime contractor is otherwise “unusually reliant upon” its subcontractor. Though it’s a fact-specific inquiry, OHA has identified four key factors for determining unusual reliance:
First, the proposed subcontractor was the incumbent contractor, and was not itself eligible to compete for the procurement. Second, the prime contractor planned to hire the large majority of its workforce from the subcontractor. Third, the prime contractor’s proposed management previously served with the subcontractor on the incumbent contract. And fourth, the prime contractor lacked relevant experience, and was obliged to rely upon its more experienced subcontractor to win the contract.
An important consideration, then, is contract management—if the subcontractor is providing project management, or if the managers previously served on the subcontractor’s incumbent contract, OHA is more likely to find ostensible subcontractor affiliation.
That brings us to Automation Precision Technology, LLC, SBA No. SIZ-5850 (Sept. 6, 2017). In that case, Automation Precision Technology (“ATS”) teamed with Serco, Inc. (the incumbent contractor, and a multi-billion dollar company) to bid on undersea surveillance systems support services solicited by the Department of Navy’s Space and Naval Warfare Systems Command. The work was solicited under NAICS code 541614 (Process, Physical Distribution, and Logistics Consulting Services), which carries a $15 million size standard.
Though ATS’s revenues alone fell under the size standard, the SBA Area Office found that ATS’s relationship with Serco violated the ostensible subcontractor rule based on the four key factors. As part of the determination, the Area Office noted that nearly all of the contract employees were former Serco employees that would transition over to ATS, including the key personnel and management employees (like the Program Manager). Serco’s size was aggregated with ATS’s and, as a result, ATS was found to be ineligible for the SPAWAR contract.
ATS appealed the determination to OHA, saying, in part, that the Area Office erred by finding ATS unusually reliant on Serco for project management. According to ATS, its proposal included a Contract Manager who would serve as “the absolute lead for the Contract team” and would ensure that ATS firmly manages the contract. Thus, ATS said the Area Office erred by finding ATS reliant on Serco for project management.
OHA rejected ATS’s arguments, noting that the solicitation identified the Program Manager as the contract’s top management official and charged her “with the responsibility of accomplishing the overall efforts of the contract.” The Contract Manager position created by ATS was not required under the solicitation. And though ATS said its Contract Manager would oversee the entirety of the contract, its proposal indicated otherwise: under ATS’s proposal, the Program Manager was “responsible for day-to-day contract management with the authority to obligate Team [ATS] within contract terms,” while the Contract Manager “provides leadership, guidance, and resources to support the Project Manager in management and execution of the contract.”
According to OHA, “the Contract Manager appears to be more of a liaison and an advisor than a manager . . . [who] does not work directly on and has no major role in performing the contract.” OHA found ATS’s Contract Manager did not exercise sufficient management over the Program Manager, thus supporting a finding of ATS’s unusual reliance on Serco.
OHA denied ATS’s appeal.
Automation Precision Technology confirms that, when evaluating ostensible subcontractor affiliation, project management matters. A company cannot avoid the sting of affiliation simply by creating a figurehead manager that lacks firm authority.
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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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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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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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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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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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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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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
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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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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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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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.
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.
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.
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.
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.
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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A self-certified woman-owned small business was ineligible for a WOSB set-aside contract because the woman owner’s husband held the company’s highest officer position and appeared to manage its day-to-day operations.
A recent SBA Office of Hearings and Appeals decision highlights the importance of ensuring that a woman be responsible for managing the day-to-day business of a WOSB–and that the woman’s role be reflected both in the corporate paperwork and in practice.
OHA’s decision in Yard Masters, Inc., SBA No. WOSB-109 (2017) involved an Army solicitation for grounds maintenance services. The solicitation was issued as a WOSB set-aside under NAICS code 561730 (Landscaping Services), with a corresponding $7 million size standard.
After evaluating competitive proposals, the Army awarded the contract to Yard Masters, Inc. A competitor then filed a WOSB protest, alleging that Yard Masters was ineligible. The protester contended that a man, Bryce Wade, was Yard Masters’ majority owner and President until recently and that he still exercised control over the company.
In response to the protest, Yard Masters admitted that Bryce Wade had previously been the majority owner, but that he had recently sold stock to his wife, Sally Wade, making her the 51% owner. Yard Masters also produced Sally Wade’s resume and meeting minutes, showing that Sally Wade was the Chief Executive Officer.
The SBA Area Office examined Yard Masters’ bylaws, and determined that the bylaws “do not create a CEO position” or assign any duties to the CEO. Instead, the bylaws identified the President (a position held by Bryce Wade) as the “chief executive and administrative officer of the corporation.” The SBA Area Office also noted that “Bryce Wade signed [Yard Masters’] proposal and its contract documents for the instant procurement,” as well as the company’s tax returns. The tax returns “identify Bryce, and not Sally, Wade as a compensated officer.”
The SBA Area Office found that Sally Wade did not control Yard Masters, and issued a determination finding the company ineligible for the Army WOSB set-aside contract.
Yard Masters appealed to OHA. Yard Masters argued, in part, that the corporation’s meeting minutes made clear that Sally Wade had ultimate direction and control of the company.
Yard Masters “argues that Sally Wade is its CEO,” OHA wrote. “The problem is that the Board did not formally create a position of CEO.” OHA continued, “[t]he Bylaws were never changed to add the position of CEO. The Bylaws clearly state that the President is the corporation’s ‘chief administrative and executive officer.’ Bryce Wade holds that position.” OHA concluded that Yard Masters’ “highest officer position is President, and Bryce Wade, not Sally Wade, holds it.”
OHA also noted that “all actions taken on [Yard Masters’] behalf were taken by Bryce Wade.” Even after Sally Wade “supposedly had taken control” of the company, “Bryce Wade signed [Yard Masters’] offer” and was listed as the point of contact. And incredibly, after the WOSB protest was filed, “t was Bryce Wade, not Ms. Sally Wade, who communicated with SBA on [Yard Masters’] behalf.”
OHA denied the appeal and upheld the SBA Area Office’s decision.
The Yard Masters case offers at least three important lessons for WOSBs.
First, corporate paperwork matters. I can’t count how many times, in my practice, I’ve seen a situation like Yard Masters’, where a company officer is using a title that isn’t established in the governing documents. In order for a woman to hold the highest officer position in the company, the governing documents need to establish that her role is, in fact, the highest. Even small, family-owned companies like Yard Masters need to ensure that their corporate documents are up to snuff.
Second, perception matters. Although there’s not necessarily anything inherently wrong with a man signing contracts and other documents on behalf of a WOSB, it does tend to suggest that the man has outsize influence within the company. WOSBs ought to be careful about who signs contracts, checks and other corporate documents–as well as who is listed as points of contact in SAM and in proposals.
And third, as a corollary to the previous item, if you’re getting protested for WOSB eligibility, don’t have a man be in charge of communicating with the SBA. Talk about not sending the right signals.
The SBA is still working in the long-awaited rules that will require all WOSBs to be formally certified. But in the meantime, Yard Masters is a good reminder self-certified WOSBs need to do their due diligence to ensure that they comply with all WOSB requirements.
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My Cubs couldn’t pull off the World Series repeat, losing badly to the Dodgers last night in the National League Championship Series. And you know what? I’m okay with it. We Cubs fans are a different breed: after 108 years, many of us thought we’d never see a title. So after the amazing championship last year, all of 2017 felt like playing with house money. Yankees fans might be grumbling that it’s been a whopping eight years since their last title, but Cubs fans like me will always have 2016.
Enough baseball–time to move on to what’s really important on your Friday, the SmallGovCon Week In Review! This week, we bring you articles ranging from government employees taking illegal gratuities, a sharp decrease in the number of successful small business contractors, investigators find major problems with many of the Census Bureau’s sole source contracts, and more.
A 40-month prison sentence was handed down to the former comptroller of the Norfolk Ship Support Activity for conspiring with others to essentially force a government prime contractor to use a specified subcontractor. [United States Department of Justice]
Federal agencies met the governmentwide small business goal for the fourth straight year in fiscal 2016, but the number of small business prime contractors has gone down by 25% since 2010. [Federal News Radio]
After helping to steer millions of dollars in contracts to a North Carolina defense contractor, a former employee of the Navy has now been sentenced to three years and four months in prison for his role in the scheme. [The Virginia Pilot]
Listen to Larry Allen on Federal Drive with Tom Temin as he discusses what GSA has in store for contractors this year. [Federal News Radio]
A whistleblower suit has led to a False Claims Act settlement of $2.6 million to resolve civil allegations that the company submitted false claims for payment to the DoD for unqualified security guards. [wtop]
Government investigators found problems with 90% of the no-bid contracts awarded by the Census Bureau, resulting in overpayment to contractors by about $9 million. [New York Post]
Congressional members have submitted a request for information on data security vetting for government contracts. [Homeland Preparedness News]
GSA Administrator nominee Emily Murphy wants the GSA to make it easier for new companies to do business with the government so competition remains robust. [Federal News Radio]
The Indian Health Service agency has come under fire for awarding a contract to a company that had previously paid $10 million to settle allegations of submitting false claims to the government. [Bristol Herald Courier]
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In a GAO bid protest, recovering costs after an agency takes corrective action turns on whether or not the agency unduly delayed the corrective action.
A recent GAO case shows that, in certain circumstances, an agency may be able to fight a protester almost to the bitter end, then take corrective action without necessarily having crossed the “unduly delayed” line.
In Evergreen Flying Services, Inc., B-414238.10 (Oct. 2, 2017), the Department of the Interior issued a solicitation in September of 2016, asking for private aircraft to help fight wildfires.
DOI wanted to hire up to 33 planes for four years, with an optional six-month extension. The idea was that the planes would be offered to the Bureau of Land Management exclusively for the 2017 fire season.
A month later, DOI received proposals from 15 firms. It evaluated offers and settled on six firms and 33 individual planes (firms could offer the use of multiple aircraft). DOI announced the awards in December 2016.
Evergreen Flying Services, Inc., a small business from Rayville, Louisiana, was one of the unsuccessful offerors. It filed a GAO bid protest the day after Christmas. Four days later, it filed a supplemental protest. Evergreen challenged the agency’s evaluation of its proposal, the best value determination, and the availability of the awardee’s aircraft.
In January 2017, before submitting an agency report, DOI chose to take corrective action. Over the next two months, it reevaluated proposals and increased Evergreen’s ratings, but still did not select it for award. Evergreen protested again, on March 3.
This time DOI fought the protest. It filed a request for dismissal (which GAO denied) and then filed an agency report on April 5. The report included each awardee’s complete schedule of services/supplies, aircraft questionnaires, and DOI’s evaluation sheets for each awardee.
Evergreen poured through the documents, seized on some issues, and filed a supplemental protest (and comments on the agency report) on April 17. The supplemental protest, for the first time, alleged flaws relating to the other offerors and the agency’s evaluation of their proposals, including minor but technical flaws such as unsigned or typewritten names instead of signatures, and reliance on supporting documentation that was outside the solicitation’s five-year window.
GAO asked for a supplemental agency report. Two days before it was due, DOI chose to take corrective action by cancelling the solicitation altogether. DOI said that the fire season was rapidly approaching and it did not have time to reevaluate proposals again. It also said it could acquire the planes it needed through other means: most of the offerors, including Evergreen, had “on-call” contracts with DOI for fire suppression services.
GAO dismissed Evergreen’s latest protests on May 4.
Evergreen and other offerors then protested the decision to cancel the solicitation and lost. The result, therefore, of three protests, two supplemental protests, one agency report, one request for dismissal, and two corrective actions, was zero contracts.
By then, Evergreen (which was using DC-based government contracts lawyers) had, no doubt, spent a significant amount of money on legal fees. It filed a request for a recommendation of costs, arguing that the agency had unduly delayed taking corrective action in the face of a clearly meritorious protest. It had been 235 days (nearly eight months) since the solicitation came out, and 130 days since Evergreen’s initial protest.
GAO wrote that, when a procuring agency takes corrective action in response to a protest, “our Office may recommend reimbursement of protest costs where, based on the circumstances of the case, we determine that the agency unduly delayed taking corrective action in the face of a clearly meritorious protest, thereby causing the protester to expend unnecessary time and resources to make further use of the protest process in order to obtain relief.” A protest is “clearly meritorious” where “a reasonable agency inquiry into the protester’s allegations would reveal facts showing the absence of a defensible legal position.” And, with respect to promptness, “we review the record to determine whether the agency took appropriate and timely steps to investigate and resolve the impropriety.”
Because the better part of a year had passed during which time the agency fought the protester by filing a motion to dismiss (which it lost) and an agency report, Evergreen probably thought it had a good case for costs, at least on the “unduly delayed” side of the ledger.
But that is not the way GAO saw it. GAO said that the measure of undue delay is not whether the corrective action was prompt with respect to the protester’s initial grounds, but rather whether the corrective action was prompt with respect to the first “clearly meritorious” grounds of protest.
Thus, in order to recover costs back to the December protest and initial corrective action, “the central consideration . . . is whether Evergreen’s December protest included clearly meritorious protest ground that the agency expressly committed to rectify, but failed to, such that the protester was forced to continue its bid protest litigation to get relief.”
GAO said that the initial December 2016 protests did not include “any protest grounds that we consider clearly meritorious on their face.” As for the second protest, which again DOI fought hard against, GAO said that it was not necessarily meritorious either, just that the “argument required further record development and response from the agency to determine whether the protest ground had merit.”
Finally, GAO said that because the final corrective action took place two days before the supplemental agency report was due, the agency did not unduly delay taking it—adding that the arguments brought after reviewing the awardees’ and the evaluation documents may not have had merit.
In other words, DOI’s corrective action was not delayed. In fact, it was two days early. GAO denied the request for costs. GAO noted that the purpose of recommending costs is not to reward a protester for winning. It is to “encourage agencies to take prompt action to correct apparent defects in competitive procurements.”
Evergreen Flying Service shows that just because a protester “wins” does not mean GAO will recommend an award of costs, even when the protest process takes a long time. In our practice, we often suggest that clients assume that protest costs won’t be reimbursed, even if there is a corrective action or “sustain” decision, and consider an award of costs to be a potential bonus that may (or may not) accompany a successful protest. With the twin hurdles of “undue delay” and “clearly meritorious” to surmount, a recovery of costs is not a given.
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A non-SDVOSB company couldn’t protest the terms of a VA SDVOSB set-aside solicitation, despite entering into a joint venture agreement with an SDVOSB–because the joint venture hadn’t started the process of becoming verified by the VA.
In a recent bid protest decision, GAO held that because neither the protester nor the joint venture was included in the VIP database, or likely to be included during the protest process, the protester wasn’t an “interested party” under the GAO’s bid protest regulations.
The GAO’s decision in Owl, Inc.; MLB Transportation, Inc., B-414962, B-414692 (Oct. 17, 2017) involved a VA solicitation for wheelchair van transport services for the beneficiaries of the Atlanta VA Medical Center. The solicitation was issued as an SDVOSB set-aside.
Before the due date for proposals, two companies filed pre-award GAO protests. Both companies argued that the solicitation’s scope of work was vague and that the pricing schedule was unfair, among other grounds of protest.
The VA moved to dismiss the protest filed by MLB Transportation, Inc. The VA argued that MLB was not an interested party to pursue the protest because it was not a verified SDVOSB listed in the VIP database.
MLB conceded that it was not an SDVOSB, but stated that it had entered into a joint venture agreement with an SDVOSB to pursue the contract. MLB acknowledged that the joint venture wasn’t listed in the VIP database, and “had not begun its VIP system application until after the time that it filed its protest.”
The GAO wrote that, under its bid protest regulations “[o]nly an ‘interested party’ may protest a federal procurement; a protester must be an actual or prospective bidder whose direct economic interest would be affected by the award of a contract or the failure to award a contract.” In this case, GAO said, “[w]e agree with the agency that where neither MLB or its claimed joint venture are listed on the VIP website or likely to be approved to be listed on the VIP website during the protest process, the protester is not an interested party to pursue its protest.”
The GAO dismissed MLB’s protest. (The second protest wasn’t dismissed, but was denied on the merits).
Interestingly, the GAO didn’t hold that a company must be listed in the VIP database to challenge the terms of an SDVOSB set-aside. Instead, the GAO indicated that a company might be eligible to protest if it was “likely to be approved” during the course of the protest process. In MLB’s case, then, the biggest problem may not have been that its joint venture was unverified, but that the joint venture hadn’t even started its application when the protest was filed.
It’s possible, of course, that MLB didn’t realize that joint ventures must be separately verified to win VA SDVOSB set-aside contracts. In my experience, it’s rather common for contractors to assume that so long as the joint venture’s lead member is verified, the joint venture qualifies. Not so.
As the GAO confirmed back in 2011, joint ventures must be separately verified in the VIP database. And as MLB Transportation demonstrates, when the joint venture isn’t separately listed in VIP, and has yet to submit an application, the joint venture (and its non-SDVOSB member) are likely out of the running for a viable pre-award GAO protest.
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An agency’s oral advice, given at a pre-proposal conference, did not amend the solicitation or legally bind the agency.
In a recent bid protest decision, the GAO reiterated that offerors rely on oral advice from agencies at their own risk–particularly when the oral advice in question appears to contradict the plain language of the solicitation.
GAO’s decision in Technology and Telecommunications Consultants, Inc., B-415029 (Oct. 16, 2017) involved an Air Force solicitation seeking IT services in support of the Air Command Personnel Recovery Division. The solicitation was issued as a competitive 8(a) set-aside under the GSA’s 8(a) STARS II GWAC.
The solicitation provided a list of tasks that the awardee wold be expected to perform. Under one of these tasks, the solicitation stated that the awardee would be expected to provide support to the Air Force Special Operations Command at Hurlburt Field, Florida. However, the solicitation did not state that offerors were required to propose an employee specifically dedicated to AFSOC support.
Before the due date for proposals, the agency held a pre-proposal conference. During the conference, attendees asked about the AFSOC position. The Contracting Officer’s Representative said that the “AFSOC position is still funded and yes, it is still a requirement.”
After evaluating proposals, the agency announced that the task order had been awarded to a company named Constellation West. The incumbent contractor, Technology and Telecommunications Consultants, Inc., filed a GAO bid protest challenging the award.
TTC argued that CW’s proposal was technically unacceptable because CW failed to propose an employee specifically dedicated to providing AFSOC support. TTC contended, in part, that the statement made by the COR at the pre-proposal conference demonstrated that the Air Force required an employee specifically dedicated to this function.
“Contrary to TTC’s position,” the GAO wrote, “our cases have frequently concluded that offerors rely upon oral advice from an agency at their own risk.” Oral advice “does not operate to amend the solicitation or otherwise legally bind the agency.”
This is “particularly the case, where, as here, the oral advice directly conflicts with the plain language of the solicitation.” The GAO concluded: “TTC cannot use the erroneous oral advice effectively to revise the solicitation’s plain language in order to support its interpretation.”
The GAO denied TTC’s protest.
Pre-proposal conferences (and similar events) can be very helpful for prospective offerors. But as the Technology and Telecommunications Consultants protest demonstrates, the oral advice provided at these events cannot modify the terms of the solicitation, or otherwise legally bind the agency. Listener, beware.
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When an agency takes corrective action in response to a bid protest, the agency voluntarily agrees to do something (such as re-evaluate proposals, re-open discussions, or even cancel a solicitation) to address the alleged problems identified in the protest. Corrective actions are quite common: in FY 2016, more than 23% of GAO bid protests resulted in corrective actions.
But what happens when a protester doesn’t like the scope of the agency’s proposed corrective action? As a recent GAO decision demonstrates, corrective actions can themselves be protested–but challenging an agency’s corrective action can be an uphill battle.
Booz Allen Hamilton, Inc., B-414822.5 (Oct. 13, 2017) involved a protest over a GSA procurement for support services requested by the Army Research, Development and Engineering Command, Software Engineering Directorate. Raytheon was named the apparent successful offeror for a task order award, which Booz Allen Hamilton, Inc. protested, alleging that Raytheon had an unmitigated organizational conflict of interest, and that there were issues with the evaluation of price and technical proposals.
The parties subsequently engaged in outcome prediction alternative dispute resolution, where GAO indicated it was likely to sustain the protest. GSA then took corrective action. GSA filed a notice of corrective action with GAO, which explained its proposed actions as follows:
GSA intends to review the scope of its analysis of Organizational Conflicts of Interest (OCI) and correct and/or supplement that analysis and/or take other action as it deems necessary to ensure the OCI analysis sufficiently addresses the impaired objectivity OCI concerns or otherwise satisfies the Federal Acquisition Regulation subpart 9.5.
GSA also indicated that it would review the evaluation record to ensure Raytheon and BAH were evaluated equally. In the event of discrepancies, GSA would re-evaluate proposals and make a new best value determination.
BAH objected to the proposed corrective action, arguing that it “did not provide adequate details and does not commit the agency to resolve the issues raised by the protester.” GAO nevertheless dismissed the protest as academic. GAO did advise BAH that if it was dissatisfied with the results of the corrective action, it could file another protest.
Three days after GAO’s dismissal, BAH filed a protest with GAO, challenging the terms of the corrective action. Specifically, BAH took issue with GSA’s repeated use of “and/or” within its proposed corrective action and the fact that GSA stated it would “take other action as it deems necessary [.]”According to BAH, these broad statements did not commit GSA to any specific corrective action.
GAO did not agree. As GAO explained, the legal standard for protesting a corrective action is high:
As a general rule, agencies have broad discretion to take corrective action where the agency has determined that such action is necessary to ensure fair and impartial competition. An agency’s corrective action need not address every protest issue, but must render the protest academic by granting the requested relief. The details of implementing the corrective action are within the sound discretion and judgment of the contracting agency, and we will not object to any particular corrective action, so long as it is appropriate to remedy the concern that caused the agency to take corrective action.
In the context of BAH’s protest, GAO was satisfied by GSA’s proposed corrective action. As GAO explained, “we do not interpret GSA’s statement that it may take ‘other action as it deems necessary’ to mean that the agency could elect to utterly ignore the OCI and technical evaluation issues identified in the agency’s notice.” Moreover, GAO concluded BAH’s arguments “merely anticipate adverse actions by the agency,” which were speculative. Accordingly, GAO dismissed BAH’s protest as premature.
Interestingly, the Court of Federal Claims has occasionally applied greater scrutiny to proposed corrective actions than is typically the case at GAO. For example, in Dell Federal Systems, L.P. v. United States, 133 Fed. Cl. 92 (2017), the Court enjoined a proposed corrective action, writing that the agency’s proposed actions amounted to a “blunderbuss approach to corrective action that neither the record nor the law supports.” While the Court, too, is largely deferential to agencies in this area, the Court may nonetheless be the better bet for an offeror challenging a corrective action.
So what is the takeaway for protesters? In short, GAO affords agencies wide discretion to craft and implement corrective actions as they see fit, and challenges to corrective action before GAO are likely to be dismissed as premature. Accordingly, protesters may win the protest battle only to lose the protest war during corrective action. Moreover, protesters concerned with a proposed corrective action may wish to consider taking the challenge to the (potentially) more receptive ears of the Court of Federal Claims.
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Whether you are an active small business federal contractor, or an entrepreneur still getting your business off the ground, you are going to need a cybersecurity plan. Many DoD contractors, in particular, face a pending deadline to comply with NIST 800-171, as mandated by DFARS 252.204-7012.
The Kansas SBDC Cybersecurity Center for Small Business wants to help.
Located in downtown Lawrence, Kansas—just across town from us coincidentally—the Cybersecurity Center, housed at the KU Small Business Development Center, is the only SBDC in the country with an office dedicated to helping small businesses contend with the growing threat of data breaches. According to Director Brian S. Dennis, the center can be a resource for small businesses across the country, not just those in the state of Kansas.
Mr. Dennis has been the director of the Cybersecurity Center since it was founded in July. He was gracious enough to answer a few questions:
Q: Don’t hackers target only huge businesses? Why does a small business need to worry about cybersecurity?
A: The International Data Corporation released a report in 2016 estimating that by 2020 over $101 billion dollars will be spent by companies trying to protect their digital footprint. America’s small businesses have not made a dedicated effort to build cybersecurity into their P&Ls [Profits and Losses]. That lack of funding on the small business side has been noticed by hackers. Small businesses are the backdoor into big business. A Fortune 500 company or the U.S. Government can throw as many dollars as they want at the threat of a cybersecurity breach, but all it takes is one small business vendor to take down the whole thing. A prime example of this is the 2013 Target data breach. The billion dollar retailer announced a huge data breach of customer information and it happened because of a third-party vendor had been granted access to the Target network. The growing threat of a data breach is forcing the U.S. Government and corporate America to rethink how they choose their vendors.
Q: What causes most cybersecurity breaches?
A: Almost any cybersecurity professional you speak to today will tell you that if there were no human users, there would be no cybersecurity threat. As end users of systems, we are flawed in our approach to internet safety. Ransomware is a prime example of this. The FBI estimates that $24 million was paid in ransoms in 2015. By 2016 that number was over $1 billion. Ransomware only works when a user on the receiving end of an exchange takes an action. We need to incorporate training across the board that enables each and every user with the knowledge of how to remain safe in the digital age.
Q: It seems like things change so quickly. How can a small business find out if its practices are sufficient or if it is at risk without knowing it?
A: It all starts with planning. Creating a plan that works and can be tested is paramount to a small business surviving a cyber event. The threat of a digital interruption is looming over all of us and there is no silver bullet that will prevent every single attack or occurrence. But if a small business can build a plan that follows five steps, the likelihood of survival increases. Those steps are:
Identify — What structures and practices do you have in place to identify cyber threats?
Protect — What are the basic practices you have in place to protect your systems?
Detect — What do you use to identify someone or something malicious?
Respond — How will you deal with a breach if and when one occurs?
Recover — How will you get your business back to normal after a breach?
Q: What if a small business is not as secure as it could be—by its nature, a small business has to choose where to put its resources, why does it need to spend money on cyberseucrity?
A: According to Symantec, nearly half of all cyber attacks these days are targeted on small business. Small businesses are the entry point into larger operations. When your business decides to allocate resources away from cybersecurity, your opportunities will begin to diminish. The hard part is understanding where to potentially shift money and resources to ensure that this can even happen. America’s Small Business Development Center (ASBDC) has over 1,100 business consultants and advisers working across America. Find a local SBDC near you and ask them for help. A good business consultant can help you get a better grasp of your P&Ls and determine where dollars can be set aside for your cyber effort. The service is free, but the commitment is your time and effort.
[Ed. Note: SBDCs are funded in part by the U.S. Small Business Administration, which helps keep consulting costs down—services are often free.]
Q: Seriously though, what’s the worst that could happen? Is a business going to lose its contracts? Something worse?
A: The Federal government is moving swiftly to ensure that its vendors and contractors are secure. The National Institute of Standards and Technology (NIST) has created a framework for cybersecurity that is already being rolled out by the Department of Defense. DOD contractors have to complete the framework by December 31st of this year. And this is just the start. If you make the decision to not properly protect your business and you are doing business with the government, you will lose contracts, that is a guarantee. Losing contracts is just the start. The something worse that is looming on the horizon is the legal responsibility. Several states are looking at what types of recourse clients/consumers will have against a small business that allows data to be breached.
Q: What do you see coming in the future?
A: There is no crystal ball for guessing what the next cyber threat will look like, but the general consensus is that cyber criminals will continue to prey upon our inability to properly train end users. Ransomware is a direct result of poor training. Attacks that started against users demanding ransoms in the hundreds of dollars range have morphed into attacks against municipalities demanding millions of dollars. Ransomware is easy to send out and easy to collect. Unfortunately, it will be here until someone develops a dedicated way to fight it.
The future will also hold the possibility for more business and industry to pick up the torch of the NIST Framework. The Framework is probably the best start to a business being protected. Banking, insurance and finance industries will be watching closely as the Framework is rolled out this year.
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After a 30-degree shift in temperatures here in Lawrence overnight, I think it is safe to say fall has officially arrived. The kids and I will be adding some extra layers while we go trick-or-treating on Tuesday evening.
Candy is on the agenda next week, but today’s treat is the latest SmallGovCon Week in Review. In this edition, the SBA will soon issue a proposed rule to implement a mandatory WOSB certification, a provision in the NDAA would shorten the GAO’s time frame for resolving DoD protests, a business owner will spend 20 months in prison for GSA Schedule fraud, and much more.
Bye-bye, WOSB self-certification: the SBA says it is 30-60 days away from issuing a proposed rule to implement mandatory WOSB certification. [Federal News Radio]
A provision in the 2018 National Defense Authorization Act would force the GAO to resolve Defense Department related bid protests within 65 days instead of the current 100 day time frame, but could this plan backfire? [Nextgov]
A business owner will spend 20 months in prison and pay more than $1 million in restitution as part of a plea deal in a GSA Schedule fraud case. [United States Department Of Justice]
Have you worked with your PTAC yet? If you’re not aware of the free resources that PTAC counselors provide for government contractors, this video provides a great overview. [YouTube]
Federal Times takes a look at three ways to help subcontractors receive their share of a winning bid. [Federal Times]
Category management “shrinks the playing field of [small business] competitors that are out there,” according to a top SBA official.[Federal Times]
A Florida man is facing federal bribery and wire fraud charges in connection with a kickback conspiracy for federal defense contracts. [News4JAX]
The slow nature of Department of Defense acquisition makes it difficult to keep up with cybersecurity defense. [Federal News Radio]
The GAO put the brakes on a $238 million contract for the Census Bureau’s 2020 mobility operations, sustaining a bid protest filed by AT&T. [fedscoop]
The SBA Inspector General says that agencies shouldn’t be able to claim 8(a) and HUBZone credit for firms that have left those programs. [SBA Office of Inspector General]
The GSA is looking for a new way to classify contractors and grant and loan recipients. Is Dun & Bradstreet on its way out? [fedscoop]
A massive $2.4 billion classified NSA contract is under protest by one of the losing bidders. [Nextgov]
A coalition of moderate House Democrats wants to expand a governmentwide security certification process for cloud computing to all types of government information technology. [Nextgov]
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If you’re a winner under a solicitation, you can’t challenge the ground rules under which you won–at least under the facts of a recent GAO bid protest decision.
In that decision, GAO concluded that the protestor of a solicitation’s terms lacked standing when the protester was subsequently identified as an awardee under the solicitation.
Daekee Global Co., Ltd., B-414899 et al., (Oct. 10, 2017), involved an IDIQ procurement for ship husbanding services in the Navy’s Seventh Fleet area of operation. Performance of the contract was to occur at both commercial and military ports throughout Korea, Japan, Russia, and Taiwan. The Solicitation broke down the services required into a number of CLINs, which included ship movement, fleet handling, waste disposal, transportation, and cargo loading, among others.
The solicitation anticipated making multiple awards to the lowest priced bidders that did not take exception to the solicitation’s terms. According to GAO, “to be considered for award, offerors needed to submit by the solicitation closing a signed proposal (with acknowledgment of all amendments) that shows the offeror is not taking exception to any solicitation term; includes the certifications and representations contained in the solicitation; and includes unit prices and total prices for all line items and sub line items in the solicitation.” Bidders were also to include a signed letter stating they were not taking exception to any of the solicitation’s terms and possessed the requisite licenses and approvals for operation.
Prior to the closing date for the solicitation, Daekee Global Co., Ltd. filed a protest challenging the terms of the solicitation. Daekee raised a number of concerns with the structure of the solicitation, including concerns about regulatory compliance and the fairness of subsequent task order competitions.
Despite filing a timely protest, Daekee also submitted a proposal in response to the solicitation. While Daekee’s protest was pending, the Navy evaluated proposals and determined Daekee was a presumptive awardee. The Navy planned to make an award to Daekee as soon as the protest’s performance suspension period was lifted.
Because Daekee was a presumptive awardee under the Solicitation, the Navy moved to dismiss the protest, arguing that Daekee was not an “interested party” within the meaning of the GAO’s Bid Protest Regulations. While Daekee was pleased to discover it was a presumptive awardee, it contended its protest should still be resolved on its merits because significant questions regarding the structure of the Navy’s procurement remained outstanding. Specifically, Daekee reiterated concerns about the fairness of competition at the task order level.
GAO was not convinced. According to GAO, the question was one of competitive prejudice. As GAO explained:
Competitive prejudice is a required element of every viable protest, and where none is shown, we will not sustain a protest. In the context of a protest challenging the terms of a solicitation, competitive prejudice occurs where the challenged terms place the protester at a competitive disadvantage or otherwise affect the protester’s ability to compete.
Since Daekee had been identified as an apparent awardee under the Solicitation, GAO concluded Daekee had not been at a competitive disadvantage under the solicitation’s terms. As for Daekee’s allegations regarding the fairness of competition at the task order level, GAO concluded these challenges were premature.
In our experience, it’s not exactly common for an agency to announce, in the midst of a pre-award GAO bid protest, that the protester will be awarded a contract once the protest concludes. That said, Daekee Global Co. suggests that an agency might be able to eliminate any pre-award bid protest simply by announcing an intent to award a contract to the protester. It remains to be seen whether GAO’s decision is truly that broad, or whether there might be exceptions under which a protester could show competitive prejudice despite being named as an awardee.
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I was grocery shopping the other day, and I had to make the tough choice between the name-brand cereal and the store-brand cereal. I don’t know about you, but with some products, the name brand has a certain flavor that the store brand just can’t replicate. When it comes to government contracts, the same is true–sometimes the government wants a certain brand or supplier and will accept no substitutes.
GAO recently held that, where an agency required quotations including parts from one approved source of supply, and an offer is submitted that proposes an “alternate product,” the agency can reasonably reject the bid–and that a protest of the approved source restriction itself is untimely if it isn’t filed before the proposal deadline.
The additional wrinkle in this decision is that, if the vendor wishes to protest the sole-supply-source restriction in the solicitation, the protest has to be made before the submission deadline for the solicitation. Therefore, the protester’s argument that it should be considered an alternate source was dismissed as untimely because the alternate-source issue is a term the protester should have raised prior to the solicitation submission deadline. This is yet another variation on the tricky rules of bid protest timeliness–in this case, involving the issue of proposing an alternative to the approved source set forth in the solicitation.
GAO’s decision, W K Engineering Int’l, Inc., B-414932, (Oct. 13, 2017), involved an RFQ issued by the DLA for headrest pad assemblies associated with aircraft ejection seats. The RFQ required that vendors submit one headrest for first article testing, and also noted that “[o]nly quotes from the approved source of supply or authorized dealers are acceptable. The dealer must provide a copy of the letter from the approved source of supply approving them to act as a dealer/distributor with their quote. Quotes from secondary dealers will not be accepted.” The approved source of supply was AMI Industries, Inc., and the agency indicated the specific part number and listed no other approved suppliers.
The solicitation also incorporated the terms and conditions set forth in the DLA master solicitation for automated simplified acquisitions. Under these terms, alternate products would not be evaluated if the solicitation was “automated,” and the DLA, with GAO concurrence, contended that the solicitation was indeed automated through DIBBS, the DLA’s Internet Bid Board System.
WK Engineering submitted its bid with an alternate product to that required in the solicitation and did not include a letter from AMI approving WKE as a dealer of AMI’s product. WKE, upon submission for its quotation, received a notification from the DIBBS system that “[o]ffers of alternate products will not be evaluated for the current procurement.” DLA awarded the purchase order to AMI, the approved source of supply.
GAO dismissed WKE’s protest, holding that, as applicable to WKE, “[a] protester is not an interested party to protest an award to an approved source where the protester would not be eligible for award because it is not itself an approved source for the item.” This seems fairly straightforward, at least as GAO describes it. If the solicitation says quotations must include an approved source of supply, and a quotation does not include that source of supply (or indicate the vendor will act as a dealer for the source of supply), then the protester could never be awarded the bid, so it is not an interested party to protest.
The second part of GAO’s opinion is more nuanced. WKE argued that it should be considered equally with AMI, the approved source, because it is a “qualified manufacturer of similar parts.” GAO held that this amounted to a challenge “based upon alleged improprieties in a solicitation, which are apparent prior to the time set for receipt of initial quotations, [which] must be filed prior to the time set for receipt of initial quotations” under 4 C.F.R. § 21.2(a)(1).
According to the GAO, since the requirement to use the specific source was clearly apparent in the RFQ, WKE should have been able to formulate its objection upon reading the RFQ, and therefore any protest was due prior to the proposal deadline. A problem that is clear on the face of the solicitation is sometimes called a patent defect, and patent defects ordinarily cannot be challenged after the date proposals are due. Since the protest was not filed until after award was made, this part of the protest was also dismissed.
GAO’s holding is another reminder that, if a contractor believes there is an improper requirement or error in a solicitation, a protest must be made before any submission deadline. In this particular example, if a potential vendor thinks there should be alternatives to an approved source of supply, any protest of that issue is probably due before the quotation deadline. If you wait too long, GAO will not usually give you a second chance to raise this kind of issue in a protest.
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Participants in the SBA’s 8(a) Program must timely submit their annual review packages to the SBA.
In a recent decision, the SBA Office of Hearings and Appeals held that the SBA may terminate a participant from the 8(a) Program for failing to provide the required information–even if the 8(a) company’s owner has had personal difficulties that contributed to the failure.
OHA’s decision in KC Consulting, LLC, SBA No. BDPT-563 (2017) involved the 8(a) Program participation of a Michigan-based small business. On January 8, 2016, KC Consulting received a letter from the SBA requesting that the company provide its 8(a) annual review information. KC Consulting did not provide the information. The SBA sent a second letter in March 2016; again, KC Consulting didn’t comply.
On April 12, 2017, the SBA issued a Termination Letter to KC Consulting. In the letter, the SBA stated that KC Consulting would be terminated from the 8(a) Program because of its repeated failure to submit the required annual review information.
KC Consulting filed an appeal with OHA, arguing that it should not be terminated from the 8(a) Program. KC Consulting admitted that it failed to submit the annual review information despite SBA’s requests for it. But KC Consulting explained that its President and Managing Member had been undergoing some personal difficulties: his parents had both passed away, and he was in the midst of divorce proceedings. KC Consulting said that these issues had a significant impact on the firm, and asked for another year in the 8(a) Program to get the company “back on track.”
OHA noted that the SBA’s 8(a) Program regulations allow the SBA to terminate a participant for “[a] pattern of failure to make required submissions or responses to SBA in a timely manner,” including the timely submission of annual review information. Here, KC Consulting “admits the violation and confirms SBA’s grounds for termination.” It is “of no consequence that [KC Consulting’s] violation was not intentional.”
OHA dismissed the appeal.
As the KC Consulting case demonstrates, the SBA takes the 8(a) annual review very seriously. Although it’s an area of broad discretion, the SBA has the right to terminate a company from the 8(a) Program for repeatedly failing to submit the annual review information, or other relevant information requested by the SBA–even if the 8(a) owner’s personal troubles made compliance more difficult.
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You might think that if you send an email with the delivery receipt option and the delivery receipt comes back, the email was delivered. But when an offeror submits a proposal by email, does a delivery receipt mean that the agency necessarily received the proposal in its inbox?
At least under the facts of one recent GAO bid protest, the answer was “no.” In that case, the GAO held that an email delivery receipt wasn’t sufficient to demonstrate that the agency received the electronic proposal.
In ManTech Advanced Systems International, Inc., B-414985, (Oct. 20, 2017), the GAO examined a proposal submitted by ManTech to provide cyber security services to the Air Force. ManTech submitted its proposal under a task order solicitation issued under the Air Force’s Cyber Security and Information Systems Technical Tasks IDIQ.
The task order proposals were to be submitted electronically via e-mail to the contract specialist, at the specialist’s email address, no later than 1:00 p.m. Central Daylight Time on July 17, 2017. The solicitation provided that receipt of proposals would be acknowledged by return e-mail.
ManTech sent its email with the proposal to the designated email address on July 17, 2017, at 1:25 p.m. Eastern Daylight Time (EDT) “and received confirmation of completed delivery through its Microsoft Outlook delivery receipt feature.”
Between 1:30 and 2 p.m. EDT, ManTech attempted to confirm receipt. First, it contacted the Air Force and learned the proposal had not been received, so ManTech resent the proposal to the designated inbox, the agency employee it had spoken to, and the contract specialist. Then it sent the email without the cover letter.
Finally, the agency told ManTech to stop trying because it was past the deadline. The agency later informed ManTech that, because the proposal hadn’t been received on time, the agency hadn’t considered ManTech for award.
ManTech filed a GAO bid protest challenging the agency’s decision. ManTech argued that the Air Force should have considered the proposal because the proposal was timely sent to the correct email address, and ManTech received confirmation that it had been received.
ManTech relied heavily on email tracking records from its Microsoft Outlook delivery system. ManTech submitted a declaration from its Director of Network Services to argue that “since it did not receive a bounce back indicating that the e-mail containing the proposal had been rejected, it must have been accepted by the agency’s e-mail exchange server.”
The Air Force responded by tracing the path of an email to its email system:
GAO wrote that “t is an offeror’s responsibility to deliver its proposal to the proper place at the proper time.” Moreover, the offeror “has the burden of showing that it timely delivered its proposal to the agency at the specified address.”
Here, “ManTech has demonstrated that it timely sent its proposal to the agency, and that it reached the EEMSG server.” However, “ManTech has failed to establish that its proposal was actually delivered to the agency’s designated e-mail prior to the time set for the receipt of proposals, and thus, has failed to meet its burden of showing the proposal was timely delivered to the agency.”
We have covered electronic timeliness issues on SmallGovCon before, as GAO seems to issue an opinion on the topic every six months. Most of these cases haven’t gone well for the protester. For example, GAO has denied a protest when an initial government server receives a proposal on time, but the proposal doesn’t make it to the final destination until after the deadline. The same result held even when the protester asserted the late email was the result of faulty government servers. And along the same lines (and pretty close to the result here), the GAO denied a protest where the offeror’s proposal was rejected by the agency’s spam filter.
To be clear, my colleagues and I here at SmallGovCon aren’t big fans of these decisions (or the decision in ManTech). Why should a contractor be punished if a government server malfunctions, or a government spam filter rejects a proposal, or (as here) the government server simply “rejects” the proposal after a scan? It seems to us that if the proposal is under government control at the time specified in the solicitation, that should be enough, in most cases, to require the government to evaluate it.
Encouragingly, the Court of Federal Claims may agree. As we discussed in the latter half of this post, the Court has issued several decisions that seem to be at odds with the GAO’s strict view. For companies like ManTech, the Court–not the GAO–is probably the better forum for a protest of this nature.
That said, offerors submitting proposals electronically should be aware of the tough rules that often apply. As ManTech Advanced Systems International demonstrates, even an email delivery receipt may not be enough to prove that an electronically-submitted proposal actually arrived at the correct place.
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Although the temperatures outside may be dropping, things are heating up in the contracting world. Now one month into the 2018 federal fiscal year, agencies have new budgets and there is a lot money to be spent. We will keep a close eye on awards, regulation changes, and related issues to federal contracting all year long, right here on SmallGovCon.
Let’s get the weekend started off by recapping the latest federal contracting news. In this edition of SmallGovCon Week In Review, we look at the potential for a DUNS replacement, a three-year prison sentence for accepting kickbacks in exchange for contracts, awards for GSA’s $5 billion VETS 2 IT services vehicle, and much more.
Defense contractors have two months to comply with one of the most complicated Pentagon regulations to hit their desks in years. [Bloomberg Government]
The General Services Administration is considering a potential replacement to DUNS, and has asked for feedback. [FCW]
GSA announced awards to 70 SDVOSBs under its Veterans Technology Services 2 (VETS 2) Government-wide Acquisition Contract. [GSA; Washington Technology]
GSA also released three requests for information under its Federal Acquisition Service. [Federal News Radio]
Ongoing efforts to modernize federal IT are starting to bear fruit, but several questions remain. [fedscoop]
Will a plan to charge $350 for each protest filing stop frivolous protests? [Federal News Radio]
South Carolina contractor sentenced to two years in prison after unlawfully obtaining more than 100 contracts worth hundreds of millions of dollars. [The State]
More bad behavior: a former employee at the Merchant Marine Academy in Kings Point was sentenced to three years in prison after receiving over $150,000 in kickbacks . [Newsday]
Still more trouble: an FDA supervisor and contractor have been charged with bribery and conspiracy relating to a kickback scheme dating nearly six years. [United States Department of Justice]
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It’s a Sunday afternoon and instead of watching football (CHIEFS!), you’re shopping for a new refrigerator. You explain to the salesman your must-haves: a black refrigerator with a bottom-drawer freezer and an in-door water dispenser. But rather than showing you refrigerators that meet your criteria, he insists on showing you stainless steel models with the freezer on the side.
If the refrigerator doesn’t meet your needs (or your wants), odds are you won’t buy it. The federal government is no different: if it identifies salient characteristics in a solicitation, proposals that deviate from them likely aren’t going to win the award.
This refrigerator-shopping scenario (which, by the way, sounds like a nightmare) is basically what happened in Phoenics Corporation, B-414995 (Oct. 27, 2017). There, the Navy issued a solicitation for a ground-penetrating radar and named three brand-name items that would meet its needs. Alternatively, an offeror could propose a different model if that model met several salient characteristics listed by the Navy.
Included among these characteristics was a requirement that the radar “have an external and removable locking pin to hold arm secure whether in operation or storage mode.” The solicitation further cautioned that an internal gear mechanism was not acceptable.
Phoenics submitted the lowest-priced quote, but its product was deemed unacceptable by the Navy. Although the gear mechanism in Phoenics’ proposed radar “positively locks the arm with an integral locking insert/pin in either the operating or storage mode,” its locking mechanism was not external and removable. Instead, the locking mechanism was “performed via a control button/lever within easy reach of the operator.” Because Phoenics’ proposed radar did not meet the salient characteristics, the Navy found it unacceptable.
Phoenics then filed a GAO bid protest, saying its product basically met the Navy’s salient characteristics. In response, GAO denied this challenge and stated that Phoenics did not refute the agency’s allegation that the locking pin was neither external nor removable. In other words, GAO said that when it comes to salient characteristics, close isn’t good enough.
From my vantage, Phoenics might have had more luck had it challenged the Navy’s identified salient characteristics as part of a pre-award protest. Offerors can be hesitant to challenge the terms of a solicitation for fear it might lead to animosity by the contracting officer.
But in our practice, we find that concern to be somewhat overblown: if done professionally and civilly, a pre-award challenge to ambiguous or unnecessary terms can be advantageous to both offerors (who have clarity over the requirements) and the government (who will get the best possible proposals). Here, for example, Phoenics might have argued that the salient characteristics overstated the government’s minimum needs by excluding a product like the one Phoenics ultimately offered.
In a footnote, GAO suggested the same thing. It wrote that “to the extent that there was a conflict between the brand name products and the salient characteristics, we find that any resulting ambiguity was patent—that is, apparent on its face.” As such, “Phoenics was required to protest any such defect in the terms of the RFQ prior to the date set for receipt of quotations, which it did not.”
As Phoenics Corporation reiterates, an offeror simply won’t be successful if it doesn’t propose what the government wants. And if the government’s salient characteristics appear overly restrictive, the best time for legal action might be before proposals are due—not after award.
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